RFID ROI — Not what it seems

I was having a recent discussion over lunch with an executive from a specialty grocer out west who admittedly didn't know what the big hoopla was about RFID. The mother of all grocers and supermarketers is into it in a big way but he didn't know what the point of it was except maybe for pallet level or truckload level tagging. I suggested - maybe its volume throughout the entire supply chain that one surmises without accurate and up to date information, supply chain managers might feel quite out of the loop and without much control. Dr. Peter Harrop has an article RFID ROI - Not what it seems that makes several points. Here's a sampling:

Ask someone in the street about RFID and they may say it is tagging prisoners. However, those in the industry generally talk about putting labels on pallets and cases necessitated by the commendable commands of leading U.S. retailers, which see sales increase and costs decrease as a result of their suppliers doing such tagging.

However, he says, if you follow the money and not the talk:

However, if we look at the major spend and potential spend on RFID, we get a very different picture. The global spend on RFID labels for pallets and cases alone — mainly for Consumer Packaged Goods (CPG) companies — will be around $0.09 billion this year rising to no more than $1.75 billion in 2017, provided the collapse in prices is halted at five cents and users demand it all over the world.

And more:

Most RFID suppliers to the retail and consumer goods industry are losing money, particularly where pallets and cases are concerned. This often amounts to millions of dollars yearly and sometimes more. By contrast, most suppliers to other sectors are making money, providing a secure, enduring support for their customers. Despite this, retail/CPG will probably dominate the RFID market by sales value in ten years’ time.

A two tiered system seems to be developing - one that is centered around the CPG/Retail space which is where the mega bucks are and the other that is centered around niche areas such as pharmaceuticals and high cost parts etc. The break is typical where one part of the market is high volume which insists on lower costs of tags for greater implementation while the other part of the market is high costs of products involved which might needs tags who are not averse to paying a premium for functionality laden tags.

Another surprising insight comes from considering item level tagging compared to pallet/ case and other applications. ...Looking behind these figures we see that item level tagging hugely benefits consumer goods suppliers whereas pallet/case tagging does not. Savvy retailers such as Best Buy, Marks and Spencer in the UK, Boekhandels Groep in the Netherlands and Maruetsu in Japan have also seen how item level tagging is exceptionally beneficial for them as well, multiple paybacks being the norm. Airbus, Boeing and the pharmaceutical companies see the most to be gained from item level tagging.

And,

Legal push is driving drug and tire tagging, which also helps.
All that means that item level tagging is not only happening alongside or even before pallet/case tagging, it usually commands a higher price and sees most participants making satisfactory, sustainable returns.

So what is one to make of this?
FUZZY!! - Still fuzzy.

posted by AJ @ 2:01 PM