The "slap-and-ship"* model that most manufacturers use to comply with military and retailer-driven RFID (radio-frequency identification) mandates isn't producing the type of investment returns that would warrant voluntary use of the technology.
In fact, less than 25% of the 650 respondents to the IndustryWeek/ IBM 2005 Value-Chain Survey published last September said they have an RFID tagging strategy. High tag prices — averaging 30 cents per passive tag but falling — and poor tag readability are major reasons why manufacturers appear skeptical about RFID's benefits, according to an October 2005 AMR Research report on RFID in the consumer-products industry.
However, some manufacturers have achieved success with RFID by using less-conventional systems that don't leave the warehouse or factory floor. "With this internal process within your four walls or your four facilities, you have complete control over how a product is being tagged and read. Those have been more successful than CP [consumer products]-to-retailer kind of examples that don't really have a business case," says Kara Romanow, author of the AMR report and a research director at the Boston-based firm.
The companies most proactive with strategic RFID initiatives are finding innovative ways to set up and use the technology. Sometimes this involves the use of active RFID tags, which are powered by batteries and typically range from $5 to $75 depending on functionality, to improve readability and inventory tracking.
"There are a number of companies using active RFID, like your [automated] toll-pass tag, [but] a little bulkier — not something you're going to put on a product and ship out the door, but certainly within automated-storage and retrieval systems we're seeing it," says Dan Miklovic, vice president and manufacturing research leader at Stamford, Conn.-based Gartner Group Inc.
For several years, Ford Motor Co. has depended on active RFID for parts replenishment and vehicle tracking. Other companies, such as International Paper and Gillette, have strategically configured RFID tags and readers throughout their plants to track inventory. These three shared with IndustryWeek how they've moved beyond compliance to leveraging RFID for their benefit.
Ford Motor Co.
Moving to a pull system
Dearborn, Mich.-based Ford Motor Co. is using an active RFID real-time location system at its North American assembly plants to signal a wireless e-kanban for parts replenishment. Each container of parts on an assembly line is associated with an active WhereCall device, manufactured by Santa Clara, Calif.-based WhereNet Corp.
When more parts are needed, the assembly-line worker pushes a button on the unit that sends an RF signal to a mobile device on a forklift that tells the operator to bring more parts, says Ted Thuis, a business process specialist with Ford's material planning logistics staff.
The result is improved efficiencies with inventory deliveries because assembly-plant workers aren't wasting trips by arriving too early. "Another key efficiency is less downtime and fewer late line feeds, being a part that gets there after it's needed and potentially either stops a line and causes production to put it on somewhere other than their workstation," Thuis says. "Of course, along with that goes improved quality, building a car on time and [being] in station more often."
International Paper
Solving readability and tagging problems
Stamford, Conn.-based International Paper Co. began exploring RFID in 1999 to track massive paper rolls stored in the company's Texarkana, Texas, paper mill and warehouse. At the time, the bar-code system the company used to manage inventory was proving to be a challenge. In some cases, the laser from the bar-code scanners would bend when reading higher-stacked rolls, and other times the actual bar codes would fall off the bulky packages.
The company realized that with RFID it could eliminate the issues caused by bar-code scanners, and that RFID tags could be embedded in the rolls, says Le Tran, director of professional services for ASURYS, a Memphis, Tenn.-based unit of International Paper that provides RFID solutions.
Now, when a roll is created, the company embeds an RFID-enabled identifier tag inside the paper-roll core. A clamp truck affixed with two RFID sensors reads the tag as it moves the rolls from the production line to the warehouse. Another set of readers is mounted in the belly of the truck so it can read additional tags strategically located on the warehouse floor. "Every time a truck passes a tag it's constantly interrogating the floor and the tag, and we have encoded an x-y coordinate that gets mapped back to a physical location, so you can think of it kind of like an internal GPS system," Tran explains.
The company expects to recover its investment in the RFID system in about two more years, Tran says. It's already allowed the company to reduce its workforce at the Texarkana facility by one person per shift and one full-time inventory employee, and it's eliminated two trucks.
In the future, International Paper would like to gain further benefits by extending the technology to its customers, but RFID costs must fall before that's likely, Tran says. "We want to leverage our customers to use the tagged roll... that's probably one of the biggest challenges in rolling this out to our end-users."
Gillette Co.
Tracking inventory from production to shipping
The Gillette Co. recognized the potential value of RFID early on when in 1999 it became one of the founding sponsors of the Auto-ID Center, an RFID research group that is now part of EPCglobal Inc. Since then the Boston-based subsidiary of Procter & Gamble has achieved significant time savings in its order-verification processes at its Fort Devens, Mass., plant by implementing RFID solutions.
Before deploying an RFID system, the company tracked products moving through a connecting tunnel from its packaging center to the plant's distribution center by scanning bar codes on each pallet five times and recording the data with three different keyboard entries. That process took an average of 20 seconds per pallet to complete, says Gillette spokesman Paul Fox. The current tracking system consists of RFID readers positioned throughout the tunnel that scan each individually tagged item on the pallets as they move from production to distribution. Now order verification between the facilities takes about five seconds per pallet. The company also has reduced the time it takes to pull and prepare products for shipping. Previously, that process took 80 seconds to 20 minutes to complete compared with just 20 seconds using RFID, Fox says.
Once the products are placed on the trucks, readers by the dock door again confirm that the correct order is being shipped. Fox estimates that RFID will save Gillette 20% in operational costs at each distribution center.
source: http://www.industryweek.com/ReadArticle.aspx?ArticleID=11346&SectionID=2 1feb2006
* Slap and ship: A generic term that refers to putting an RFID label on a case or pallet just before it is shipped from a supplier's facility to a retailer's facility. This approach to using RFID is strictly to meet the retailer's requirements and delivers no internal benefits to the supplier.
source: RFID Journal Glossary
Getting the most out of your RFID investment requires not only a commitment to the technology but a vision to use RFID for collecting business intelligence.
If you want to get real value out of your radio frequency identification deployment, the first thing to do is to put a stop to all that mindless slapping and shipping.
A radio frequency identification (RFID) tag—a piece of plastic or paper that contains a wireless transmitter and an embedded microchip that stores basic information—can track and report the movements of a tagged object. That's a good thing. But slap and ship deployment—that is, slapping RFID tags onto cases, pallets, or products, sending them on their way, and then using the tags as nothing more than high-tech tracking devices—won't give you the best return on your investment.
"To really realize ROI from RFID, companies need to see this technology as a way to collect valuable business intelligence that can help them cut costs and increase profits," says Manish Bhuptani, director of market development at Sun Microsystems.
Bhuptani, with coauthor Shahram Moradpour, has written a book, RFID Field Guide: Deploying Radio Frequency Identification Systems, which provides an in-depth practical look at the best practices and pitfalls of RFID deployments. He believes that before companies start tagging anything, they should first consider what their business goals are and how information gleaned from RFID could help them achieve these goals.
Getting the ROI into Retail RFID
Recently some retailers and suppliers needed to quickly implement RFID technology because of mandates by major retail partners such as Wal-Mart, which required that its top 100 suppliers be RFID-compliant by January 2005. Bhuptani recommends that in these cases companies do simply slap and ship, and then consider what other benefits they can gain from the deployment.
Whether RFID is instituted because of a mandate or deployed as a company-chosen initiative, when it is utilized properly, as a fully integrated part of a business, retailers can use RFID to track assets, ensure timely delivery and receipt of goods, and collaborate with suppliers and partners to improve fundamental business processes across the entire supply chain. Retailers achieve these benefits by analyzing what RFID data is trying to tell them: Where are the products, where should the products be, and do they have what they need when they need it?
Information gleaned from the tags can alert retailers to potential stockouts of popular items in time to do something about the situation, validate the authenticity of received goods, allow retailers to know exactly where goods are in every step of the production and shipping process, and much more, says Bhuptani.
"One of the keys to realizing ROI from RFID is finding ways to use the information from the tags in the same way as you'd use any type of business intelligence," says Bhuptani. "Sun is working with our partners to develop solutions that really put RFID to work."
I Can See Clearly Now
Sun and SeeBeyond Technology recently formed a technology and marketing partnership to deliver combined products for building service-oriented architectures (SOAs) and for processing and using RFID data gathered by a retailer and its supply chain.
"Clearly, SOA is emerging as the preferred service delivery mechanism for forward-thinking IT strategists," says Jim Demetriades, CEO of SeeBeyond. "As customers standardize on the Java Enterprise System for their core infrastructure, it's only natural that they would extend this platform to include a complete SOA-based composite application development environment to drive their integration projects, thus improving core business operations, reducing development costs, minimizing risk, and accelerating ROI."
SeeBeyond will port components of its SeeBeyond Integration Composite Application Network (SeeBeyond ICAN 5) Suite to the Sun Java Enterprise System. ICAN 5 modules enable users to bring together disparate enterprise network systems and resources. The two companies will initially focus on solutions for RFID and portal application development, which will then be jointly marketed and sold by Sun and SeeBeyond.
One solution that Sun and SeeBeyond are close to releasing is a joint end-to-end offering specifically for the retail market. This solution features the interoperation of Sun's Java Enterprise System RFID software and SeeBeyond's ICAN 5 Suite, which allows organizations to make better use of systems already in place; connect seamlessly with partners, suppliers, and customers; and automate core business processes to improve operations.
With Sun and SeeBeyond's joint solution, Sun's RFID software processes data coming in from RFID readers and integrates it with existing business applications, where it can be put to good use. The collected information is then sent to the SeeBeyond platform for distribution to business partners and enterprise back-end systems such as SAP or Oracle.
"RFID will give a significant competitive edge to retailers who use it as a source of real-time information. Solutions like Sun and SeeBeyond's that bring RFID data directly into business collaboration and decision-making applications are exactly what retailers need," says networking systems consultant Edward Addams. "Taking the flow of data produced by RFID and transforming it into actionable information makes RFID both practical and profitable."
Retailers will soon be able to see the Sun SeeBeyond joint RFID solution in action at Sun's RFID Test Center in Dallas.
source: http://www.sun.com/br/0205_ezine/ret_cbeyond.html 1feb2006
Conforming to RFID specifications worries many retailers. But a trial in a state-of-the-art test center can provide peace of mind.
Retailers recognize the potential for radio frequency identification, or RFID, technology to cut supply chain costs, increase operational efficiencies, speed delivery time, and minimize theft and waste. Unfortunately, reaching the potential is not always practical, and some retailers have adopted a wait-and-see attitude toward RFID.
But mandates from Wal-Mart and the Department of Defense requiring major suppliers to adopt RFID by January 1, 2005, have ramped up deployment plans—and anxiety levels.
"Today's retail market has enterprises focused on every penny of margin they can achieve and retain, and they know that an improper investment in technology can make or break them," says Gene Alvarez, vice president of technology research services at the META Group.
Echoing Alvarez's thoughts, a recent report from AMR Research states that retailers remain concerned about implementing RFID without guidance from trusted sources and solid assurances that the technology will actually work in the real world. To help suppliers quickly achieve compliance with RFID mandates and calm worries surrounding its deployment, Sun Microsystems soon will open state-of-the-art RFID Test Centers in Dallas, Texas, and Linlithgow, Scotland.
At the centers, retail suppliers will be able to see that RFID can integrate smoothly into existing systems, and they can test deployments to ensure that all the pieces of the solution—from information integration in back-end systems to sharing data with supply chain partners—are configured for optimum results. The test facilities will also allow companies to evaluate various solutions before they invest in them.
"Sun's RFID testing center will be helpful on a number of levels," Alvarez says. "Many retailers and suppliers may not have the funds ready to establish pilot projects and to conduct the testing needed to verify and establish their RFID infrastructure and applications. And since time is of the essence, there is no time to trial solutions in the field and then try to fix any problems once the solution has been deployed.
"Any opportunity that a retailer or supplier gets to test and verify RFID capabilities will prevent the loss associated with failed implementations," adds Alvarez. "Plus, working with a technology partner like Sun can help organizations gain a real understanding of RFID and can reveal ways to leverage the vendors' knowledge base."
Getting RFID Right
U.K. supermarket chain Tesco and the U.S. Food and Drug Administration have also asked suppliers to deploy RFID. As high-profile deployments of RFID move forward, many prospective users of RFID technology do not have a clear picture of the effect the technology will have on their operations. In a December 2003 report, AMR Research analyst Nigel Montgomery outlines typical retailer concerns, such as how much it will cost, how long it will take, what issues should be tackled first, and what the true return on investment will be for each implementation.
"Nearly all of the companies that have implemented the technology won't share the result of their experiences," Montgomery writes out in the report. "RFID is providing competitive advantage and is returning cost benefits, but thereby hangs the problem. Having been through the pain to arrive at something that gives you an edge, what right-minded company would then tell everyone else, immediately losing any advantage gained?"
That's where Sun's RFID Test Centers come in. The warehouse facilities provide a working environment that allows suppliers to see RFID in action, and perform a thorough analysis of their own manufacturing, warehouse, and distribution environments to ensure that their product-tagging plan is ready for implementation from conveyor and dock door stations to warehouse forklift portals.
Test center users will also be able to work closely with Sun's RFID experts, who will share best practices, answer questions, and help users determine how to most effectively implement RFID in their businesses.
"With the variety of readers, tags, and other infrastructure components out there, customers face a significant task in picking the right infrastructure for their needs," says Vijay Sarathy, group marketing manager, Sun RFID Infrastructure Solutions. "Sun's RFID Test Centers are there to help mitigate the risks that our customers face."
Meeting the Challenge
According to META Group analyst Alvarez, current RFID challenges involve working out basic issues such as the best location on the product for the tags (in the box or external) and determining the best locations on pallets to ensure that the tags will not be damaged during normal activities.
"Suppliers and retailers will also be facing issues on reader placement—where in the supply chain to do the data capture and how to transform raw data into valuable information," Alvarez says.
"We do believe that this data will give birth to new business intelligence and application capabilities. It's important that products be standards-based so retailers can put together the best solution for their individual situation."
Sun's RFID Test Centers use a number of Sun technologies that simplify an RFID implementation including:
Solaris Operating System Sun Java Enterprise System Sun's solution also facilitates secure and seamless integration with legacy systems and other standards-based enterprise applications and solutions.
"Sun is committed to standards entirely," says Sarathy. "We believe that anything Sun brings to the market should adhere to open standards so that customers can protect their investment.
"And then we add value by innovating beyond the standards and providing the advanced functionality that some customers want. The key part to remember is that we do not require the use of these advanced features. So we are providing value and enabling the customer to choose."
End-to-End Expertise
Sun's RFID Test Centers are just one part of Sun's overall RFID offering, which includes hardware, software, services, and partnerships. The centers will showcase RFID in action—providing working proof of the real benefits this technology can bring to the retail arena, which Sun is already exploring in its own business process.
"Sun is practicing what it preaches," says Sarathy. "We've applied RFID technology in a pilot program in our own manufacturing facilities. This has provided us a test bed where we can better understand the factors driving ROI, as well as test our RFID infrastructure."
"This pilot has been very successful in terms of the learnings we have achieved and the potential ROI that we know it can bring to our own operations."
source: http://www.sun.com/br/0204_ezine/ret_rfid.html 1feb2006
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