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Study Finds High Economic Gains from RFID Deployments

According to University of Texas researchers, RFID technologies have already added $40 billion in benefits to the retail and health-care sectors, despite relatively low adoption of item-level RFID tagging.
By Beth Bacheldor
Dec 13, 2006RFID technology has the potential to create billions of dollars in benefits to the retail and health-care sectors, according to a new study conducted by researchers at the University of Texas at Austin. The findings of the study, commissioned by NXP Semiconductors, were released earlier this month.

That economic boon in the retail sector will come from reducing labor costs, shrinkage due to theft or misplaced goods, and inventory and inventory write-offs, the study claims, as well as from increased product availability and time-to-market. For providers of health-care and pharmaceutical products, the researchers expect the benefits to come from reducing drug counterfeit and shrinkage, hastening time-to-market, and improving the product recall and sample-management processes, inventory turnover and clinical trials. Hospitals, the study predicts, will gain value from RFID by improving equipment tracking and asset utilization, increasing access to health care and providing better patient safety and care.

Anitesh Barua
"We've all been looking at the RFID industry at large, but one thing that has been very difficult to create clarity on is the benefit," says Jan-Willem Reynaerts, general manager for the RFID Market Sector Team at NXP, an independent spin-off semiconductor company founded by Philips. "We expect the technology will create a better user experience, reduce inventory and decrease shrinkage. But one of the main arguments we hear is that there's a lack of clarity about what the technology can specifically mean to a company."

The estimated economic gains, the researchers say, are perhaps the most surprising finding of the study. While studies in the past have predicted high value from RFID deployments (see MIT and IESE Study Shows RFID's Value and Item Tagging Offers Quick Payback), few—if any—have estimated such a sizable impact. Using current adoption levels of RFID at the pallet and item levels (9 percent and 2 percent of retail sales, respectively), the study estimates that the retail industry currently derives $12.05 billion in benefits from existing RFID applications. Furthermore, it says, economic benefits to sellers in that sector will jump to $68.55 billion within five years if, as predicted, adoption rates of RFID in the retail reach 45 percent of sales at the pallet level and 20 percent of sales at the item level.

Using current adoption levels of RFID within the health-care sector, which includes manufacturers, distributors and hospitals, the study values the benefits at $27.95 billion. Even without accounting for the monetary value of human life, it estimates improved patient care from RFID deployment to be $34.67 billion at current adoption levels. That includes savings resulting from such implementations as using RFID-tagged syringes to dispense the correct dosages of medicine, and extending the usable life of RFID-tagged surgical tools by ensuring that they're properly sanitized. As RFID adoption rates grow in the health-care sector, so too will the financial returns.

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