Small to midsize enterprises weigh the costs and implications of making the jump into RFID.

It's expensive, the ROI is hard to realize, and most businesses don't have to do it, so why move forward with radio frequency identification (RFID)?

The biggest difference is the label. Instead of the standard bar code now a label is affixed  that contains an RFID chip.

Only one piece of new hardware is required, an RFID label printer that costs about $4,000, a little more than twice the price of standard bar-code printers. The modest, up-front investment, however, is only the tip of the iceberg.

The Costs Add Up
First of all, the tags themselves are still somewhat pricey. “The tags cost at least 20 cents each, as opposed to mere pennies for standard labels," says Christine Overby, analyst with Forrester Research in Cambridge, Mass. "This can be significant, even for small to medium-sized manufacturers, if you ship in large volume."

Then there is the business case, or lack thereof. Slap and ship, by itself, won't give you much benefit. To get any real benefits from RFID, most companies need to do things that may not even be possible given current constraints.

Increased Visibility and Risk-Avoidance
RFID will put more intelligence into enterprises. The benefit, however, is not in "slap and ship." Rather it's in increased visibility into the company's internal supply chain. RFID tags in raw materials can track the manufacturing process all the way to the pallet leaving the dock door.

Among other things this would give the company the ability to do a fast, "surgical" recall of products if necessary.  This kind of granular tracking would make it possible to immediately locate the specific cases and pallets that need to come back.

Another Cost to Consider

And the road to Utopia requires more than a new label printer. The right middleware, in fact, is essential to getting more bang for your RFID buck. It is all about putting context to the RFID signal.  This means you have to store RFID data, possibly associate it with some metadata, and certainly integrate it with back-end data, and application systems such as ERP.

Vendors OATSystems, RedPrarie, and Manhattan Associates, to name a few, all offer some form of RFID middleware for the enterprise. The software Microsoft is now making available to Jack Link's will target small to midsized businesses. Microsoft plans to bundle this software with its own ERP offerings, Navision, Great Plains, and Axapta.

Early Adopter Pain
Exactly how all this new hardware and software will best fit together with existing systems is still very much in doubt, which is one reason why adopting a wait-and-see policy is a sensible strategy. You can always outsource RFID tagging to a 3PL [third-party logistics] partner. However, don't do this just to avoid thinking about RFID. Be prepared to migrate to an architecture that allows you to reap the benefits of RFID when the technology is more mature.

In some ways the nascent RFID market is like the early days of networking. "You have a lot of new hardware devices at the periphery," explains Gene Alvarez, analyst with the Meta Group in Stamford, Conn. "These all need software support and remote management. The standards for this are still being developed, similar to what happened with modems and routers back about 15 years ago." In other words, the case for taking it slow on RFID is strong.

Source: informationweek.com