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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
Crush the Competition
RFID is an open system and won’t be a competitive edge in the long term. But in the short and medium term, companies can use it to gain or extend an edge on their competitors by providing the same goods at lower cost, improving service or adding value in some other way. “RFID is strategic in that you need to figure out how you are going to use it to maintain your advantage over your competitors,” says IBM’s Campbell.

Wal-Mart is setting the pace in the United States. Tesco and the Metro Group are taking the lead in Europe. Other mass-merchandise retailers have to move quickly just to keep from falling behind. But just keeping up with the leaders isn’t enough. If a retailer wants to grow its market share, it needs to do more than just match the leaders tagged case for tagged case. It has to find innovative ways to use the technology to gain an edge on the leaders.

That may mean exploiting niches that the leaders aren’t going after right now. A grocery retailer might use RFID to provide its customers with the freshest produce. Another might use it to verify that all its vegetables come from certified organic farms, or that its beef comes from cattle that have not been fed animal proteins, which are believed to raise the risk for mad cow disease. “I see companies taking different approaches to RFID that fit their way of competing in the world,” says ePC Group’s Abell.

Manufacturers also need to keep an eye on the competition. Wal-Mart has asked its top 100 suppliers to begin tagging cases and pallets by Jan. 1, 2005. But as of Feb. 1, 2004, an additional 29 companies have signed on to do so. “It could be that these companies rushing to join Wal-Mart’s top 100 see RFID as a way to increase sales,” says Joseph Tobolski, an associate partner at Accenture Technology Labs in Chicago. “By demonstrating faster, more efficient compliance, they hope to raise their stature with Wal-Mart. They may feel that larger companies can’t meet the compliance deadline and might lose market share, at least as far as Wal-Mart is concerned.”

Many industries are moving more slowly toward adoption. Some companies will see competitors sitting on their hands and opt to do the same. Others may choose to launch pilots and begin to understand how they can use the technology to lower costs and become more efficient. If they can find an internal return on investment, they will start benefiting from the technology quickly. If not, they will still be in a position to execute a well-planned strategy before their competitors get up to speed.

“For a large percentage of suppliers, simple compliance is going to be a negative value proposition,” says Tobolski. “So you need to look at the big picture—how are you going to change your business with technology to change the ROI equation? If you don’t, you might be leaving a lot of money on the table, in terms of internal benefits and other applications.”

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