Create a free Manufacturing.net account to continue

ROI From RFID

Taking a long, hard look at what’s required.

A quote from the great Albert Einstein makes a good analogy for the struggle the pharmaceutical industry and its supply chain are having with RFID when he said, “We can’t solve problems by using the same kind of thinking we used when we created them.”

To illustrate, remember when Personal Computers were first introduced, everyone (that had a network) used dumb terminals that shared the applications on a mainframe. At that time, it was very difficult to imagine placing the applications on everyone’s desktop and sending the resulting outputs across LAN’s, WAN’s, etc. But this technology revolutionized the business world. Why? The appropriate business applications (spreadsheets, word processing, etc) were developed that, when combined with the technology (PC’s in this case), delivered productivity improvement and thus, ROI for the company.

Is ROI from RFID possible?
Today, everyone who writes about RFID analyzes the same question: “Where Is the ROI with RFID?” The answer to this question is quite simple. No technology by itself delivers any ROI without the hard, in-the-trenches work required to discover the specific-to-your-company applications that could be improved and then prioritized based on the amount of business pain they cause. This type of investigation should provide a detailed map for management that can be used to prioritize and allocate resources based on the best ROI options. Then, it is possible to evaluate whether RFID can be applied to the defined business improvement opportunities that could deliver business value. (Remember, it is even more dangerous to think there is nothing that CAN’T be improved!)

Many times, even if this challenge is undertaken, pharma may have difficulty with “seeing” the possibilities for doing a task in a new way. It is a normal part of the human condition that any significant change actually reduces efficiency - at first. This is commonly known as the “learning curve”. The new methods are unfamiliar - people will make more mistakes when they get out of their normal routine. However, the act of forcing changes to established procedures somehow brings out creativity in every company’s greatest asset - their employees.

This may sound like so much philosophy. In many ways it is. Businesses that manage to “rise above the rest” are documented and written about every day. Every article I have read on this topic has a common theme: Reinvent yourself constantly or perish!

Adapt RFID To Your Business Model Simply put, study and discover how RFID can help your business, or your competitors will gain a competitive advantage that you may not be able to overcome. What has happened to those companies that did not adapt desktop computers, ignored the internet, or refused to get rid of their manual systems for material and resource management? Sure, the early implementations were difficult and many, unexpected issues seemed daunting. The same things were being said about bar coding.

Remember, they used to call bar coding a “disruptive technology.” But if we take a look backward, and find archives describing the “bar code mandates” that were implemented in the early 1970’s, we could take many of the statements and predictions of that time, put them into our presentations about RFID deployments today, and the impression would be almost identical. This is very instructive to understand because bar coding has achieved the “ubiquity” that was predicted for it. It is not a big story today when a company invests in a bar code infrastructure project.

New Tech Not Always The Answer As I’ve mentioned, new technology does not, by itself, solve any of our problems. New technology, after we climb the learning curve, does stimulate new creative thinking – probably one of the most valuable commodities any business needs and can’t buy at any price. Before you dismiss RFID as just a “mandate with no ROI”, or, the “next big cost with no return”, ask yourself a few simple questions: “Why is Wal-Mart - the biggest retailer in the world - convinced that this thing called RFID can produce dramatic cost savings?
What business processes are they attempting to improve?
Could my company benefit if we focused on improving the same processes - with or without RFID?

These are crucial questions about survival in today’s business environment. The Wal-Mart motto is “Always the lowest prices - ALWAYS!”

How do they believe RFID is going to help them sustain this corporate culture? Understanding the assumptions that support this initiative is far more important than finding out what the lowest price is for an RFID tag or dismissing RFID out of hand because news reports insist the technology “isn’t mature yet.” Of course it isn’t mature yet! If RFID were mature, like bar coding, then everyone would be using it, and there would not be the potential for a competitive advantage, only the chance to maintain your current position.

Technology in its early stages presents an opportunity to challenge how “things have always been done around here”, and by engaging in the challenge, it is possible to realize more of the collective creativity of your employees. So the key question ultimately becomes, “How long can I wait to decide how to use RFID to my advantage?”

A mature industry is a lot like an old house - there are too many places that need to be improved, so how do you prioritize? How do you decide which areas have the most potential to improve the business performance, and can justify new investment? Somebody in the line of fire has to ask the hard questions about “the thinking that has created today’s circumstances”, and find ways to implement continuous improvement, reduce waste and improve company productivity through a constant evaluation of internal processes.

So, don’t listen to me, listen to Einstein! What areas of your business have become too routine? Too established? Dare I say it - TOO BORING!!

Take those on with some gusto, and see what happens with RFID.

More