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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
6) As often happens, it is assumed that as part of the contractual agreement, the technology provider shall provide a demonstration version of its solution for use during the pilot project, which normally lasts between 2 weeks and 2 months. As there will not be an enterprising resource planning (ERP) system during the demo phase, the data received will be manually entered into an Excel or Access database, generating no additional cost.

In the event that the project is successful, the company would then purchase the full package with the technology provider: interrogators, encoders/printers, RFID server and middleware, ERP systems integration, training and maintenance.

Taking the above into account, the total estimated investment cost would be $17,200 for the implementation of RFID technology during a two-month pilot project.

Table 2: Costs for a Two-Month Pilot Project
(To view a larger version of the table, click here.)

In Europe, an employee's salary and benefits average $26.05 per hour. As indicated in Table 1, the amount of labor needed to organize a container shipment without the use of RFID is 2.66 hours (160 minutes) of labor. It would thus cost the company a total of $69.30 (2.66 hours at the worker's $26.05 hourly rate). This means the total annual cost for the 1,600 containers shipped from the Belgian office to overseas destination would be $110,869.

Assuming Company X were to implement RFID within its operation, there would be a considerable change in the amount of time needed to organize the transport: 0.61 hours (36 minutes 30 seconds) against 2.66 hours. This would mean a cost of only $15.85 (0.61 hours at the worker's $26.05 hourly rate) to organize a shipment through the entire supply chain, and a yearly cost of $25,360 for the 1,600 container shipments to the company. The annual savings of using RFID to ship 1,600 containers would be $85,509.

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