Reaching For ROI On RFID

Jan. 26, 2006
Compliance continues to drive most RFID implementations. But Ford, International Paper and Gillette have found ways to cut costs and improve efficiencies.

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.

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Making RFID Work
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.

About the Author

Jonathan Katz | Former Managing Editor

Former Managing Editor Jon Katz covered leadership and strategy, tackling subjects such as lean manufacturing leadership, strategy development and deployment, corporate culture, corporate social responsibility, and growth strategies. As well, he provided news and analysis of successful companies in the chemical and energy industries, including oil and gas, renewable and alternative.

Jon worked as an intern for IndustryWeek before serving as a reporter for The Morning Journal and then as an associate editor for Penton Media’s Supply Chain Technology News.

Jon received his bachelor’s degree in Journalism from Kent State University and is a die-hard Cleveland sports fan.

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