One of the most common questions companies asked is: "How much is it going to cost for my company to comply with our retail customers RFID mandate?"
The short answer: "It depends." Asking that is the equivalent of asking how much it costs to build a house. It depends on the house. In this chapter of The RFID Bible, we'll estimate the costs of a very simple compliance solution. Since RFID is such a new technology to so many, it is important to emphasize using a phased implementation approach in order to develop internal competency with RFID technology.
The first phase always includes building an internal team, educating the team, and up-front analysis. The team needs to answer many questions. How many product lines need to be tagged and what are the volumes? What processes are affected? Which IT systems are affected? There are many other questions, but ultimately, everything can be measured in time, which is predominately made up of labor costs. Every company has variable labor costs, but on average, five to seven key people are going to spend at least half of their time focused on RFID with one full-time-equivalent employee leading the charge. Companies should also plan on some external costs, which may include training, an RFID development kit, some tags, and strategic consulting. These are all part of the project's first phase of spending.
After this, testing and a pilot are the next steps down the road to compliance. The most common pilot is a slap and ship solution. Slap and ship is defined as way to comply with RFID mandates that applies an EPC-encoded RFID tag to a case or pallet just prior to shipment. The process tends to work as follows:
As cases are aggregated into a pallet, operations personnel will manually enter order data into a middleware application. An RFID printer/encoder will then print enough labels for the operator to affix one per case and finally one on the pallet. The label will basically look as the same as the current labels going on to the product. The main difference will be an RFID tag embedded in the label.
The pallet is stretch-wrapped and it then travels through a designated outbound RFID-enabled dock door portal. The pallet tag is read and an Advanced Shipping Notice (ASN) is generated by the middleware. The ASN is then sent to the customer and the pallet is shipped. Voila, instant compliance.
Obviously, this is a very high level process overview. This example only includes one product line, which is a low volume product of fewer than 1,000 tagged items per day. This solution creates bottlenecks at higher volumes.
Determing the costs of a slap-and-ship solution can be difficult. Most vendors do not disclose their price lists publicly. This makes it extremely difficult for companies to build a budget. It requires extensive research that is time consuming to both customer and solution provider. Weeks of discussion often end with a project that is on-hold until the budget is approved. Experience has shown this can take a year or longer.
Some of the common external costs a company can expect with a very simple slap and ship solution such as this one, look like this:
Description
One Thermal RFID Printer/encoder
$5,000
Two Dock Door Read Points, includes:
3 x EPC compliant, multi-protocol reader
8 x Bi-static 915MHz Antennas
4 x Industrial Strength Enclosure for Dock Doors
Cables, UPS, Lights, Mounting Hardware, Ballards
$15,000
Hardware Total:
$20,000
RFID Middleware (varies by vendor):
$30,000
External Services:
$50,000
Total
$100,000
As for consumables, the 4 inch by 6 inch RFID Labels tend to cost around $0.40 a piece for quantities of 100,000 or less. Thermal printer ribbons are most likely part of the current budget. Please note that these prices are rounded off. The actual prices do not include sales tax or shipping costs.
Let's go through the list of items:
The average cost of a high quality RFID printer/encoder is around $5,000. For example: Zebra R110Xi Printer / RFID encoder: $4,395.
If you already have an existing infrastructure of Zebra barcode printers you'll find most RFID printer/encoders support ZPL (Zebra Programming Language). By upgrading one of your existing barcode printers to an RFID enabled model, there is minimal development effort.
Two dock door portals are recommended in the event one door is busy. Depending on volume, you may need to outfit additional doors. You're going to need RFID readers that are compatible with ISO 18006-C standard (also know as EPCglobal Class 1 Generation 2). Make sure they comply for local regulations for frequency and power and are approved by appropriate governing bodies. For example: in the United States, the reader should operate in the 902 to 928 MHz range and MUST be FCC certified. Additional equipment required includes uninterruptible power supplies for the readers, feedback lights for operations personnel, mounting hardware, cables, and ballards, which are the yellow cement bumpers that protects the RFID equipment from the fork-lift. A spare reader and a couple more antennas is also recommended if you have the budget.
Middleware really varies by vendor and requires a great deal of shopping before you make a decision. On average, a site license for a middleware solution tends to cost around $30,000.
External services may involve a wide variety of tasks that can include architecture consulting, training, analysis, and tag selection / placement testing. More internal labor normally means less external labor. What you can't get in-house tends to be the experienced RF engineers that have built solutions before. They need to be brought in. Depending on the services firm you're comfortable working with, $50,000 is normally a good starting point and should buy you a little over 300 hours of professional services, and includes the following tasks:
Site Survey
Test and configure equipment off-site
Installation
Design and configure interface to two customer back-end systems
Complete System Test
Full System Documentation
Training
Customer acceptance
Project management
Plan for more if you have multiple facilities and more than one product line.
Please note, this example covers the external costs only: RFID equipment, software, tags, and some consulting services. Internal costs continue to be focused on labor. How much time does it take to enter the information and tag the product? How much time will it take for the maintenance crew (these guys are normally employees) to run power and network cables to the dock doors, install ballards, and drill holes to mount the equipment? Finally, annual support costs tend to run from 10 percent to 15 percent of the external costs.
The time to implement a solution like this also varies by company. The up-front analysis takes more time than installing the equipment. Overall, the internal and external budget to get started will run you between $500K and $750K. Again, We emphasize there are a lot of variables in this number.
As you begin on your road to compliance, recall the house analogy. There are a lot of variables to consider, especially whether to build the system yourself or bring in someone to build the system for you. Just remember, you have to live in the house once it's built.
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