The Blank Canvas of RFID Part 2: RFID in Supply Chain and Logistics
on Mar 5, 2013
RFID is a natural fit for the supply chain. Here we explore how it is used to improve visibility, speed and accuracy, reduce labor costs, monitor products' condition, fight counterfeiting, track assets, and more.
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In this series, we are looking at where and how RFID is being used by each functional area in an enterprise.
In Part 1, we examined how RFID is used by product managers and designers. Here we venture into the realm of logistics and supply chain managers.
Supply Chain Use Cases Driving RFID Investments
The first major wave of enthusiasm and investment for RFID that erupted last decade was initiated largely by two announcements in 2003 by Walmart and the DoD (who respectively run the world’s largest private and public supply chains). They both announced major RFID-enabled supply chain initiatives, mandating their suppliers to start tagging with RFID so they could track goods (mostly at the pallet and case level) through the supply chain, and in Walmart’s case, at the store. Those programs progressed much more slowly than originally planned, leading to widespread disappointment and disillusionment about adoption of RFID technology. However, we are now seeing a second wave of attention and adoption for RFID, this time a little more sober, being driven largely by the surge in item-level tagging in apparel. This is another supply chain-oriented use case, driving smarter replenishment to reduce out-of-stocks and overstocks in retail stores.
Item-level Visibility and Replenishment Driving Major Deployments in Retail
Walmart, Macy’s, JCPenny, Marks & Spencer, Façonnable, American Apparel, and others are implementing item-level RFID in a big way. Last year, well over one billion apparel items were tagged. That number is expected to rise substantially this year. Macy’s announced that all ‘size-intensive replenishment’ items are being tagged, representing about 30% of their total annual sales. Marks & Spencer is tagging all apparel and home goods products at all of its stores. American Apparel is rolling out RFID to all of their stores. JCP is using RFID with about 35% of their merchandise. High-fashion retailer Façonnable is rolling out RFID on 100% of their merchandise at all its retail locations and DCs worldwide. The primary driver here is making smarter and more timely replenishment decisions at the store shelf. Reducing out-of-stocks at the store has high value.
In early pilots, retailers largely tagged items themselves at the store or in their DCs. Now suppliers are increasingly being asked to apply the tag at the point of manufacturing. RFID-related requirements have been added to the vendor compliance manuals of these major retailers (for more see What Retail RFID Mandates Mean for Suppliers). Once items are tagged at the source, there are many different places and ways within the retail supply chain that RFID can be used to improve performance or provide additional value to the consumer. Initially, many of the implementations only use it at the store, but in some cases logistics service providers are being asked to provide item-level visibility of goods in motion throughout the supply chain.
Improving Shipping and Receiving Accuracy and Throughput
Once individual items are tagged, then they can be used to improve accuracy in warehouse and store operations processes. For example, as a warehouse worker packs items into a case, before sealing the case the tags can be read in an instant and compared against the ship order. Given a green light, the worker proceeds to seal the case. A red light tells the worker to correct an error. When the reader is incorporated directly into the flow of work, such as mounted under the pack table, this checking can happen automatically without the worker having to scan anything. The same sort of verification can happen as cases are being palletized and loaded onto a truck—the green/red light ensures the right items are being loaded onto the right truck, in the proper sequence.
At the receiving dock on the other end, items can be automatically scanned as they are unloaded, comparing the received items against the ASN to flag any discrepancies right on the spot. Again this happens with no extra steps for the warehouse worker. Just the act of driving the forklift between the dock door readers or the cartons on a conveyor running through a tunnel reader causes the verification to automatically occur. RFID can be used to automatically generate an electronic Proof-of-Delivery (e-POD) as well. The advantage is not just the dramatic increase in accuracy and reduction in mistakes. RFID also lowers labor costs. For example, RFID lowers the manual labor required for receiving by 50%-80% compared with that required when scanning barcodes.
For RFID tagged items, inventory cycle counts can be done 10-30 times faster than current manual methods of counting. When items are tagged at the source, this is true for cycle counting in the DCs (both retailers’ and manufacturers’) as well as the store. Inventory accuracy is improved dramatically due to more frequent cycle counting and reduced counting errors. Improving inventory accuracy leads to improved replenishment and forecast accuracy, allowing retailers to intelligently lower inventory levels and at the same time reduce out-of-stocks. RFID has been shown to reduce out-of-stocks by 20%-30%, thereby increasing sales by 1%-2%.
Chain-of-Custody and e-Pedigree
RFID can be used for tracking the hand-offs across a chain-of-custody. This is becoming important in a variety of industries. California’s SB 1307 mandates an electronic pedigree for all pharmaceuticals sold in the state, tracing the chain-of-custody from the point of manufacturing to the point of dispensing.1 To comply, many manufacturers will use 2D bar code at the item level and RFID at the carton level, using tamper-evident seals on the cartons. The purpose of this legislation is to secure the supply chain and help prevent counterfeiting, misbranding, and diversion of drugs.
Another example is combating illegal logging. The EU’s EU Illegal Timber Regulation and the US’s Lacey Act make it unlawful to trade, receive, or acquire illegally logged timber. In support of this, traceability records must be kept. The Forest Stewardship Council provides Chain-of-Custody certification that traces the path of products from forests through the supply chain. Several governments in areas with tropical forests have traceability programs, some using RFID to facilitate the tracking from the felling of the tree all the way to end markets. For example, RFID is used with the chain-of-custody tracking solution from Helveta in a pilot by the Forestry Department of Malaysia.
Monitoring the condition of items as they travel through the chain is critical for certain types of products. RFID is combined with various sensors to provide this type of monitoring, such as temperature tracking in the food and pharmaceutical supply chains. See Carton-level Temperature Tracking for Cold Chain Pharmaceuticals for more on the increasingly important role of RFID in the pharmaceutical supply chain. Winning the Freshness Wars describes how grocers use RFID-based temperature monitoring throughout the farm-to-store supply chain to reduce waste and improve the freshness of produce, dairy, and meat. Other types of RFID-enabled condition monitoring can include sensing moisture and humidity, atmospheric pressure, shock and vibration, hazard chemicals, radiation, and more.
Perhaps the most basic, but extremely valuable supply chain application of RFID is visibility. Answering the key questions: where’s our stuff, how much, and when will it get here? The DoD has been using RFID to track containers for over 20 years. They currently use ISO 18000-7 compliant active tags on containers. The tags have enough memory to hold the entire shipping manifest data, describing the content of the container. They are using Savi Technologies’ tracking network to keep track of supplies in transit and in the theater of action. This RFID-based technology helped enable the rapid deployment of emergency assistance to Haiti by the US Military in 2010 after the earthquake, as well as the massive deployments in Iraq and Afghanistan.
Reusable Container Tracking
Another increasingly common use of RFID is tracking reusable containers throughout the chain such as reusable pallets, kegs, drums, totes, bins, cylinders for gas or chemicals, and more. Pallets are notorious for being lost— companies can lose as much as 30% of their pallet stock per year. Japan Pallet Rental (JPR), who rents about 20 million pallets per year, has been using RFID to track pallets for several years. Challande et Fils, a Swiss waste-management company, has RFID tags on their waste bins. They combine this with GPS data from the truck hauling the bins to keep track of exactly where the bins are at any given time. Elpiji uses RFID to automate the filling and tracking of its LPG cylinders. New Belgium Brewing uses RFID to track the kegs for the beers it distributes from its Fort Collins brewery.
RFID and Supply Chain—A Natural Fit
While there are thousands of use cases for RFID, the use in supply chain has been the perhaps most widely publicized. And rightly so. RFID is great at tracking things. Timely, accurate, granular tracking of goods and assets is a core underpinning of supply chain management and logistics excellence. In many cases, RFID is just the right tool for that job.