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While many companies have been driven to deploy RFID to meet mandates from large customers, even more manufacturers are turning to the technology to make operational improvements. According to a report from ChainLink Research, many manufacturers are using RFID internally for such applications such as logistics tracking, invoice and dispute resolution, and asset tracking. Approximately one-third of the 257 manufacturing companies surveyed had already implemented RFID or were planning to do so in 2007 because of customer mandates. But more than 40% were using the technology for process improvements. Just under a quarter of respondents were motivated by both customer mandates and internal improvements. "I expected the number of companies driven by mandates to be higher, but many of those companies are actually dragging their feet as long as they can," says Bill McBeath, ChainLink's chief research officer. "If they aren't making any process changes or improvements, then RFID is just an added expense." In the report, titled "RFID for Manufacturers," ChainLink identified eight general process improvement areas where RFID was being used, including manufacturing and plant floor operations, outbound shipping, distribution and logistics, invoice and dispute resolution, service and support, supply chain and custody tracking, recall and product expiration, and asset and capital equipment tracking. More than half (53.8%) of respondents that were already using RFID or planning to do so were using the technology for outbound shipping. Distribution/logistics came in second at 45.7%. Just over a quarter of companies were using RFID for asset tracking. Although many outbound shipping applications were mandate-driven, McBeath says that 85% of companies using RFID for that application were doing so to verify shipment content, slightly higher than the 83% using it to meet a customer requirement. On the asset tracking side, McBeath says companies in the automotive, oil and chemical industries were using RFID to track specialized containers with complex life cycles. Other manufacturers used the technology to track tools and vehicles. "In some very large plants, there may be several thousand acres and a lot of buildings," says McBeath. "The biggest factor there was to reduce the time spent looking for assets." He added that companies are using a mix of technologies, including active and passive RFID, and real-time location systems (RTLS), for asset tracking. Not surprisingly, the report found that implementations driven by customer mandates, but without process improvements, generally did not show a positive return on investment (ROI). Generally, higher ROI resulted from focusing on high-value or high-consequence processes in areas such as routing of goods in motion, choke-points and hand-offs, tracking assets and employees, expiration and first in/first out (FIFO) disciplines, chain-of-custody tracking, and sequencing operations. However, 71% of respondents said that it was "too soon to tell" about ROI, while 14% reported a good ROI and 15% reported a poor ROI. The third of companies that were not planning to implement RFID were holding off because of cost, insufficient ROI, lack of knowledge, the maturity of the company, and/or the perceived maturity of the technology. There is still a need for RFID education among many manufacturers. Similar companies in the same industry often came to "radically different decisions about whether RFID is a good investment for them," according to the report, which noted that "many (if not most) of the reasons cited by those not doing RFID were born out misinformation." ChainLink expects an increase in RFID spending, with levels more than doubling from 2005 to 2007. In 2005, respondents said they were planning to spend an average of $600,000 on RFID hardware, software and services. That figure rose to $850,000 in 2006, and is projected to grow to $1.3 million next year. An audio archive of ChainLink's webinar on the report can be accessed at www.clresearch.com/rfidmfg.htm.
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