According to a survey released by global management consulting company Accenture on Tuesday, almost half of North American manufacturing executives anticipate a high return on investment (ROI) from their radio frequency identification (RFID) investment.
Since retailers such as Target in the U.S. and Wal-Mart have mandated that all of their top suppliers be outfitted with RFID tags — for some as early as 2005 — many organizations have spent the last few months determining what RFID can do for their organizations and how far they are willing to go with the technology.
One industry observer warns, however, that companies are going to have to spend money to make money.
One surprising finding from the survey was that although a full one-third of executives said they expect high ROI from their investment and nearly all — 86 per cent — said they believed RFID’s greatest benefit would expand beyond the “four walls of individual organizations to the extended supply chain,” the majority are still unconvinced of RFID’s benefits, explained Steve Convey, a partner at Toronto-based Accenture.
When it comes to analyzing the advantages RFID can bring to an organization, Christopher Boone, program manager for analytics firm IDC in Framingham, Mass., said companies usually fall into one of three categories and attitudes.
The first category is companies that are on the bleeding edge of this technology, Boone explained. This is the group that understands that money will have to be spent in order to get an RFID solution that will actually benefit the organization down the road.
“They have been working with it for a number of years even prior to the mandates trying to figure out how they can improve their own business processes,” he added.
The second group is comprised of those companies that are sitting in the middle. They are probably very efficient companies today before implementing RFID, so they are struggling to build a business case around deploying the technology, Boone explained.
The last group is made up of companies that are “truly in compliance mode,” according to Boone. This is the group that wants to spend as little as possible to gain an RFID solution. They don’t want to loose Wal-Mart’s business but they just see implementing the technology as added cost, “not thinking too much about how they are going to use this in their own organizations and don’t want to think much about it.”
It is this category of user that is going to find it difficult to see a positive business case from an RFID implementation, noted Boone, adding that if they are only going to implement a bare bones RFID implementation, then “it is likely going to be close to a 100 per cent added cost to their business.”
“I understand why companies are just looking to comply because they may still be waiting for some of the standards to be set in place and they don’t want to move forward too quickly until they see some of the standards in place,” Boone said. “They also want to see more companies spending on the technology so it becomes cheaper, [but] if everybody is just doing it for compliance it may take a little bit longer for those costs to come down.”
According to Accenture’s survey, the two greatest barriers to RFID adoption appear to be the costs associated with it — mainly the tags and the readers.
Accenture’s Convey said that standards also received high ratings particularly by North American participants, “where the pressure to comply with mandates is greater.”
Although Convey said he recognizes that there is hesitation from companies to implement the RF technology, he thinks this apprehension will turn into action when RFID “becomes more pervasive across the supply chain.”
“[RFID] will ultimately revolutionize the business performance of manufacturers and create opportunities for innovation and new ways of generating revenue,” he said. “It’s our view…that effective RFID implementation and utilization long-term will separate the wheat from the chaff in terms of high-performing companies.”