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Developing an RFID Strategy

The approach each company takes toward an RFID deployment can make the difference between disaster and profitability. Here are three basic strategies that companies can adapt to further their long-term business goals.
By Bob Violino
Jan 16, 2005By Mark Roberti

A year ago, radio frequency identification was hardly on the radar screen of most CEOs. Today, many are treating it like a blip on the IT department’s screen, an added expense that must be borne to keep big customers happy or to keep pace with key competitors. While it’s important to deploy RFID to meet deadlines or to keep from falling behind industry leaders, many CEOs are acting without considering the full impact the technology could have on their company.

“If you don’t have a strategy and you don’t know what the payback is going to be, effectively you’re asking your board of directors and your shareholders to underwrite an ongoing cost that could undermine your profitability,” says Jonathan Loretto, global technology lead for RFID at Cap Gemini Ernst & Young. “The impact on a business, if RFID is done right, can be significant, but the impact if it’s done incorrectly can be devastating.”

Each company’s strategy is going to be different, depending on whether it’s an industry that’s moving quickly toward broad adoption of RFID, such as consumer packaged goods, or one that’s moving more slowly, such as agriculture or construction. The strategy will also depend on whether a company stresses a high level of customer service and support or focuses on execution and efficiency. And it will depend on whether the company makes, moves or sells high-value goods, such as consumer electronics, or low-cost goods, such as canned foods.

There will be overlap among strategies. All companies want to cut costs and boost revenue. But it’s critical that the CEO establish an overarching RFID strategy that marries the way RFID is deployed to the company’s larger goals. For instance, Wal-Mart stresses everyday low costs and has developed an RFID strategy that focuses on using the technology to cut costs wherever possible. Other retailers, such as the Metro Group in Germany, are examining how RFID can improve the customer experience in the store.

Once a company has settled on an RFID strategy, the CEO needs to create a steering committee with senior executives from virtually all areas of the business. Failure to do this will mean missed opportunities. For example, executives in charge of corporate security are seldom put on RFID steering committees, yet RFID could play an important role in helping companies to comply with regulations designed to reduce the chance of a terrorist group using a shipping container to sneak weapons of mass destruction into a country. “It goes beyond just supply chain, logistics and IT,” says Pete Abell, cofounder of ePC Group, a consulting firm.

A clearly articulated RFID strategy will bring discipline and focus to the deployment. It’s easy for the engineers and operations managers overseeing the installation of RFID equipment to see myriad potential uses for the technology. The only way to make sure that everyone is going after the most important opportunities first—the ones that will provide a return on investment and further the company’s long-term goals—is to have a strategy that defines which opportunities are most important. The three broad strategies described below should help CEOs at retailing, manufacturing, distribution and logistics companies begin to formulate and articulate a coherent strategy. That’s the first step. The next is to turn that strategy into a workable battle plan (see 10 Things CEOs Must Know).

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