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Understanding RFID's Role in an Enterprise

Achieving total business visibility will require a suite of technologies, but RFID will do the lion's share of the work.
By Mark Roberti
Nov 09, 2009My last few Editor's Notes and blogs have been fairly shrill, a sign of my growing frustration with analysts and journalists who misinform readers about radio frequency identification, and with vendors who sell RFID but don't want to discuss the very technology they're selling. So now I would like to take a deep breath and explain why I believe so passionately that RFID is becoming a critical technology for most companies.

When I first learned of RFID, back in 2000, researchers at the MIT Auto-ID Center (now the Auto-ID Labs at MIT), backed by Procter & Gamble, Gillette (then not part of P&G), Wal-Mart and others, had developed something called the Electronic Product Code (EPC). This RFID technology was designed to provide a way for companies to better manage their supply chains, with accurate near-real-time data. This made complete sense to me.

But as I followed the development of RFID, it became clear the technology was much more than just a way to track cases and pallets in the supply chain. It could be used to monitor assets, inventory, tools, vehicles and all the other things that companies struggle to manage. And it could be utilized to achieve total business visibility, which could be shared with customers and supply chain partners to facilitate business. I came to see this technology not as something companies deploy simply to solve one business problem—such as the underutilization of assets—but as an extension of the corporate IT infrastructure to better manage many aspects of their business.

RFID enables companies to see, track and manage all the parts of their business they can't manage effectively today. Mobile assets don't report on their utilization rates the way salespeople file production reports, or the way fixed machines now report on their output. Inventory doesn't tell a warehouse manager when there is too much of one item and not enough of another. And tools don't shout out when they are left in the wrong location or stolen.

Do companies need to manage these things? I argued in last week's column that they do, even if they don't yet realize it (see Do You Really Need to Justify Your RFID Investment?). The supply chain VP of a major consumer packaged-goods company told me that at any given time, his company has $1 billion in inventory for which it can not account. The inventory is not lost or stolen; it's simply not visible. That amounts to excess inventory the company could eliminate with better inventory visibility, while still meeting demand. And that would free up a billion dollars—a billion dollars!—in working capital, as well as eliminate perhaps $250 million in annual carrying costs.


Bob Nonneman 2009-11-09 06:45:10 AM
RFID enabled? Is RFID journal RFID enabled? I would be interested to know how RFID is impacting your business?
Mark Roberti 2009-11-09 11:32:45 AM
RFID-enabled It's a good question. We have not deployed RFID because we are about as close as you can come to a virtual enterprise. We have no reusable containers, parts, vehicles or inventory to track. We have some assets, such as laptops, printers and so on, but since we are only 12 full time people and half of the people work out of home offices, these assets don't need to be tracked with RFID. Our Web site is hosted in a third-party data center in California, so we have no data center assets to track. I'd like to track the amount of time people spend at their desks, but I'm afraid the probably wouldn't be too pleased about that. ;-)
Peter Grimlund 2009-11-13 09:59:37 AM
CEO, Co-Founder Mark, We are totally in agreement with you about the long term potential for improved and more efficient supply chains, manufacturing operations and customer facing solutions. However our approach to communicating that potential value proposition to business executives is different than what you appear to be advocating. We are one of the companies that downplays the emphasis on RFID. And we believe for good reason. By focusing on the business problem to be solved, we can engage the senior business executives whose lives would be made better if we can deliver on a solution to their problem, weather it be increased inventory accuracy to get at the excess inventory problem you mentioned in your post or for any of a myriad of other things that real-time visibility into a products where abouts and its movement can provide improvement. But leading with and placing emphasis on RFID as a technology immediately relegates the discussion to the IT group. They are not the decision makers. They do now own the problem. They assist the business executives when evaluating which potential solution fits best into their current technology infrastructure. But they typically are not the thought leaders that will introduce the changes necessary within an organization to embrace a full scale process re-engineering needed to get the most out of an RFID enabled solution. Now before all of the IT leaders out there take umbrage with this remark, there have and continue to be very forward thinking IT leaders sprinkled within organizations big and small. We see their names and hear their presentations at conferences because they represent the minority of companys, early adopters if you will, of RFID enabled solutions. However, they are not the eyes and ears of the mass market that we all need to sell into to see RFID enabled solutions go mainstream. Persisting to place emphasis on RFID only serves, at least in our experience, to create an artificial barrier between the message that we are trying to communicate and the business executives who are in need of hearing the message. So while being truly appreciative of everything that the RFID Journal and especially you Mark, are trying to do to advocate for the advancement of the technology, we believe it is time to lead our discussions with non technology charged language. And oh, by the way, we couldn't deliver the value to you mr and mrs customer without RFID.
Mark Roberti 2009-11-13 03:19:54 PM
Leading with RFID Thanks for the note. I need to clarify what I'm talking about. I don't advocate leading with RFID. When we write articles, we never write, XYZ corp has deployed an active/passive or other system. Here's what it does. We always talk about the business problem the company had an how RFID was used to solve it, or how a specific benefit is achieved. What I am saying is that the RFID industry needs to educate people about everything RFID does, so end users realize that the visibility it provides can do a lot of different things for them. The problem I see with your approach is you have to know what business problem the company has before you can engage senior business people. If every senior business person in the world understood the value of the visibility RFID provides, millions of senior business people would be coming to RFID vendors asking for help with myriad business problems. Until we get there, RFID will remain a technology that is used to solve one-off problems, rather than an infrastructure that can be used to achieve visibility across the enterprise. So to be clear, I understand that vendors need to sell product today, but I also think they need to simultaneously explain the bigger capability the RFID provides. Airbus gets it, but few other companies do.

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