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Manufacturing Insights has published its 'RFID Investment: Cost of Compliance or Strategic Business Benefit?' report, which examines the current state of RFID initiatives and provides insight into the value of using an "options-conscious" investment strategy rather than a traditional ROI strategy.
According to the report, manufacturers should now focus on the true business value of RFID, rather than the cost of compliance, and it encourages executives to treat their RFID business case as a living document by identifying RFID opportunities (options), investing in a scalable RFID platform, and empowering management with the flexibility to make the needed adjustments to take advantage of those options.
Urgency
The report argues that the current RFID climate is overwrought with a sense of urgency (especially in the consumer goods and retail industry) to reap the potential supply chain benefits promised by RFID, and to comply with the plethora of RFID labelling mandates. This, the company says, has forced many manufacturers to implement immature technology in a narrow, compliance-focused scope. However, according to the manufacturers interviewed, there's no substitute for hands-on experience and, while the cost of RFID tags was definitely their greatest short-term concern, long-term issues revolve around physics, integration and process.
In light of these issues, and the challenges and opportunities they illicit, Manufacturing Insights believes that if RFID is leveraged to its full potential over the next three to five years, it will force companies to redefine the rules of engagement for collaboration: specifically, how supply chain data is exchanged and utilised, increasing operational visibility and providing a clearer picture of available options.
RFID lifecycle
The report also defines and analyses the potential value of four distinct stages along the RFID lifecycle. While most manufacturers linger in the "compliance" stage and some have graduated to "identification," only a few industry leaders have made progress into the "process" stage, which focuses on end-to-end supply chain integration and transforming both upstream and downstream processes. Manufacturing Insights suggests that the true value of RFID lies in the sensor networks of the final stage ("product"), postulating that current passive RFID solutions will prove to be the stepping-stone to sensor networks for open end-to-end supply chain applications.
Strategy tips
Manufacturing Insights worked with Dr. Robert Fichman, an associate professor at Boston College's Wallace E. Carroll School of Management, to define and introduce the "options-thinking IT investment strategy". Key points include:
- Recognise and create options for RFID investment: Companies must employ a needs-focused analysis of business processes, systems architecture and resource capabilities to identify all organisational options available, as well as existing risk factors and uncertainties.
- Value the options: Companies must place a systematic, accepted value on each identified option.
- Extract value from IT project options: Companies need to establish checkpoints to manage the options approach successfully.
According to Mike Witty, programme director for demand management strategies at Manufacturing Insights: "Waiting for RFID to become 100% proven, understood and standardised may seem to be a safe decision on the surface, but it's a losing strategy. In general, companies have focused too much on the cost of compliance and not enough on the business value of RFID". Indeed, Witty asserts that companies that develop a comprehensive RFID strategy extending beyond mandate compliance will be poised to gain a competitive advantage once the dust settles after early pilot projects.
Manufacturing Insights also warns that companies should create a RFID programme management office before developing an RFID strategy. The report offers guidance for the creation of such offices, and is available directly from Manufacturing Insights.
Source: Manufacturing Insights
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