REAL ROIFOR RFID

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M a n a g e I n v e n t o r y B e t t e r A P e n t o n P u b l i c a t i o n

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INSIDE

RFID War of Words: HF vs. UHF and the Multiplicity of Truth

REAL ROIFOR RFID

Ridge Tool’s New Crib

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“Cool only sells for a short period of time,”says Nancy Breiman, client director for IBMin Phoenix. She’s responsible for the overall

relationshipbetween IBMand logistics

provider DHL (Tempe, Ariz.) “If [RFID]doesn’t drive business value to your customer,there’s no real reason to do it.”

Comments like Breiman’s are becomingmore commonplace in discussions of RFID,where the focus is on RFID projects that de-liver faster return on investment. What kindsof projects? Here are a couple of examples.

Breiman and her team are currently work-ing with Bob Berg, RFID projects manager forDHL, on a pilot project for one of DHL’s cus-tomer’s repair facilities. Because of non-dis-closure agreements, we can’t mention theoriginating company or its product. Theprocess, and RFID application, however,could work for any manufacturer with a re-turn and repair policy.

“DHL is handling the transportation piece,”says Berg, “and IBM is functioning as the sys-tem integrator and business consultant.” Us-

Adopters of RFID technology are no longer stand-ing around like deer frozen in the headlights,

blinded by the brilliance of the technology. Nor are theybaffled by the bedevilment of mandates.

Real-World ROI for

RFIDBy Clyde E. Witt

Today’s applications of RFIDtechnology build the businesscase first.

RFID

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When the repair is complete, an-other RFID label is generated to di-rect the product back through thetransportation system to its owner.

“When we [IBM and DHL]started this program,” addsBreiman, “we were firm in theknowledge that we shouldn’t in-vest our time and money if therewasn’t a business benefit to be derived.”

That business benefit will be aprocess that is flexible and scalable,and that DHL can take to other re-turn and repair customers. It ishoped that the pilot project willevolve to provide complete lifecycletracking of a product, using thesame tag by different entities, eachfor its specific piece of the logisticssupply chain.

Breiman says the real value fromthis, or any RFID program, comesfrom understanding when cycletimes can be reduced and whererevenue can be increased throughbetter visibility. “You also want to beable to put some operational effi-ciencies into the process as well,”she says.

Lift trucks and RFIDJustin Hotard, director, project

management, RFID division, Sym-bol Technologies (Holtsville, N.Y.),agrees that there is a general indus-try focus now on projects with a realROI, particularly material handlingprojects.

“A year ago,” says Hotard, “peo-ple were trying out the technology,emulating what others were doingor thinking of it in terms of otherguy’s ROI. Now, people are askinghow they can use the technology toget real value, based on their ownbusiness processes and their cus-tomers’ needs.”

One of the sharpest areas of fo-cus, he says, has been the marriageof lift trucks and RFID readers. Thelift truck is being recognized as acore part of the DC businessprocess. “Adopting RFID readers to

lift trucks are being viewed as aneasier way to invest in the technol-ogy and get immediate visibility.”

He says capturing product infor-mation at each point of movementrequires a lower overall investmentthan trying to establish portals ateach point the goods will passthrough. The challenge, says Ho-tard, is the wide variety of lift trucksand the configurations within eachmanufacturer’s product line.

“Each project is more like cus-tomization,” says Hotard. “Thechallenge for RFID equipmentmanufacturers, is to design a prod-uct or system that is flexible andscalable and can be deployed into awide array of trucks.”

In the real world of the factoryfloor or distribution center, surviv-ability of the readers and the tags isa challenge. “We’ve done enoughpilots to realize that if the operatordoesn’t know, or care, about thereading device, it will suffer dam-age,” says Hotard. So manufactur-ers are making the tag readersmore rugged.

He adds that one way to increaseRFID tag survivability is to specifythe correct tag for the application.“A tag for a case of paper towels willbe different from a tag on a piece ofelectronics gear,” says Hotard.

Another real-world example ofusing the lift truck to enable RFID,says Hotard, is the application of anRFID tag at shelf or rack locations.“When you put a tag at the loca-tion,” he says, “you automate theput and take process. The tag has tobe rugged because it will be ex-posed to abuse from the fork tines,possibly, as well as temperature fluc-tuations in the warehouse.”

Hotard says a key to getting ROIfrom an RFID program is under-standing the application to be auto-mated. “Item visibility might not benecessary at every read point,” hesays. “If you have visibility of the pal-let and visibility of 70% of the itemson the pallet, you can use logic in

ing RFID as the principal ingredi-ent they are creating a process forthe return and repair of electronicdevices that will enable the manu-facturer to turn around repairswithin 24 hours.

When an electronic device needsrepair, the end user calls the manu-facturer, which sends a message toDHL’s warehouse at its logistics hubin Wilmington, Ohio. A special car-ton, with proper return packagingmaterial, is prepared and labeledwith an “EZ Return” label.

“Actually it’s two labels, one ontop of the other” Berg explains.“The RFID tag is in the bottom la-bel and the destination [shippinglabel] for the empty carton is ontop.” There is currently a bit of re-dundancy between bar coding andRFID tagging in this process thatwill eventually go away as the pro-gram progresses.

When the empty carton leavesthe DHL facility the RFID tag isscanned to notify the end user thatthe carton is on the way. The emptycarton is scanned through all thenormal delivery channels until itarrives at the customer’s facility.

“If the device needing repair isready to go,” says Berg, “it’sdropped into the box and sealed.The courier peals off the top labelrevealing the return label (withthe RFID chip embedded)preprinted to direct the carton tothe manufacturer’s repair facilityin Memphis.”

All the cartons pass throughDHL’s hub in Wilmington wherethey are unitized. Since the manu-facturer receives about 800 of thesedevices for repair each day, specialair cargo containers were designedto ship them on pallets for deliveryto the repair center. Cartons arearranged on the pallet with the la-bels facing out to assist the RFID tagreaders. The entire pallet of car-tons is read as it enters the repair fa-cility, saving manual scanning ofeach bar code label, says Berg.

RFID

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RFID

tion. Chand says when retailerspush information back to suppli-ers, such as on-time delivery per-formance or real-time sales data,that information can then be tiedback to production processes.“When that happens,” he says,“manufacturers will be able to re-alize the demand-based produc-tion that they envision.”

Chand refers to RFID as thecommon index or commonpointer that can bring together allthe disparate data collected withina company. “We collect data whenraw material enters the factory,when the product is built andwhen it is shipped,” he says. “Ex-cept that all this data resides in dif-ferent locations. Now, RFID pro-vides the link to bring it alltogether.”

The metaphor Chand uses isthat the RFID tag is like a train go-ing down the track. Each time thetrain stops, another car (more in-formation) is added until it gets toits destination. He contrasts this toa bar code, which he describes as amarble rolling across the floor. It,too, gets to its destination, how-ever nothing new is added in theprocess.

Chand sees new applications forRFID as the technology evolves.“We currently talk a lot about trackand trace applications,” he says.“However, I think we’ll see emerg-ing applications for security andaccess control.”

He also foresees bar coding andRFID co-existing for years to come.“Companies have made an invest-ment in the infrastructure [fordata collection systems] and arenot willing to just turn one systemon and another off over night totry something new.”

Time is money“A big part of the business case,”

says Martin Brewer, director of

the software to validate all of thegoods on the pallet.”

Spending money on item-leveltagging makes sense on expensiveand controlled goods, such as drugs.It does not make financial sense forlow-cost goods. “Companies that aresuccessful [with RFID programs] arethose that gather information theycan act upon,” says Hotard, “not justgather information for the sake ofhaving more information.”

RFID meets the Internet“A major contributor to the evo-

lution of RFID,” says Sujeet Chand,senior vice president, advancedtechnology and chief technical offi-cer, Rockwell Automation (Milwau-kee), “has been its marriage with In-ternet technology.”

Chand says the breakthrough hasbeen the ability to catalog informa-tion and link it to a Web site or data-base, then being able to hit thatWeb site index through an identifi-cation number or with some identi-fier, that being the RFID tag.

In the next five years there will bemajor improvements in interoper-ability, predicts Chand, who leadsthe U.S. delegation to IntelligentManufacturing Systems, a world-wide consortium on manufacturingtechnology. “We’ve made strideswith the Gen2 standards on the ra-dio interface between tag andreader,” he says. “The next step willbe with software interfaces.”

Another area in which Chandanticipates improvements is thebusiness case for RFID. Many man-ufacturers are still trying to figureout how to justify the cost of RFID,he says. “Now, they’re beginning tolook at making process changes tosupport the RFID they’ve installed.It is those changes in process thatwill help them get the ROI.”

The power of RFID’s data collec-tion enables retailers, for example,to pass on critical matrix informa-

technical strategy, Wavelink (Kirk-land, Wash.), “is saving time. Timeis money for distributors.”

As a provider of mobile soft-ware, Brewer works on the leadingedge of the challenges involved indeploying, managing and control-ling data collection systems.

“We’ve been doing a lot of workto integrate data collection andbar coding applications with newRFID equipment,” says Brewer.“Doing slap-and-ship to complywith mandates only gets a com-pany so far. People are looking forways to achieve ROI by savingtime.”

“If you have a smart truck [tagreaders on lift trucks], for exam-ple, it not only saves time in gath-ering the data,” he says, “it alsoprevents shipping a load to an in-correct destination. A load goingto the wrong location costs timeand money in getting back. Plusthere’s compensation for the in-tended receiving party and thereal possibility of the goods beingdamaged in the process.”

To achieve the ROI an invest-ment in RFID entails, Brewer saysmanagers must determine if theimprovements gained from tag-ging will exceed the overall cost oftagging itself.

“The business case has to bekept realistic. Managers need tofirst analyze where the time andmoney are currently being spentin movement of products in man-ufacturing and distribution,” heexplains,

He adds that because RFID is amobile technology, it must be de-termined what usable data can begathered while the product ismoving that cannot be gatheredvia bar code scanning. “The RFIDsystem has to gather what is exclu-sive to RFID; that which bar cod-ing cannot provide.” MHM

Copyright © 2006 by Penton Media, Inc.

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