Installing and deploying an RFID tracking system in your warehouse, or supply chain, obviously takes an investment. It will require time, effort and money from your organization to get an RFID Tracking system to operate properly and provide a return on your investment. To calculate an ROI on RFID, you need to know where you will find your return on investment—whether it’s labor, tangibles or intangibles.
How Much Does Implementing RFID Technology Cost
RFID Asset Tracking System Integrators like A2B Tracking, work very closely with their customers to get metrics to help justify these solutions. RFID technology is like any other technology implementation—the price tag can vary greatly depending upon the scope and size of the system, as well as, the environmental conditions involved. An RFID implementation could cost as little as ten thousand dollars for a small, well defined project or hundreds of thousands of dollars—if you’re trying to outfit a large, complicated warehouse with a mixture of mobile readers, fixed gateways and autonomous mobile robots (AMRs) with RFID capabilities.
When considering the costs for an RFID system it’s natural to begin with the hardware and software costs. Obviously, a new system is going to need to have RFID readers, either mobile or fixed readers (or both) and RFID tags applied to each of the unique assets or inventory that want to be tracked. Some sort of asset tracking or inventory control software and middleware is also needed to make business sense of the RFID data that is being collected. What is not so obvious at first blush is the cost of implementation and the science involved with choosing the appropriate hardware (tags and readers) for a specific environment and the specific assets needing to be tracked.
Unfortunately, there are solutions in the marketplace that attempt to simplify RFID. These solutions take advantage of the concept of selling “RFID in a box” where everything you need is contained in a simple, easy-to-use package (RFID tags, readers and a software license) all at a convenient price point. Experts agree that this type of a solution is dangerous with vague promises of immediate success – when in reality, the analysis of your specific environmental conditions along with scientifically testing the RFID tags and readers is essential to achieve the best return on investment.
How long does it take to install RFID technology?
RFID installation time will really depend upon the details and the scope of the implementation. If the system being implemented is only using mobile readers with a small number of assets, or inventory, it could be operational within a couple of days. In contrast, if you are working on a large warehouse, or manufacturing facility that contains a large amount of metal machinery, and you are trying to track a wide variety of assets or inventory — it could take many weeks.
Installing fixed gateways and portal technology as well as RFID AMRs requires a significant amount of time to configure, test and set up properly. If your warehouse has thirty overhead shipping/receiving dock doors that want a fixed RFID reader at each one, the installation of that equipment alone will require a few weeks. Also understand that your team will most likely need to schedule training to get your personnel ready to take advantage of the system. Unfortunately, there is no easy answer to implementation time but, it’s important to understand that the more complicated the requirements are the longer it will take to implement. In my opinion, it is a smart move to keep the implementation as simple and as contained as possible to find the fastest path to success.
Calculating Supply Chain ROI with RFID Technology
In order to determine your ROI before you implement an RFID technology, you need to start by looking at the labor savings. RFID technology can give you the ability to better utilize your staff to perform tasks that are more beneficial to your business than performing manual inventories or cycle counting. RFID technology is a very efficient system and will increase the speed and time of other warehouse activities, such as shipping, receiving, packing or putting items away— as well as reduce the time spent on finding misplaced items or inventory. For many warehouse and supply chain managers, the biggest return on the investment is found in saving by a reduction of labor, as well as, ensuring that shipments are verified for accuracy before they leave your facility in order to avoid mis-shipments.
At the end of the day, RFID tracking systems provide increased visibility of assets. A properly installed RFID system has the potential to achieve inventory accuracy levels at 99% or better. Having that level of accuracy, visibility and accountability is very valuable for any organization allowing them to achieve much higher levels of efficiency. Increased operational efficiency can usually translate into higher productivity and a reduction in labor costs.
Increased asset visibility can also translate into process improvements. It’s not uncommon for an RFID tracking system to be able to provide visibility into a manufacturing process and highlight the bottlenecks and the trouble spots in the operation. Having visibility and quantifiable metrics as a project moves through a work in process to understand which steps in the process are less efficient can be instrumental for an organization and highlight the areas that need improvement.
Other Benefits of RFID
As mentioned above, RFID Tracking systems can provide fast and accurate inventories which lead to not only labor savings; but also, improved inventory accuracy and organizational efficiency. Here are some more benefits of RFID that will make immediate impacts on the ROI of your RFID project.
- RFID provides automatic data capture at the unique item level
- RFID can work autonomously — unattended by humans
- RFID is high-speed and can read hundreds of tags per second
- RFID does not require “line of sight” as is required by Barcode systems
- RFID can penetrate packaging – like cardboard boxes and plastic cases – to read the tags inside.
- RFID tags can contain several times the amount of information as barcodes
Another way to Calculate the ROI of RFID
C-level executives will often assess the ROI of RFID differently. Executives are not only concerned with the reduction of costs, but also with increasing the quality of customer service, improving the accuracy of shipments or the ability to leverage an improved brand in the eyes of their customers by using modern technologies.
Executives know that increased real time transparency with customer orders is central to good customer service. It is important that customers know they can walk into an operation and know exactly where their item is in the cycle and when to expect it’s delivery.
For example, if you take a company that services after-market items—they are going to have customers who might walk into their location and want an update, “Okay, where’s my item? It’s been a couple of weeks.” Imagine if it took as much as a half an hour, to an hour for your employees just to find the item for the customer. That would not only be embarrassing—that would also be bad for business. Customers today expect accurate, up-to-date information at a moment’s notice. Solving this customer service problem for an organization is a huge benefit and can pay for itself many times over (Note: If this is a consistent problem for your organization see our Pro-Locate solution).
Conclusion
Attempting to perform a Return on Investment analysis for an RFID Tracking system can get complicated very quickly. The value of the new RFID system is often difficult to predict prior to implementation. Hopefully, this article has provided some ideas and concepts to show how an RFID Tracking system can provide value in your organization – with improved efficiency, accuracy and asset visibility along with many other benefits. Each unique organization will put a different value on each of these benefits and also possibly be able to understand the long range impact that they will have on the organization.
To learn more about how RFID could improve your operation watch our recent on-demand webinar: Modern RFID Tracking – start and small and grow with success. In this webinar Bob Peckham and Dan Faria explore the benefits and challenges with a modern RFID System implementation. Watch now and gain some real-world insights before you consider implementing RFID technology.
Editors Note: This article was originally published in November 2016. It has been revised and updated for accuracy in November 2021.
