Shari would like to thank Stephen Gallagher for contributing to this month's column.
Oscar Wilde once said, "It is a very sad thing that nowadays there is so little useless information." His observation in the 19th century has a new kind of resonance in modern corporate life. Besieged by the wizardry of the electronic age, collecting structured and unstructured data and morphing it in into useful information is one of the greater challenges faced by senior executives today. Things are about to get a lot more complicated as a result of the accelerating acceptance of radio frequency identification (RFID) technology.
RFID is no longer a solution in search of a problem; but for some executives, it could be a solution that is actually creating a problem. The amount of data created as a result of the adoption of RFID will scare every CIO who has sanctioned the rollout of the technology across their enterprise - even those at the pilot stage are about to get a wake-up call.
The problem isn't that RFID represents a wasted investment - far from it. Used operationally by organizations in the retail industry such as Wal-Mart and Marks & Spencer, RFID indisputably offers enormous value potential in areas such as reducing cost and improved operational efficiencies and accuracy.1 But while generating an increased volume of data, RFID needs solid referential data to enable automatic event processing capabilities and optimize operations. The issue here is that software companies have not been able to offer a solution, leaving organizations trying to build the solution in house. Software for the masses is missing.
Companies should embrace the potential for the plethoric information created by RFID and find a means to channel and analyze the resulting data. Trend analysis is a natural result, as are real-time data analytics that offer benefits for areas such as fraud analysis. But to convert excessive information to meaningful information, a business intelligence (BI) methodology and comprehensive data warehousing capability is essential.
According to a 2005 Forrester study, 46 percent of end-user companies that are addressing RFID specifically said they have put money aside for analytics and BI but have not yet spent it.2 It is vital for companies to integrate vast volumes of data with an independent end-to-end solution, warehousing data being just the beginning. True rewards lie in turning that data into information that will create business value.
Several major retailers are working on a new approach that pulls RFID data into a centralized warehouse, bringing economic benefits through areas such as:
- Improved execution and understanding of inventory in supply chain management practices;
- Store labor/store stocking efficiencies; and
- Customer insight, merchandizing and promotion.
The potential of RFID cannot be ignored. At the annual conference of the Council of Supply Chain Management Professionals in October 2005, Louis Sirico, an RFID consultant, predicted that by the end of 2006, retailers in the United States and Europe would push 40,000 suppliers worldwide into tagging their shipments. In a recent study of the electronics industry, it was calculated that electronics manufacturers, distributors and retailers could generate $4 billion a year in net value from full-scale adoption of RFID.3
RFID delivers a granularity that needs to be effectively managed from a quality as well as a quantity perspective. By creating a strategy and vision that applies a combination of data warehousing and BI, companies can better measure and optimize data to create a valuable asset that impacts the bottom line.
For public sector organizations, a failure to harness the data from RFID could lead to lack of fraud detection, while for private companies, it could be the difference between spotting the next industry trend and falling behind the sector leaders.
Making an investment in data warehousing is more than just data housekeeping. By partnering RFID with good BI capabilities, companies are better able to serve their customers and generate opportunities to drive high performance in their business. For many companies that have yet to fully exploit the RFID opportunity, it can be said, to misappropriate Browning, the best is yet to be.4 It is a proposition too good to be missed.
- Jonathan Collins. "Marks & Spencer to Extend Trial to 53 Stores." RFID Journal, 18 February 2005.
- Evan Schuman. "Report: No Analysis for RFID Data." CIO Insight, 24 March 2005.
- Bill Mongelluzzo. "RFID's Big Bang." Journal of Commerce, 7 November 2005.
- Robert Browning. "Rabbi ben Ezra." 1864.
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