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Where the Money Is in RFID
Oct 16, 2017—Although radio frequency identification technology is almost magical in its ability to identify, count and track items—you simply wave a reader around, or goods just pass by an antenna, and the information appears—it is not a sexy technology. By that, I mean that business journalists don't consider it an attention-grabbing topic. I've been pondering why that is for a while now, and the only reason I can come up with is that journalists and the businesspeople they write for view RFID as a mundane cost-cutting tool.
Most CEOs would like to cut costs. But it's not their passion. No one ever went into retailing to cut costs. They went into retailing because they enjoy selling. Likewise, no one ever went into the car business to lower supply chain costs. They went into the car business because they love to make great cars. If you view RFID as only a tool for tracking and managing your inventory, your work-in-process or your reusable containers, it's unlikely to be a high priority.
Internet of Things technologies, on the other hand, are viewed as sexier. Why? Because if you connect your coffee maker to the internet and allow people to schedule when it starts brewing, that's cool, and it could lead to more sales of coffee makers. Or it could lead to higher margins. The Nest thermostat sells for $249. A Honeywell programmable thermostat that doesn't connect to the Internet costs about $100.
I would contend, however, that RFID can not only cut costs and boost efficiencies, but also lead to higher sales. Retailers that have deployed passive UHF RFID tags on apparel items have found that sales have gone up by between 5 percent and 15 percent. That's because they're able to ensure they have the correct product in the right place when a customer wants to buy it. In the future, customer-facing applications will help add a "cool" factor to stores and help bring customers back.
Manufacturers, of course, benefit when retailers sell more. But manufacturers also benefit from using RFID. Killdeer Mountain Manufacturing used RFID to track work-in-process, but also shared the data with its customer, Boeing, thereby enabling the supplier to lock in a relationship with a good customer (see An RFID Roadmap for Small and Midsize Contract Manufacturers). OEMs tend to give more contracts to suppliers that offer that kind of visibility.
We've covered examples of medical device manufacturers selling more because they use RFID to replenish items in a timelier manner. We've even seen vending machine operators use RFID to alert them to restock machines, so that they could sell more efficiently (see PantryLabs' Vending Machine Dispenses Fresh Foods Via RFID).
What's more, we've seen companies add RFID to their products to sell more. Berntsen International added RFID to its system for tracking buried assets. Kuehne+Nagel, a logistics firm, is employing the technology to provide active, real-time temperature monitoring of temperature-sensitive pharmaceuticals and health-care products in transit during intercontinental transportation. There are many other examples. The point is that RFID is not just about cutting costs—it can help grow topline revenue as well. And in business, that's sexy.
Text and photos by Mark Roberti, courtesy of RFID Journal.