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Fashion Group Expects Positive ROI Within 3 Years
The study, carried out by the University of Parma's RFID Lab and backed by major European garment manufacturers, sees payback coming mainly from a reduction in labor and increased sales.
The RFID hardware and software infrastructure installed allowed the automation of a number of processes. For receiving, for instance, an operator utilized a handheld reader to interrogate the tags on individual items in a cardboard shipping container. The employee moved the interrogator around the box multiple times, and the computer system informed him if all items expected in the shipment were present. RFID technology used in the RFID Fashion Store also allowed the ability to automate inventory taking at the store. This increased the accuracy of the process and reduced the time required for its completion, thereby ensuring a timely and accurate replenishment of store shelves and, thus, reducing stock-outs and increasing sales volume. (Click here to see a video of the RFID-based processes.)
The test of the various processes includes the use of the EPC network. Data is available on the DC's EPC server. When the store receives the box, an EPC network query is made to receive relevant data regarding the shipping or manufacturing process.
The third phase of the project involved creating a calculation model for assessing the economic feasibility of the RFID-based processes. Using the model, the researchers evaluated what they considered to be a representative supply chain, with one DC and 20 retail stores and an annual product flow of approximately 7.8 million items.
The test assumed that the manufacturer tagged individual items at the end of the production line. A best-case scenario resulted in an investment of €1.37 million ($1.81 million) in RFID hardware and software, and yielded a positive ROI within three years. A worst-case scenario required an investment of €1.59 million ($2.11 million), necessary to outfit a supply chain that had little existing technology in use, and yielded a positive ROI within three years. In both scenarios, approximately 20 to 25 percent of the investments were needed for the DC, while the rest was required for the retail stores. A major component of these calculations was the cost of tags needed for one year—roughly €656,000 ($869,000), using an average of .08 cents per tag.
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