What Is RFID’s Value in the Warehouse?

By Mark Roberti

We don't really know, since it has never been accurately quantified—and that should change.

Last week, RFID Journal hosted a virtual event called RFID for Warehouse and Inventory Management. More than 450 people registered, which is nearly double the average for one of our online events. This shows there is a great deal of interest in using radio frequency identification to better manage warehouses (a preconference seminar on this topic at RFID Journal LIVE! each year is always the best-attended of all our preconference seminars).

During the event, several attendees asked whether there are any metrics that quantify the return on investment in RFID for warehouse and inventory management. To my knowledge, there are not. For several years, I have been proposing to various organizations that they fund a study to determine the value of RFID in warehouse management, so that RFID Journal could create an ROI calculator similar to the RFID Apparel Retail ROI Calculator we produced (see A New ROI Tool for Apparel and Footwear Retailers).

Warehouses all have pretty much the same workflow and processes. Shipments are received. Goods are counted and put away. Orders come in. Items are picked and then shipped to stores or factories. I believe it is possible to quantify the benefits that RFID could deliver by improving these processes.

We could study, for example, the amount of time it takes employees to receive items by manually counting or scanning bar codes, and how much time it takes to verify goods received using RFID. We could quantify the amount of time it takes for workers to locate and pick items with bar codes, as well as how many errors are made. We could then time these processes and count the mistakes when workers are utilizing RFID.

How much time does it take for workers to verify that they have picked all the right items via bar codes, and how long when using RFID? How many shipping errors are made with bar codes, and how many with RFID? What is the cost of these errors—and of correcting them? It might even be possible to determine shrinkage in the warehouse due to items that are stolen, lost or spoiled.

If a detailed study could answer these questions, RFID Journal could build a calculator that would allow companies to enter variables, such as the cost per hour of labor, the number of items received, the value of goods and so on. We could allow firms to estimate a system's cost, based on the number of RFID tags needed, the number of dock doors requiring portal readers and so forth. I believe we could build a tool that would be of great value to businesses considering an RFID system, and it could help them obtain funding for an RFID solution.

One challenge, of course, is that goods are not coming into the warehouse tagged, which means companies might need to pay for the time and labor required to tag goods as they arrive. This makes it more difficult to achieve an ROI. But if the calculator shows the value that can be had from using RFID in the warehouse, vertically integrated companies could work together to encourage suppliers to tag goods at the point of manufacture. And suppliers might decide there is sufficient benefit for them that it is worth tagging at the source, which might help industries get to mass adoption much more quickly.

It frustrates me that the RFID industry can't get this done. I believe the research into RFID's role in inventory management in stores, conducted by the University of Arkansas' RFID Research Center (the lab has since been moved to Auburn University), led directly to the adoption we are seeing in retail now. Why can't the same thing be done for warehouses?

It's particularly frustrating when you see RFID companies wasting money that could have a long-lasting impact on the industry. A few years ago, two RFID solution providers paid $60,000 for a supplement about RFID in a European newspaper. The articles did not convince even one business to deploy the technology, so the money and work expended in preparing the supplement was essentially wasted. That money alone probably could have paid for the study I am proposing. Go figure.

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, the Editor's Note archive or RFID Connect.