Lauren Scott California: At the Seams of RFID - 'ZIFFPAGE TITLEGaining Customers'
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Gaining Customers' Trust

"We realize this is going to be a progressive evolution; it may take three to five years for all the pieces to be put in place," he says. "But our first step has to be to get it into the marketplace and gain the acceptance of the consumer."

Scott agrees, and says that may be the key insight for other CEOs looking at adopting RFID technology. Consumers will have to walk, not run with the new technology. Just getting the tags in stores and in the view of shoppers is a critical first step.

"Until people have a greater comfort level, we'll have to take baby steps," she says. "I expect that in 12 to 18 months, we'll be back where we were—sewing tags into the seams."

Tag Your I.T. Lauren Scott California is proceeding with a radio frequency identification (RFID) technology implementation, placing RFID tags on some of its clothing even though the economics are questionable. The business case is primarily based on gaining a competitive edge. What are the costs involved in an RFID implementation? Here's what they might look like for a midsize manufacturer with one warehouse. EXPENDITURES 2006 2007 2008 Software* $1,030,000 $50,000 $50,000 Hardware** $50,000 $10,000 $10,000 RFID tags (4 million at $0.30 each)*** $1,200,000 $1,000,000 $800,000 TOTAL: $2,280,000 $1,060,000 $860,000 SAVINGS Supply chain improvements**** $1,650,000 $1,650,000 $1,650,000 NET ($630,000) $590,000 $790,000 NET in first-year dollars (2005) Discounted to present at 10% a year ($630,000) $490,000 $640,000 Dashboard Decision GREEN LIGHT Go YELLOW LIGHT Evaluate RED LIGHT Stop GREEN LIGHT Quick Return NET PRESENT VALUE: $500,000 *Software costs include data management software and integration into enterprise software. **Hardware costs include readers for 10 dock doors, reader peripherals, RFID printers and networking equipment. ***RFID tags range in price from 13 cents each at low end to about $1. Assumes a 20% annual reduction in price. ****Supply chain improvements based on 4 million units at an average price of $25 per unit, and include inventory carrying costs, reduced labor, theft reduction and claims/returns reduction. Sources: Baseline research, Forrester Research, SmartWear Technologies, Alien Technology

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