Majority agree on extended supply chain benefits from RFID but still evaluating short-term return for organizations
New York — June 7, 2004 — Faced with industry mandates, almost half (47 percent) of North American manufacturing executives anticipate a high return on their radio frequency identification (RFID) investments, according to results of a survey released today by Accenture.
While nearly all (86 percent) of the executives at 30 manufacturing companies who participated in the survey said that RFID's greatest benefits would expand beyond the "four walls" of individual organizations to the extended supply chain, 45 percent reported that they are still evaluating the technology's benefits for their own organizations.
"The emphasis on the extended supply chain enables a new era of visibility and collaboration for manufacturers, distributors and retailers," said Lyle Ginsburg, managing partner for technology innovation in Accenture's global Products Operating Group. "While industry mandates require companies to invest in RFID, those that go beyond the minimalist approach to compliance will open the door to a host of competitive advantages."
The survey findings indicate that executives seem to be far more focused on the short-term rather than long-term benefits of RFID. For instance, when asked to identify benefits of RFID implementation, 48 percent cited improved lot track and trace, 45 percent cited improved recall management, and 41 percent cited better shipping and receiving. On the other hand, far fewer respondents said they expected longer-term supply chain planning benefits, such as reduction in inventory and working capital, improved revenue through reduction of out-of-stocks and reduced expediting costs, which were cited by only 31 percent, 28 percent and 17 percent of executives, respectively.
"Many manufacturers evaluating RFID today are looking for tactical benefits because the path to return on investment looks shorter and clearer," noted Christopher Boone, program manager for IDC, a leading IT market intelligence and research firm. "However, the long-term, strategic benefits of RFID, although harder to attain, will lead to competitive advantage in supply chain operations."
The survey also found that the two greatest barriers to RFID appear to be the costs of tags and readers and the cost of implementation, although one in three (34 percent) reported that they will implement RFID by 2005. Of these, 38 percent plan to implement RFID at the pallet level, 34 percent plan to do so at the case level and only three percent expect to do so at the item level. While 53 percent of respondents reported being under industry mandates to implement RFID, the majority (86 percent) of respondents said their companies are currently conducting RFID business cases, although only 21 percent said their companies are piloting the technology, and 3 percent said their companies are rolling out RFID implementations.
The survey, which was conducted by telephone in April 2004, entailed querying North American manufacturing executives at 30 consumer goods and pharmaceutical companies. The executives, in the United States and Canada, are decision makers for RFID at a division, regional or higher level.
Supply & Demand Chain Executive recently polled its readers and found that the market hype around radio frequency identification (RFID), as well as RFID compliance deadlines set by retail giants like Wal-Mart and Target, clearly has many companies thinking about this technology: a total of 54 percent of respondents said that RFID is going to be important, very important or critical for their companies over the next 12 to 18 months. Watch for the June/July issue of the magazine for more on this reader survey.