Your RFID Questions Answered

As companies continue to evaluate RFID or prepare to meet compliance or trading partner mandates, many supply chain professionals still have questions as the technology, and reports of its effectiveness, continues to emerge. Here Tompkins Associates' RFID experts, Tom Singer and Brian Hudock, answer some your top RFID questions.

Q. When evaluating RFID for future use is an RFID pilot necessary? How does it work?

A. It is important to know what the challenges to RFID are up front and prior to implementation. RFID is still an emerging technology, and a pilot can take all of the possible conditions and scenarios into consideration. A pilot project will assess technology, operating procedures, training and integration issues, and can be conducted in a lab or production environment. The payback is discovering where the issues are, allowing necessary changes prior to rollout to full production levels.

When it comes to RFID, a pilot is highly recommended to ensure read rates on tags-both case and pallet-for different types of materials/products taking into account the environmental conditions (including electronic interference) at the site. Read rates are dependent on tag/reader antenna orientation, speed of tags through the read window and material handling issues such as the amount of metal in the product, the storage equipment framework or equipment like pallet jacks or conveyors. Liquids can also create interference issues.

It is essential to understand the best location for tags and to determine whether any product interference (liquids or heavy metals) blocks or mutes transmissions on interior cases on pallets, or if conditions exist that damage tags using various material handling equipment. The first step is to test the unitized product for interference in a lab setting to ensure accurate 100% read rates and to discover if there are any product or product packaging issues. Next, the technology should be taken on site to be tested with actual operators to discover local environmental or operational issues such as background electromagnetic noise or specific handling procedures prior to investing fully in a single vendor or approach to RFID.

In a material handling environment, the primary challenge presented by RFID is the lack of design guidelines that help engineers properly develop the design. Therefore, the pilot becomes the forum that allows experimentation and discovery to understand limitations prior to rollout, as well as the documentation of design guidelines. It is far less expensive to try to fix problems on paper vs. fixing them once technology has been purchased and implemented. In most cases, vendors are willing to provide equipment that will allow further evaluation and testing without a large up-front investment.

Since many different components interact to affect system performance, a pilot is necessary to evaluate the most cost effective solution as well as to identify areas that must receive special consideration in production. A pilot can also help identify operational procedures needing refinement to support RFID.

Q. What changes are we seeing as a result of RFID-how is it impacting the distribution center (DC)?

A. Currently changes are generally restricted to receiving and shipping. Operations that are driven by compliance mandates are typically modifying order packing or staging processes to apply RFID labels. While the firms that are issuing compliance mandates-Wal-Mart, Target and Albertsons-are initially looking at RFID to help streamline receiving and shipping operations, RFID has the potential to touch every aspect of a distribution operation. Its ability to track product without a manual scan can help streamline processes, accelerate product flow and improve accuracy. Consequently, its potential impact on any DC depends on its operational flow and business requirements. It could help reduce or eliminate audit functions, reduce safety stock levels, or improve the efficiency of material moves. These prospective gains will not be achieved by merely applying RFID hardware and software, but will require revamping processes and facilities to meet the targeted objective. However, most of these potential gains and related changes are not yet viable given the current state of the technology. Performance and cost issues currently restrict RFID's practicality for most operations. We can only speculate the speed at which these barriers will be overcome. Until they are, RFID's impact on most DCs will be relatively muted.

RFID is really about discovery and how to not only meet compliance requirements, but to reduce labor costs and inventory, and to add value to internal supply chains and operations. At present, RFID is causing IT, supply chain and distribution managers to scratch their heads while looking for budgets and planning numbers to meet the demands of top retailers. Changes within DCs are not necessary at this point, except for adding readers and RFID-capable printers. However, the future holds the promise of replacing auditing functions with RFID readers at the dock to eliminate short picks as well as to improve inventory tracking. How extensive the use of RFID versus, or in conjunction with, bar codes for tracking and verifying is yet to be determined until the accuracy and costs for RFID are justified against the internal operational savings.

Q. How will RFID impact your warehouse management system (WMS)?

A. How RFID will impact any operation's WMS will depend on the system currently in place and how it is used. The impact may be minimal for an operation just looking to address an RFID compliance directive. An operation may choose to use functionality provided by their WMS/ERP vendor, warehouse control system (WCS) vendor, third party or internally developed compliance solution to meet RFID requirements. The impact will be considerable for those operations looking to improve warehouse operations and increase visibility through RFID. They will need to have WMS solutions that provide specific functionality that takes advantage of RFID's positive verification and flow-through nature.

Top-tier WMS vendors are providing native RFID support in their solutions in upcoming releases. This RFID-specific functionality will be initially limited to receiving and shipment loading, but it will expand as the technology matures and as standards evolve. Most operations will take a wait-and-see approach, and eventually look to their WMS/ERP vendors for a solution.

Q. Despite all the hype, does RFID have a place in our supply chain?

A. RFID has tremendous potential to improve supply chain operations from source to end customer. But many cost and performance issues still exist. Existing solutions have limited functionality. While the hype is intense, many operations are hesitant to jump on the RFID bandwagon. All of this will change. RFID will eventually find a place in most operations. However, the questions of when and how still are very much open for many supply chains. Distribution operations fall within three basic categories on the RFID adoption curve:

• Leaders: These are large distributors and consumer goods firms that have seen the potential cost savings in RFID technology for years. They realize that the technology is still raw, but believe that they have the clout and resources to push it along. Leaders are in it for the long haul.
• Compliance Responders: These firms are suppliers to major distributors that have issued RFID mandates. Given the current state of the technology, many of these operations are cautious in their response to compliance directives. They seek to meet the mandate but are hesitant to make any additional investment beyond the minimum required to make their major customer happy.
• Wait and See: This category makes up the vast majority of supply chain operations. They see the technology as too raw and expensive to be applicable to their operations. They are more than willing to wait until the Leaders and Compliance Responders flush out the technology.

Regardless of whether a firm falls within the Compliance Responder or Wait and See categories, it is a mistake to ignore or dismiss RFID's potential. Operations are making decisions today that can affect their ability to take advantage of RFID in the future. Furthermore, there are many situations where RFID can produce a positive ROI today, like reusable container tracking and fixed asset management.

This doesn't mean that most firms should immediately launch RFID projects. Anyone considering RFID for their operations should do their homework when it comes to costs and benefits. There are many good reasons not to get too far in front of the RFID adoption curve. But operations need to look ahead since they are making decisions today that will affect their ability to take advantage of the technology tomorrow.