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How to Estimate the Cost of a Closed-Loop RFID Project

Here are five steps to help you plan how to fund the deployment and determine the potential ROI.
By Bob Violino
Dec 10, 2007—Before an organization can undertake a major RFID implementation, it must first estimate project costs. This helps a company not only plan how the deployment will be funded but also measure the potential return on investment it can achieve using RFID technology.

Here's a step-by-step guide to what companies must do to predict the costs of implementing and maintaining an RFID system. The implementation in this example is a closed-loop asset-tracking system, employed within a single facility such as a warehouse.

1. Determine the scope of the project. Figuring out the types of assets to be tracked, and drawing a boundary of where RFID will be used within the facility, is something organizations should do upfront, says Roy Wildeman, senior analyst at Forrester Research in Cambridge, Mass.

During this step, it's important to determine exactly what your organization hopes to accomplish with an RFID tracking system. Is it trying to prevent loss or theft of assets, for instance, or to improve inventory management? Here are some key questions to ask in determining the RFID capabilities you require:
  • Does your company need to establish the location of a given asset in real time?
  • How precisely do you need to track the location? (It will cost more to locate assets to within, say, three feet than to within 50 feet.)
  • Will your firm track raw materials as well as finished goods, vehicles or manufacturing equipment?
  • What's the read range desired? What kind of potential interference is present where the assets are located? And what frequency provides the best reads?

The answers to these questions will help determine which types of RFID tags, interrrogators and software you'll need to implement.

"The first step is to clarify the overall business objective you're trying to achieve, in the context of asset tracking," says Paul Schmidt, RFID practice lead at Accenture, located in New York. "Once that's clearly identified and you have alignment and executive support to proceed, you can define how things work today, and how you want the environment to work in the future."

To evaluate current operations and identify areas that will be affected by RFID, Wildeman says, you should dispatch teams to examine plant-operating characteristics through site visits, user interviews and process mapping. Interviews with equipment manufacturers and providers of RFID products and services can also help provide early insight into which operational areas will be affected by RFID technology.
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