A Long, Hard Look at RFID ROI

Today everyone who writes about RFID analyzes the same question: “Where Is the return on investment with RFID?” The answer is quite simple. No technology by itself delivers any ROI without the hard, in-the-trenches work required to discover the specific-to-your-company applications that could be improved and then prioritized based on the amount of business pain they cause. This type of investigation should provide a detailed map that management can use to allocate resources based on the best ROI options.

Many times, even if they undertake this challenge, companies have difficulty seeing the possibilities for doing a task in a new way. It is a normal part of the human condition that any significant change actually reduces efficiency at first. This is commonly known as the learning curve. The new methods are unfamiliar, and people will make more mistakes when they get out of their normal routine. The act of forcing changes to established procedures, however, somehow brings out creativity in every company’s greatest asset: its employees.

This may sound like so much philosophy. In many ways it is. Businesses that manage to rise above the rest are documented and written about every day. Every article I have read on this topic has a common theme: Reinvent yourself constantly or perish.

Simply put, study and discover how RFID can help your business, or your competitors will gain a competitive advantage that you may not be able to overcome. What happened to those companies that did not adapt desktop computers, ignored the Internet, or refused to get rid of their manual systems for material and resource management? Sure, the early implementations were difficult, and many issues seemed daunting.

Then again, the same was true of barcoding. Barcoding was once called a “disruptive technology.” But if we look back and find the “barcode mandates” implemented in the early 1970s, we could take many of the statements and predictions of that time and put them into our presentations about RFID deployments today with no one else the wiser. This is very instructive because barcoding has achieved the ubiquity that was predicted for it. It is not a big story today when a company invests in a barcode infrastructure project.

As I’ve mentioned, new technology does not, by itself, solve any of our problems. New technology, after we climb the learning curve, does stimulate new creative thinking – probably one of the most valuable commodities a business needs and can’t buy at any price. Before you dismiss RFID as just a “mandate with no ROI” or, the “next big cost with no return,” ask yourself a few simple questions:

  • Why is Wal-Mart – the biggest retailer in the world – convinced that this thing called RFID can produce dramatic cost savings?
  • What business processes is it trying to improve?
  • Could my company benefit if we focused on improving the same processes – with or without RFID?

The Wal-Mart motto is “Always the lowest prices – ALWAYS!” How does it believe RFID is going to help it sustain this corporate culture? Understanding the assumptions that support this initiative is far more important than finding out what the lowest price is for an RFID tag or dismissing RFID because news reports insist the technology isn’t mature yet. Of course it isn’t mature yet! If RFID were mature, like barcoding, then everyone would be using it, and there would not be the potential for a competitive advantage, but only the chance to maintain your current position.

Technology in its early stages presents an opportunity to challenge how things have always been done. By engaging in the challenge, it is possible to realize more of the collective creativity of your employees. So the key question ultimately becomes “How long can I wait to decide how to use RFID to my advantage?”

A mature business is a lot like an old house: There are too many places that need to be improved, so how do you prioritize? How do you decide which areas have the most potential to improve the business performance and can justify new investment? Somebody in the line of fire has to ask the tough questions about the thinking that has created today’s circumstances, and find ways to implement continuous improvement, reduce waste, and improve company productivity through a constant evaluation of internal processes.

Bill Arnold is chief strategist for the RFID division of Omron, a Schaumburg, IL-based RFID solutions provider.

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