Are You Considering RFID?
Companies ignore the broader implications of RFID mandates at their peril. If you are just starting to do your homework on RFID technology, you are late; but better late than never.
We at The Switchboard have come to understand that effective use of RFID as a competitive tool will be a market disrupter. It will result in major re-rankings of companies in such industries as CPG retail suppliers, security, travel, entertainment and hospitality, automotive and aeronautics suppliers, packaging manufacturers, shipping and more. Even if you think this is too extreme, at the least it would be wise to watch developments carefully.
By October 2005, Wal-Mart reported that after only the preliminary stage of rolling out the use of RFID in their retail systems, losses from Out of Stocks (OOS) are down 16%. Using their own reports that OOS cost them $2 billion annually, once fully implemented this will save them $320 million annually. That is before you factor in the substantial expected increase in just OOS efficiencies from having worked out all of the kinks.
To ride the wave and compete effectively in this fast-changing market, companies need to get educated. If RFID is one of your many responsibilities, your first step should be to understand the magnitude of what your customers expect. You may think there’s no need to rush to get up to speed. Think again.
By the end of 2005, the world’s largest retailer will have 12 distribution centers and 600 stores that are RFID-enabled. Over at the Department of Defense, 16 strategic Defense Logistics Agency Depots/Maintenance Facilities and four TRANSCOM Facilities will be RFID-enabled. Other major retailers throughout the world are enabling their facilities as well. Manufacturers Boeing and Airbus are beginning to require the 10,000 parts they buy to be RFID tagged.
One director of supply chain logistics told us that his company received a mandate letter from a major retailer, but had not yet read the detailed guidelines. “Our warehouse management systems company told us all we need is an RFID printer and their middleware to be compliant,” he said, “so that’s all we thought we had to do.” OUCH!
On the other hand, smaller retail suppliers that have volunteered to tag cases and pallets of products have already started capturing market share from their competitors. One company proudly advertises that their business has grown by $12 million in the past 12 months because they started tagging early.