08 Nov How Manufacturers are Saving Money with RFID Technology
The benefits and return on investment from RFID do not apply solely to the distribution phase of the supply chain. Manufacturers across the world are turning to RFID technology to track their assets in the manufacturing process. This can provide real time data along the entire length of the manufacturer’s conveyor belt, allowing analysis of best practices, ways to boost efficiency, and where to improve.
Wal-Mart, one of the first major companies in the world to implement RFID asset management systems into their business, has since seen massive return on investment in manufacturing.
Wal-Mart’s manufacturers, slowly being forced to change with the times and put RFID tags on their goods, reported increased efficiency and fewer errors at each plant in which RFID was implemented. They could review and analyze RFID data to identify bottlenecks in the manufacturing process. The return on investment became apparent to the company as soon as RFID was being effectively utilized, and since its implementation amid the company and its suppliers, Wal-Mart has only grown.
They have had such incredible success with RFID to track the manufacturing process that they continue to mandate that more and more of their suppliers put tags on their goods. Even the U.S. Department of Defense has issued requirements of RFID tags. RFID helps companies optimize speed, minimize errors, and ensure the highest profitability possible.
Quantifying ROI in Manufacturing
It always varies by company, but across the board, no matter what company is studied after implementing an RFID system into their operations, labor savings are huge. In a case study on a large industrial equipment manufacturer, not only was transaction and inventory accuracy increased, but there was a significant labor reduction.
At the time of implementation, 2003, the ROI was estimated at an annual $8.4 billion in savings. Over $7 billion of this comes from labor savings (which are huge in manufacturing and in the warehouse) and out-of-stock supply chain cost reduction. By 2005, company revenue had risen from $1 million to $20 million. Since then, the system has easily paid for itself and continues to add to Wal-Mart’s massive global profits on the daily.
Savings are integral to the effective use of the RFID system, but if done right, the company is improved as well. SAP transaction configuration is catalyzed and eventually the overall customer experience is faster, easier, and even cheaper.
Perhaps the greatest return on investment provided by RFID asset management systems is the keen awareness of the future that comes with the real time data delivered to the company by RFID. This data is used to predict asset life cycles, plan for new orders of assets, maintenance of assets, and utilization. It can even predict growth of a specific product or the company itself.
Giving the company insight for the future allows for improvement, innovation, efficiency, and an enhanced customer experience. The return on investment in manufacturing is apparent not just in the books, but in giving the company the peace of mind that mistakes are minimized, and the skillsets to avoid them altogether.
To see some available inventory management systems for your manufacturer, go to http://www.abr.com/Solution/New-Inventory-Management.
Image cc Flickr by i-5 designs