How Can an Express Transportation Company Introduce RFID?

Can a firm use the technology as an internal tool, with goods recorded upon pick-up and delivery? Or is it necessary that our customers also use RFID?

—Name withheld

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Yes, you can implement radio frequency identification without your customers deploying the technology, but it is important to think about the value of utilizing RFID instead of bar codes. The value might be lower technology deployment costs (which I will explain in a minute), fewer errors, lower labor costs or possibly all of the above. But some investigation will be necessary to determine your potential return on investment (ROI).

If you are a relatively young company without a lot of bar-code infrastructure already installed, then RFID could be a cheaper technology option. It is my understanding that the setups used by Federal Express, UPS and other courier companies to be able to read bar codes on parcels, regardless of their orientation, cost upwards of $50,000 each. Installing a passive ultrahigh-frequency (UHF) RFID portal, on the other hand, typically costs only about $5,000. However, the cost of a bar-code label is much lower than that of the same label with an RFID transponder. So determining which solution is cheaper is a question of the volume of RFID tags being used, versus the savings gained on the portals.

Let's say an RFID transponder ads 15 cents to a label's cost, and you will be handling 1 million packages within a facility equipped with 10 receiving bays. Using RFID labels would cost $150,000 more than bar codes. But if you have five receiving bays, installing RFID interrogators instead of bar-code scanners would save you $225,000 ($45,000 times five doors). So during the first year alone, RFID could be $75,000 cheaper.

Obviously, the tags will be a recurring cost, so there need to be some ongoing operational benefits achieved. These might differ depending on your operational procedures. If your firm frequently experience errors, such as items being placed onto the wrong truck or airplane, then RFID might be able to greatly reduce those problems, possibly leading to faster delivery times and more satisfied customers. And if you use a lot of labor to count and check items, RFID might save labor expenses. Again, these issues need to be investigated and an ROI study conducted.

You also need to think about the operational aspects of using RFID. If a customer won't be putting the transponders on, who will do this, and at what point during the process? How will information about the shipment be associated with the serial number on the transponder? How will that information be sent to back-end systems? These issues need to be thought out clearly, so that any solution rolled out will work the way that it was expected to work, and deliver the anticipated ROI.

—Mark Roberti, Founder and Editor, RFID Journal