The Five Stages of RFID

The Five Stages of RFID

As manufacturers come to accept the inevitability of RFID, they are also discovering some tangible benefits.

There was a time not so long ago when, in manufacturing circles, the words "radio frequency identification" (or RFID) were synonymous with retail giant Wal-Mart's RFID initiatives. That's no longer the case today, points out Lora Cecere, vice president, consumer products with analyst firm AMR Research.

RFID has the notoriety of being both a mature technology (military applications date back to World War II) and an emerging technology (most of the current interest among manufacturers dates back only about five years). It wasn't until Wal-Mart and other big-box retailers (e.g., Home Depot, Target, Best Buy), as well as the U.S. Department of Defense, began mandating the placement of RFID tags on cases and pallets being shipped from a manufacturer to a retail distribution center (DC) that companies started paying attention to the costs and potential benefits of RFID.

The modern era of RFID began in June 2003, when Wal-Mart concluded that the technology had far more potential than what was then being realized (end uses at the time were typically at toll booths, libraries and security checkpoints). Wal-Mart notified its top suppliers that they were expected to begin testing and ultimately implementing RFID tags on every shipment to a Wal-Mart distribution center (to date, the mandates have centered mainly on DCs in the Dallas region).

Boeing uses RFID technology to track its assets at the International Space Station Processing Facility.
For most of those suppliers (a few, such as Procter & Gamble and Unilever, had actually helped develop the current generation of RFID technology), the Wal-Mart mandate led to various reactions remarkably similar to the classic stages of grief. First came denial ("This has got to be a joke!"), then anger ("How dare they try to force-feed us this untested gimmick!"), then bargaining ("OK, we'll do the very bare minimum amount of investigation into this RFID test"), then depression ("We're gonna go broke paying for all these tags and readers"). It remains to be seen how many manufacturers will eventually reach the final stage, acceptance ("We're actually able to run a lot leaner thanks to RFID").

RFID has become a significant business, with the global market currently worth $5.29 billion, according to analyst firm IDTechEx, which includes tags, readers, labels, and software and services. The tagging of pallets and cases as mandated by retailers in 2008 amounted to 325 million RFID labels, based on IDTechEx estimates.

In Search of ROI

Today, consumer goods manufacturers are implementing or evaluating RFID "to track assets, gain better visibility of manufacturing and supply chain operations, and improve product and service quality," AMR's Cecere explains (see table below, "How Consumer Goods Manufacturers Use RFID"). "Most of the RFID projects underway today in the consumer products industry may seem simplistic and, well, dull, when compared to the excitement and controversy raised by the Wal-Mart mandate. In the aggregate, though, these same projects represent why we can confidently say the industry has formed a base of expertise from which further growth will come."

Consumer goods companies, Cecere notes, have found it "virtually impossible to find a return on investment using disposable RFID tags on low-cost products, particularly at item level." While industry pundits have long predicted an ROI delivery when tags fall below the price of 10 cents per tag, the price is still in the range of 10 cents to 12 cents when bought in volume, she points out, and there is little chance that the price point will shrink significantly any time soon.



ProMat Preview: RFID

The following companies will be exhibiting RFID and data communications equipment at the ProMat 2009 show in Chicago, Jan. 12-15, 2009:

ARINC
Access Control Group
Accu-Sort Systems
AeroScout
BEB Fleet Source Group
Banner Engineering
Barcoding
Cadre Technologies
Cannon Equipment
Conductix-Wampfler
Dasko Label
Datalogic Mobile
Data/MAX/Rfgen Mobile, ADC Solutions
Energo Power Systems
Glacier Computer
Hal Systems
HARTING North America
I.D. Systems
iGPS
iLink Solutions
ISOPHI
Intek Integration Technologies
Intermec
JEKA USA Services
The Kennedy Group
Keytroller
KNAPP Logistics Automation
LXE
Legacy Global
M/A-COM Technology Solutions
Motorola's Enterprise Mobility Business
Newcastle Systems
Next View Software
Panther Industries
PEAK Technologies
Psion Teklogix
RM Michaelides Software & Electronic
RackDeflktor SpeedShield
Rice Lake Weighing Systems
Sconvey
ShockWatch
SICK
Siemens Energy and Automation
Speech Interface Design
Systems Application Engineering
Taylor Made Cases
top-VOX
TranSystems
Voxware
WhereNet

There are two basic categories of RFID tags: active tags (which include a power source, such as a battery), and passive tags (which do not). While industrial manufacturers such as Boeing Co., Dow Chemical Co., Ford Motor Co. and others have achieved success with active tags, most consumer goods manufacturers impacted by the retail mandates are focusing on passive RFID.

"Where line of sight is allowed, the use of 2-D barcodes -- essentially barcodes that carry a database of information about the object they are attached to -- is becoming a popular, and in most cases, less-expensive alternative," Cecere says. "Semi-passive and active tags are also gaining in adoption, when used in a closed-loop process that allows for their reuse."

Indeed, some companies are now exploring ways to "unchain" their RFID implementations so they can derive some internal benefits, rather than meeting a retailer's mandate. "RFID's return on investment in closed-loop applications typically stems from reduced labor time and costs, reduced loss and theft, and improved accuracy, efficiency and productivity," says Steve Park, vice president and general manager of RFID operations for Zebra Technologies, a provider of RFID solutions.

"RFID tags are commonly used as remote databases on tagged equipment to store configuration data and service history information to assist maintenance operations," Park says. "Rewritable memory on RFID tags lets technicians access and update essential information in remote and challenging environments where other database or wireless access is unavailable. Tagging helps ensure equipment and components are identified accurately to ensure the correct item is serviced." He points out that aerospace giant Boeing, for instance, has committed to using RFID on its Dreamliner 787 project to identify critical aircraft parts, with the goal of helping airlines improve maintenance operations, improve traceability and streamline record-keeping.

Boeing is also using a new generation of RFID technology called a real-time location system (RTLS) to locate equipment, tools and critical components at NASA's Kennedy Space Center, in support of the International Space Station project. The RTLS is designed to provide real-time updates on the location of tagged assets and can be extended to track items to within a defined granularity, according to Ron Rose, vice president of business development with RFID Global Solution.

Custom Cupboards, a manufacturer of custom cabinetry, has increased the throughput of its total operation by about 10% and final inspection by nearly 50% over the past year thanks to RFID, notes David Kurakazusampson, development supervisor with Stiles Machinery, which provided the RFID software for Custom Cupboards. "By tracking components with RFID tags and constantly feeding the data into workflow automation software, Custom Cupboards can determine how many parts may be waiting in front of a sanding operation or give instructions to quality assurance personnel at the end of the production line on how to double check that an order is properly fulfilled," Kurakazusampson explains. "The system even tells a CNC packaging machine how to make optimum-sized cardboard boxes for shipment of the finished products."

Lance Johanson, Custom Cupboard's vice president of operations, anticipates his company launching an automated workcell, with robots building up to 400 cabinet face frames per day using RFID information.

"RFID technology also can be used to track inventory as it is being carried throughout a plant," Kurakazusampson adds. His company has successfully tested a system that uses forklift trucks to automatically read the RFID chips of the parts they are transporting, then transmits the location, number of parts and stage of completion of the parts to centralized data processing.

Ultimately, companies finding their own benefits from RFID tend to be well ahead of companies dragged kicking and screaming into mandated initiatives. "Collaborative processes of trading communities that are based on RFID that cross company boundaries will continue to be slow in forming," Cecere believes, adding that it's not the fault of the technology. "Whole new ways of working together need to be developed so that all share in the value generated. That will take time, mandates notwithstanding."

How Consumer Goods Manufacturers Use RFID

Active Implementing Evaluating No Activity
Warehouse operations 11% 28% 39% 22%
Transportation management 8% 17% 42% 33%
Receiving/inbound logistics 11% 14% 39% 36%
Shipping/outbound logistics 11% 17% 56% 17%
Understanding customer/end-user demand 11% 14% 50% 25%
Vendor-managed inventory 6% 19% 44% 31%
Leaning out the supply chain 3% 17% 39% 42%
Store-level replenishment 14% 17% 39% 31%
Establish a more secure supply chain 6% 19% 39% 36%
Yard management 6% 28% 22% 44%
Returnable container tracking 8% 25% 28% 39%
Bulk container tracking 6% 28% 31% 36%

SEE RELATED ARTICLES

Unchaining the Value of Closed-Loop RFID Systems

A Successful RFID Implement: Case Study of Custom Cupboards

RFID Down on the Farm and Up on the Shelves
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