Reference #: ITRI-WP091-0507 Date: May 1, 2007

Is There a Business Case for RFID?


In June 2003, Wal-Mart asked its top 100 suppliers to begin using radio frequency identification (RFID) tags on pallets and cases beginning January 2005. Since that announcement, the business value of RFID in the consumer packaged goods supply chain has been periodically questioned. Recently, a Wall Street Journal article asserted that RFID is not living up to its hype, and in reality is not providing the promised tangible business value throughout the supply chain. In light of such claims, this paper examines the business value of RFID in the supply chain and presents a model of RFID assimilation which proposes that the creation of business value is dependent upon the depth of assimilation (extent of use). The model is grounded in industry observations of the difficulty of early adopters to fully realize the benefits of RFID assimilation. The model conceptualizes RFID assimilation as occurring in three waves: the first wave of the model is Technology Deployment, the next wave of Data Understanding, and, lastly, the final wave is Business Value Creation. In this paper, the first two waves of the model are explored briefly with the emphasis placed on proven business cases and potential opportunities for RFID to provide business value in the supply chain.