November 24, 2005
EPC implementation - part 1
According to research by AMR, the retailers who have shown an interest in RFID from the beginning are now reaping the fruits of having taken initiative early on. These companies have managed to bring down the supply chain expenditure by as much as 5%. This means that suppliers who have initiated RFID deployment to comply with the retailer mandates also stand to profit by implementing RFID in their own supply chain.
The perceived high cost of implementation should not be a reason to miss out on the opportunities presented by RFID. The companies that have implemented RFID have created processes to facilitate the deployment and to try and integrate RFID with the existing systems. Within an industry, the cost of RFID equipment is not going to vary for the end-users. The differentiating factor between companies who profit from RFID and those that struggle to do so is going to be the manner in which the system is evaluated and deployed.
In order to deploy EPC/RFID, it is important that the business requirements be understood. For most suppliers, the minimum requirements of their deployment project are defined by retailer mandates. The requirements could be in terms of the type of equipment to be used, products to be tagged, and performance levels.
Experts feel that a strong case for RFID deployment can be made on the basis of the fact that the investments made in complying with the mandates will also help to improve the internal management and reduce the supply chain costs of the suppliers. For retailers, RFID offers an opportunity to increase sales by improving stock availability and visibility; the suppliers also will see an increase in sales, which according to a study by A.T Kearney could be up to 0.07% of the existing figures.
Increased sales due to RFID deployment yield greater profitability than those achieved thorough marketing and promotional efforts. EPC/RFID systems provide greater benefit to companies that are facing a high number of stockouts. Even though the DoD does not sell anything, it has still considered it worthwhile to deploy RFID. It hopes to recoup its costs from the benefits that will accrue from minimizing labor, improved inventory control, and better distribution of goods.
Research by Accenture has yielded information that increased visibility can reduce the safety stock by up to 30% across the length of the supply chain. This can result in reducing the working capital by up to 8% and the fixed assets such as space and equipment that are freed can be utilized for other activities.
--
Did you enjoy this post?
« RFID for building energy management | Main | EPC implementation - part 2 »
