When starting to calculate ROI for RFID investment companies start looking at when different cost will occur and how to pay it back.
If a company wants to follow its items from manufacturing (or at
least manufacturing country) all the way to the point of sale, it
may well mean RFID investments in 6-10 different operations.
However, this is usually not the case. To simplify things, let
us take a look at the route of an item to a consumer.
The picture above shows the main steps of a garment on its way
to consumer. To understand who pays for RFID, it is important to
- Who takes care of the operations?
- Who benefits the most from RFID?
STEP 1: MANUFACTURING
If garments are to be followed from the manufacturing onwards,
such as with American Apparel, it is key to attach the RFID tag to
the item at manufacturing. Many large garment distributers also
mandate this to their manufacturers.
What is the investment?
When this is done the simplest way possible - the Gerry Weber
style - there will be no fixed installations at the manufacturing.
The brand owner or retailer who lets the garments manufactured will
supply the manufacturer with RFID enabled labels (care labels or
price tags for instance). Nothing changes at the manufacturing, but
typically a local tag converter would take care of supplying the
tags. This cost is covered by the brand owner.
Taken it a bit further, the manufacturer OR the retailer/brand
owner may invest in RFID printing facilities. This means that the
manufacturer can create ready labels for the items they manufacture
as they go. The cost is covered by the brand owner or the retailer,
dependent on how it is agreed between the players. At this point
one should ask oneself: who benefits the most from the hardware at
the manufacturing estate? And the benefitor should pay.
STEP 2 / 4: TRANSPORT
Typically transport vendors, especially shipping companies
invest in RFID as an answer to the request of their clients. At the
simplest, all that is needed is to read RFID tag from each box that
is carried by the company and report this back to the customer.
This is easiest done with a mobile RFID reader, which has access to
mobile phone network for data upload. The investment to the
equipment is not heavy, but the challenge lies in different
customers' need to receive data differently. No transport company
wants to install tens of different application clients to their
mobile device in order to serve different clients. Hence the
sharing of this data should be somehow standardized as well. This
cost is typically carried out by the transport company. However, in
most cases retailers do not necessarily need this step to include
STEP 3: DC OPERATIONS
DC operations vary from company to company. Some use DC
primarily for cross docking, others have several different
functions for a DC. The more the DC does, the more benefits there
may be to the DC operator from RFID. RFID can be used for goods
receiving and delivery processes, picking, different registrations
as well as stock control. Additionally DC's may offer their clients
RFID tagging and Association services and other RFID related
services as well.
Depending on what the RFID will be used for and how, the party
investing in the RFID is either the Retailer / Brand owner or the
DC operator. The more the DC operator will benefit, the more likely
it is for them to pitch in for the cost. Especially in cases when
the same DC serves several end clients.
STEP 5: Store
The investment on hardware equipment is heaviest at this end.
The store also needs different applications and integration to ERP
or PoS system. However, the store typically witnesses the most
benefits as well. But of course, none of the benefits are sensible
unless the garments are tagged before they enter the store. So
either tagging at the manufacturing or tagging at the DC would be
necessary. The cost of RFID equipment and applications in the store
are carried by the store operator - so the distributor / retailer
or brand owner.
To finalize, the easiest way for a retailer / garment
distributor to benefit from RFID is to get the different items
tagged and invest in RFID equipment in the store (and potentially
in own DC). For other vendors in the garment value chain, RFID is
more of a must, however, many DC vendors may find ROI in DC
automation and of that RFID can be a great part.