Determining Justification for Rfid Technology

racetrack Head DETERMINING JUSTIFICATION FOR RFID TECHNOLOGY Deter momenting Justification for RFID engineering Bahram Izadi, Master Student of Business charge, University of Isfahan, Isfahan, Iran and John Boyd, BASc, Computer Engineering, University of Ottawa, Ottawa, Canada Abstract What atomic number 18thebenefits? is acommon question for any make-up watching implementing a untested applied science. This is an especi aloney burning(prenominal) questionfor small or exploitation companies, where an misplay in investment couldresult in unrecoverable in operation(p) ceiling loss.As Radio Frequency Identification (RFID) adornments argon making bass and impressiveimprovements in manufacturing, distri moreoverion, and supply chain management and military logistics, it is succession to countthe quantitative financial and operational benefitsof RFID inan organizations competitive strategical ends. This article go out review the benefits of RFID carrying out against its be, and demonstratehow the introduction of an RFID outline laughingstock reduce resultion, distri thation, and w atomic number 18housing lives, while increasingthe operational qualification of an organization. by financial poetic rhythm, value equations, and numerical abstract this article pull up stakes demonstratehowRFID implementation shadow improve non b bely anorganizations toilet course of action, but as well impalpable benefits such as internal focus, constancyleadership, and differentiation from its competitors. A sample melodic line sector case occupy exit be presented to demonstrate to the enunciateer valuable insight to both real-world advantages and limitations associated with RFID adoption. 1. foundation The focus of this paper is how to develop an RFID strategic final cause to quantify RFID excuse through return on investment (ROI).RFID draw outs strategic advantages for businesses, private or state organizations because it can improve efficiency , damage nest egg, and yield greater returnsin virtually all lands of business memberes and operations. However due to the complexity associated with an RFID system, its enigmatic proven capabilities, and high cost of implementation, it is crucial to create straight a business case and justification in terms of ROI, either quantifiable or intangible, which offer the greatest benefit to the company. 2. Backg move What is RFID?Radio frequence identification, or RFID, is a wireless automatic entropy collection engineering which uses electronic tags for data storage. An RFID system consists of an RFID tag, a lector/writer building block with antenna, and a computer, as shown in Figure 1. pic Figure 1 RFID ashes The reader/writer emits radio signals from its antenna to power the tag, and can read or write data to the tag without a direct line of site. Reader/writer units be available in various shapes and sizes depending on requirement or use.Similarly RFID tags are availa ble to suit roughly any application or environment from unobtrusive paper lithe tags suitable for traditional barcode applications, to large straining-duty brick sized tags to track heavy machinery. The computer or middleware allows communication between the RFID computer hardware and system applications. 3. RFID Benefits and cost RFID offers strategic advantages for businesses because it can improve productivity, efficiency, cost savings, and yield greater returns in virtually all areas of business operations.As an example, Air Canada was losing $2 1 million million million USD worth of food carts per social class. This initial problem of asset tracking resulted in the deployment of RFID systems which yielded a 2% decrement in total gillyflower, 5% reduction in master(prenominal)tenance be, 20% to 50% in trucking charges, 80% reduction in shrinkage, 100% reduction in cost for auditing annually scrutinise counts and ROI within 18 months. Internet, 4 In general some of t he main advantages of RFID usage are Reduced warehouse and dispersion labor be due to step-upd data automation Reduced inventory by omitting inventory errors Improved forecasting and course of studyning due to improvements in profile of supply chain Reduced theft by tracking the products bloom to pint Reduced out-of stock conditions via rele doorway RFID product tracking RFID is apply for everything from tracking cows and pets to triggering equipment down oil wells. The most common applications are payment systems, toll collection systems, access control, track people, assets and products without the need for military personnel intervention or direct line of site. Internet, 5 All of the applications listed have been deployed because they harbor proven ROI. . RFID Costs When considering RFID costs a company must consider the total cost of ownership rather than just the initial RFID hardware and tags costs. A masterful RFID system takes not only hardware infrastructure, but in any case advantage such as design, development, deployment, maintenance, ongoing support, and training. Also to consider are the futurity costs as the system is scaled beyond its initial buffer storage or trial phase. Costs should also be associated with restructuring or introducing brisk business practices. 5. Creating Justification for RFIDThe potential applications and benefits of RFID are only constrained by a companys level of innovation. However, in advancehand rushing to adopt RFID technology a company can train the greatest rate of return and success by having in place a comprehensive strategic plan which quantifies all encompassing aspects of RFID including technology and business processes in pitch to deliver its benefits for utmost value. In array to justify the costs of an RFID system it is vital a companies RFID strategic plan contains quantifiablemetrics assigned to values of each area which RFID impacts.thusly when a company does decide to implement RFID, such a strategic plan lead allow them to proceed confidently to their strategic documental while ensuring the maximum potential value areas are achieved. By strain a poor RFID strategic plan without careful and insightful study, risks to deoxidize the focus and resources of the business and whitethorn prove to be detrimental and wasteful, sooner of beneficial. Each RFID deployment impart have its unique application varying with the application of the company and the companys goals so there is no hit ROI or total cost of ownership criteria for RFID.On the other hand, ROI in many cases is not only found financially but also in intangible factors. For example a dispersal center may place value on increasing efficiency throughput in order to save money on labor and reduced shipping errors, where a hospital or healthcare center would place value on increasing visibility of surgical equipment so to have a better chance to save a persons life due to increased rejoinder time economic cost would not be so some(prenominal) as a constraint in this case, but rather the serve is of more importance than straight financial justification. . Creating a RFID strategic plan to determine ROI justification As previously mentioned, there are much uncertainties and reservations when an organization first considers introducing RFID, such as concern of high charge or hesitation at the risks of being an early adopter and risking mistakes and skill costs. This is usual behavior in small companies and especially in developing countries wherean error ininvestment couldresult inunrecoverableoperating capital loss.To overcome this uncertainty and to proceed confidently with the company-wide acceptance of RFID deployment, a plan must allow strategic thinking and financial justification. Sweeney, Patrick J II, Chapter 16 By thinking strategically, we uncover the hard data and information that enables members of organization to make informed decisions and to communicate the rationale of RFID deployment effectively. Performing an ROI study on RFID leave alone allow a company to become reacquainted with current business processes and to identify opportunities for optimization (if RFID is decided to be used or not. Through analysis and calculations, in this process we examine every RFID affected area and assign to them associated value metrics in terms of quantifiable or intangible returns. However in order to obtain the information and data necessary to perform ROI calculations and value equations it is necessary to create a solid and detailed rich strategic plan comprised of but not particular(a) to the following sections, Figure 2. pic Figure 2 Involved Steps of an RFID Strategic Plan 6. 1 Form Business TeamSince an RFID implementation will affect business process as well as technological change, it is beneficial that the business team includes internal management personnel qualified of RFID analysis from all related functional departments. Int ernal team members, works closely together with external experts and consultants, will be able to offer valuable procedural insight to the development and design of an RFID system. 6. 2 mend Scope and Assumptions A strategic plan should clearly define how RFID will affect the business and define key elements of RFID operation.A clear pinch of affected processes, departments, and areas of coverage, is essential. Assumptions are necessary to ensure a common intellectual of how the RFID system will be implemented and what processes will be affected. 6. 3 Identify Strategic and Economic Benefits Benefits represent one of the most important factors in building an RFID business case. To determine justification and feasibility of an RFID system a company must summarize its expected strategic impacts and quantifiable benefits obtained through more efficient RFID enabled processes.Since strategic or intangible benefits can not be easily quantified, it is important for the company to artic ulate wherefore an RFID introduction is important to business and have a clear discretion of its associated value. This is especially important for companies which place value on product or data visibility. Examples of strategic benefits include internal focus, industryleadership, and differentiation from its competitors, and product visibility. Quantifiable economical benefits can be tested through metrics and measured with calculations.Quantifiable benefits will vary with industry and RFID application but will generally be attributed to time or process improvements through automation and improved efficiency. 6. 4 Develop Business growth Models Process modeling consists of creating business-flow diagrams and use-cases to determine and quantify how RFID will impact those processes and associated applications. Adoption of RFID technology will most likely create new additional process steps, and therefore modified business use cases will be introduced to polish optimized RFID use. Some sub processes might get streamlined and thus issue efficiency gains, whereas some other sub processes might need to include additional touch steps, which might impact their efficiency rates. The use cases associated with the force and newly introduced processes can then be analyzed for benefit Lahiri, Sandip, Chapter 8. 6. 5 Determine Costs When considering ROI, one must consider the total cost of ownership rather than just the initial RFID hardware and tags costs.A complete RFID system includes not only hardware infrastructure, but also service such as design, development, deployment, maintenance, ongoing support, and training. Also to consider are the future costs as the system is scaled beyond its initial archetype or trial phase. Costs should also be associated with restructuring or introducing new business practices. 6. 6 Create an instruction execution Road Map An implementation roadmap breaks up the complete RFID solution into a series of objective milestones within set time- butts.The main tasks involved in completing this step are developing a scale of implementation from trial or pilot stages to full deployment, and assigning associated metrics of costs and benefits with each stage of milestone. 6. 7 Create Business chemise Finally all information should be compiled to form a business case. Each benefit should be associated with a level of impact and time to realization. The level of impact takes three factors into report whether a benefit generates revenue, mitigates risk, or reduces cost.We may assign low-impact to benefits that meet one factor and high-impact to benefits that meet two or more factors. Time frame is a time period in which the business will estimate benefit. Short term could be one to two years and colossal term three to vanadium years. It is difficult to forecast beyond five years. 7. Criteria and Justification Metrics to Justify ROI In order to justify the costs an RFID system it is vital a company complete RFID str ategic plan contains quantifiablemetrics assigned to values of each area RFID impacts on including procedures and personnel to ensureRFID investments yield the greatestrate of return.Through study numerical analysis value equations and modeling, thevalue of various RFID systems can be made apparent and determined to be financially feasible orcost prohibitive. It is important to present a cost benefit analysis in order to justify the investment in an RFID system and set in motion a clear ROI. Upon the completion of the strategic plan, the quantified figures and resultant findings can be processed through value equations to justify and determine feasibility of an RFID system.However, ROI in many cases is not only found financially but also through intangible factors. In this case, VOI (Value of enthronement) should also be considered. Value of Investment is much more holistic approach to the benefits delivered and includes, next to the hard costs figures, the soft and difficult to m easure benefits such as improved quality, lag moral and service perception, and customer loyalty. 8. Sample of RFID Justification through Case Study 8. 1 IntroductionThis example will show the reappearance on Investment (ROI) of an RFID solution for a company which sends shipments from its manufacturing whole works to its diffusion center. The system will be closed loop which means that the tags and their data will be limited to internal company use and will not be used beyond the limited area of distribution center. RFID technology will be used to help automate the vary process. The overall objectives are Demonstrate how RFID technology may be employ to improve the efficiency of the transfer of shipments. Demonstrate a case which is justifiable in cost due to positive ROI analysis. 8. 2 Background A companys distribution center is plagued by errors and inefficiencies when receiving shipments from the manufacturing plant. Especially knotted areas are delay in receiving pallettetetetetes and loss of pallets to be returned. 8. 3 designate Metrics to Processes Estimation time to completion (ETC) of points entering the distribution center, without and with RFID is expound as in Table1. No. Process ETC Process with RFID ETC with RFID - - - Precondition RFID tags are0 sec affixed to pallets and individual items at the manufacturing plant. 1 force play scans barcode on pallet30 sec Pallet is placed in RFID 5 sec to bindingatedate order and manually reader gate and scanned compares to expected manifest along with all contained list. items.Order is checked automatically. 2 If pallet is valid expected 3 min If pallet is valid but found3 min personnel enters pallet as to have exception it is acquire and breaks open the broken own, all items are pallet automatically scanned and noted, and extra item is brought to return area. 3 Else pallet is invalid it is 4 min Else pallet is invalid it is4 min moved to return area. moved to return area. 4 Personnel scans all individual 6 min - - bar-coded items to validate the pallet contains all lucid items 5 If item is invalid personnel 2 min per item - - manually notes this and places item in return section. 6 Else item is valid and is placed 6 seconds per itemElse pallet valid and all 1 min into received area to be moved contained items are present, into inventory section. (Pallet entire pallet is placed in contains 20 individual items. ) received area to be moved to inventory. Time to unload a pallet with no 11min, 30sec - 1min, 5sec invalid items Table 1 Estimated time to completion to process pallet at distribution center From Table 1, the estimated completion times (ETC) of Time to unload a pallet with no invalid items is 11min, 30sec without RFID, compared to 1min, 5sec with an RFID system. 8. 4 RFID Solution and Process Detail Placing RFID reader portals at the distribution cente rs dockside gate allows for automatic identification of all pallets and included pallet items to be scanned upon arrival.This would drop dead the manual steps of unpacking and checking each individual item separately before adding to inventory. An additional processing step of placing RFID labeling on items and pallets before them leave the manufacturing plant would be occurred however this would not affect distribution center processing time. 8. 5 RFID Benefits Incorporating RFID into the distribution center process provides the following quantifiable and intangible benefits Quantifiable benefits include Pallet processing time increased of 90%, Reduction of loss as all pallets due to total visibility, jab savings, and Reduced keyboard entry errors Intangible benefits Neater docking area, Improved work strain 8. 6 Risks and complexityPotential risks and complexity associated with RFID implementation may include Tag Misread due to damaged tag, moisture on the pallet tag, or prox imity to metal surfaces. Site evaluation and proper RFID technology can minimize this risk as well as racecourse barcodes in parallel with the RFID tags. 8. 7 RFID Components and System Costs The proposed RFID system will require estimated infrastructure and services consisting of the following Description Costs unhopeful $ Costs High $ Hardware/Software RFID gate portal reader (4) 28,000 40,000 RFID handheld readers (4) 6,000 8,000 Accessories Cables, etc 1,000 1,000 Servers and Accessories (5) 10,000 15,000 Software 30,000 50,000 RFID tags (10,000) Closed loop system, tags can be recycled 2,000 5,000 integration Engineering, Installation and Integration services, training, 60,000 100,000 maintenance (60 person days) Business Process adaptation RFID tag application retooling at the manufacturing plant 35,000 55,000 Total 172,000 274,000 Table 2 Estimated RFID Costs 8. 8 Summary of Results Through RFID implementation if you compare the palle t processing times of Table 1, you can see that a savings of 10min, 25secs can be realized per pallet. This is equivalent to a 90% increase in processing throughput times with the condition of a valid pallet and items. If the distribution center receives euchre pallets per day it can realize investment between 10 and 16 months depending on RFID costs, with assumed personnel costs of $10 hour and a 261 working-day per year calendar. If the distribution center is exonerate of invalid pallets 95% of the time return on investment can be seen as in Table 3, as follows Pallets received per nest egg per day Savings per day Savings per year ROI with low RFID costsROI with high RFID costs day (in $USD) (in $USD) (in months) (in months) (in hours) 300 49. 5 495 129,140 16 26 500 82. 5 824 215,234 10 16 700 115. 5 1155 301,328 7 11 Table 3 Time to ROI Sample calculations are as follows for 500 pallets received per day 11min,30sec * 500 pallets = 690sec * 500 = 345000sec. 1min,30s ec * 25 pallets = 690sec * 25 = 17250sec. 1min, 5sec * 475 pallets = 65sec * 475 = 30875sec 17250+30875 = 48125sec 345000sec 48125sec = 296875sec 296875sec/3600 = 82. 46hr, round to 82. 5hours 82. 46hr*$10=$824. 65/day , round to $824 824. 65*261=$215,233. 65/year 215,234. 38/172,000=1. 27 0. 79*12=9. 58, round to 10months 215,234. 38/$274,000=0. 799 1. 27*12=15. 27, round to 16months Once RFID familiarity has been gained and estimated metrics have been realized, RFID may be moved to other areas of the company such as the picking from inventory at the distribution center, or some other RFID application at manufacturing center itself.However, the processes, equipment, results, and lessons learned will be applicable to other distribution centers, and acquired knowledge may be applied to other potential cost saving areas. 9 Conclusion The capabilities and limitations of RFID much be understood on a technical level, but also on a business procedural level to determine how RFID will ult imately impact on business. The decision to implement an RFID system must be carried out diligently with ROI equations. Also important to consider is intangible value which may not be apparent on a balance sheet. RFID is ultimately a business tool like many other IT options and to access its maximum capability, a company must have solid business procedures and plans in place. References Lahiri, Sandip (2005, August). RFID Sourcebook. Prentice Hall PTR.ISBN 0-13-185137-3 Larsson, Bjorn & Qviberg, Ola (2004, December). Evaluation and Justification of an RFID Implementation master at IKEA Customer Distribution Centre. Master thesis LiTH-EKI-EX04/083SE plant of technology Linkoping University Department of Management and Economics Industrial Engineering and Management Sweeney, Patrick J. II (2005). RFID for Dummies. Wiley Publishing, Inc. ISBN 0-7645-7910-X Ustundag, A. Cevikcan, E. (2007, October). Return on Investment Analysis for Evaluation of RFID Implementation on Cargo Operatio ns, Istanbul Tech. Univ. , Istanbul Appears in RFID Eurasia, 2007 1st Annual Publication see to it 5-6 Sept. 007 ISBN 978-975-01566-0-1 INSPEC Accession Number 9777002 Digital Object Identifier 0. 1109/RFIDEURASIA. 2007. 4368145 Date Published in Issue 2007-10-29 Internet 1 Association for Automatic Identification and Mobility. What is RFID? Retrieved family line 2, 2008 from http//www. aimglobal. org/technologies/RFID/what_is_rfid. asp 2 Axios Systems. (2007, March) Return on Investment Fact or Fairy Tale? White Paper. Version 1. 1. 0 Retrieved September 5, 2008 from http//www. axiossystems. com/ sixer/shared/downloads/pdf/ROI_fact_or_fairy_tale. pdf 3 Miles Technologies. Common Applications Using RFID for Asset Tracking and another(prenominal) Applications. Retrieved September 5, 2008 from