RFID in the Manufacturing Sector: It's all about Profitability

Jan. 19, 2012
RFID has proven to be a problem solver for both straightforward and visionary applications. But its potential is in its earliest stage.

RFID is a proven enabler of profitability that's growing more powerful every day. Microchip sensitivity is improving. Support services are maturing. Companion technologies, such as sensors, are being successfully integrated into chips. And smaller tags are opening the gate for multitudes of potential applications previously thought too small to accommodate an RFID tag. A tag measuring only 23 x 5 mm, for example, was released to the market within just the past few weeks.

What first came to prominence as a solution to track cases and pallets in distribution centers, has steadily and profitably migrated to heavier industries and related service sectors. RFID applications are taking hold in fields as diverse as mining, electronics, medical equipment and corrosion monitoring. More, RFID can now address many applications in proximity to metals and liquids. The latest technology is enabling businesses to tag products ranging from kegs of beer to petroleum and chemicals.

A tip of the hat to retailers: The RFID implementation processes that retailing largely pioneered are making it easier for manufacturing concerns to adopt the technology. Models for creating RFID business cases, for example, and templates for launching RFID projects exist that would otherwise need to be produced from scratch. Research and investment by vendors to improve the technology will always be a part of RFID advancement, but retailers can reasonably be said to have led the evolution from analog to digital data capture technology. It was retailers who demonstrated how data capture could be improved from a bar code's 70% reliability to RFID's 97% reliability, which translates to a host of cost-saving efficiencies.

To the top tier of manufacturing management, RFID's continuing technical achievements and its proven value in hundreds of industrial applications present huge opportunities for competitive differentiation, problem solving and ultimately, solid rewards on the balance sheet.

Getting Started
To launch a successful RFID program, C-level vision and support is vital. RFID solutions originating without the active backing of top management tend to unfold as projects with limited scope rather than as full-fledged business processes capable of delivering long-term robust payback.

RFID opportunities can often best be spotted across the enterprise from the C-level perspective. For productive spotting, ask yourself, "Where are our biggest bottlenecks?" "Where would vastly improved tracking of work in process (WIP) and raw and in-process (RIP) save money?" "Have we experienced recurring equipment or materials failures?" Chances are good that a challenge your enterprise is facing has been addressed using RFID before, and a solution that needs modest adaptation will fill your bill.

A few manufacturing related RFID cases in point:

  • A leading provider of orthopedic and prosthetic devices to the hospital community discovered situations where products packaged in kits were not matching up with hospital orders. RFID now helps ensure that the right goods are in the right kits, a solution that guards against goods being returned and also contributes to optimum patient care and customer satisfaction.
  • A Canadian mining company employs RFID to track the mineral concentration of ore as it is mined in real time. The process delivers efficiencies associated with metal production at processing mills. The company estimates savings of $30 -- $70 million per year once the process is rolled out to all of its mining facilities.
  • A manufacturer of electronic products is using RFID to track semiconductors. The technology replaces a time-consuming manual process that was error-prone.
  • In a Grand Rapids, Mich., waste management application, RFID is being applied to disposable containers to determine which customer regions are providing what kinds of recyclable materials. Officials have publicly reported saving $75,000 in 12 months.
  • RFID chips matched with sensor technology are being embedded in piping. The chips provide an early warning of material corrosion in critical applications, including bridges.

Brand Protection--The Next Big Thing
The versatility of RFID lends itself to a wide array of applications. Potential exists in most industrial environments where obtaining better information faster would increase business efficiencies. Beyond that, look for brand protection to emerge as the next major area for RFID development and implementation. The algorithms built into RFID chips' codes have the potential to protect the validity of products more effectively than other available technologies. Critical industrial components that are subject to counterfeiting, such as bearings, can be monitored to help assure authenticity from the point of manufacture to the point of installation in machinery.

RFID technology has already helped prevent counterfeiting in some areas. For example, governments in Asia employ RFID to protect against counterfeiting of items such as wine and tobacco products which typically yield heavy tax revenues. With RFID, officials can quickly identify authentic branded products that have been taxed versus counterfeits that have not been taxed.

The Future-A Bit Farther Out
In heavy industry, the leading edge of RFID technology is already at work in a few select companies. Applications consisting of networks are providing real time information on inventory, process flow, work in process and raw and in-process goods, which is then integrated back with shipping and ERP systems. The networks build upon readers that are part of a warehouse or industrial plant's infrastructure. For industrial concerns RFID can become an entire network that improves profitability. These networks take time to develop and perfect, but they are evolving.

RFID has proven to be a problem solver for both straightforward and visionary applications. But its potential is in its earliest stage. As results and imagination bring RFID more prominently into play, unforeseeable new solutions will appear throughout the manufacturing sector. For C-level managers in search of new ways to fatten their bottom line, RFID is an investment worth making. Typical ROI targets fall within the 12 - 18 month range. Increased profitability can last indefinitely.

Jack Farrell is vice president and general manager of Avery Dennison RFID.

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