Skip to Content
Author's profile photo Former Member

Overview of RFID and Its ROI ( Return on Investment)

What is RFID?

Radio Frequency Identification (RFID) is a method using tags or transponders to enable automatic, remote identification of objects that have been “tagged” with RFID transponders. RFID tags are like little transponders that send out information to a reader, or “interrogator.” An RFID tag contains a silicon chip and an antenna to enable it to receive and respond to radiofrequency queries from an RFID transceiver. The tags are small and can easily be attached to or incorporated into a product, animal, or person. Active RFID tags have tiny batteries in them, while passive tags must usually be “awakened” by a tag reader in order to send information.

Active tags can store and send more data and at greater distances than passive versions.

Applications and Benefits!!!

RFID tags are often seen as a replacement for barcodes, with significant advantages over barcode technology. The data capacity of an RFID tag is big enough to allow each tag to have its own unique code. Current bar codes are limited to a single type code for all instances of a particular product. With an RFID tag a product can be individually tracked as it moves from location to location through a process, or through the supply chain

What RFID can do?

Since the RFID tag is a transponder, the scanners do not require line of sight access to the tag as opposed to a laser scanner trying to read a bar code. This makes it very easy to read RFID tags on items that are difficult to reach such as cartons on a pallet.

•       RFID smart labels can be read and written to through dirt, paint, and many nonmetallic objects.

•       RFID tags can withstand harsh environments.

•       Tags can be read simultaneously, even through containers and packaging — for example, multiple individual items within one box.

·         The RFID readers allow for automatic, unattended scanning. With scanning ranges between 4 inches and 10 feet, boxes on a moving conveyor belt can each be identified individually.

•       The RFID chip can hold a large amount of data as well as monitor the movement of the tagged object — acquiring and delivering new information along the way like a traveling database. Greater storage capacity, combined with update flexibility, make smart labels ideal for applications such as product tracking through the supply chain, baggage tracking, or asset tracking

RFID Tags can be found in many applications across industries-

In the consumer goods and retail industry, RFID technology can provide information about location and condition of an item throughout the entire supply chain,

From manufacturing to distribution, all the way to the customer’s shopping cart going through the checkout lane. Information gleaned from the tags can alert retailers to potential stock outs of popular items in time to do something about the situation, validate the authenticity of received goods, and allow retailers to know exactly where goods are in every step of the production and shipping process

What is ROI of RFID?

Major manufacturers, particularly in the consumer-goods market, face intense pressure from Wal-Mart, Target, Albertson’s, and others to get on the RFID bandwagon. But for many other companies, it’s more of a chicken-or-egg game: manufacturers are waiting to see how many retailers install RFID-reading equipment before they invest heavily in RFID tags, while retailers are holding off on such investments until enough of their suppliers start shipping tagged goods.

Many major consumer packaged goods manufacturers do not foresee any quick Return-on- Investment (ROI) from adding RFID tags to their packaging and distribution systems. Instead, they see it as the cost of doing business with major customers such as Wal-Mart and the U.S. Department of Defense, which mandated the use of RFID tags

Getting the most out of your RFID investment requires not only a commitment to the technology but a vision to use RFID for collecting business information. To realize ROI from RFID, companies need to see this technology as a way to collect valuable business intelligence that can help increase profits and reduce costs. Before companies start tagging anything, they should first consider their business goals and how information obtained from RFID could help them achieve these goals. A systematic approach is needed for a successful RFID deployment

There are two types of ROI from RFID Solutions

1)     Short term

2)     Long term

Short Term ROI from RFID Solutions

Finding a ROI in RFID technology might be difficult in the short term because of the high Start-up costs, This reduction will occur because organizations will have a better understanding of how much product is available and where incoming shipments need to be placed, allowing for greater emphasis on cross docking. In addition, operating expenses will decrease since more products will move at a faster throughput with the increased amounts of hands-free Movement Based on labor reductions alone; organizations will reduce operating expenses by 7.5%. Larger manufacturers with high volumes will discover more opportunities for ROI

Long Term ROI from RFID Solutions

With increased visibility of inventory, organizations can deliver the right product to the right place at the right time with more efficiency many organizations believe fulfillment levels on store floors will also improve. Reductions by 7% in stock-outs will exist since RFID technology increases the visibility of inventory

In Addition shrinkage reductions due to the enhanced security of RFID will aid in creating higher fulfillment levels, customer service,

RFID technology over the long run could cut warehouse picking errors and labor costs by 36%

The faster companies integrate the RFID technology into their warehouses the more ROI will accumulate as the RFID technology evolves. The following is a summary of the positive benefits organizations have experienced after RFID implementation

ROI Checklist

•       Reduction in inventory carrying cost

•       Reduction in stock outs

•       Reduction in shrinkage

•       Reduction in labor costs

•       Improved customer service

•       Improved fulfillment rates

Another important fact concerning the long-term ROI is the potential for RFID-related savings once the tags can be fully implemented throughout the supply chain down to the item level. At this point there are predictions of huge costs savings due to complete product visibility even at the retail





This is very complex task and should not be underestimated. At the first place organizations must know their current position and role in supply chain



Business leaders must investigate and understand their current practices and processes and identify areas where enhanced information and visibility from RFID can provide the largest and fastest returns.




One of the first issues that must be addressed with RFID tags is when the tags will be

Placed on the cases/pallets. Will item already have RFID tags installed or will it be necessary to develop a process at the warehouse to tag all incoming items? Will corrugated manufacturers build the tags into the boxes? Organizations must also consider how pallet loads created at the warehouse, especially rainbow pallets (pallets of mixed products), will be properly identified and



There are two main strategies for the placement of RFID readers. One strategy is

Place readers at major gateways or portals within the warehouse, with the highest concentration of readers located at receiving and shipping areas. Other ideal locations for gateways are entrances and exits to the conveyor system. Managers must be sure to place these gateways in areas that promote efficient product flow and support the quick movements of large amounts of goods.

Rerouting goods or slowing down the product flow to ensure proper reads should not be required if the processes within the warehouse have been reengineered to realize the benefits of RFID



The implementation of RFID tags alone does not provide any direct benefits. To realize the full benefits of RFID, the implemented system must have the ability to capture and process the data

created by RFID tags and to analyze that data to provide useful information to support warehouse decisions. To capture and process this data, some type of middleware must be developed and installed to interface between the RFID readers and the WMS because WMS systems are not currently capable of direct interface with RFID readers

4)    IT Infrastructure

There are many requirements for an IT infrastructure to handle an RFID system implementation. One of the major requirements will be to assess the amount of bandwidth needed to handle the increase in data transmissions

5)    Labor Training

The implementation of an RFID system will have profound effects on nearly all jobs and

Tasks in a warehouse. Organizations must involve personnel from each process area in

the warehouse to understand how RFID technology will affect each required task. This

Detailed level of understanding along with lessons learned from initial pilot programs will

allow managers to develop the appropriate training modules for their employees. The

training of employees must emphasize how RFID will make it easier for employees to

complete their daily tasks as well as outline how RFID will improve the efficiency of the

entire warehouse along with the rest of the supply chain


RFID is a significant part of the broad movement toward sensor-actuator, always-on devices; smart tags with capabilities ranging from monitoring the date of perishable goods and automatically reducing the price as the expiration approaches, to sounding an alarm when a forklift operator places a palette of flammable chemicals in a restricted area. Reaping all the benefits from RFID and achieving positive ROI requires more than just tags and readers. A thorough rethinking of how to do business and a restructuring of systems and processes throughout an organization.


Assigned Tags

      Be the first to leave a comment
      You must be Logged on to comment or reply to a post.