Enjoyrfid Technical

At first glance, the cost of RFID seems high. The cost of RFID includes the cost of tags, readers, and IT infrastructure. In 2006, several years after the commercialization of RFID, the cost of tags and readers have come down significantly, but they are still high compared to the major competitor, barcoding.Tag costs run anywhere between 25 cents for short-range passive tags to well over
$10 for specialized long-range active tags. Tag prices tend to increase with the amount of information that can be stored on the tag. Reader costs hover between $500–$5000 per device, depending on technology and features. Faced with these cost figures, it is obvious that companies need to look for a significant return on this investment.

Typically, one can view reader and infrastructure costs as fixed costs, as they tend not to vary significantly with the amount of product that passes through the supply chain. Tag costs, however, are variable costs in that every pallet, box, or item needs a tag. Thus, in popular literature, the cost of tags is usually seen as the most important determinant of RFID profitability.

Our view on the cost issue of RFID is that for most cases, the cost of RFID (and the cost of RFID tags) is over-emphasized. In all RFID implementations that we have observed, and in all the studies that we have conducted, it turned out that the RFID cost could easily be amortized over a few years. This held true even when only the most basic RFID benefits were realized. By basic RFID benefits, we mean “low-hanging fruit” such as labor savings from not having to barcode scan boxes or pallets in a warehouse, etc. It is important to understand that the economies of RFID are fundamentally different from barcoding: With barcodes,the label cost is low, but the incremental cost of each scan is high, because it typically involves human labor and a break in the material flow. With RFID, the tag cost is higher, but the incremental cost of each scan is very low, because scans can be performed automatically by stationary readers as goods flow by. Thus,potential benefits from RFID tend to be highest when each tagged good is scanned repeatedly.

These RFID “economies of scan” notwithstanding, one needs to be realistic about what items can be RFID tagged and where RFID tagging simply does not make sense economically. RFID-tagging very inexpensive and low-margin items is not going to make sense – the 50-cent candy bar with a 20-cent RFID tag is not going to happen outside of pilot studies. This explains why mass-market consumer
retail businesses that operate on very thin margins are reluctant to adopt item-level RFID tagging.