FRAMINGHAM, Mass., August 22, 2005 – Manufacturing Insights, an IDC Company, today announced the availability of RFID Investment: Cost of Compliance or Strategic Business Benefit?, a new report to educate manufacturers on the current state of RFID initiatives and provide insight on the value of an options thinking RFID investment strategy in place of traditional ROI strategies. According to Manufacturing Insights, manufacturers should focus on the true business value of RFID, rather than the cost of compliance. Manufacturing Insights encourages executives to treat their RFID business case as a living document – identifying the company’s RFID opportunities (options), investing in a scalable RFID platform, and empowering management with the flexibility to make the needed adjustments to best leverage identified options.
The current RFID climate is overwrought with a sense of urgency (especially in the consumer goods and retail industry) to reap the potential supply chain benefits promised by RFID and comply with the plethora of aggressive mandate timelines. This has forced many manufacturers to implement immature technology in a narrow, compliance-focused scope. However, according to the manufacturers interviewed, no substitute exists for hands-on experience and, while the cost of RFID tags was definitely their greatest short-term concern, long-term issues (further defined in the full report) focus on physics, integration and process.
In light of these issues, and the challenges and opportunities they illicit, Manufacturing Insights believes that if RFID is leveraged to its full potential over the next three to five years, it will force companies to redefine the rules of engagement for collaboration: specifically, how supply chain data is exchanged and utilized, increasing operational visibility and providing a clearer picture of available options.
The study also defines and analyzes the potential value of four distinct stages along the RFID lifecycle. While most manufacturers linger in the “compliance” stage and some have graduated to “identification,” only a few industry leaders have made progress into the “process” stage, which focuses on end-to-end supply chain integration and transforming both upstream and downstream processes. Manufacturing Insights states that the true value of RFID lies in the sensor networks of the final stage – “product” – postulating that current passive RFID solutions will prove to be the stepping-stone to sensor networks for open end-to-end supply chain applications.
With all of the uncertainty and risk factors that exist with RFID today, Manufacturing Insights worked with Dr. Robert Fichman, an associate professor at Boston College’s Wallace E. Carroll School of Management, to define and introduce the options thinking IT investment strategy to replace traditional ROI strategy when evaluating RFID technology. Key points include:
- Recognize and Create Options for RFID Investment: Companies must employ a needs-focused analysis of business processes, systems architecture and resource capabilities to identify all organizational options available, as well as existing risk factors and uncertainties.
- Value the Options: Companies must place a systematic, accepted value on each identified option.
- Extract Value From IT Project Options: Companies need to establish checkpoints to manage the options approach successfully.
“Waiting for RFID to become 100 percent proven, understood and standardized may seem to be a safe decision on the surface, but it’s a losing strategy,” said Mike Witty, program director, Demand Management Strategies, Manufacturing Insights. “In general, companies have focused too much on the cost of compliance and not enough on the business value of RFID. Organizations that develop a comprehensive RFID strategy extending beyond mandate compliance will be poised to gain a competitive advantage once the dust settles from the early pilot projects.”
In addition, Manufacturing Insights asserts that companies should create a RFID Program Management Office (PMO) before developing an RFID strategy. The report also offers guidance for the PMO’s charter creation.