Supply Chain Metrics: Choose an RFID Strategy Carefully

RFID tagging offers the potential for more efficient logistics processes, but be wary of additional costs and longer delivery times.

Sep. 6, 2012 Becky Partida, knowledge specialist, supply chain management, APQC

APQC's data indicates that there is no clear best choice among RFID tagging strategies. Organizations that have adopted a specific tagging strategy perform better on some logistics metrics than on others. When the potential for RFID requirements from customers is considered, the situation becomes more complex.

Cost to Operate Warehousing

A metric related to warehouse cost is the total cost to operate warehousing per $1,000 in revenue. For its analysis, APQC defines operating warehousing as all activities related to receiving products, storing products, shipping products for outbound delivery, and tracking shipments. There is a significant variation in the median total cost to operate warehousing among the RFID strategy groups.

Organizations that maintain separate inventories of tagged and untagged items have the lowest median cost associated with operating warehousing ($2.67 per $1,000 in revenue), whereas organizations using a slap-and-ship strategy have the highest median cost ($11.41 per $1,000 in revenue). The higher costs obtained by organizations using a slap-and-ship tagging strategy may result from the extra labor needed to place and monitor tags on products destined for specific customers. The organizations would need to identify the products that need to be tagged and then have employees tag those items before the products could be shipped to customers.