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 error.
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 technology evaluation.
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?