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Business DriverWhen shipping goods, a company is blind, to a degree, as to what happensto the cargo after it goes out the door. A number of bad things can happen.They can be lost or stolen, tampered with or replaced with counterfeits. Andfrozen items can be allowed to thaw. Similarly, a company may be blind tothe exact location of its on-site assets, which is crucial to productivity on afactory floor, in a healthcare facility or virtually any company with a biginvestment in tools, equipment and machinery.

For example, workers would lose the equivalent of a 40-hour workweek ifthey spend only 10 minutes a day for a year searching for needed items. Scanning barcodes is the current answer to tracking needs. And that systemworks very well at locating a shipment, although it is a manual process. Butthere are limitations on how much information can be gleaned fromscanning a barcode.

SolutionWhat is the answer to opening the eyes of today’s companies when they aremanaging assets or shipping goods? RFID smart labels, which are embeddedwith a microchip and an antenna, are all about visibility. An RFID system hasthree primary components: the tags, the readers and the backend system.“The backend systems have been there awhile. Nothing makes a backendsystem run better than good quality data in a timely manner,” says TobyRush, president and founder, Rush Tracking Systems, LLC, Kansas City, KS.“To get that data, you have to have the infrastructure: that is where the tagsand readers come in.”

BY J. SHARPE SMITHEDITOR

RFID: Opening

Eyes in AssetManagement

Rectangular gray readers chart the course of components tagged with RFID smart labels as they become part of theaircraft shown above in Boeing's Wichita plant.

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The ReturnRFID technology promises increased amounts ofinformation about a shipment or factory equipmentlocation/status through an automated reading process,helping make the supply chain and those who handleassets more accountable. Individual cases or pallets can beprocessed at a rate of one to seconds per unit. The RFIDtags may have read/write capabilities for real-time updates.These could come in the form of updating a maintenancelog for a piece of machinery. The systems are non-line ofsight, and the tags can be read from up to 100 feet away.Additionally, multiple RFID tags can be read at one time,and the tags can record time, temperature and otherfactors as they move through the supply chain.

A Little HistoryRFID has been around for about 50 years. In World War II,using RADAR, radio waves would be sent to the aircraftand a transponder on the plane would respond with anidentification code. It was a challenge/response system.That was the first example of radio waves being used toidentify an object. The same principle is used today,although the technology is more complex.

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Today, RFID is all around you. You seeit on toll roads where a transponder isattached to the windshield of the car.The system identifies the car anddebits the amount of the toll from itsaccount. Many entry cards forentering secured areas are equippedwith an RFID microchip. RFID tags areeven implanted in car keys with thereader in the steering wheel.

Point-of-Sale, Closed-Loopand Open-Loop Systems

RFID can be separated into threecategories: point-of-sale cashcollection (Mobil SpeedPass), closed-loop and open-loop. Closed-loopsystems are used internally where onlyone company is reading the tags,usually for asset tracking. Open-loopsystems, as the name suggests, areopen to multiple companies to readthe tags. Supply chain management,for example, must operate in anopen-loop environment. Closed-loopsystems, on the other hand, can getby with a proprietary standard system,while open-loop must bestandardized, at least with the othercompanies that are involved inreading the tags.

BenefitsThe potential benefits of RFID includeimproved shipment visibility, improvedservice and reliability, reduction infreight claims, improved asset

utilization, operational complianceand improved inventory management.According to Rich Hardt, vicepresident of technology research anddevelopment for Yellow RoadwayCorporation, “It can provide us withbetter information to run our day-to-day operations,” Hardt says. “Anytime you can improve access toinformation in a more automated,efficient manner, it always sparks ourinterest.”

Closed-Loop RFID Systemsand Tracking Works-in-progress

User ProfileBoeing Commercial Airplanes, WichitaDivision, is a Kansas-basedmanufacturer that produces part ofevery commercial jetliner except the717, including 75 percent of theairframe of the 737. It also designsand builds engine nacelles and nosesections for the 747, 757, 767 and777 jetliners. The company has aroundsix years of experience with RFID.

Business DriverIn 1999 Boeing-Wichita looked toRFID for more efficient methods fortracking and visibility. Boeing’s interestin RFID coincided with itsimplementation of EnterpriseResource Planning, a comprehensive,time-consuming material planningprocess that requires the computer

system to be constantly updated as tothe progress of each work order. Thecomputer system uses the progress ofexisting work orders to help plannersto know which production orderneeds to be released next. Every timean operation is complete or materialsare received, the “transaction” isreported back to the computersystem.

During 2000-2001, the WichitaRFID team performed three pilottests with active tags and threewith passive tags. In passive tags,the reader initiates thecommunication with the tag,while an active tag (sometimesknown as real time location system)is continually transmitting its location.“The active system was well liked,but the infrastructure and activetags were more expensive than thepassive system and were deemedto be too costly at that time, saysDebbie Fogg, RFID project managerfor Boeing-Wichita Commercial.

SolutionAfter choosing a passive tag, theteam had to decide which processwould receive the new technology.“Everybody wanted to use the systemand there are a variety of things thatcan be tagged: work-in-progress,tools and equipment,” says Fogg.“So, we put together 30 different

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Wal-Mart has become a major driver of RFID tagging for supply chain management.

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options, and let our Director Steeringteam determine the best fit.”

It was decided to deploy RFID in awork-in-progress system. In 2003,the initial system was implementedinto production. It comprisedinternally developed software andvendor hardware to support 20antennae. It was used to track work-in-progress, raw material receipt,loading of an Automated Storageand Retrieval System, Order Tracking,Order Closure, Location Updates andautomated feeds of data to multiplelegacy systems. The process beginswhen the production paperwork foran order is generated; a tag isattached to the supportingpaperwork. This tag is read throughout the fabrication process. Uponcompletion, the work order is closed,and the tag is removed and reused.The infrastructure currently consists

of 55 antennae deployed in thefacility and there are 18 more ready to be implemented in its 1,100-acrecampus, which includes a 12 millionsquare foot covered area. “Antennasare in a variety of places on the shopfloor. We use an incrementalimplementation strategy that allowsus to work with each shop floorteam to ensure that our antennaplacement supports their long termprocess goals, enabling a reduction inmanual tracking of each order,” saysFogg.

The ReturnRFID is now an integral part ofEnterprise Resource Planning and itautomates about 25,000 transactionsa week, updating the computersystem on the progress of the workorders, which increases theproductivity of personnel. And thatnumber of transactions is growing all

the time. Another 35,000transactions are made to legacysystems unique to Boeing Wichita.Boeing uses a closed-loop system for90 percent of its RFID. About 10percent of the company’s RFID isdevoted to receipt tracking of rawmaterials and purchased parts wherethe readers must acknowledge thetags used by the suppliers in anopen-loop system.

“It is harder to establish ROI foropen-loop because determining whocontributes to the costs and whobenefits may not be well defined. It ismuch easier to develop the ROI for aclosed-loop system, because we arein control of all of the componentsand parts. Fogg says. “After theinitial implementation, Boeing’s ROIfor subsequent implementation areashas been less than one year.”

continued on page 25

RFID is not a silver bullet for themanufacturing process. It takes a lotof effort and certainly won’t solveevery problem. It is simply a tool forimproving processes and for fine-tuning the efficiency of a factory. Asa developing technology, earlyadopters battle productobsolescence, continual upgradesand evolution. “While there arepoints of frustration because it is anevolving technology, from a financialperspective it has been a worthwhileventure,” she says.

Once the infrastructure in fabricationis complete, opportunities will openup for other types of tracking, aswell. In the future, Boeing is lookingat using RFID in the assembly processand asset tracking of internaltransportation and equipment, suchas forklifts. “When you have as largea campus as we have, knowingwhere all of your assets are can be agreat advantage,” Fogg says.“However, the cost of looking forequipment is hard to quantify.”

Open-Loop RFID Systemsand the Supply ChainManagement

To develop an open loop RFID systemfor supply chain managementdemands the cooperation of amultitude of suppliers and evenmanufacturers. Setting in motion thedomino effect in RFID was Wal-Mart’sbold requirement that its distributors,which number in the tens ofthousands, use the technology.

“We've been moving forward withadvancing [RFID] technology in aretail setting since 1999 when wejoined the Massachusetts Institute ofTechnology’s Auto-ID Lab. RFID hasbeen around since the 1940s, and

there comes a time with everytechnology when someone has tostep forward and say the time hascome. The time to introduce RFIDsolutions into the retail industry hascome,” says Christi Gallagher, Wal-Mart spokesperson.

Wal-Mart believes RFID will enhance

supply chain visibility and allow forimprovements in available stock forits customers and improved sales forits suppliers, as well as for theretailer. Initially, for Wal-Martcustomers, better product availabilityis expected to be the number onebenefit. However, down the road,Wal-Mart sees benefits related to

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RFID continued from page 13

returns, recalls, warranties andbattling counterfeit products,including pharmaceuticals.

One of the biggest lessons for Wal-Mart’s suppliers has been that a singletype of tag (antenna design) does notnecessarily fit all of their products,according to Gallagher. “However, wehaven't seen a product where wecouldn’t find a tag that would deliverthe read performance needed tofacilitate process improvements,” sheadds. “In fact, many of our suppliersare working with their packagingsuppliers to have the tag fixed orembedded prior to them receiving thepackaging. Many packagingcompanies are carrying out lots ofresearch in this area.”

Crucial to the effort by Wal-Mart todevelop an open-loop system is thestandardization of RFID tags, whichallows interoperability betweendifferent companies in the supplychain. Late last year, EPCglobal Inc.,a standards organization, ratified theroyalty-free UHF Generation 2standard for RFID tags. A standard fortags also invites multiplemanufacturers, which drops prices.

“Adoption is gathering momentum,and RFID is becoming pivotal in

driving changes in the supply chain toreduce cost and enable companies toboth keep prices as low as possibleand deliver an improved service.Recent ratification of the Gen 2 tagswill allow the cost of the tags to comedown. This will, in turn, lower the costfor our suppliers and create a truly"global" tag.

Is RFID for You?

Yellow Roadway Corporation, one ofthe world’s largest transportationservice providers, ships industrial,commercial and retail goodsdomestically and internationally. Bothopen-loop and closed-loop systemsare being considered by YellowRoadway, which employs over 50,000,to achieve better utilization of itsequipment as well as applying RFID toshipments.

Here are the steps to use inconsidering RFID:

• First, you must understand thetechnology and its limitations

• What is the stage of thetechnology: nascent or mature?How is it evolving?

• Look at the cost of the technologyand apply it to a rigorous financialmodel.

• Project how the cost of thetechnology will drop in the nextfive to 10 years.

• What type of effort will it take toroll out the technology?

• What is the proper timing? Youdon’t want to be early but youdon’t want to be late.

Financial model

Using financial modeling as a tool,Yellow Roadway is doing a full-blowncost analysis to gauge its entry intothe RFID marketplace. It is looking at itfrom a capital expense perspective,which includes the cost of installingreaders at the doors, computerservers, networks that will be needed,software engineering, constructioncost, on-going cost of tagging cargo,training on the usage of thetechnology, hardware/softwaremaintenance upgrades andmaintenance.

Then the company looks atincremental value. This includesproductivity improvement, assetresource allocation improvement andsavings on claims. “We live in a verymeasurable world. There are keymetrics and key measures out there.We are well engineered; weunderstand our cost models,Hardt says.

Typically, Yellow Roadway targets aone-year ROI. With the current costof the readers, Hardt doesn’t believehe can get the ROI down to threeor four years. The company willconduct several iterations of thefinancial model to determine if theimpact of the new technology hasbeen accurately portrayed. Basedon that information, the companywill then know when to startinvesting in the technology andwhen to begin pilots with customersand internally. “We are trying to

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understand the financials surroundingthe implementation of RFID andstudying the most beneficialapplications of the technology andthe needs of the customers,”Hardt says.

RFID Versus Bar Codes

Perhaps one of the biggest barriers toRFID deployment might be theembedded base of bar code trackingsystems in the enterprise space. Notonly does RFID need to makebusiness sense for a company but italso has to be convincing enough tomove them to throw out the barcode investment.

Yellow Roadway, for example, alreadyprovides many mechanisms that allowcustomers to track shipments, usingreaders, barcodes and the Internet.“We have a pretty extensivetechnology infrastructure in placetoday. We scan more than 350,000images a day and company-wide wedo 30 million shipments a year,” Hardtsays. “It has to make good businesssense to upgrade your current systemif it is already working well.”

One of the factors that separatesRFID from bar codes is thetremendous amount and types ofinformation that can be programmedin and read from the tags. “Forexample, sensors will be integratedinto the tags, and the object will notonly be identifiable but it will answerseveral other queries, such as: Howdo you feel? Are you too hot? Areyou too cold? Have you been shakenor dropped?” says Rush.

In heavily regulated industries, such asaerospace manufacturing, they needmore information, such as whoworked on what and when, according

to Rush. For consumer goods, RFIDwill provide inventory managementand promotions management. Forretail, it will serve as a check onwhat is out of stock and as a guardagainst theft and diversion of goods.In the pharmaceutical industry, it willbe making sure that the rightproducts get to the right place at theright time and that they are notcounterfeit.

Conclusion

As the standards process movesforward, the infrastructure is built outand the prices of tags and readersbegin to drop, the adoption rate ofRFID will increase exponentially. Thefuture may bring new opportunitiesin active RFID tag use, for example, atBoeing Wichita. “We’ve already seenthe costs of equipment go down. Asthe popularity of RFID increases, weexpect to see that continue especiallyon the active tag side,” Fogg says.

With RFID you get the feeling that anew application is going emergeevery day. For example, I.D. Systems,Inc., a wireless RFID-based assettracking and management solutionsprovider, announced in May of thisyear that it has a U.S. patent for afully automated wireless vehicle rentaland return system based on RFID toreduce operational costs and increaserevenues for car rental companies.

“We are building out theinfrastructure for applications that wedon’t even know about yet. We arejust scratching the surface,” saysRush. “Once the RFID infrastructure isdeployed and it can support all thedifferent tag types, it will becomemore useful and beneficial foreveryone.”