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For Small to Midsize Container Companies, RFID Makes Sense

Based on a study involving a real-life logistics provider, the average payback period for an EPC Gen 2 RFID implementation is between 12 and 24 months.
By Melanie Hippler
Described below is a real-world application scenario covering the logistics process of Company X (an actual Belgium-based third-party logistics services provider that wishes to remain anonymous). The scenario analyzes the amount of time required to organize a container shipment via the current traditional approach, and by outfitting each container with an RFID tag.



Table 1: Amount of Time Needed to Organize a Container Shipment
(To view a larger version of the table, click here.)

Explanation:

ACTUAL
The "actual" times were determined by measuring how long it actually takes Company X's employees to carry out the processes of receiving a shipment request from a customer; organizing the shipment with a factory, trucking company, barge operator, ocean carrier, customs and so forth; and tracking and tracing it accordingly. Hence, the measuring reflects the real time needed, based on a weekly average of 30 to 40 shipments (the number of shipments per week conducted by the company at that time).

WITH RFID
The "with RFID" times were based on information submitted by Belgian RFID solutions providers PHI DATA and Time2Trace. After some meetings, the numbers—the times needed to carry out the tasks with help from RFID—were defined. This information should reflect the real time needed to organize a shipment, on average.

Feasibility of Implementing RFID
Before deciding to adopt RFID technology, a company should ensure the return on investment (ROI) and success by having a comprehensive strategic plan in place that quantifies all encompassing aspects of RFID, including technology and business processes, while containing quantifiable metrics assigned to values for each area in which RFID has an impact.

Performing an ROI study on RFID enables a business to become reacquainted with current business processes, and to identify opportunities for optimization. In order to obtain the information necessary to perform ROI calculations and value equations, however, it is necessary to create a solid and detailed strategic plan, which can then result in a pilot project.

Each of the plan's benefits should be associated with a level of impact (if revenue is generated, if risks are mitigated or if costs are reduced) and a time to realization. It is during this timeframe that a business will see (or not see) the benefit—hence, the go or no-go decision before creating the implementation map, which divides the complete RFID solution into a series of objective milestones within a set timeframe. The main tasks involved in completing this step are to develop a time scale for implementation, from trial or pilot stage to full deployment, and to assign associated cost and benefit metrics with each stage of the milestone.

In the analysis below, the cost for a pilot project is explained, in order to understand what the investment would be if RFID were adopted by Company X's Belgian office.

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