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Look to Asset Management for ROI

In this guest article from AMR Research, analyst Dennis Gaughan argues that, in the race to find ROI from cross-supply chain activity, companies deploying RFID may be ignoring the better, more immediate source of ROI: internal asset management.
Oct 19, 2005This article was originally published by RFID Update.

October 19, 2005—The current state of the RFID market could best be described by the chicken-and-egg parable: customers won't accelerate their spending until they get a better ROI justification, and vendors can't reduce their costs until the volumes make it possible. Recent announcements of cost reductions and the promise of Gen2 notwithstanding, the market is still at a loss when it comes to viable use cases for RFID. This reality is going to force many RFID adopters to drag their feet and spend as little as possible on the technology, whatever is required for compliance.

Part of the problem is that the market in general is almost singularly focused on the cross-supply chain activity associated with customer compliance. We all know the issues with this. In a frantic search for ROI, vendors and some customers are trying to make lemons out of lemonade; trying to leverage that work to create business cases around proof of delivery or stock out reductions. While everyone would agree that these are definite long-term benefits of RFID, the current state of the RFID data is not sufficient to use these scenarios as a cost justification. The read rates are still not good enough and the scope of deployment is still too small to get the scale required to deliver a positive return.

What is puzzling to me is why the vendors continue to plod down this long-term road when what they really need is a short-term win. We talk to a lot of customers that have deployed, or are planning to deploy, RFID. Occasionally instead of hearing tales of woe regarding the lack of ROI, we hear examples of companies that have found benefit from the use of technology. In almost all cases (no pun intended), it is through the use of RFID technology to track assets internally to their organization. Tagging re-usable containers to better track component parts or using those tags to track work in process (WIP) to identify yield loss are just two examples that customers tell us deliver a positive ROI. In the latter case, the customer believes the ROI from this internal use case will help cover the cost of compliance.

I spoke with one prominent solutions provider the other day and he believes that asset management applications may be the use case that can help push the market forward. I tend to agree. So the near-term ROI might be there, it just might not be in the place you are looking. So, instead of trying to make lemons out of lemonade, why not try making some iced tea instead?
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