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Building the Business Case

To achieve a return on investment in RFID, companies need to have different departments work together to solve the many minor, low-level problems that contribute to a big issue, such as excess inventory. Here’s how to build a bottom-up business case.
By Bob Violino
The first step is to put together a team of senior executives from all the major functional areas of the business, including manufacturing, operations, packaging, warehouse management, security and finance. It’s important to have members from across the company. Solving issues that contribute to macro-level problems will require changing processes throughout the company. For instance, if a company is trying to cut losses from theft and counterfeiting, packaging expertise will be needed to integrate RFID with existing anticounterfeiting techniques. Manufacturing executives will have to figure out how to do the integration, and warehouse managers will have to change the way products are received, stored and shipped.

2. Educate the team.

Many senior executives are skeptical about RFID’s potential to deliver efficiencies. Part of that skepticism is rooted in ignorance about RFID. It’s important to educate the cross-functional team about the components and costs of an RFID system—tags, readers, middleware, enterprise applications and so on. They also need to know how data can be leveraged internally (and eventually with supply chain partners) to achieve benefits today. Companies can bring in consultants or systems integrators and early adopters to do the teaching.

Team members need to understand that RFID is an enabling technology that can be used in many ways to solve problems. “People can’t think of RFID as just a data collection technology or a replacement for the bar code,” says Sean Campbell, a partner with IBM Business Consulting Services. “You need to get people thinking about how they can use timelier, accurate information, and in some cases new information that isn’t available today, to drive process changes.”

3. Identify problems and opportunities.

Once the cross-functional team has been educated, members should meet with their department’s senior and midlevel managers and discuss the major areas of the business where RFID could have an impact and what micro-level issues contribute to the larger problem. They should be encouraged to think creatively about how RFID could be used to resolve those issues. This not only leads to better solutions, it also creates buy-in from the various company departments.

The focus should be on all the issues that contribute to macro-level problems. Take, for instance, a DVD manufacturer that loses significant sales whenever there’s a hit movie because retail stores don’t have the DVD in stock 20 percent of the time. What issues within the manufacturer’s own supply chain cause the product to be out of stock so often? Employee theft? Poor inventory accuracy? Lousy order fulfillment?

The team should also look for ways to cut labor costs and boost efficiencies. Let’s say the DVD manufacturer employs five people to check shipments to retail customers before pallets are put on a truck, but accuracy is still wanting. By deploying RFID, the manufacturer might be able to achieve perfect order fulfillment and eliminate the positions of the five workers because counts would be automated and problems flagged.

Consider all possibilities, including changes to packaging or a switch to reusable containers. Changing packaging is costly, but the savings from being able to read every carton on a pallet before it is shipped might make it worthwhile. Using reusable containers means the expense of RFID tags can be amortized over the containers’ lifetime.

4. Define the scope of the RFID deployment.

After the team reports back, members should identify which benefits stack to tackle. Don’t worry about what the system will cost and whether it will do everything you would like it to do. Concentrate on identifying which macro-level problem would deliver the most benefits to the company if you could use RFID to solve it. Would the company save more by cutting inventory than it would gain by reducing out-of-stocks?

Once you’ve selected the benefits stack to go after, list the factors within the company’s control that contribute to the macro-level problem. Chances are the team will identify many potential applications within the benefits stack. It’s not possible to go after all of them simultaneously, or to solve the macro-level problem across the entire company all at once. Instead, narrow the scope of the project to, say, a region where a particular problem is chronic. Or it might make sense to start a pilot in a region where customers have begun requiring tagged product.

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