It’s virtually impossible to read a manufacturing, material handling or logistics trade journal today without finding a reference to radio frequency identification (RFID) technology and its potential for machine-to-machine (M2M) communications, global shipment tracking and supply chain visibility and event management. What are the implications for the HVAC community? Are there opportunities? What should you be doing about RFID today?
We’ll answer those questions in a moment, but let’s take a step back first. Forty years ago, industry watchers heralded the potential of bar code for providing users with the visibility of goods-inprocess, so important to effective operations management. With increasing refinement of supply chain systems, that visibility has enabled thousands of users to do a better job of managing inventory and marshaling resources to deliver the right products in the right condition to the right place at the right time – and, equally important, to adapt quickly to changing conditions and requirements.
The key throughout the evolution of supply chain systems has been accurate, real-time data capture and processing. Until the early 2000s, the automatic identification and data capture (AIDC) workhorse in manufacturing, warehousing and distribution was bar code – and, make no mistake, it still is. Quietly, in the background, RFID deployment for the identification of high-value items, rail cars, tractors, trailers, and ocean and intermodal containers as well as pallets, reusable/returnable containers and even lift trucks has been gaining market share since the early 1990s. Unlike bar code, RFID tags do not have to be “seen” to be read. Additionally, they have the ability to carry and transmit substantially more data than their optical counterparts, thereby permitting product identification down to the unique item level. Further, some RFID tags have the ability to monitor and record temperature, shock, vibration, tampering and other environmental changes, a key consideration for assuring product integrity as it moves from the point of manufacture to consumption or installation and postinstallation maintenance.
Anatomy of RFID
Typical RFID systems are characterized by three primary components:
• Identification tag – A transponder that consists of an integrated receive and transmit antennae and a microchip for data storage. Tag types include read-only and read/write with many variations.
• Fixed location antenna or antenna array – Tags are activated by an RF signal from antennae located along the path of tagged item movement.
• Fixed location reader – The reader triggers the antenna and receives data from the tags, then decodes and validates it before transmitting it to a host or local system for further processing. Handheld readers carry their own antenna(e).
The first industry RFID deployment in the United States was at General Motors in 1984, where tags attached to chassis carriers served as license plates that, when read, triggered the just-intime delivery of components for a given vehicle to the assembly line. The unique license plate number buried within each $100 tag was system-linked to the build plan for the automobile at the beginning of the line. Upon assembly completion, the tagged carrier was returned to the head of the line and the process repeated for another vehicle. At the time, a durable tag could take 200 to 300 trips down the line before “running out of gas,” and the cost per trip of 30 to 50 cents was eminently justifiable. Today, the price of these robust tags has dropped by 50 percent to 70 percent.
Since the GM installation, RFID has been deployed in hundreds of applications where environmental constraints or the absence of line-of-sight access to the tag precludes the use of bar coding. Such uses include item or carrier identification while moving into or through spray booths, ovens or machining operations where the tag must provide reliable feedback in spite of temperature extremes or contamination by paint or coolants, and places where performance and durability are worth the premium.
Also, utility companies are using RFID to keep track of transformers and other assets, both in the yard and “on the pole.”
In other words, the technology has already proven itself. Indeed, it has been and is now being used in a wide variety of industrial applications ranging from tracking tote boxes and pallets to containers of military supplies used in Afghanistan and Iraq.
The majority of RFID deployments to date have been in “captive” or tightly controlled applications where benefits for the user have been relatively easy to quantify. However, the instant an item carrying an RFID tag leaves a user’s domain, the levels of complexity and associated costs are compounded. Here we’re talking about things like consumer product and case identification to facilitate tracking from a manufacturer or processor to the retail shelf. In this market, RFID holds enormous potential for reducing shrinkage and improving traceability, inventory management and shelf replenishment through the unique identification of every item. Although progress is being made, most notably in the apparel industry for higher end clothing, shoes and accessories, broader RFID deployment requires dramatically lower tag costs (<$.02), inexpensive readers and antennae for store shelves as well as enhanced, secure real-time connectivity between suppliers and retailers. Barring order-of-magnitude technology breakthroughs, it’s unlikely that we’ll see RFID on boxes of Cheerios© before the next decade.
Assessing RFID for Your Operations
Recognizing that if you are reading this article and it is not likely that you produce breakfast cereal, should RFID be worth a closer look? If none of your customers is demanding that you move ahead with RFID, you may want to hedge and let the early adopters in your industry go first. But, if you hedge, you might also be missing an opportunity to differentiate your company from the competition. Which applications should you consider? Two areas would seem to be worth considering. The first is the use of RFID for higher value or critical parts/ components identification from receipt, as they move into and out of warehouse or distribution center storage and when they are shipped to a customer or construction site. The second area would be the use of RFID to simplify major product and/or component identification and transcription of maintenance tasks performed in the field by your service personnel. If one or both of these possibilities resonate for you, what’s next?
Objectively assessing the value proposition is fundamental to launching any corporate initiative. A measured approach to business case development is critical to minimizing risk or, at least, scoping the challenges associated with investing in new technology. The list below identifies the steps that should be taken whether you’re looking at streamlining your manufacturing and warehouse or distribution center operations or considering RFID to support field service and maintenance activities.
Note that technology doesn’t appear on the roadmap until you’ve stepped through profiling current operations, opportunity identification, process and infrastructure refinement, and defining trading partner needs. Careful execution of these steps lays the foundation for evaluating the true potential of RFID and related systems. Note the last word on the last bullet – Defer. At the end of the road, you may well determine that the benefits will never match the investment required – or that bar coding will adequately meet your needs. At the very least, you will find some low-hanging fruit in the process.
Go with the Flow
When profiling operations, take a look at material and data flow. Every time a product moves, be it in manufacturing or at the warehouse, the information associated with its characteristics and location should be updated. Take the time to carefully map and compare material flow and data flow. Often, there is a lack of correlation between the two: material goes one way and the information associated with it sits there or goes another.
In many operations, the disparity between material and data flow creates time lags that impact the accuracy of inventory and affect space and labor utilization, order fulfillment and shipping efficiency. Disparity analysis highlights opportunities for layout modifications, process improvement and technology deployment that can contribute to cost reduction and avoidance.
As you profile operations, look at historical receipt and sales order transaction data as well as labor hours to get a better handle on throughput rates and costs by function. Historical profiling coupled with projections of future unit volume facilitate the preparation of key performance indicators (KPIs) and the analysis that lays the foundation for improving physical layouts and process flows, as well as for defining the potential impact of new technology (e.g., RFID) and systems.
Examining Costs and Benefits
The table above lists the elements of initial and recurring costs for RFID deployment and potential benefits. How do they match up? Reader costs are not a particular concern. At the moment, they are comparable to those for bar code. Tag costs, as suggested earlier, can be a hurdle. If you are looking at using RFID to permanently identify one of your high value products (e.g., furnace, boiler, air conditioner, etc.) to simplify data capture and logging during a maintenance call to a customer site, a $3 to $5 sealed tag that contains item model and serial numbers and other data may be justified. On the other hand, that price is unlikely to fly for tagging a replacement pressure switch.
Suppliers often quote potential savings from RFID deployment of 15 percent to 30 percent in improved labor utilization, 30 percent in inventory cost reductions and so on.
Management, however, is unlikely to accept these generalizations as a basis for moving ahead. A detailed profile of potential that directly links performance improvement opportunities and dollars in a format that is readily understandable is required. A metrics-based analysis will tighten the value proposition and enable establishment of performance targets against which you can measure the success of the program.
Contrast current performance against what you could reasonably expect to achieve with RFID and related systems. Place a value on the corporate-wide impact of improved performance in each area. Look at the impact and put a value on customer retention, sales and lost sales, product costs, logistics costs, field service and maintenance costs. Then match the results against the projected required investment to determine feasibility.
Preparing for RFID
As already suggested, RFID deployment without a hard look at facility layout, handling systems and methods will almost certainly produce a sub-optimal implementation. Indeed, minor (or, if necessary, major) changes to layout, material flow, storage and picking procedures often will produce benefits well before RFID installation.
Are there enhancements to your current information system that could contribute to improved utilization of space, people and equipment through real-time task interleaving, random storage, automatic replenishment, location consolidation, scheduled and exception- based cycle counting, etc.? Will the system facilitate further refinement of the layout and procedures as well as additional productivity gains? What are your trading partners asking for? How might RFID and the system and process changes needed to support it help meet their requirements?
Find out what others in your industry are doing. Meet with RFID suppliers and integrators. Pilot test the technology to ensure its viability in your environment before launching a program.
Success with RFID or any technology deployment is invariably the result of solid preparation, rigorous attention to detail, a clear vision of where the technology fits within the enterprise, a defensible business case and a corporate-wide commitment to building organizational ownership from the time of opportunity identification to and through installation, acceptance and operation. I wish you well on the journey.
Steps to Take
• Profile Current Operations
*Could you get the job done with bar coding?
COST & VALUE CONSIDERATIONS