876 Words4 Pages

3.3.2 Return on Investment
Organization should consider about the cost-benefit analysis in three aspects: cash flow (both positive and negative cash flow), assumptions (e.g. container loss and the number of container needed in the cycle) and cost justification approaches. Regarding to the first aspect, some researchers, such as Rosenau et al. (1996), Twede et al. (2004) and Hellstrom (2009), proposed that there are three types of cash flow that should be estimated: initial investment, operational cost and operational saving. The details of each type of cash flow are displayed in Table 3.4. Furthermore, there are some concerns on the validity of cost-benefit analysis. Tajima (2007) stated that a company may suffer from hidden cost and long payback period of RFID adoption. Véronneau et al. (2009) also agreed with Tajima (2007) that based on his case study if the duration that RFID is used in each day is small, the expected useful life will be shorter than the amortization of fixed equipment. Although Hellstrom (2009) agreed that a company should carefully include all possible costs such as man-hours used in the estimation to ensure the validity of cost-benefit analysis, he argued that the payback period of his two case studies was within two years. Moreover, he argued that rather than focus on the cost, companies should emphasize on the number of RFID readers required, the system integration and the implementation process.
Table 3.4: Cash Flow Investment
Initial investment

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