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Part 10: Where to Start Using RFID

Before companies deploy RFID across supply chains, they'll need to implement it internally. This installment of our Special Report looks at where retailers, distributors and manufacturers can find a quick return on investment.
By Bob Violino
May 03, 2003—May 5, 2003 - The great promise of radio frequency identification is that it can reduce costs across the supply chain. By sharing information on the amount and location of product, retailers, manufacturers and distributors can all reduce inventories, react more quickly to changes in demand signals and make sure goods are always where they needs to be.

But before RFID can be deployed across the supply chain, companies are going to need to find ways to use it internally to cut costs and improve their own efficiency. The goods news is there are plenty of opportunities, and it's not hard to launch a project that will pay off within a year. The bad news is that starting a small project that can be expanded to cover an entire area of your operations and integrated with RFID systems in other operational areas is far more challenging.

In Part 4 of this Special Report (see The Importance of Vision), we explained why it was necessary for senior executives to look at their company as a whole and its position within supply chain. The goal is to draw up a flexible blueprint that allows you to automate one area of the business at a time. Think of it like you are building a hospital complex one wing at a time. Each one has to function independently, but it also work as part of the whole.

There are many choices that need to be made in small tactical projects -- which hardware vendor to use, which frequency, which standard, which software and so on. These decisions should be made not just on the basis of what will work for an individual project, but what will work across the company and eventually across the supply chain.

At this early stage, it will be difficult to get every decision right. You might decide that one frequency or data structure on the tag is ideal for your application. A year from now, an industry body could propose the entire industry adopt something different. Compounding the problem is the limited number of systems integrators who can provide good advice. (For a list of integrators, visit our Vendor Directory.)

It's important to talk to vendors about options, about how easy it is to upgrade readers to handle new standards and whether it's possible to reconfigure middleware to handle different data structures. We recommend investing in multi-protocol, multi-frequency readers that can be upgraded to handle whatever tagging technology becomes dominant in your industry.

Each company will have to sort out these issues based on its own situation and needs. The purpose of this article is to look at areas where companies can begin deploying RFID successfully. That is, we want to identify areas where companies can get a return on investment while learning about what RFID can and can't do, about integration issues, and about other aspects of a deployment that will become critical as you begin to implement the technology more widely.

ROI, of course, is influenced by hardware prices (not to mention software licenses and integration fees). This article looks at areas where experts and end users say you can get a return on investment today, with reader costs of $1,000 to $3,000 and tag costs of 50 cents to a dollar.
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