RFID : ROI opportunities after the sunk cost

Abstract

Currently many alternative options exist to satisfy the RFID mandate by Wal-Mart--tag cases at the exit doors, tag all cases at the supplier's warehouse docks, tag a certain section of the warehouse, etc. The big question is how to prevent Wal-Mart suppliers from treating the cost of EPC standard-adoption from just becoming another one of those nagging costs of doing business with Wal-Mart and how the cost of RFID adoption can be leveraged to differentiate the company's products and service levels from that of the non-RFID-adopting/non-RFID-cost-incurring competition. In addition, it is worth exploring how can all of that translate into long-term comparative advantage for a consumer electronics manufacturer. By examining the different scenarios for a Consumer Electronics Manufacturer (CEM) supplier of Wal-Mart that will be RFID tagging small ticket items on a case level, this study proposes an ROI/ROA framework within which investments in RFID can be evaluated and validates through a simulated financial model that positive value exists for early adopters of RFID technology.