A quantitative model for the introduction of RFId in the fast moving consumer goods supply chain : Are there any profits?

Purpose – The purpose of this paper is to describe an analytical model to assess the costs and benefits of radio frequency identification (RFId) applications in the fast moving consumer goods (FMCG) supply chain. Design/methodology/approach – The paper is based on an in‐depth literature review and a classification of the main contributions regarding the assessment of RFId applications. The impact of RFId technology on supply chain processes has been modelled using an activity‐based approach. An extensive, six‐month discussion and refinement process with the logistics and supply chain managers of 30 FMCG companies is conducted to validate the model and to collect the required inputs. Findings – Pallet‐ and case‐level taggings have been explored. The former scenario shows limited benefits, whereas the actual potential of RFId becomes clear in the latter. The profitability of these projects is significantly affected by the costs of RFId tags and by the characteristics of the base‐line supply chain in terms of efficiency, quality requirements and, of course, product features. The model provides a clear assessment of how and when a positive return on investment can be achieved, even with today's technology (in terms of costs and performances). Originality/value – This is one of the first attempts to provide a comprehensive analysis of the costs and benefits of an RFId application, taking into account all the major factors involved. The model can be a valuable support to manufacturers and retailers in evaluating their investments.