Cost-benefit analysis of item-level RFID in unmanned retail environment, Case study – Convenience goods smart cabinet

Abstract

The objective of this thesis is to research the benefits of radio frequency identification (RFID) by conducting a cost-benefit analysis for unmanned convenience goods RFID cabinet. RFID is a technology for automatic identification and data capture (AIDC) that utilizes radio waves in wireless communication for identification of assets, products or other physical items. The benefit of RFID is based on non-line-of-sight reading that enables more automated processes and promotes cost-efficient operations and effective information flow.

The theoretical framework of the thesis focused on the fundamentals of RFID and automatic identification technologies for leveraging the item-level inventory information within convenience goods retail environment. Furthermore, the potential benefits that RFID can deliver along with the assessment of economic feasibility for RFID investment decisions were introduced. The methodology section introduced the case study environment and the applied research methods. The benefits and economic feasibility as key determinants for RFID smart cabinet implementation were studied through a cost-benefit analysis of case company’s operations.

The results of the cost-benefit analysis indicated that there’s a high potential for lucrative investment opportunity for RFID smart cabinet implementation within the studied environment. Real-time visibility to the cabinet inventory along with process-level efficiency improvements, error reductions and better control over theft and spoilage were the key drivers for RFID benefits. Item-level identification and accompanying dynamic pricing capability were also assessed. From the identified quantifiable benefit categories, potential increase in revenue and decreased waste were determined to provide the most significant monetary gains from the RFID implementation. A variety of process-driven improvements within the warehousing and distribution activities were also recognized to provide savings in terms of reduced labor costs.