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A Midsize Approach to RFID

You don’t have to be as big as Wal-Mart to benefit from RFID, as long as you think strategically and act tactically.
By Ann Grackin
Oct 01, 2004—There’s a perception among many midsize manufacturers that RFID mandates represent an additional cost for them, without offering any benefits. That’s because midsize firms don’t have big IT budgets and may not have the resources to take advantage of the technology internally. But midsize companies can achieve significant benefits if they think strategically and act tactically.

Click here to enlarge image.

Clearly there are areas where RFID can pay off in the short term. At ChainLink Research, we recently did a survey of 885 midsize companies to see where their inefficiencies were. More than 80 percent said administration had to intervene manually at least once to complete a customer order. The number of interventions in the warehouse increased tenfold. In purchasing, commodity managers spent about 30 percent of their day tracking inventory in transit. The result: lost productivity, charge-backs, late orders and other problems.

These inefficiencies can be tackled by implementing targeted RFID programs. The return on investment that come from an RFID transformation—deploying the technology throughout an organization to support strategic goals—will take at least three years to achieve. Many midsize companies don’t have deep enough pockets to wait that long. But they can achieve short-term benefits by aligning RFID with other programs already in the works, such as Six Sigma quality improvement and efforts to introduce lean manufacturing techniques.

In other words, if your midsize company is part of a manufacturing kanban—a just-in-time, lean-manufacturing supply network—you can deploy small RFID projects that support the goal of improving just-in-time delivery and reducing inventory. Each new RFID project supports the company’s long-term strategy and eventually leads to an RFID transformation.

The chart shown at left lists three strategic initiatives that many midsize companies already have underway, and explains where RFID can support those initiatives and what the short-term payback is.
Midsize firms need to approach RFID compliance with their own needs in mind. By taking on tactical projects that meet mandates and cut costs or improve efficiencies in the short term, midsize companies can reduce the financial burden that RFID tagging requirements place on them. Ultimately, by aligning tactical RFID programs with long-term strategic goals, companies will become more competitive—and might even outflank slower-moving goliaths in their industry.

Ann Grackin is the CEO of ChainLink Research, a research and supply chain advisory services company in Cambridge, Mass.
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