The Hidden Discounts of OpEx for Inventory Tracking

When you think of inventory tracking, you often think of purchasing RFID tags and readers at the best price & with the best warranty.

Whether it is monitoring goods within a warehouse or returnable transport items such as pallets, tagging assets and setting up gateway hotspots has been common place with RFID or more recent Bluetooth Low Energy (BLE) based technologies. Low Power Wide Area Network (LPWAN) technologies like Nb-IoT, CAT-M, and Sigfox, are gaining popularity today because it is infrastructure-less, where tags double up as gateways (like this Roambee solution). 

Irrespective of which technology fits your bill, you are dealing with sensor devices which brings about a common question when it comes to hardware-intensive solutions: “Should I choose the Capital Expenditure (CapEx) or Operational Expenditure (OpEx) model?”

In recent times there is a huge preference among supply chain executives and CFOs towards OpEx although on paper it may seem more expensive per month than the amortized CapEx model.

So, what are these hidden discounts that are attracting them to OpEx?

Let’s find out!  

Hidden Discount #1: Freedom from Systems Integrators

You’ve purchased some tags, readers, and antennas with a bulk discount.

You now need somebody to piece them together.  Even if you are using a LPWAN-based wireless solution, you need someone to configure the direct-to-cloud smart devices, which then needs to plug into your enterprise software for integrated visibility.

Systems integration will cost you significantly. The average cost of setting up an RFID reader is $5,000 per door, and a good chunk of that amount goes to your systems integrator.

Thought hardware was cheap? Think again! And if you have hundreds of warehouses across the country, you need to hire multiple systems integrators. There is a precious time-equivalent of money that goes into contracting and engaging them at your organization.

Hidden Discount #2: Freedom from Scaling Limitations

If you are an automotive OEM with about 100 vendors, think of the time and cost that would go into getting these vendor-warehouses up and running. Even if one warehouse takes a week to setup, you are looking at a 2-year project plan before you even know if your project is successful or not.

With an OpEx model, you can pick 10 critical locations to begin with, start demonstrating savings in the initial months, and confidently scale the solution across your own supply chain network.

Hidden Discount #3: Freedom from Becoming a Tech Dinosaur

OpEx totally trumps CapEx when it comes to saving your organization from becoming a technology dinosaur.

First came RFID, then came Bluetooth Low Energy (BLE), and today there are LPWAN based solutions like Nb-IoT, CAT-M, and Sigfox which rid you of the need for infrastructure like readers or antennas. The speed at which newer technologies are developed is only accelerating. Therefore, waiting for 3 or 5 years for a 5x ROI versus migrating to a newer technology that could give you 15x ROI is a tough call if you've already sunk in your funds for years in a CapEx model. 

With OpEx, you can plan for unplanned technology upgrades as part of your implementation roadmap, and if your current vendor isn’t able to offer you newer technology value-advantages, you are free to explore the market.

Hidden Discount #4: Freedom from Warranty and Maintenance

Warranty and maintenance don’t just apply to hardware, they apply to software too. With a CapEx model, you will have to hire technicians once the warranty period is over or when a fine-print limitation clause tends to find its perfect fit for your specific problem.

In an OpEx model, the service provider is usually obligated to make the service work. This means ensuring the devices, software, and everything else is always up and running, reducing the chance of paid downtime.

Hidden Discount #5: Freedom from Poor Utilization

Imagine you purchase a million tags to track your returnable transport items like reusable containers, pallets, trays, or crates as you found that bulk discount, and then 3-months down the line, you’ve only managed to tag only 500,000 assets. This means, you’ve already paid for the remaining 500,000, but they haven’t affixed them onto your assets yet because they haven’t showed up at your primary distribution hub yet from your vendor or customer locations.
That’s 500,000 tags awaiting implementation you’ve already paid for.

With OpEx, your monthly billing will only be applicable for the number of tags you’ve ordered for that month. What’s better? Imagine you have subscribed to a returnable leasing model too where and your pallet inventory pool is low for a particular season, you can shrink your monitoring tag inventory too to coincide with your pallet rental volumes.

No more un-utilized or underutilized pallets here.

Hidden Discount #6: The Data Predictions

OpEx service providers like Roambee not only use the right technology for the use-case and regional connectivity, they also have the advantage of penetrating multiple companies in the industry because of the ease of adoption. This ease of adoption doesn’t just help a service provider like Roambee grow fast, but also enables them to collect a large number of data-points for better analytics and prediction.

It’s the same reason why Google Maps more predictable when it comes to estimating your ETA as compared to a smaller mapping service? It’s because they have analyzed more data points and scenarios as compared to most other service providers, leading to improved trust in predictions.

The Honeycomb IoT platform has data across multiple industry verticals to improve predictions on asset behaviour, while ensuring world-class data privacy standards across it’s customer data.

The Biggest Bargain Yet: Peace of Mind

Peace of mind is the biggest contributor to your team’s productivity. The OpEx model can deliver peace of mind from:

• The burden of internally selling a CapEx project
• The burden of demonstrating utilization
• The burden of warranty, repair, and maintenance
• The burden of waiting years to match ROI with forecasted savings

Combine this with actionable intelligence with predictions you can trust, and you’ve got a winner.

So, the next time tags, readers, gateways, or narrowband/LPWAN devices seem cheap, think of all the hidden discounts of OpEx that you are sacrificing. Be smart when it comes to smart technology!