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Where the Benefits Are

From receiving and warehouse management to yard management and shipping, here’s how RFID is helping five companies save millions.
By Bob Violino
Jan 01, 2004—If you’re struggling to develop a business case for deploying RFID technology and all you see are huge costs, you’re thinking too narrowly. RFID is a lot more than a technology that can improve order accuracy or reduce the amount of time spent scanning bar codes in the warehouse. As you wonder about the potential return on investment, keep in mind that RFID is a platform you can use to make your organization more efficient in many different ways in many different areas.

Think of the Internet. If you had tried to justify your investment in routers, switches and Ethernet cable by finding a return on investment from sending e-mail over the network, your company still wouldn’t be wired today. Yet the Internet makes almost every part of every business more efficient—from research and development to accounts receivable. And so it will be with RFID.

No company has RFID-enabled their operations from end to end. But many companies, including the five we profile here, have proved that lower costs and higher productivity can be achieved with RFID in key operational areas. That’s why it’s so critical to create a cross-functional team (see “A Mandate for Change,” page 18). Keep in mind that your company may not get the same benefits Boeing or Procter & Gamble got in one area, but you may achieve greater benefits in another. Each company has to find and focus on where it will get the most return on investment. See “Five More Ways to Save” on page 27 for additional ways to reap rewards from RFID.

Receiving. In June 2003, Boeing, the Chicago-based aircraft maker, went live with an RFID system in its commercial airplane unit in Wichita, Kan. The passive UHF system tracks parts as they are received into the facility. Boeing’s suppliers attach RFID tags to airplane parts before delivering them to the Wichita facility. The suppliers also send advance shipping notices over the Internet, which lets Boeing know the serial number associated with each part.

When Boeing receives the parts, their RFID tags are read automatically. The system matches the parts to the purchase order and confirms that the company got everything it ordered. Inventory is updated automatically. Boeing is still determining its precise return on investment, but it knows it’s saving in at least three ways: It doesn’t have to use people to scan parts into inventory; there are fewer mismatches between orders and deliveries to investigate; and it has a more accurate inventory.

Having suppliers put RFID tags on shipments can produce immediate benefits. A recent IBM Business Consulting Services study found that RFID could reduce labor spent on receiving by 60 to 90 percent. Keep in mind that the savings will be greater for manufacturers handling hundreds of different parts than for consumer packaged goods companies, which tend to buy bulk materials that are more easily tracked.
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