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An Eye on RFID ROI

BOSTON -- As the technology improves and business cases become clearer, nearly half of North American manufacturing executives expect a high return-on-investment from radio frequency identification projects, a new study from the consulting firm Accenture finds.

The relatively upbeat outlook is largely due to progress in addressing stumbling blocks that have threatened to delay adoption of RFID and electronic product codes, the underlying system of identifying an item's manufacturer, product category and serial number.

"Global standards will be in place in the not-too-distant future," said Lyle Ginsburg, managing partner for technology innovation at Accenture, in a keynote address at IDC's RFID Update conference here this morning. One exception is China, which has the potential to be a massive market for all types of goods. The country still needs to devote airwave space for RFID, he said.

Ginsberg said costs have also dropped. The price of the tags, which attach to pallets of goods and transmit data to receivers and ultimately back-end enterprise systems, have dipped to as low as 19 cents each (for the most basic functionality and performance) when ordered in mass quantities, he said.

Privately, some large-scale buyers want to band together to negotiate prices in the 6 cent to 8 cent range. Getting below 5 cents per tag however won't happen without an advance in technology, Ginsberg said.

Other experts at the show said fears that RFID systems would produce terabytes of additonal data that would need to be processed and stored, appear to be misplaced.

Despite these positive developments, companies are still cautious. While 86 percent of the executives at the 30 manufacturing companies surveyed said RFID's greatest benefits will be in the supply chain, 45 percent are still evaluating the technology based only on in-house considerations.

When asked to identify RFID benefits, executives chose short term goals, such as improved lot tracking (48 percent), better recall management (45 percent) and streamlined shipping and receiving (41 percent). Fewer expected longterm supply chain benefits such as reduction in inventory and working capital (31 percent).

When Wal-Mart issued RFID guidelines for its top suppliers, executives in other industries felt like they'd dodged a bullet, Ginsberg said. Then, the DoD jumpedin, expanding the scope of manufacturers that needed to explore RFID.

"There are fewer place to hide," Ginsburg said. "Non-compliance is a non-option."

Besides consumer products goods and consumer electronics, the pharmaceutical industry is a proponent of RFID and EPG. On a panel discussion, drug makers and sellers said they were moving forward with plans, and are showing a good deal of cooperation for an industry that has been loathe to share information in the past.

"CVS is not a bleeding edge company, which is probably why we make so much money," said Jack DeAlmo, vice president of inventory management and operations for the drug store chain CVS. But the company feels it's imperative to lead on RFID.

In addition to efficiency, DeAlmo, and other industry executives, said electronic product codes can help detect counterfeit drugs from being inserted into the supply chain. No solution is bulletproof, but it can help.

Also, in case of a drug recall, like the Tylenol scare of more than two decades ago, EPC could make it easier to account for all the drugs in question.

Originally developed during World War II to help anti-aircraft gunners discern friend from foe, RFID is now being enlisted to help manufacturers and retailers track products from factories to store shelves.

The systems have two components: tags, which are paper-thin, one-inch radio transponders attached to pallets, cases and eventually individual items. The other components are readers, which are panels about the size of a pizza box that receive and translate signals and shuttle data back to a network.

Retailers believe RFID will replace bar codes, vastly improve the efficiency of their supply chain and cut down on theft and loss. Still, other business sectors are looking at tags and readers for a variety of tasks.

Hospitals see the technology as a way to manage medicines and keep track of equipment. Fire departments envision a system that gives commanders instant information about their team members' location.

"If you haven't started playing with the technology start, start now," Accenture's Ginsberg counseled. "Make sure it's in your longterm plans."