the value proposition of rfid to the manufacturer

Can RFID Deliver the Goods?

The Manufacturer�s Visibility into Supply and Demand

January 2007

http://www.aberdeen.com/common/send_to_friend.asp?cid=3758

Benchmark Report: RFID in Manufacturing

All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group � i

Executive Summary

uring the last six months, Aberdeen�s Emerging Technology Practice surveyed more than 150 Manufacturers using or planning to adopt RFID (Radio-Frequency Identification) technology. They expect the technology to help in three general areas:

D 1. Optimizing the procurement and management of raw materials 2. Monitoring tools, equipment, parts and personnel in the production environment 3. Providing forward demand visibility into the supply chain

Penetration of RFID into the manufacturing sector is only three or four percent today; but, growth is strong -- over 112% in 2007 -- and the average manufacturer�s RFID budget will grow from $50,000-$75,000 per year in 2006 to $100,00-$200,000 in 2007. Key Business Value Findings • New RFID initiatives in manufacturing planned for 2007 will add 51% new demand

into the RFID market in that sector, and RFID budgets for manufacturing initiatives already underway in 2006 will increase an average of 61%

• Best in Class manufacturers are twice as likely to select an RFID vendor based on the customer service and infrastructure maintenance record (and half as likely to select a turn-key solution) than average manufacturers.

• Sixty-two percent of manufacturers cite data integration as their top cost concern when they consider an RFID initiative.

Implications & Analysis There is a direct correlation between best-in-class performance and compatibility of the RFID solution to installed process management systems; to the type of manufacturing, industry, or materials; and to the manufacturer�s primary performance objectives.

Recommendations for Action 1. Anticipate a massive influx of real-time data and verify that your critical systems and

business processes are ready to adapt to new sources of business intelligence. 2. Prepare for close collaboration with supply chain partners. Your data-sharing policies

and integrated systems will help reduce inventory overhead and out-of-stocks. 3. Automate manual processes to reduce the likelihood of errors. Then leverage real-

time alerting so that your staff can focus on the exceptions. 4. Understand the big picture and the constraints that your legacy systems place on the

RFID solution; start small, measure often and plan to grow rapidly.



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Table of Contents

Executive Summary .............................................................................................. i Implications & Analysis ................................................................................... i Recommendations for Action.......................................................................... i

Chapter One: Issue at Hand.................................................................................1

Chapter Two: Key Business Value Findings .........................................................4 Vendor Selection............................................................................................ 4 By the Numbers............................................................................................. 5 Key Findings Summary.................................................................................. 8

Chapter Three: Implications & Analysis...............................................................9 Process, Organization and Knowledge........................................................ 10 Technology Usage (Industry �Ah-ha�) .......................................................... 11

Chapter Four: Recommendations for Action ......................................................13 Laggard Steps to Success........................................................................... 13 Industry Norm Steps to Success ................................................................. 14 Best in Class Next Steps ............................................................................. 14

Author Profile .....................................................................................................16

Appendix A: Research Methodology ..................................................................17

Appendix B: Related Aberdeen Research & Tools .............................................19

Figures


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Table of Contents

Figure 1: Top Objectives of RFID Initiatives in Manufacturing ..............................1

Figure 2: Data Integration Emerges as Top RFID Cost Concern..........................3

Figure 3: Most Valued Characteristics of an RFID Vendor ...................................5

Figure 4: Manufacturers� 12-Month Average KPI Improvement............................6

Figure 5: Process and Discrete Manufacturers Tackle Different Challenges ........7

Figure 6: Manufacturers Leverage RFID with Other Sensor Capabilities .............7

Figure 7: RFID Tag Technology Growth in Manufacturing .................................. 11

Figure 8: Tag Type Migration Map ......................................................................12

Tables

Table 1: Three Objectives � Three Strategies ......................................................2

Table 2: Companies With Top Performance Scores Earn �Best-in-Class� Status: 4

Table 3: RFID Competitive Framework.................................................................9

Table 4: PACE Framework .................................................................................18

Table 5: Relationship between PACE and Competitive Framework ...................18

Table 6: Competitive Framework........................................................................18


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Chapter One: Issue at Hand

Key T

akea

ways

• RFID solutions take three forms in the manufacturing environment, creating integration challenges for those who wish to leverage the technology across the organization.

• The critical systems that manage the production process are not always able to absorb the data that RFID provides. Some legacy systems can severely limit the benefit that RFID delivers to the organization.

• The correct combination of technologies (tags, readers, RFID network infrastructure, data management, vertical applications, analytics, and alerting) depends on the nature of the business.

he Aberdeen Group has surveyed over six hundred companies that are using RFID in the last twelve months. During that time, the percentage of companies adopting RFID primarily to satisfy a government or customer mandate has fallen by half. While it may still be true that many RFID initiatives begin in response to compli-

ance mandates, the primary objective has changed dramatically. Today, more RFID ini-tiatives begin with other goals in mind and manufacturers are leading the way with barely 8% of projects being compliance-driven (Figure 1)

T Figure 1: Top Objectives of RFID Initiatives in Manufacturing

34%

20% 19%

11%8% 8%

0%5%

10%15%20%

25%30%35%40%

Asset Tracking ProductionEff iciency

Supply ChainVisibility

Raw MaterialsMgmt.

MandateCompliance

Finished GoodsInventory Control

Source: AberdeenGroup, January 2007

Manufacturers are showing signs of significant maturation in their approach to RFID. Recognizing that materials management, production efficiency and supply chain visibil-ity begin with a robust data management system and a rich information stream. Manufac-turers are assuming a leadership role in both tag and sensor-based asset tracking and data management and sharing procedures.

Early adopters of RFID in Aerospace, Automotive, Pharmaceutical, Paper, Electronics, and Heavy Industrial manufacturing are already leveraging the technology to drive out waste, enable just-in-time delivery of finished goods, and realize continuous improve-ment throughout the production process. Thus, the value proposition of RFID to the


All print and electronic rights are the property of Aberdeen Group © 2007. 2 � AberdeenGroup

manufacturer can be segmented into three general areas:

1. Optimizing the procurement and management of raw materials

Definitions Open Loop Tags are affixed to assets and

move from one enterprise to an-other, the data being shared among them and often updated along the way.

Closed Loop Tags are affixed to assets and are kept permanently within the do-main of the enterprise or are re-moved from the asset prior to its leaving.

Active Tags Tags include internal power source, can be read from a greater distance and may include addi-tional functions such as an indica-tor light.

Passive Tags

Simple tags, like bar codes can hold more data and be updated with status changes as the asset moves through the process.

2. Monitoring tools, equipment, parts and personnel in the production environment

3. Providing forward demand visibil-

ity into the supply chain Each of these represents an opportu-nity for manufacturers to cut produc-tion costs, speed the time to market, and respond to changes with more agil-ity. However, they also require very different technologies and adoption strategies, a condition which creates organizational and technical challenges for the enterprise. Generally speaking, the solutions can be characterized as shown in table 1 (below).

Table 1: Three Objectives � Three Strategies

Objective Organizational Requirements

Architecture

Tag Type

Materials pro-curement, supply management

Requires collaboration with suppliers or may be confined to the manufacturing enterprise. Usu-ally requires interface to ERP or APS.

Open or closed loop

Passive

Production effi-ciency

Requires internal system integration (for exam-ple to the MES) and the organizational flexibility to adapt production procedures.

Closed loop Active

Distribution, warehousing, and supply chain visibility

Requires highly collaborative development, complex system integration with external sup-ply chain management systems, and data shar-ing agreements.

Open loop Passive


In addition, early adopters are finding that RFID provides:

• accountability; • improved safety; • a deterrent to counterfeiting; • less risk from the cost of product recalls; and, • the opportunity for proactive field service.



To realize the potential of RFID on the shop floor, careful system integration planning is required, an important step often ignored due to its cost and complexity. Especially when an RFID initiative begins as a measure to comply with an external mandate, the solution is designed with cost minimization the guiding objective. Then, as RFID becomes a key differentiator in the quest for lean operations and a flexible organization, those early cost savings become expensive mistakes. To avoid them, manufacturers focus on specific practices (described later in this report) promoted aggressively by best-of-breed RFID vendors with manufacturing domain expertise. Aberdeen research shows that the primary concern of manufacturers adopting RFID technology has changed dramatically over the last 12 months, showing clearly that lessons learned by the early adopters are not being ignored.

Figure 2: Data Integration Emerges as Top RFID Cost Concern

Changing Cost Concerns

0%

10%

20%

30%

40%

50%

60%

70%

Dec-05 Jun-06 Dec-06

Perc

ent o

f Sur

vey

Res

pond

ents

Tag Costs

ReaderCosts

DataIntegration


Beyond the selection of tags, readers and data integration methodology, manufacturers must also consider an intelligent RFID network infra-structure layer, a strong data analytics engine, and real-time alerting capabilities, all of which are vital for turning a mountain of data into ac-tionable business intelligence. Taken all to-gether, the optimal combination of RFID tech-nologies is a function of the manufacturer�s ob-jectives, the core systems in use in the back of-fice and on the shop floor, the partnerships that the manufacturer enjoys with its suppliers and downstream supply chain partners, and the prod-ucts themselves.

�Our long-term vision for op-timal use of RFID in manufac-turing includes the communi-cation of current production conditions and situations to enable full integration among suppliers, manufacturer, and customers.�

- VP of Manufacturing, U.S. chemical plant



Chapter Two: Key Business Value Findings

Key T

akea

ways

• 53% of manufacturers surveyed indicated that integrating RFID with enterprise systems is the top challenge facing them when moving to an adaptive manufacturing model.

• 82% of manufacturers surveyed indicated that their RFID technology selection is driven in part by a hostile environment or challenging production materials.

• Best in Class manufacturers are twice as likely to select an RFID vendor based on the customer service and infrastructure maintenance record.

trategies to maximize the value of RFID are only as good as the results they de-liver. Aberdeen used four key performance criteria to distinguish best-in-class companies from average and laggard companies. These key performance indicators

(KPIs) represent process measures � with safety stock and cycle time reduced to improve process efficiency, and quality measures � with percent on-time delivery and change-over time improved for performance and flexibility (Table 2).

S Based on aggregate scores that incorporated all four of these metrics, those companies in the top 20% achieved �best-in-class� status, those in the middle 50% were �average�, and those in the bottom 30% were �laggard�.

Table 2: Companies With Top Performance Scores Earn �Best-in-Class� Status:

Definition of Maturity Class Mean Class Performance

Best-in-Class: Top 20% of Aggregate Performance Scorers

• 34% improvement in manufacturing cycle time • 6% improvement in on-time delivery • Reduction in safety stock by 4 days • 28% reduction in change-over time

Average: Middle 50% of Aggregate Performance Scorers

• 11% improvement in manufacturing cycle time • 5% improvement in on-time delivery • Reduction in safety stock by 1 day • 17% reduction in change-over time

Laggard: Bottom 30% of Aggregate Perform-ance Scorers

• No improvement in manufacturing cycle time • No improvement in on-time delivery • No reduction in safety stock • No reduction in change-over time


Vendor Selection Seventy-eight percent of all manufacturers agree that the top criteria in selecting an RFID technology vendor are successes in similar environments and strategic partnerships with other leading RFID vendors. With the majority of manufacturers of all classes agreeing that their vendors must be able to demonstrate existing similar RFID solution implemen-tations, the vendor�s domain expertise and solid roster of technology partners are critical



to success. These values can be attributed to the emphasis placed on the challenges of integration and to the heavy demands that adverse environmental conditions such as heat and dust, and that materials such as liquids and metals place on the technology.

A startling difference between the Best-in-Class manufacturers and the rest of the popula-tion is the criteria they use to evaluate and select an RFID technology vendor.

Figure 3: Most Valued Characteristics of an RFID Vendor

17%

19%

45%

47%

62%

43%

29%

57%

29%

57%

0% 10% 20% 30% 40% 50% 60% 70%

Customer servicerecord

Domain expertise

Strategicpartnerships

Turn-key solution

Existing similarimplementations

Best in ClassAverage


Best-in-Class manufacturers understand that RFID is not a panacea for their business chal-lenges. The technology cannot simply be in-stalled and forgotten; it grows and changes with the organization as its results impact man-agement�s decision-making and as new appli-cations of the infrastructure emerge and are embraced. Thus, the vendor of choice is not providing a �turn-key� solution, rather the vendor and the manufacturer are engaged in a long-term support and learning relationship punctuated by strong customer service.

��Our long-term vision for RFID includes helping re-move operator error in our manufacturing operations�

- VP Manufacturing Vacuum Metalizing, Co.

Total penetration of RFID into the manufacturing sector may be only three or four percent today; but, growth is strong, shown in this study to be over 112% in 2007 and the average manufacturer�s RFID budget will grow from $50,000-$75,000 per year in 2006 to $100,00-$200,000 per year in 2007. Competition for mind-share and market-share among vendors is fierce. Only those who are dedicated to educating and servicing their customers will be able to capture their unfair share of industry spend.

By the Numbers Based on the data collecting in this study, the adoption of RFID in the manufacturing environment clearly yields positive results. During the same period of time, Manufactur-


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ers who have been using RFID in their processes reported a much stronger improvement this year over last in all four key performance measures than did those who have not adopted RFID.

Figure 4: Manufacturers� 12-Month Average KPI Improvement

19%

9%

27%24%

6% 6% 7% 6%

0%

5%

10%

15%

20%

25%

30%

35%

Cycle Time % On-Time Delivery Safety Stock Change-Over Time

With RFID for at least 6 months Without RFID


The ROI suggested by figure 4 is obvious. Reductions in cycle time and change-over time are readily measurable in reduced cost of labor with longer-term impact on overall manufacturing flexibility. Safety stock reduc-tions translate into lower warehousing costs, reduced shrinkage, and less revenue tied up in raw materials inventory. While on-time delivery may not necessarily have direct im-plications to the value of ongoing contracts, it certainly affects overall customer satisfac-tion. It is not surprising, therefore, to find that RFID budgets are increasing.

RFID can make it easier to find inventory on hand and to identify inventory that is missing movement of people and equipment around thimproving cycle time. RFID gives production linmonition� with respect to the next job, reducingsafety. The technology can also report supply turer�s ERP system to provide forward visibilityexcess safety stock.

Beyond differentiated vendor selection, best-inRFID to tackle the business processes most suitTo illustrate this, we looked at the primary objediscrete manufacturers and found that process sple and assets while discrete shops focus more o(figure 5). In almost all cases, discrete manufac

��Our long-term vision for RFID includes labor tracking and control, and better visi-bility of work in progress�

CIO Canadian Apparel Manufacturer

roup © 2007.

or in low quantity. It helps manage the e shop floor, thus eliminating waste and e workers and equipment a kind of �pre-

change-over time and improving worker chain information back to the manufac- to demand and thus reduce the need for

-class manufacturers are those who use ed to the technology and to their product. ctives cited by best-in-class process and hops focus primarily on location of peo-n inventory and production management turers focusing on personnel and mobile


7

11%13%

21%24%

32%32%

37%47%

68%

0% 10% 20% 30% 40% 50% 60% 70% 80%

CorrosionRadiation

BiohazardsLight

MotionVibration

ShockHumidity

Heat

asset security had more trouble realizing performance improvement, as was the case with process manufacturers focusing heavily on finished goods inventory and production management applications of RFID.

Figure 5: Process and Discrete Manufacturers Tackle Different Challenges

72%

44%

32%

20%

12%

24%

16%

40%

27%

33%

27%

20%

40%

40%

0% 20% 40% 60% 80%

Production Management

Finished goods location

Tools and parts location

Condition monitoring

Asset security

Mobile asset tracking

Personnel identification

Discrete Process


Integration of RFID technology with other sensor-based technologies also separates manufacturer objectives and describes a key differentiator in best-in-class performance.

Figure 6: Manufacturers Leverage RFID with Other Sensor Capabilities

Source: AberdeenGroup, January 2007 Environments that place unusual demands on the tag technology provide a strong incen-tive for manufacturers to forgo bar codes in favor of RFID. Of the 82% of manufacturers whose business challenge includes harsh conditions or challenging materials, those se-lecting RFID vendors with strong domain expertise saw the best performance improve-

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ment, reporting faster time to positive ROI despite significantly higher RFID develop-ment budgets

Key Findings Summary Based on the analysis of data collected in preparation for this report, there is a direct correlation between best-in-class performance and:

• Compatibility between the RFID solution and MES, APS or ERP systems;

• Selecting an RFID solution that is compatible with the type of manufacturing, the industry or the mate-rials (for example, using passive tag technology for process manufacturing and active tag technology for discrete manufacturing generally produces better results); and

Best-in-class manufac-turers are 18% more likely to capture RFID data than average manufacturers and 60% more likely to do so than laggards.

• Compatibility between the RFID solution and the manufacturer�s primary objectives with respect to performance improvement.



Chapter Three: Implications & Analysis

Key T

akea

ways

• RFID adapts to the business process, not the other way around. However some business processes can be improved to better leverage RFID.

• Best in class companies develop an internal strategy for RFID deployment, then collabo-rate with trading partners on data integration strategy and master data management.

• RFID data has tremendous value as an enabler for actionable business intelligence. Sharing that data makes the entire supply chain more intelligent.

• Incompatible technology infrastructure across enterprises is the biggest barrier to true collaborative supply chain management.

s shown in Table 2, survey respondents fell into one of three categories � Lag-gard, Industry Average, or Best in Class � based on their characteristics in four key categories: (1) process (ability to address exceptions, turn data into action-able business intelligence, and to innovate); (2) organization (collaborative strat-

egy, design expertise, and staff training); (3) knowledge (enterprise data management strategies, visibility, and real-time process management); and (4) technology (infrastruc-ture excellence, analytics and performance improvement).

A In each of these categories, survey results show that manufacturers exhibiting best-in-class RFID usage characteristics also enjoy best-in-class financial performance.

Table 3: RFID Competitive Framework

Laggards Industry Average Best in Class Process

• RFID initiative driven by mandate or regulatory com-pliance. Process remains ignorant of the potential im-provements intro-duced by RFID.

• RFID initiative moti-vated by need to solve a particular set of business problems. ROI is calculated using point solution-based metrics.

• RFID initiative is part of a general strategy. ROI based on actionable busi-ness intelligence, forward visibility to demand and proc-ess improvement.


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Laggards Industry Average Best in Class Organization • RFID solution ex-

pected to conform to existing business processes. Man-agement is passive. Knowledge workers focus on mainte-nance.

• Business and IT collaborate on the adoption process. Willingness to ad-just business proc-ess to take advan-tage of the technol-ogy. Senior man-agement has regu-lar involvement.

• Multiple business units, senior man-agement and IT share strategy and actively seek in-volvement of trading partners in design and implementation.

Knowledge • Knowledge com-promised by out-sourcing system management. Data capture limited to minimal require-ment, not leveraged or shared.

• Internal expertise developed as re-quired to complete and maintain the solution, data shared within the enterprise for im-proved business in-telligence

• Innovation re-warded. Business process data is lev-eraged to improve production effi-ciency and facilitate extra-enterprise col-laboration.

Technology • Turn-key solutions preferred. Lowest cost solution adopted, even at the expense of do-main expertise. Lit-tle or no attention to performance meas-urement.

• Priority placed on technology com-patible with existing infrastructure. Solu-tion selected for ap-plication to top busi-ness challenge. In-tegration sufficient to leverage data.

• Solution selected to optimize perform-ance across the en-terprise. Data cap-tured and distrib-uted to analytics systems and shared with suppliers and distributors.


Process, Organization and Knowledge • In the process category, best-in-class firms consider

RFID to be a part of an overall strategy for per-formance improvement, focus on data analytics to put RFID data in context, and turn it into actionable business intelligence. At every stage, RFID data is considered for its ability to improve process effi-ciency and enable forward visibility both for the organization itself and for its trading partners.

• As reported in �Achieving Total Supply Chain Visibility with RFID� (Aberdeen Group, November 2average manufacturing organization can expect to reco

Best-in-class manufac-turers are 18% more likely to capture RFID data than average manufacturers and 60% more likely to do so than laggards.

7.

006), it was reported that the ver the technology investment


All print and

in about 31 months. Current research suggests that this figure can be greatly reduced by taking the proper organizational approach to the initiative. When operations and management collaborate on an RFID initiative, the time to positive ROI ranges from 9 to 24 months; whereas, when IT is solely responsible for the initiative, the time to positive ROI ranges from two to five years.

• Approximately one third of the manufacturers surveyed indicated that improving the delivery of real-time information was a high prior-ity and likely to be a significant source of ROI. Demonstrating the value of this priority, 57% of them can be found among the best-in-class performers.

Technology Usage (Industry �AhAs shown in Table 1, the research showstion for each of the three major types of R7 shows an updated projection of RFID 12-18 months.

Figure 7: RFID Tag Technology Growt

11%

13%

8%

8%

19%

9%

21%

28%

0% 10% 20%

Class 0 Passive

Class 1 Passive

Semi-Passive

Hybrid

Integrated Sensor

Active

Class 2 Passive

It is interesting to note that 45% of the mactive tags are currently using passive taging adopting passive tags are currently uolder passive tag technology or not usinmanufacturers who are considering adoptags are already using either active or pass

Best-in-class manufacturers are 37% more likely than average to have the improvement of real-time delivery of process information as a stated priority.

electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group � 11

-ha�) the typical tag type and architectural composi-FID implementations in manufacturing. Figure

tag adoption by manufacturers within the next

h in Manufacturing

38%

48%

41%

30% 40% 50% 60% 70%

Current Planned


anufacturers surveyed who planning to adopt s whereas only 5% of manufacturers consider-sing active tags; the rest are either upgrading g RFID yet at all. Furthermore, over 90% of ting semi-passive, hybrid or integrated sensor ive tags (Figure 8).



Figure 8: Tag Type Migration Map

Manufacturers Planning to Adopt or Upgrade Passive RFID

Technology

5%

32%

63%

0%

10%

20%

30%

40%

50%

60%

70%

AlreadyUsingActiveTags

AlreadyUsing

PassiveTags

Not UsingRFID Yet

Manufacturers Planning to Adopt Active RFID Technology

0%

45%

55%

0%

10%

20%

30%

40%

50%

60%

70%

AlreadyUsingActiveTags

AlreadyUsing

PassiveTags

Not UsingRFID Yet

Manufacturers Planning to Adopt Advanced RFID Technology

10%

50%40%33%

14%

53%

6%

47% 47%

0%

20%

40%

60%

Already Using ActiveTags

Already UsingPassive Tags

Not Using RFID Yet

Semi-Passive Hybrid Integrated Sensor


The optimal combination of tag and reader hardware, edge device management systems, RFID network infrastructure, and vertical application architecture varies based on the type of product, the business objectives of the manufacturer and, to some extent, the ability of the supply chain partners to achieve consensus on standards.



Chapter Four: Recommendations for Action

Key T

akea

ways

• Automate manual processes to reduce the likelihood of errors. Then leverage real-time alerting so that your staff can focus on the exceptions.

• For early ROI, look to reductions in cost of labor in inbound logistics and receiving, stock-taking and warehouse movement, in reduction of clerical errors and improved asset utilization.

• Anticipate a massive influx of real-time data and verify that your critical systems and business processes are ready to adapt to new sources of business intelligence.

he promise of RFID to deliver visibility and efficiency to the manufacturer ap-plies to all firms that are committed to

optimizing their use of the technology. Aggres-sive activity around planning, technology selec-tion, collaboration, prototyping and deployment will yield results for companies large and small, in CPG, industrial equipment, apparel, aero-space, or elsewhere.

T �We see RFID as a very promising technology, use-ful to increase networking within the business, inte-grated throughout the value cycle from NPI [New

Product Innovation] and PLM [Product Lifecycle Management] throughout the supply chain and all the way to the consumer.� - Director of Procurement, Major

European Telecom Equipment Manufacturer

Whether a manufacturer is trying to move its RFID initiative from �Laggard� to �Industry Average,� or �Industry Average� to �Best in Class,� the following actions will help spur the necessary performance improvements:

Laggard Steps to Success 1. Select technology vendors and solutions based on best-practices.

Select technology vendors based on their customer service history and their abil-ity to demonstrate successful deployments within your domain. RFID is designed to fit into your existing business processes. You should not have to compromise the way you conduct your business in order to incorporate RFID technology into the enterprise.

2. Encourage collaboration between management and line of business managers.

Even if RFID is being employed in a very limited scope to solve a specific busi-ness challenge, the implications of the technology to other parts of the organiza-tion and outside the enterprise should not be ignored. Collaboration among line of business managers and management can greatly enhance the value of the tech-nology and reduce the time to positive ROI.



3. Measure results often and adopt process efficiencies suggested by the data.

Even if RFID is strictly a matter of compliance for your organization, keep in mind that the data may have tremendous value to you. Intelligent data capture, storage and analysis will reveal opportunities for further process efficiency on the shop floor and in the warehouse.

Industry Norm Steps to Success 1. Build internal expertise and reward innovation.

Industry consultants with deep domain expertise are invaluable in the early stages of any RFID initiative. However, the long-term success of an RFID initia-tive requires building in-house expertise. Watch the industry and communicate with experts but focus on adapting your own business processes to innovative ideas that come from within the organization.

2. Enlist major system vendors to aid in leveraging the RFID capabilities.

Encourage collaboration between your major software system suppliers and your IT group to share strategy and actively seek design improvements. Include trad-ing partner objectives in the architectural design and share ideas for feature en-hancements with ERP, APS, SCM and MES system vendors.

3. Build awareness with trading partners to use RFID beyond the four walls.

Once RFID is in use in the organization, look for ways to leverage it. RFID tech-nology in one part of your organization or one part of the supply chain can greatly enhance efficiencies elsewhere. You are a leader in supply chain innova-tion. Implement a data sharing program that opens the possibility for adding value to your partners.

4. Focus on master data management.

Real-time business process data and visibility into the location and condition of assets becomes actionable business intelligence when it is placed into context and served to decision-makers in a timely way. Performance analytics and proc-ess monitoring can catch and handle exceptions before they become problems.

Best in Class Next Steps 1. Continue to innovate and experiment with emerging RFID technologies.

Despite the many years since its invention, RFID is still emerging. Tag, antenna and reader technology is improving and getting less expensive. The opportunities for making use of new developments are available to companies with existing in-frastructure. Maintain a competitive advantage through experimentation and make sure that you are on the distribution to receive new product announcements from your vendor. Manufacturing Business Technology Magazine, other trade journals, and of course Aberdeen�s continuing research into RFID technologies are all good sources for news and ideas.



2. Leverage the RFID infrastructure for further process efficiencies.

A well-designed and successful RFID solution opens opportunities for process efficiency beyond inventory management, asset tracking, and security. Improved use of environmental control, real-time management dashboards, and proactive alerting outside the organization widen the competitive gap. For more informa-tion on technologies for manufacturing flexibility, read Aberdeen�s current benchmark publication on the topic.

3. Participate in standards organizations.

Manufacturers that participate actively in standards-development organizations have the opportunity to direct the future of the technology. RFID is still develop-ing. Don�t miss the opportunity to leverage a position of leadership. Join EPC Global, the Auto-ID Center, or AIM Global.




Author Profile

Russ Klein Director of Emerging Technology Edge/Retail Research AberdeenGroup, Inc.

Russ Klein is Senior Research Director of the Emerging Technologies Practice for Aber-deenGroup, Inc., a Boston-based market research and positioning services firm. In this role, Klein provides analysis and assessment of software and services that automate and streamline retail operations. He also keeps a close eye on emerging technologies and their impact on the organization, its key processes, and its knowledgebase.

Klein specifically focuses on emerging technologies, data integration, collaboration, and e-commerce, and on best-practices in knowledge discovery. His passion is in realizing potential value in corporate data warehouses and employing emerging technologies to enhance data capture and directed data analysis from the edges of the enterprise to the central databases.

He has more than 20 years of experience developing database software applications, ad-vising companies on developing and refining knowledge acquisition systems, and har-vesting business intelligence from transaction data.

He brings a wealth of knowledge and experience to Aberdeen in the areas of online transaction technologies, business intelligence systems and data warehousing as well as familiarity with emerging technologies, some of which have yet to find applications in the real world. His current research efforts include Aberdeen�s benchmark studies on RFID, GPS, and Master Data Management technologies, pervasive retailing and supply chain logistics, as well as real-time process monitoring, handheld database application technologies, and information architecture.



Appendix A: Research Methodology

uring November and December, 2006, Aberdeen Group examined the proce-dures, experiences, RFID buying intentions of hundreds of manufacturers. The research focused on many specific industries, such as CPG, industrial equipment, high tech, food and beverage, health care, pharmaceuticals, apparel and foot-

wear, chemical, and consumer electronics.

D Responding business line managers, IT executives, and corporate application developers completed an online survey that included questions designed to determine the following:

• How RFID technology facilitates the manufacturing process;

• Current and planned use of RFID technologies;

• Risks and challenges in adapting RFID manufacturing processes;

• The benefits that have been derived from RFID;

• The importance and methods for measuring the ROI.

Aberdeen supplemented this online survey effort with telephone interviews with select survey respondents, gathering additional information on RFID strategies, experiences, and results.

The study aimed to identify emerging best practices for maximizing the benefits of RFID in manufacturing initiatives and provide a framework by which readers could assess their own deployment strategies and performance.

Responding enterprises included the following:

• Job title/function: The research sample included respondents with the following job titles: line of business managers (22%); C-level officer (35%); director (11%); devel-opment staff (12%); and consultants (10%).

• Industry: The research sample included respondents predominantly from consumer packaged goods companies, transportation, high-tech, industrial equipment. CPG represented 13%, transportation and high-tech followed with 11%. Food and Bever-age represented 7%, with aerospace, apparel, automotive, chemical, medical devices and metals each constituting 6% of the survey pool.

• Geography: 75% of the study�s respondents were from North America, 7% were from Europe, 14% from Asia/Pacific, and 1% from the Middle East and Africa.

• Company size: 23% of respondents were from large enterprises (annual revenues above US$1 billion); 41% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 36% of respondents were from small businesses (an-nual revenues of $50 million or less).



Table 4: PACE Framework

PACE Key

Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows:

Pressures � external forces that impact an organization�s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competi-tive) Actions � the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product/service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities � the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products/services, ecosystem partners, financing) Enablers � the key functionality of technology solutions required to support the organization�s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management)


Table 5: Relationship between PACE and Competitive Framework

PACE and Competitive Framework How They Interact Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of com-petitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute.


Table 6: Competitive Framework

Competitive Framework Key

The Aberdeen Competitive Framework defines enterprises as falling into one of the three following levels of RFID performance:

Laggards (30%) � RFID practices that are significantly behind the average of the industry, and result in below average performance and little or no ROI.

Industry norm (50%) � RFID practices that represent the average or norm, and result in average industry performance.

Best in class (20%) � RFID practices that are the best currently being employed and significantly superior to the industry norm, and result in the top industry performance.




Appendix B: Related Aberdeen Research & Tools

Related Aberdeen research that forms a companion or reference to this report include:

• RFID Benchmark Report: Total Supply Chain Visibility (November 2006)

• RFID Benchmark Report: Finding the ROI in RFID (September 2006)

• RFID Benchmark Report: Finding the Technology Tipping Point (December 2005)

• RFID Benchmark Report: Scaling RFID Implementations from Pilot to Production (June 2006)

• Candid Comments: RFID in Health Care (June 2006)

• Service Oriented Architecture is Key to Scaling RFID Deployments (March 2006)

• Mandates Temporarily Drive Mid-Size Manufacturer RFID Adoption (March 2006)

• Average Change in Mobile Fleet Productivity as a result of Mobile Computing (January 2006)

• RFID�s Biggest Non-Issue Now Resolved; Consortium Launched (September 2005)

• RFID-Enabled Logistics Asset Management: Improving Capital Utilization, Increas-ing Availability, and Lowering Total Operational Costs (June 2004)

• RFID in the Consumer Industries: Being a Winner, Not a Follower (March 2004)

Information on these and any other Aberdeen publications can be found at www.Aberdeen.com.

http://www.aberdeen.com/


Solution providers recognized as sponsors of this report were solicited after the fact and had no substantive influence on the direction of this report. Their sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge.

Aberdeen Group, Inc. 260 Franklin Street Boston, Massachusetts 02110-3112 USA

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© 2007 Aberdeen Group, Inc. All rights reserved January 2007

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