Monday, October 16, 2006

Improving Your Firm’s Risk Management Profile with RFID

RFID Law Journal
Newsletter No. 26
October 16, 2006

Is your company considering deployment of a RFID, or other auto identification, system in support of its supply chain operations? If so, your company’s decision makers are usually tasked with identifying and evaluating ROI gains from such deployments. Most experts highlight the following as potential benefits:

-stock-out reductions,
-labor cost reductions,
-supply chain optimization,
-shrinkage reduction,
-spoilage reduction,
-payment optimization, and
-compliance (with mandates).

RFID gurus are typically well-equipped with pilots and studies supporting most of these rationales (e.g., Wal-Mart, etc.).

Your company's legal department may also help your firm identify another related gain from this early stage technology. Though not necessarily intuitive, RFID may serve as a “risk management” tool over the longer haul, and as such, could provide discernable benefits.

Ubiquitous deployment of RFID within your company’s (division’s) supply chain may, for example, provide your company (division) with ammunition to distinguish its valuable brands from “tainted” brands in the industry. (See RFID Law Journal Newsletters & Articles: “Making a Smart Investment in Your Company’s Supply Chain,” “Tracing the E.Coli Outbreak,” and “Products Liability Implications of Auto ID Deployments within the Aerospace Sector”). In the instance of major disruptions to a specific industry’s supply chain (e.g., tires, food (spinach), drugs, etc.), RFID could provide your firm with critical brand support at a time of crisis (for competitors). That translates into a competitive advantage, though its value may not be discerned for years.

RFID also equips companies with an important risk management tool in times of crisis. In the instance of an unsettling finding, RFID enables a management team to more quickly trace and track a problem within its supply chain (e.g., tainted goods, mislabeled products, etc.) and take action to minimize the risks for the company and the public, resulting potentially in a better brand protection and an improved public profile. After all, why amputate the patient’s leg if a far less intrusive method is available?

And if there are “commercially” available tools, such as RFID and other enabling technologies, to satisfy pedigree standards, it seems likely that stakeholders, including the trial bar and their clients (e.g., victims of mislabeled drugs, tainted food products, etc.), will be intensifying pressure on manufacturers to deploy such technologies to ensure supply chain optimization that falls on the right side of protecting the public’s health and safety.

While RFID isn’t necessarily a panacea for all of your company’s supply chain problems, RFID could provide your management team with a significant tool that reduces its long-term business risks. As such, it’s worth considering the opinions of your company’s risk management and legal departments when evaluating this IT deployment decision.

© 2006 – RFID Law Journal, LLC. All rights reserved.

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