Bracket International The RFID Decision Case Study Jack Bracket, the CEO of Brac

ID: 353921 • Letter: B

Question

Bracket International The RFID Decision Case Study Jack Bracket, the CEO of Bracket International (BI), has of steel shelving and brackets, the firm operates three grown his business to sales last year of $78 million, with small factories in Ohio, Kentucky, and South Carolina. a cost of goods sold of $61 million. Average inventory BI's number one competitive priority is "service first, levels are about $14 million. As a small manufacturer while high product quality and low cost are the number CHAPTER 4: Technology and Operations Management 79

Explanation / Answer

1.How does RFID compare to bar-coding?

Advantages of RFID

Disadvantages of RFID

How does RFID compare to bar-coding?

Bracket International - The RFID Decision - Numerical Solution OM4 Example Payback Computations

Sales

$78,000,000

Cost of Goods Sold

$61,000,000

Average Inventory

$14,000,000

Factory Operates

260

days/year

Employee Annual Salary

$55,000

Miss Reads Bar Code %

0.020

Miss Reads RFID %

0.002

Average Miss Read Cost

$4.00

Students often convert to hours so

No. Items Scanned/Day

8,850

all 3 factories

(23,010,000/3600) = 6392 hours and

6392/2000 = 3.2 people

No. Items Scanned/Yr

2,301,000

(8,850*260)

Bar Code Scan Time/Item (seconds) =

No. Scan Seconds/Yr

23,010,000

[(10 sec/item)(260)(8850)]

One Full Time Equivalent Employee Time (Hours) per Year =

2,000

One Full Time Equivalent Employee Time (Seconds) per Year =

7,200,000

(2,000*3600)

Direct FTE Labor Saved Due to Scan Time Reduction =

3.20

people (23,010,000/7,200,000)

Total Labor $ Saved Due to Scan Time Reduction =

$175,771

(3.2*$55,000)

No of Miss Read Savings

41,418

(0.02 - .002)(23,010,000)

$ Saved Due to Miss Read Reduction

$165,672

(41,418)($4)

Annual Cost Savings

$341,443

You do not have enough case information to do a

RFID Investment Costs

NPV cash flow analysis over years 0 to n so a

Readers, Scanners, Tags

$620,000

Simple payback is most appropriate.

New Operating Software

$480,000

Total Cost

$1,100,000

Simple Payback (years)

3.22

(annual cost savings/benefits)

3. What are the risks of adopting a new technology too early? Too late?

The two key questions are: What to adopt? When to adopt? Obviously, a first adopter benefits from an early marketplace lead, reduced costs due to beta testing agreements with RFID developers, enhanced brand image, and the potential for huge profits (Apple iPhone, iPod, iPad, etc.). Fast followers wait and watch the technology and markets, and then jump in fast once the technology is proven and/or adopted by other competitors or the government. Laggards wait too long and miss market opportunities and can even be shut out of the market. Apple is a great example of introducing innovative products with different customer segments adopting the technology at different times while competitors enter the market trying to catch up.

4. What do you recommend Mr. Bracket do in the short- and long-term? Explain your reasoning.

Short-term Recommendations/Actions

Long-term Recommendations/Actions