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RFID compliance, technology and ROI

In part two of a two-part interview, Taylor Erickson, an SAP supply chain and ERP expert, explains how SAP customers are readying their applications and data architecture for RFID.

Are most enterprises conducting early adopter projects only to meet compliance mandates?
The analysts will tell you that the majority of the work is compliance driven and usually slap-and-ship RFID type endeavors. What my experience has been is that most of the customers outside of compliance are looking to RFID as a strategic opportunity. They're looking at it for ROI first.

What we've been doing at Deloitte on both fronts is saying that ROI is going to be a critical component whichever path you choose. If you are doing a slap-and-ship mandate effort, at some point that needs to scale through your organization. It's going to grow and ROI is going to become a critical component to fuel that growth. We believe, and we do a lot of research into, saying, 'Where is this ROI going to come from?' In many cases it's going to come from the data that is flowing into their systems.

Eventually, how will the ROI come from the data?
A lot of the ROI initiatives around RFID are targeted around process improvements, productivity improvements and business process optimization, and those are very physically oriented. But what about the vast amount of data that is going to be flowing into their business? Is there value in that? Have they set up their infrastructure so they can mine this data to create actionable business intelligence from this data?

RFID has the potential to really unleash fundamental changes in the company's infrastructure such as data warehousing, data marts and analytical tools to mine that data and create that business intelligence. As an RFID project grows in scale, all of that infrastructure and software needs to be in place. Otherwise the enterprise is going to increase the amount of noise that is entering its system.

RFID is also going to require this huge data synchronization effort. An enterprise data management strategy is needed internally to make sure that the enterprise can scale RFID within their organization and then externally when they start looking at global data synchronization to open collaborative supply chains with their partners.

How are companies addressing data collection?
Some customers are looking to replace the information they have with bar codes. They are trying to feed the same information from the bar codes into RFID tags and glean productivity improvements by facilitating the scanning capabilities. They are taking a walk before they can run approach and say 'We're going to just change the way in which we receive the data, which will help our business process, but we're not going to fundamentally alter the data we're receiving or the business process.' Once they get that foundation laid, they go a little bit larger.

Other companies are taking a broader strategic approach saying, 'Whatever we do now is going to have to support us in the long run, so let's look toward standards bodies like EPCglobal. They are taking a very proactive and smart approach because there will be a handful of companies that scale and explode with RFID, and then they will hit the point where they're going to want to collaborate with their business partners. When that happens they will realize that they've got a massive reconstruction effort to get down the standards to where they can collaborate.

RFID news at a glance

RFID adopters to share struggles with deployments 

Suppliers must look beyond RFID compliance, analyst says

Sybase completes RFID package with addition

Oracle showcases RFID partners, to launch data hub

SAP targets small businesses with RFID

Do you see EPCglobal becoming the industry standard?
There are a lot of questions whether EPCglobal is going to be an adopted framework. A lot of intelligence is going into this EPCglobal network. It doesn't mean we're 100% sure it's going to go that way. I'd like to keep the most options open and it seems to me that the smartest play is to bank on it happening. It's not going to require huge commitment in capital or infrastructure resources that you're going to lose if it doesn't happen. If anything, the process of becoming compliant and synchronizing your data in those formats is going to be good for your business as a whole, and will help you even if it doesn't happen.

What are the challenges moving forward?
Initially a lot of the effort was focused on the physical aspect of requiring data, such as figuring out whether to use active versus passive tags and figuring out all the environmental conditions such as what frequency and spectrum to use.

I think the perspective has kind of changed from data acquisition to data management, and one of the fundamental things is going to be to understand the balance of those physical decisions and the data being collected.

Some of the early adopters have a spaghetti architecture in place where they have all sorts of interfaces. Even though they are first to move, they might have a silo within their organization that is doing RFID, and their ability to scale and grow is going to be hampered by their infrastructure. In some sense they might have experience with RFID, but other companies might surpass them based on their infrastructure.

In other cases, some companies have gained learning efficiencies. These companies realize that RFID needs a broader focus and a multidisciplinary team to make strategic decision around the technology and the infrastructure that is in place.

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