The return on investment from RFID may be in the stores

Manufacturers and distributors in the retail supply chain are looking to the store for their ROI from RFID, says ARC Advisory Group.

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 12/27/2006

“We will not see a big bang for RFID in the supply chain in 2007,” says Chantal Polsonetti, vice president of manufacturing advisory services for ARC Advisory Group. “What we will see is a continued measured roll out.”

And while the headline most people are paying attention to is that Wal-Mart expects to have 1,000 suppliers tagging cartons and pallets by the end of 2007, Polsonetti says the real news is under the radar.

“Our manufacturing customer base is telling us they already have sophisticated supply chains, so the benefit from RFID in the distribution center is incremental at best,” says Polsonetti. “Instead, they’re looking at applications around asset tracking, work-in-process and how product moves through the retail store to get an ROI.”

When it comes to work-in-process, manufacturers are looking at RFID to not only track the progress of products through manufacturing, but also to use that data for error-proofing and process improvement.

“To most people, RFID is associated with automatic identification,” says Polsonetti. “We see the greater value in using the data to automate decision-making.”

As an example, one automotive manufacturer is using an RFID solution to read tags on trucks when they approach the gate. The system opens the gate and based on business rules, instructs the driver where to deliver the trailer to the dock.

When it comes to the retail supply chain, manufacturers that have invested in RFID to comply with Wal-Mart’s mandate are looking for value from the store shelves.

“Out of stocks are the poster child, but the sophisticated suppliers want to know if their product isn’t on the shelf, whether it’s in the backroom. Others are looking at whether their promotions do better in aisle three than in aisle seven. They have this data, so now they’re turning to analytics to make these kinds of inferences.”