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Benefits of RFID

We are a medium-sized business and are looking with great interest at the RFID initiatives of benchmark companies such as Wal-Mart with great interest. What are some of the benefits that RFID can deliver?

We are a medium-sized business and are looking with great interest at the RFID initiatives of benchmark companies such as Wal-Mart with great interest. What are some of the benefits that RFID can deliver?

The costs for implementing RFID are still too high for most mainstream applications, but they are falling. While the costs and risks might be too high to deploy in a production environment, the benefits are proving more apparent and many should be conducting research projects to begin determining the potential ROI.

Here is a quick checklist of several benefits that can be achieved with RFID solutions:

  1. Reduce warehouse and distribution labor costs -- Replace the point and read labor-intensive operation of tracking pallets, cases, cartons and individual products with sensors that can track these items anywhere in the facility with pin-point accuracy. This can reduce the high labor costs and service fees of regular stock management and store shelf inventory.


  2. Reduce point-of-sale labor costs -- With RFID-enabled products, checkout can be completed with a quick scan of all items in cart helping to reduce point-of-sale labor costs. The current scan-it-yourself component of self-service checkout can be improved, helping to improve adoption, reduce self-service checkout times and reduce fraud.


  3. Reduce inventory -- Inventory accuracy is important to helping eliminate excess/missing inventory, losses and write downs. With RFID, inventory errors can be reduced so that the company can be assured that the inventory indicated is the actual inventory available.


  4. Improve forecasting and planning -- Visibility improvements throughout the supply-chain can help to improve the forecasting capabilities to help better track where inventory is and what is happening to it throughout the supply chain.


  5. Reduce theft -- Losses due to theft are estimated to cost retailers over $30 billion per year and are estimated conservatively at 1.5% of overall sales. With RFID, products can be tracked through the supply chain to pinpoint where a product is and eliminate inventory errors that can cause shipments to go missing, or to better find where and when in the process the product was lost. Within the retail store, RFID can and has been successfully deployed, particularly on higher margin items, to help prevent theft.


  6. Reduce out-of stock conditions -- When an item is out of stock the customer is often left disappointed, either avoiding the purchase altogether -- common in grocery stores where as much as 4% of their revenue is lost each year due to out-of-stock conditions -- or worse, the customer moves on to a competitor in order to source the product. Eliminating out-of-stock conditions via better RFID product tracking and inventory visibility and forecasting, such as alerting the store staff immediately when the last item leaves the shelf, can have an immediate top-line revenue impact and have residual effects by improving customer service and satisfaction.


  7. Improve customer experience -- With RFID, items in a cart can be tracked and if a high-tech cart or kiosks are part of the shopping experience, offers can be made automatically related to the items -- such as dynamic up-sell/cross-sell of useful or necessary accessories.


This was last published in December 2005

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