I spoke with a manager of a jewelry store recently about using RFID technology. She is in charge of the day to day administrative operations of two retail stores.

All through our meeting, she associated RFID solely with getting her staff less work so that they can knock off from work earlier. But really, I was not getting through to her about ROI. She was looking at RFID from a b-r-o-a-d perspective. B-r-o-a-d perspective generalizes RFID implementation, while disregarding specific RFID strategies that can mean enormous savings for the organization. It paints a picture of luxuries, the company can afford NOT to have.

I believe RFID ROI will only make sense when implementation is highly focused, targeting to fit / improve / newly enable specific roles within the business. Wide scale RFID implementation across multiple supply chains, interchangeably among companies is unlikely to happen not unless the RFID prices fall further. The alternative for RFID integrators who are looking to create a valuable proposition for their clients must examine the places RFID can fit and expand current business capabilities. Look at opportunities where RFID can optimize processes, enable a new business function that places the company above its competitors.

The obvious calculator are

1. Time-savings, bulk scanning versus per item scanning
2. Cost per error
3. Savings in cost of labour - E.g. 10 men vs 3 men in annual costs
4. Value of timely data acquisition which ties in with my next point
5. Quantify inventory efficiencies

Look into the chief bottlenecks of the current system for applicable RFID areas.

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We have been talking to our customers as early as 2002 on implementing RFID based jewelry software management systems. We believe RFID can profoundly improve the efficiency of the jewelry business, that we have seen happen for some. The initial resistance to RFID adoption is not very different from what we hear now. Of course when they experienced 70% savings in costs relating to manpower costs, barriers to theft and other tangible benefits of having such a system, the stories changed inevitably.

I like to touch on one of the MAIN sound of resistance :

RFID is expensive, considering the equipment and tags investment. - TRUE? False.

1. In the case of Advago Jewellery, we partnered a software integrator sometime in 2003 to customize a RFID based solution. Previously Advago had employed more than 7 persons for inventory management, processing and handling transactions and among other manual tasks. Their operations personnel usually spent up to 2 to 3 days to account for all the inventory. When the RFID based solution was rolled out, the inventory process reduced for the company almost 70% of the time they would have taken before to complete the tasks.
2. Another key benefit : The RFID based solution opens up the entire supply chain for detailed scrutiny of which every jewelry item is tracked, yes even its location. At Advago, in one particular instance, loses arising from potential thefts were uncovered ahead of time by an automated detailed audit trail. Of course the management on discovering the loophole scrambled to put in extra checks.
3. Finally about the costs of the tags. Each tag costs about 1% and even less the retail value of each jewelry product in most cases. Amortize that tag cost over the many lifetimes of many jewelry pieces by tag reuse, you will see it further drives the overall costs lower. Compared to the capabilities that RFID enabled for a jewelry business, the costs-benefits are simply overweighing on benefits. In addition, we have observed the costs of RFID tags have steadily fall due largely to more efficient processes that manufacture them.

There are a few other common objections I hear, which I may cover in future posts. But I think I will stop here for now…

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