RFID: 12 Months and counting...
By NED BAUHOF
During the past six to
nine months I have refrained from adding to the hype over the RFID (radio
frequency identification) anxiety. As we enter 2004, the January 2005
deadline for Wal-Mart's top suppliers to provide RFID capability
looms closer and closer. Therefore, it is now time to throw my two cents on
this subject into the ring. As I prepared to tackle this monumental issue,
I solicited the insight of information systems experts and bottlers alike
to ensure that we cover the full breadth of this subject.
The one common theme that turned up during my research
is unmistakable: that the world of RFID is upon us, and you had better
prepare. In fact, whether you choose to prepare for RFID or not isn't
the main issue. This new technology will unfold in step with the recent
mandates of retail giant Wal-Mart and the Department of Defense. Both have
said they will not do business with you unless you are RFID-capable. This
leaves you in the seat of the apprentice, becoming aware of technical
developments and preparing for the inevitable. More importantly, it is how
you, the bottler, prepare and take advantage of this opportunity, as
opposed to just absorbing the cost, which will determine whether you
succeed in this new technological shift. We have seen how the power of the
Internet has provided infinite access to a wealth of information. The
advent of the ePC Global initiative will provide companies with the tools
required to access critical data and information related to assets and
inventory. Such information will transform your ability to achieve levels
of inventory control and supply chain efficiencies that, before RFID
technology, were impossible. Managers and business owners will possess the
inventory control tools and ability to make decisions based on real-time
data rather than delayed data that is prone to inconsistencies and user
The biggest mistake most organizations have
historically made when embarking on a supply chain technology project is
implementing a product or technology to support current processes. Before
embarking on a supply chain technology initiative, it is critical for
organizations to analyze current business processes in an effort to
identify and optimize all process inefficiencies.
Gene Weir, senior systems engineer with St. Onge Co., maintains
that an organization's RFID immediate needs will dictate an organization's path
to implementation. Additionally, he notes that "the ideal approach requires
an overall analysis of your manufacturing, distribution and warehouse management
processes." The intent of this analysis is to isolate and identify areas of
operational improvement. You can achieve significant operational efficiencies
and subsequent cost savings by performing the proper distribution network optimization,
inventory deployment analysis, warehouse layout and inventory slotting optimization
and operational process definition. These are low-cost initiatives requiring
minimal capital expenditures to achieve immediate cost savings and a suitable
environment for supply chain technology implementation.
Once you've identified the areas of improvement, the next step
in the optimization process is to pursue technology initiatives to further streamline
the supply chain processes. Typical supply chain technology includes warehouse
management systems, transportation management systems, labor optimization tools
and inventory analysis/planning tools. We now have the ability to take this
a step further and deeper into the supply chain optimization arena with the
emergence of RFID technology.
The technology question
RFID technology has opened the floodgates of new and
confusing terms and questions that are as foreign as those associated with
the personal computer 15 years ago. Which technology is the right one for
your operation? Should you use passive or active transponders? Should they
be chip-based or chip-less? Do I need to be concerned with frequencies,
data retention, read/write capabilities, environmental conditions,
simultaneous read rates, anti-collision performance, savant development, RX
modulation and global ePC adherence? These are all new, confusing and
extremely important issues that are required as part of your RFID
In addition, countless questions are related to the
technology standards of RFIDs. As RFID technology matures, the need for
standards adoption is imminent. In addition to the technology standards, it
is necessary to identify strategic paths. Is the strategic goal of your
organization to be compliant or to develop an innovative solution
encompassing a broader spectrum of capabilities and benefits?
After identifying a path, considerations include the
where and how to update and apply tags to the product. Have you identified
a complimentary IT strategy that will allow an employee to utilize the
information provided by the RFID network? What is the most cost-effective
approach to optimize current operations, in conjunction with implementing
an RFID strategy, which will result in the greatest return on investment?
Where is the value for the manufacturer?
We need to examine the entire supply chain and analyze
the benefits a bottling company can achieve by utilizing RFID technology in
this environment. Where are the links and how can the value chain benefit
from real-time determination of product availability and movement?
Within the manufacturing community, functional
departments are looking into opportunities within their areas of functional
responsibility to determine how RFID can address, and potentially solve,
issues surrounding inventory management, collaborative forecasting,
replenishment, vendor managed inventory (VMI) challenges, asset tracking
and traceability and security. These benefits are not applicable across all
functional areas and business processes. However, all supply chain
activities can benefit in various ways through the implementation of an
end-to-end RFID network.
The diagram on this page illustrates the various areas
that will utilize RFID capabilities and the exponential benefits that your
company can achieve by providing real-time and accurate inventory data
across the supply chain.
In 2003, AMR Research performed a survey on the readiness of
U.S. companies for using ePC/RFID technology. Of the companies participating
in the survey, 63 percent were in the evaluation process, 26 percent were not
evaluating, 5 percent were piloting ePC/RFID, 5 percent are using ePC/RFID and
none planned to deploy ePC/RFID within the year. Where are you?