ROI, ROI, and ROI

February 3, 2020 | What's Trending?

When we are approached by nursery owners, executives and inventory managers who are interested in an RFID solution, there is usually a problem they are trying to solve e.g. less time spent sizing and counting inventory. However, the problem is often not the root cause of the issue, or it is linked to other business challenges/issues. Our sales process is really a discovery process. We pride ourselves in understanding your business, your real problems, and linking those to solutions that drive results, and justify the business case for change. More often than not, the justification comes down to Return on Investment (ROI). Sometimes, an emotional reason for change plays a large role in the decision as well. We meet business leaders where they are at, and help them go where they’d like to be.

Over the years, we have learned that each business owner has a different way of approaching ROI e.g. different financial philosophies, and different expectations when it comes to returns, payback periods, and so-on. Further, ROI can be tricky to calculate when it comes to tech that has both quantitative and qualitative benefits. In general, we try and focus on the high-level justification for the RFID spend, and align the right application of the solution with the organization’s budget and objectives. Through robust dialogue, we “pull the string” on areas where ROI can be achieved via RFID, oftentimes, in unexpected places.

In a recent example, after assuming ROI was an uphill battle due to exchange rates and low minimum wage thresholds, we learned that a grower had a 50% loss/cull rate in their first production stage. The RFID solution would allow him to reduce basic inventory management time by 50-80%+ thus freeing up time for quality assurance. If he can lower his defect rate by 10%, by reallocating inventory labor, that increases supply on a product that they continue to stock out of due to high demand. They estimate that they stock out of product equivalent to 100% of their annual revenue. The savings are substantial, it just took a little time to find the opportunity for a solid return by tracing labor hours, to defect rates, to lack of supply.

Prospective customers routinely have costing challenges. They lack visibility into each stage of production. One grower has shared that he sells an oversized 2-gallon plant, at 2-gallon pricing when it should have been upshifted and sold at 3-gallon pricing. He estimates that he loses 40% of his annual revenue per year due to the lack of visibility into each stage of his production process, which means he turns inventory too slow and when it does turn, it is priced wrong. In his case, RFID tagging each plant may not be cost-effective, but RFID tagging each tray of plants is effective. The RFID enables the visibility needed in production planning and costing, without the added steps/labor. The end result is that decisions can be made during production to ensure that plants are sized and priced correctly, linking production back to accounting and sales in a more meaningful way.

There are dozens of examples similar to the ones I shared. Soft benefit examples often include improved customer service and improved employee job satisfaction. These are harder to measure, but we all know are there and realized.

One key to a successful RFID project, that drives the ROI you are seeking, is marrying the correct tech to your specific application, and ensuring that the right processes and procedures are in place to support it. If organizations take that approach, they will be in a great spot to add meaningful value to their bottom line, as we do for other nursery owners, executives, and managers. The technology can do its part, but the company’s strategy, people and processes need to align to make sure the desired results manifest where they are expected.

Cheers,

Matt

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