Baby Steps

By Jeffrey Rothfeder  |  Posted 2004-08-10 Print this article Print

Baby Steps

Moreover, the tentative steps taken by large suppliers should turn out to be a boon for small and midsize companies. Instead of having to compete against big initiatives driven by a stable technology, smaller manufacturers and distributors can also begin to assess nascent RFID systems on the cheap, and that should better prepare them to participate in the gains from RFID, along with their larger rivals, when automated EPC-based supply chains become prevalent.
That, of course, will have to wait a few years. Until then, the most successful RFID applications are likely to remain very targeted, "closed-loop" efforts that operate solely within a single facility or company operation and dont require transmitting data among business partners or even business units. (In July, the airline carrier, Delta, began a 24-month program to embed invisible RFID tags in all labels placed on baggage sent on domestic flights. Readers at check-in counters, on conveyer belts where the bags are sorted, and at aircraft cargo compartments will continuously monitor the whereabouts of every bag. This should all but eliminate the problem of misdirected bags, because an inventory of the planes cargo before takeoff, based on RFID data, will determine if the right luggage made it into the hold. And if a bag is loaded onto the wrong plane, Delta will be able to locate it instantly, without the huge labor costs currently incurred in tracking down lost luggage.

This project—among the first full-scale airline RFID implementations—is slated to cost between $15 million and $25 million and is expected to be operational by 2007. Thats a small price to pay, as Delta sees it. U.S. carriers currently mishandle about one bag for every 250 pieces of luggage they carry, and Delta spends about $100 million a year in labor, delivery and other overhead costs to find and return lost items to their owners. Delta estimates that the technology will soon pay for itself. "Weve reached the end of the improvements in baggage handling that we can accomplish without new technology," says Delta spokesman Reid Davis. "Any way you look at it, the RFID system is a great investment."

Its unusual to hear "great investment" and "RFID" spoken in the same breath. But most technology experts argue that it wont be long before ROI and RFID will be synonymous. The question, they say, is when, not if. But the only certain answer, is not now.


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