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A growing number of companies are considering radio frequency identification as a tool to enable fundamental changes to their organization.
June 11, 2012—A decade ago, I wrote an article about Emerson Electric, which had embraced electronic commerce as a way to integrate its diverse companies and lower its procurement costs (see Case Study: Emerson Electric Inc. and Innovation). The firm had grown through acquisition, and had different divisions buying the same items at sometimes dramatically different prices. Emerson’s senior leadership realized that if it adopted a common e-commerce platform, it could integrate purchasing and leverage greater buying power, thereby lowering costs and gaining an advantage over its competition. So rather than one unit buying 50,000 items for, say, $200 each and another purchasing 1,000 of the same asset for $300 apiece, the company could instead buy 51,000 units, each priced at $200. Doing this over tens of thousands of products could add up to millions of dollars in savings.
I bring this up now because I am beginning to see businesses take a more strategic approach to deploying radio frequency identification. Rather than viewing the technology as a way to solve a single business problem, some companies are starting to understand that RFID can be used to achieve a larger end goal—unifying disparate business units into a more efficient whole, for instance.
For conventional retailers, RFID provides the kind of inventory visibility that enables them to improve efficiencies and cut costs, so that they can compete with their online-only rivals. Macy’s is a good example of this. The U.S. department-store chain wants to boost inventory accuracy, but it has a larger goal in mind: It wants to be an “omni-channel” retailer. That is, it wants customers to be able to buy an item through a phone or online and then pick it up at a store, or to purchase a product via phone, have that item shipped from a nearby store to their home and, if it doesn’t fit, return it to the store. To achieve this fundamental change in how it does business, the retailer requires highly accurate inventory monitoring and visibility. RFID is the technology that can offer Macy’s that ability.
I know of one manufacturing company that, like Emerson Electric, grew through acquisition. The company operated different IT systems and business processes across its many units. After installing new SAP enterprise resource planning (ERP) software across its enterprise, the firm realized that its many different business processes made it difficult to make SAP work without a great deal of customization. The company is now implementing RFID to track work-in-process (WIP) and finished inventory, in order to ensure that all units perform similar tasks according to the same process. RFID business processes are, in a sense, becoming the common language across the various manufacturing units.
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