Overview
There is no question about it – Radio Frequency Identification (RFID) is not a passing technology fad. According to a Datamonitor survey of the top 300 manufacturers in the US and Europe, 60 percent already have an RFID project underway – and many more manufacturers are investing.
However, many companies are rushing to meet compliance mandates and reap the benefits of RFID without properly understanding the underlying architecture needed to support these smart tags. In return, inadequate implementations meant that in 2004, nearly half of all RFID pilots were abandoned as failures.
How do we avoid failed projects such as these? What exactly makes up RFID today and what RFID technologies of the future should manufacturers start to prepare for? We take a closer look at the impact of RFID, the challenges and the solutions on offer today.
What is Driving RFID?
RFID is a hot topic today in the supply chain business world, RFID technologies have been in the market for some years. The recent major driving forces for RFID from global retailers and the Department of Defense in the US have brought it to the fore.
RFID uses small radio tags to keep track of goods as they move through the supply chain – from production line right through to final destination. Demand for these tags has soared due to Wal-Mart and US Department of Defense mandates, which required that large suppliers tag products and pallets by the end of 2005. The top suppliers of other major retailers such as Tesco, Target and Metro are also required to utilise RFID tags at a case and pallet level on shipments. In conjunction with this push, EPCglobal has established a RFID standards committee to provide RFID standards globally.
Compliance will also be driven in regulated industries such as pharmaceuticals, food and tobacco where RFID is destined to become mandatory to help improve traceability and counteract fraud. Besides compliance, network-wide optimisation, data visibility, track & trace are also driving RFID deployment.
Fig. 1: Incorporating RFID technology into the supply chain
RFID Today and Its Impact on Warehouse Logistics
Suppliers who have been compelled to implement RFID in response to mandates are now starting to realise the full benefits that RFID can provide. We are beginning to see a real shift beyond a mere obligatory “slap and ship” use of the technology to one where vendors are using it to increase efficiencies and harness the wealth of information inherent within the supply chain.
RFID will impact virtually everyone working for manufacturing companies, from the forklift operator to the head of logistics. It can improve warehouse and distribution centre efficiency, save time in deliveries, increase productivity and reduce human error. It can also ensure cost savings in out-of-stock supply chain reductions, prevent counterfeit issues, and theft and help companies obtain key information on customers and their activities.
The impact of RFID on warehousing will also be tremendous as the guesswork in managing an inventory is dramatically reduced. Visibility is sorely lacking from real-world supply chains, which is why companies hold lots of stock in massive warehouses, to accommodate for a shortfall in planning. Although this does eliminate the chance of running out of stock, the cost of having and managing a warehouse is huge – adding up to US billion in the US alone. RFID provides an opportunity to move from ‘just in case’ to ‘just in time’.
The combination of RFID hardware with a unique Electronic Product Code (EPC) can transform the supply chain and enable manufacturers to associate a lot of information with each tagged object. However, if companies want to create a truly demand-driven supply chain, RFID will need to be totally integrated in business processes and shop floor systems.
Fig. 2: Impact of RFID and type of RFID technology at different levels of a supply chain
Getting More Value from Your Existing Systems with RFID
Radio Frequency Identification (RFID) technology is a next-generation data collection technology. Currently, there are a number of data collection methods available such as RF-enabled barcode systems, voice Technologies, etc. RF-enabled barcode systems have been available for many years and permeate both business and day-to-day life. Barcode is most widely used in tracking visibility of supply chain logistics.
Both RF barcode and voice technologies require human interaction, and barcode scanning requires line of sight. Although these methods of data collection can provide real-time information, there is generally a delay in reporting on the data collection in supply chain tracking. RFID technologies on the other hand can fill the gap on current data collection technologies.
RFID offers many benefits, including:
• The ability to automate inventory handling thus reducing labour required.
• The facilitation of the flow and exchange of data as it moves through the supply chain from point of production to point of consumption.
• Enterprise track & trace enablement
• Monitoring product movement through critical control points
• Compliance issues and security
• Asset tracking
• The provision of real-time status and visibility resulting in reduced inventories, improved service levels, reduced loss and waste, and improved safety and security.
• Cost savings via reduced labour
• Seamless RFID receiving with ASN’s
• Seamless RFID shipping and flow through
• Potential for higher accuracy via verification
Even through RFID has different format and technologies, EPCglobal has helped to standardise the data formats. In fact, data serialisation is key to the future of RFID.
Considerations before RFID Implementation
Business values need to be considered before RFID deployment. Business goals and long-term strategy need to be established on each RFID project. The goals can include improving enterprise inventory accuracy, achieving higher customer satisfaction, reducing stockouts and so on. Proper identification of the business goals and subsequent plan to achieve it are critical success factors in a RFID implementation. In parallel with planning, education should be considered a key part of the rollout. The key message being that RFID does not mean a reduction in labour force. Rather, RFID will improve business processes through labour efficiency.
Potential business process changes should be identified at the first stage of the project. RFID will generate massive amounts of data, so consideration needs to be given to the IT infrastructure required to accommodate this need.
Finally, the organisation needs to select a partner carefully to assist with rollout. Ensure a partner that has proven RFID implementations is chosen. It will help to increase the project success rate given that most implementations are in their infancy and practical experience is critical.
Enterprise Impact
A RFID system typically consists of a radio-enabled device that communicates with or interrogates a tag or label, which is embedded with a single chip processor and an antenna. The frequency of RFID will affect the penetration performance as well as the power. Frequency and power of RFID is also determined by the communication policy of a country. For example, some countries only provide 1 watt power for RFID devices. This means that the range of coverage is small and hence, more receiver devices may be needed to cover a wider area.
RFID technology is enabled by a combination of RFID tags and an open, global network for identifying goods with those tags. With microchips embedded in various types of media, companies can track any type of goods that has an RFID tag attached to it, regardless of where that product is in the product lifecycle or its location in supply chain.
The organisation must research which RFID tags are the optimal ones to use. It could be that certain tags are used for some requirements, but are not as effective in other environments. For instance, some tags will have interference issues with materials such as metals and liquids. In fact, one of the key factors to successfully implementing RFID technology in your operation depends on your selection of RFID tag.
The following points should be considered during RFID Tag selection:
1. Frequency range
2. Read/write vs. read-only technology
3. Range performance
4. Form factor
5. Environment conditions
6. Standard compliance
7. Product material (metals, liquids, etc.)
Using RFID technology will drive value through:
• Extending business process to smart edge devices
• Creating value via the virtual extension of enterprise applications
• Utilising external workflow to drive the enterprise system
RFID systems will generate a massive amount of data that needs to be accommodated for in enterprise applications, hence the need to invest in RFID middleware that will complement your enterprise applications and also the need to prepare those applications for data synchronisation.
The key areas to consider are:
• Avoid drastic changes to enterprise systems
• Avoid duplication of core business processes externally
• Preserve and extend your enterprise investment
RFID will also provide serialisation opportunities to the business since each RFID tag will have a unique identification number. The business needs to ensure that they are ready for serialisation.
Ensuring a Successful RFID Project
A lot of factors will affect the success of a RFID project:
• A strong partner with proven RFID implementation experience and deep vertical-market knowledge
• Proper planning to maximise long-term business value
• Communication to obtain organisation buy-in on RFID strategic direction and reduce any issues with the labour force
• A scientific approach to product testing. Ensure product configuration and tag properties are analysed
• Understanding the implications on your business systems
It is important that with any RFID implementation, thought extends beyond the RFID project. The most successful RFID projects will focus on delivering long-term business value.
Potential Challenges in RFID Projects
Many RFID projects failed in 2004 due to inadequate thought given to the type of environment manufacturers are operating in and the kinds of products they will be tagging. For example, special tags are needed for movable parts, some tags need to be heat-resistant and others require very precise locations. The actual cost of RFID implementations is also a key challenge. This may include upgrading IT systems to deal with the wealth of information generated from the tags. In addition, as the technology or tags improve, manufacturers need to replace existing RFID hardware, such as readers, so that they can still operate on the latest radio frequencies. Besides cost, companies also need to consider if they have the systems in place ready to deal with the amount of information that they will receive. Real-time transactions provide a huge business benefit, but the IT infrastructure and software systems need to be responsive and resilient.
In many industries, RFID is yet to be implemented due to the ongoing issues with standards and common communications protocols. RFID will ultimately fail unless these issues are overcome. In many ways RFID pilots projects have identified the gaps within inter-company communications, and the lack of standards to enable one-time scanning of RFID tags or barcodes. Before implementing RFID, manufacturers should review the current technology and standards to ensure that they are using the latest available software and hardware. Manufacturers should also do a ROI business analysis to be able to prove to the board how much it is costing them to have lack of true visibility versus real-time visibility in their supply chain.
Del Monte Foods – Learning from Its Pilot Project
Del Monte Foods, a US billion retail food manufacturer, is one of the largest manufacturers and distributors of branded canned food. In its pilot project to introduce RFID technology into its supply chain, the company faced a particularly challenging environment.
A key challenge was learning about RFID, and understanding the technical challenges and benefits of RFID technology. Del Monte managed this education process by using a practical approach. The RFID project team established a working lab within one of Del Monte’s warehouses, in effect mimicking the production environment.
Del Monte’s products are usually in a dense fluid within a tin. It was a challenge for the team to get RFID to work with metal surfaces and liquid products, two of the most difficult components to tag for RFID. To overcome this, Del Monte had to determine the optimal location to place a tag to get the best read, as well as which of the different styles and classes of tags would work best for its products. Gathering this crucial information made the lab testing process particularly lengthy. In addition, RFID technology is changing so frequently that Del Monte has to re-test better solutions that came up. The interoperability of RFID equipment also meant that Del Monte had to test different types of printers, and tag designs.
The pilot project provided valuable lessons for Del Monte on how to approach RFID. An early mistake made by the team was to set up a standalone system without fully integrating this with the company’s backend warehouse management systems. The team now realised that it can do a lot more with data by integrating information into its warehouse management system.
Del Monte is now implementing SSA Global’s RFID for Distribution and Warehouse Management software to locate inventory and shipments across the supply chain. Supply chain management offers huge opportunities and RFID is one of the tools that will make it easier for Del Monte to track its products. The pilot at Del Monte demonstrated enough about the benefits of RFID to encourage the company about its use in the future. An area that Del Monte believes RFID can achieve beneficial results is electronic proof of delivery, a simple concept where the pallet shipped out has 100 RFID tags. In addition, RFID can also help the company to identify where a given product is within the supply chain at any time. This is especially vital if products need to be on shelves before promotions.
DC Logistics – Reaping the Benefits
DC Logistics is one company that is reaping the rewards from RFID deployment. The company, which is using SSA RFID for Distribution from SSA Global at its RFID Distribution Center in Dallas, tags and tests products from suppliers before they are shipped to Wal-Mart. The software allows the company to locate inventory automatically in the supply chain by reading the RFID tags. DC Logistics has found that this automatic collection and analysis of data through SSA RFID for Distribution invaluable to its successful development of the RFID Deployment Center. The organisation has been able to meet industry compliance mandates and deliver immediate value to its customers.
Crystal Ball Gazing – a Sneak Preview
RFID is still in its infancy and developments are occurring on a daily basis. The early phase of RFID has had many parallels with the introduction of barcoding, some 20 years ago. Just as with RFID, initial barcode implementations were in response to a Wal-Mart mandate and early adopters took time to realise true return on investment within their own organisations. There were readability issues, teething problems and a need to agree standards. But all these problems were overcome and the business benefits of barcode labels are now unquestionable.
RFID is moving quickly along the same path. An increased interest and use of RFID is to be expected in areas of asset management where today’s standard tracking and tracing procedures might be deemed insufficient for future market requirements. RFID will be most useful in the short term for tracking of valuable inventory within a shipping unit, as well as the tracking of the investment in shipment unit assets.
A milestone in this journey will be the introduction of Generation II tags, to be released later this year which promise better reader operability over greater distances, harmonised standards and improved security.
Once Generation II tags are released, we will see much greater RFID adoption, particularly because these tags embody open standards. This will fuel greater hardware adoption and bigger rollouts, which will ensure that tag costs will be driven down, facilitating wider implementation – and adoption will continue in this cyclical nature. This standardisation will lower the barriers of entry to new suppliers, driving price, competition, innovation and choice.
Once RFID is truly adopted, the world – not just the supply chain – could be a very different place. In a vision of the future, intelligent shop shelves will register as soon as a product is taken and put in a shopping trolley, and will automatically replenish itself, ensuring consistent stock levels. We will simply push our trolley through a checkout point without having to unload it whilst RFID readers register the products individually. In fact, we will even buy those items by simply walking out the shop with them – RFID payment devices in our pockets and tags in our items will allow automatic payment. Washing will be made simpler with appliances choosing relevant cycle settings based on tag information in the items to be washed. The applications are endless.
Conclusion
According to Gartner, during the next 10 years, real-time retailing will become a requirement to staying competitive, just as supply chain improvements became critical to surviving the 1990s. Although it is not quite available as an ‘off the shelf’ solution yet and may never be, RFID should be on every manufacturer’s near-future shopping list. However, in order to meet the pace of development and evolution of standards in RFID, manufacturers are encouraged to work closely with a trusted supplier to ensure challenges are both anticipated and worked through, and the tangible benefits of RFID are realised.
 Trevor Barrows is Director, Logistics Solutions for Asia Pacific Japan at SSA Global. Trevor has worked with clients in the distribution, retail and CPG manufacturing markets for over 20 years. He has been involved in implementing International Fortune 1000 solutions and has managed projects across multiple sites and distribution channels throughout Australia, New Zealand and Asia.
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