One of the hardest things to do when evaluating an Asset Tracking RFID project is figuring out its ROI, and how to calculate it over time.
You may be very aware of the inconvenience of lost items, and the production line delays that might occur when you don’t have parts or tools or personnel in the right place at the right time. But how do you translate that into dollars and cents, so you can get the CFO to fund your RFID investment?
Over the years Entigral has developed a methodology for project discovery which naturally leads us to identifying which parts of your process have the most to gain from RFID Asset Tracking capabilities. You might have a problematic step in your process which could yield big savings, but then realize the cost of implementing RFID to solve the problem is rather complex, and would involve significant process re-engineering. The best successes usually come when you can augment existing processes with RFID, and don’t need to change much. If you do the “discovery” right, you’ll be able to quickly identify the low-hanging fruit.
Here’s an example of the ROI assessment that came out of the discovery process for one of our clients.
CFOs want Certainty not Risk
Once you’ve identified the project that appears to deliver the best bang for the buck, now you need to calculate the costs and savings to see if there really is a sustainable ROI worth chasing. You should understand that when a CFO looks at your positive ROI analysis, he/she will not look at it in isolation. The CFO will compare it to other investment strategies, i.e. what else could he/she do with that capital investment. Would something else yield better ROI, or lesser ROI but with lower risks?
Risk is a key concept here. Your CFO wants certainty, not risk. The more accurately you calculate the ROI for your project, the more you eliminate the perceived risk of not yielding it, and the easier it is for your CFO to fund your project.
Chances are you’ve already wasted time on cookie-cutter ROI calculators you found on line, only to realize they are a force fit for your business. Truth is, there is no back-of-the envelope solution for calculating ROI for RFID Asset Tracking in complex business processes. There is real work involved, and you need a method.
For these reason we have developed a step-by-step guide that you can apply to your business, in order to identify, measure and calculate all the costs and savings that apply in your unique business process.
If you want to calculate ROI the right way, download the Calculating RFID ROI guide.