The Recession Is Over—Now What?

By Mark Roberti

The global economy appears to have turned the corner, but no one expects sales to pick up quickly, so companies need to focus on cutting costs and enhancing efficiencies.

As the third quarter of 2009 winds down, many economists are suggesting the Great Recession is over, and that global economic activity has stopped declining and is now inching up. In the United States, they cite a rise in housing prices, fewer first-time unemployment claims and a second quarter decline in gross domestic product of 1 percent (compared with a 6 percent decline in the fourth quarter of last year). Asia and Europe are showing signs of picking up as well.

But no one is forecasting a quick recovery. Most economists believe unemployment will remain high in the United States for another year or two, and that consumer confidence around the world is still extremely low. That means people are going to be more careful about how they spend their money. And with sales growth expected to be weak for the next year or more, companies will need to focus on cutting costs.

Given that businesses responded so quickly to the downturn by reducing their headcount, selling off or closing unprofitable businesses, and cutting all discretionary spending, you might think there's no room for further cost-cutting. But that's where new technologies, including radio frequency identification, can help. Here are four areas where RFID can deliver a quick return on investment.

Improved Asset Utilization

Whether you run a hospital, oil refinery or brewery, you spend a portion of your capital budget on replacing tools, reusable containers and other assets. For a relatively small investment, RFID can reduce the number of assets that need to be replaced, by improving asset utilization. In 2007, Wayne Memorial Hospital planned to purchase more than 300 infusion pumps, but after putting in a real-time location system (RTLS), it wound up purchasing only about 250. The hospital saved nearly $276,000, plus an additional $27,000 in operating costs, for those added pumps (see At Wayne Memorial, RFID Pays for Itself). That was more than the cost of the RFID system, which means any additional savings from the RFID system flows right to the bottom line.

Labor Savings

If your company spends a lot of time and money collecting information on the movement of goods—say, for regulatory compliance, or looking for files, products or assets—RFID can potentially help you save a significant amount of money. Telstra recently completed an RFID trial that, if rolled out across its 130 retail outlets, could save the Australian telecommunications firm up to AU$4 million (US$3.2 million) in annual labor costs and product shrinkage (see Phone-Tracking Pilot Down Under Points to Big Benefits). And Fish & Richardson P.C., which specializes in patent and trademark law, turned to RFID technology to identify and track the thousands of legal files at its trademark practice in Boston. By reducing the amount of time needed to locate files, the new system saves the law firm an estimated $144,000 a year (see RFID Brings Order to the Law).

Yard Management

Cost Plus World Market, a large specialty retailer of food, furniture and other home goods, has deployed an RFID-based real-time location system (RTLS) to monitor the 75 trailers in its fleet (see Cost Plus World Market Finds RFID Sweet Spot in Yard Management). The retailer says the system has improved its yard efficiency and reduced costs by automating many yard-management processes previously performed manually. Kimberly-Clark uses a similar system and achieved an ROI within nine months (see Kimberly-Clark Sees Positive Results With PINC Trailer Tracker System).

Inventory Management

The U.S. Navy's Fleet and Industrial Supply Center Puget Sound (FISCPS), a multi-building facility encompassing approximately 300,000 square feet of warehouse space, services submarines and on-base repair shops. It receives some 6,000 stock replenishments and new items each month, and stores roughly 110,000 repair and replacement parts. FISCPS introduced RFID and new warehouse-management technology to automate, speed up and increase the accuracy of its receiving process, as well as improve asset visibility. The Navy reported benefits on the investment in the RFID portion of the project of $220,000 in annual savings related to improved inventory accuracy. It also reported $61,600 from reduced inventory losses, and $176,000 in labor savings from reduced receiving/data entry work. The total RFID value for Naval Base Kitsap Bangor, in Silverdale, Wash., was estimated at $457,000 (see RFID Joins the Navy).

There are many other applications, large and small, that can cut costs and deliver a near-term return on investment (see RFID and the Road to Recovery). With the economy unlikely to pick up rapidly for perhaps another two years, companies need to investigate new technologies now that can save money and boost the bottom line.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog or click here.