RFID IOU: Be prepared to pay, and pay, and pay

That’s the message of a report by Larry Shutzberg, CIO of consumer packaging, promotional display and recycled paperboard manufacturer Rock-Tenn Co., that appears in InformationWeek. While there’s been a lot of talk about the purchase of chips or tags as the chief cost of an RFID system, Shutzberg points out that implementing a fully functional system will mean multiple ongoing expenses. Total investment needs will vary widely, but industry analysts predict RFID mandate compliance for typical large-scale manufacturers of consumer goods will range from $9 million to $25 million.

Shutzberg says it’s likely that implementation will be more costly in the early stages, especially among early adopters, who will have to deal with first-time mistakes and a lack of industry best practices.

Among the variable costs Shutzberg cites are those for tag readers, which can range from $1,000 to several thousand dollars; tag printers, ranging up to several thousand dollars each; RFID middleware, also possibly reaching several thousand dollars for an enterprise-wide system; RFID technology infrastructure, an expense which could be significant; strategy and technology consulting, which initially could be as little as $50,000 but, depending on the scope of RFID deployment, might potentially reach hundreds of thousands, even millions, of dollars; and RFID research and development, including labor, testing equipment and consulting. And don’t forget changes to internal business systems; integration with RFID middleware; implementation, training and change management; third-party service provider fees; and, of course, additional labor. All of these costs will vary widely depending on the size of each company and scope of its RFID requirements. But wait — there’s more! If advanced RFID capabilities are pursued, such as seamless integration with existing equipment or specialized network-connected apparatus, the investments needed could grow considerably. And there are recurring costs to figure in as well, including that for RFID research and development, which will be an ongoing expense simply due to the evolving nature of RFID. Oh, and let’s not forget those all-important tags. While the cost will vary depending on the amount purchased, Shutzberg says tags have the potential to be the largest single cost line item for major consumer goods companies shipping millions of cases and pallets each year to Wal-Mart and other retailers with RFID mandates. The bottom line? Shutzberg believes many early adopters have underestimated the cost of implementing RFID — and that may be an understatement.

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