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Uncover the ROI in RFID Closed Loop Systems Provide Savings RFID Proves Benefits With Asset
Uncover the ROI in RFID Closed Loop Systems Provide Savings RFID Proves Benefits With Asset
Uncover the ROI in RFID Closed Loop Systems Provide Savings RFID Proves Benefits With Asset
Uncover the ROI in RFID Closed Loop Systems Provide Savings RFID Proves Benefits With Asset

Uncover the ROI in RFID

Closed

Loop Systems Provide Savings

RFID Proves Benefits With Asset Tracking and Indirect Material Management

WinWare Incorporated 1130 Northchase Pkwy Suite 100 Marietta, GA 30067

Phone: 888.419.1399 Fax: 770.419.1968

www.cribmaster.com

January 2007

executive

white paper

Suite 100 Marietta, GA 30067 Phone: 888.419.1399 Fax: 770.419.1968 www.cribmaster.com January 2007 executive white paper
Suite 100 Marietta, GA 30067 Phone: 888.419.1399 Fax: 770.419.1968 www.cribmaster.com January 2007 executive white paper
Suite 100 Marietta, GA 30067 Phone: 888.419.1399 Fax: 770.419.1968 www.cribmaster.com January 2007 executive white paper

Contents

Contents

1 RFID is Not All the Same

 

2 The New Bar-Code vs. Process Automation

3 Compliance / Process Discipline

4 Cost Reduction Capabilities

5 Taking Away the Guess Work - Making RFID Repeatable

6 Growing Beyond a Single Solution

CribMaster

Inventory Management System | WinWare, Inc.

RFID

It’s Not All the Same

RFID It’s Not All the Same 1 Away with the Standards a Simpler, More Focused Approach

1

Away with the Standards

a

Simpler, More Focused Approach

Wal-Mart and the DOD have done amazing things for the movement of RFID technology.

Their mandates forced the compliance of a single use of RFID and has brought a great deal

of attention to the 900mhz passive technology. It also seems that, because of these man-

dates, the development of this technology has moved quite rapidly and the Gen2 releases

are proving the speed of maturity is at a good pace. RFID has come a long way in the last two years and with so many suppliers being forced to tag pallets and containers, RFID

remains in the spotlight. So that’s it

we

tag our pallets and boxes, but what else?

OK

dards to function as a way to improve the logistics operations of suppliers and manufactur-

ers. Hats off to EPC Global, Spec 2000 and some of the other organizations that put their best foot forward to make sure these standards were established. Thanks to those compa- nies who have focused on the movement of this technology to improve the logistics / supply chain operations, a new breed of asset management and indirect material management sys- tems have surfaced.

in

a fairly short period of time, RFID technology has developed the necesssary stan-

of time, RFID technology has developed the necesssary stan- The New Breed of RFID (Closed Loop

The New Breed of RFID (Closed Loop Systems)

these

Closed loop, indirect material, asset management

used by companies to describe the means in which they have utilized this technology to prove real results in everyday operations. Almost every opera- tion has challenges associated with managing assets or indirect material of some type. It may be a large office who can’t keep control of office supplies, a technology company who can’t keep up with their laptops or hand-held com- puters or a manufacturer who can’t keep up with spare parts or tool inventory.

are terms commonly

A closed loop RFID system is described as a system that basically completes

an entire task and is not required to have standardized information to share amongst systems of other organizations. The system may share information with other internal software, but the tag will not have information embedded into it that will make sense to any other software system. The RFID tag of a closed loop solution will often times have a unique identifier that will marry to more extensive information about the item contained in a database. When this tag is viewed by RFID readers attached to the closed loop system it will make the match and know that the ID number of 12874537 embedded on the tag is identifying the tagged item as a Black and Decker Cordless Drill with a serial number of BD567-9823-DR. To any other RFID system it is simply 12874537 and we know nothing else about it.

AMR Research has stated that it finds, “companies that take a more simplified and focused approach to the use of RFID technology incur much less risk in implementation, receive tan- gible value, and build capabilities that give them significant differentiation from their competi- tors. - "Finding the ROI in RFID", by Jon Fontanella and Matt Bilodeau, AMR Research, October 31, 2003

CribMaster

Inventory Management System | WinWare, Inc.

The New Barcode vs.

 
The New Barcode vs.  

Process Automation

 

RFID

the

New Barcode?

   

How many times over the last few years have you heard that RFID is going to be the new barcode? Well there may be some real truth to that, but in reality it isn’t a new bar code it is a whole new way to look at business processes. RFID tags provide a new level of automation that far outweighs that of barcodes. Although barcodes may be replaced by RFID, the poten- tial to further automate processes and reduce human interaction provides much greater effi- ciency than a barcode system. You probably aren’t going to find too many instances where you will replace your barcodes with RFID technology and the processes remain the same.

RFID technology is very flexible and radio waves can be read through most solid objects (excluding metal) which does not require the tag to be visible. This fact is a far stretch from that of a bar code and can create a whole new way to look at the business process associat- ed with this new level of auto identification. Looking at these processes and the opportunity to streamline current methods, will identify areas where human interaction is reduced greatly, which directly relates to cost reduction.

Bar Codes vs. RFID for Asset Tracking and Indirect Material Management

 
 

Bar Code Technology

RFID Technology

   

Creates a high level of hands-free automation

X

Is a mature technology

X

   

Can be used to monitor and store information

X

 

Is “Read and Write” capable

 

X

 

Does not have limited industry expertise

X

   

Proven ROI from implementations

X

X

 

Allows uninterrupted process flow

 

X

 

As you can see from the above chart, RFID can be utilized as more than a data collection technology. In fact, RFID can be used to further streamline the flow of material or more close- ly monitor the movement of assets around a facility. Any process that can benefit from having an uninterrupted flow, because it currently requires manual barcode scanning or manually entering data, are prime starting points for potential projects that will prove ROI with RFID . A common area where ROI has been proven in multiple installations by WinWare, Inc. has been in store rooms, tool cribs or maintenance storage areas that contain indirect material or assets.

 
 

CribMaster

Inventory Management System | WinWare, Inc.

 

2

making the process work

making the process work

Compliance & Process Discipline

Employee Compliance

 

Make it easier to do the right thing than it is to the wrong thing and people will do the right thing every time. This is the theory that should be applied to the increased process automa- tion provided by RFID technology. Every work environment is different and the level of employee compliance you will receive when implementing new processes varies. Often times it even varies from one shift to another. You may find that the day shift is more likely to comply to a certain process than those who work afternoons or an overnight shift. One thing for certain is that the more obtrusive the process is, the less compliant people will be. This is not always on purpose. When retrieving needed inventory, if the process requires slowing down to scan a barcode or count inventory, it just gets forgotten because their number one goal is to make production numbers or whatever the next step might be to complete that task. This is exactly why RFID has such a tremendous upside when applied to every day asset tracking and indirect material management.

For example, let’s take a look at an operation that requires machine operators to check out their own machine components before performing changeover to make a different product. These machine components consists of dies, punches, tools and mill parts. All of the machine components are located in an unlocked room and each operator is responsible for removing the components and corresponding tooling to perform the change over. They are also scanning a barcode on each piece when removing inventory. It is important to have open access to this inventory because the operators are required to make production num- bers and are alloted a certain amount of time to complete the changeover and continue production. Then these items have to be scanned back in when they are returned.

During the process, machine operators gather all of the parts he/she needs and gets back to his/her machine to perform the changeover. While performing the changeover, which is pushing the alloted time, the operator realizes they forgot the gage needed and goes back

to the room and retrieves it. He/she forgets to scan it out. When another operator goes to use it, it comes up missing. After searching for hours, a new one is ordered for overnight

delivery

about

the same time the other one is found. This entire mishap is not uncommon

and has a great deal of cost associated with it. Again, this is an example where taking the

required human interaction out of this process would have improved this greatly. This is possible today with RFID.

Looking at this scenario, each machine component needed for changeover can be kitted into a custom kit box or rolling cart. That box or cart is identified with a single RFID tag which is associated with each item in the database of the closed loop system we talked about earlier. On issue, the employee is required to identify themself to the system before entering the room through a locked portal or opening a locked cabinet. Upon identifying themself access is permitted and the box can be removed from a RFID equipped cabinet or the cart can be rolled back through a RFID portal. This requires little to no human interac- tion and dramatically improves a process that will provide measurable ROI.

CribMaster

Inventory Management System | WinWare, Inc.

3

how do we save money with rfid

how do we save money with rfid

Cost Reduction Capabilites

How Do I Determine if I Can Make My ROI?

 

Cost reductions vary based on the process you are looking to enhance with an RFID solu- tion. You may be looking at managing expendable tool inventory through an automated RFID tool crib or tracking specialized test equipment that requires a high-level of calibration and certifications that are logged with digital signatures confirming that they have been per- formed. No matter if it is a durable asset or a piece of expendable inventory that requires continual replenishment, it is all inventory. As a matter of fact, if the item does not become part of the product you are manufacturing, it can be considered indirect material inventory and there are many ways to determine ROI based on different cost saving categories.

These can be broken down into 4 areas of cost reduction.

On-HHand Inventory Reductions

Overstock Inventory Redcutions Carrying Cost (Overstock and Obsolete)

Inventory Spend Reductions

Inventory Reduction Based on Usage Accountability Inventory Reduction Based on Optimization Lost Inventory Reductions Reductions in Carrying Cost

Operational / Labor Reductions

Reduced Red Ticket Shipments Reduced Searching Time Reduced Purchasing Task Time Reduced Planning Task Time Reduced Wait Time Reduced Walk Time (Inventory Relocation in RFID Cabinets) Reduced Issue Time (Organization and Kitting)

Obsolete Inventory Liquidation

Revenue Received from Inventory Liquidation

Once you have taken the management solution to an enterprise level, you begin to see these results at each plant but additional savings become apparent by a much higher level of management. These savings are seen enterprise-wide, in both “Hard” and “Soft” cost reductions. Hard costs at this level are those costs that are directly associated with the cost of inventory and “Soft” costs are generally associated with time spent by corporate man- agement analyzing spend or usage information.

With the proper system and enterprise view at the corporate level you can identify weak spots across your organization. As well, you will be able to identify areas of surplus and enable transfers of indirect materials. This is a “Hard” cost savings that can sometimes be dramatic.

For a complete cost savings worksheet call 1.888.419.1399

CribMaster

Inventory Management System | WinWare, Inc.

4

taking away the guess work

Making RFID Repeatable

taking away the guess work Making RFID Repeatable 5 Look for Successes in an Emerging Market

5

Look for Successes in an Emerging Market

With an emerging technology there are going to be early adopters who struggle through “science projects” to achieve results. Typically there are technology companies who take on these science projects and learn a little more every step of the way. There are also those who find a successful means of utilizing this technology and those companies are the ones you should look for when deciding to venture into an RFID project. Like any process change, it is important that your company take complete ownership of the project and man- age the change internally. In these early days of RFID asset tracking, it is important that you look to partner with a company who can:

- Be the single partner for the project

- Provide a complete solution for the task at hand

- Provide a solution that easily expandable plant-wide and enterprise wide

- Provide expertise in a niche use for RFID

- Prove a successful implementation history

- Prove ROI from other installations

- Uses RFID to enhance a technology shortcoming or human process

Literally Plug-n-Play

Those are words I bet you never heard being applied to RFID, yet it is possi- ble. I know it seems like an RFID solution that was literally “plug-n-play” should be in a Ripley’s museum somewhere but instead they are being used by companies like ATI Wah Chang, Crown Equipment, the USAF, Bassett Industrial and others to rapidly improve processes. They do this without need- ed trial periods and an average installation time of two days. How can it be? They have implemented a COTS (commercial off the shelf system) that serves a specific purpose. These solutions are built into products that are manufac- tured to perform a specific task. Portals to manage indirect material and tool- ing, cabinets to also manage these indirect materials, tools or maintenance spare parts at point-of-use or RFID enabled modular drawer systems used to manage FOD processes.

These solutions are driven by a robust software package and were designed to provide rapid go-live and expansion to manage indirect materials and assets within manufacturing and other productive environments. Typical inventory items being managed in the “Plug-n- Play” RFID devices are MRO items, power tools, safety products, expendable cutting tools, cleaning supplies, toner cartridges, abrasives, gages or calibrated instruments, costly test equipment like oscillospopes, IT inventory, batteries and spare parts. Using RFID for this type of inventory has proven a very rapid payback and is a very good use of the technolo- gy.

a very rapid payback and is a very good use of the technolo- gy. CribMaster Inventory

CribMaster

Inventory Management System | WinWare, Inc.

continuous improvement

Growing Beyond a Single Solution

continuous improvement Growing Beyond a Single Solution Why Implement a Corporate -W W ide Solution Back

Why Implement a Corporate-WWide Solution Back to the basics. The ultimate leverage you have when negotiating contracts with suppliers is order quantity. You certainly stand a greater chance of getting a better deal on 70,000 pairs of safety glasses rather than 10,000 pairs of safety glasses. Do you have a system in place where you can confidently attempt to establish corporate contracts based on actual usage fig- ures (not order figures) of each of your facilities? Do you have a single system that has tracked usage, replenishment, maintenance tasks and optimized inventory levels for each of those facilities? Does this system enhance processes and accurately monitor these indirect materials or assets with the use of RFID?

Wouldn’t it be nice to be able to run a usage report on every common mro item, tool, comput-

er, or lubricant of all of your facilities? If you can clearly see actual usage of like items across your entire enterprise, you can negotiate contracts with confidence that you are not over pur- chasing your indirect material or needed assets. All of this inventory should be linked by a common item number and be pushed to a data warehouse so that you have enterprise wide reporting at your finger tips. Optimum order quantities, optimum inventory levels and enter-

prise-wide transferring and reporting

an

incredible impact on your bottom line.

Single Location Contract

10,000 Pairs of Safety Glasses Yearly = $6.00 per pair 25,000 Carbide Inserts = $43.50 per 10 25,000 Drills = $2.00 each 5000 Vice Grips = $14.00 each

Corporate Contract

VS.

70,000 Pairs of Safety Glasses Yearly = $3.50 per pair 175,000 Carbide Inserts = $33.50 per 10 175,000 Drills = $.95 each 35000 Vice Grips = $9.00 each

10 175,000 Drills = $.95 each 35000 Vice Grips = $9.00 each = Contract Savings $420,000
10 175,000 Drills = $.95 each 35000 Vice Grips = $9.00 each = Contract Savings $420,000

=

Contract Savings

$420,000 vs $245,000 = $175,000 difference $761,250 vs $586,250 = $175,000 difference $350,000 vs $166,250 = $183,750 difference $490,000 vs $315,000 = $175,000 difference

TOTAL COST SAVINGS = $708,750 with 4 products

$175,000 difference TOTAL COST SAVINGS = $708,750 with 4 products Inventory Management System | WinWare, Inc.

Inventory Management System | WinWare, Inc.

CribMaster

6

Crown Equipment: Case Study

1

A Common Scenario There are some things we all wish we could have 24 hours a day. Like a nice meal, or a quality TV program in the middle of the night. Much like the rest of the manufacturing world, Crown Equipment, the makers of the num- ber one brand electric lift trucks in the US, is no exception. They require access to their inventory 24 hours a day, 7 days a week. But unlike their peers, Crown took the necessary steps to ensure their employees could access what they needed no matter what time it was.

Crown is a corporation which has received over 50 product design awards, been nationally recognized for their DP (Demonstrated Performance) QuickStart™ training program, and honored by the EPA for their waste minimization efforts. This is a company with innovation and efficiency at the heart of its design and manufac- turing philosophies.

at the heart of its design and manufac- turing philosophies. There Must be a Better Way

There Must be a Better Way It became apparent to Crown that there must be a better way to manage indirect materials than what was currently in place. Brenda Hughes, Supervisor and Buyer for Crown Equipment noted, "We really needed to get product to the operators on the machines. We felt our replenishment was effective, but unavail- ability for all three shifts was hurting production." Crown, being the forward-thinking organization that they are, began to look at RFID (Radio Frequency Identification) to help with their indirect material challenges.

Being a manufacturer of lift trucks, RFID had certainly been on Crown's radar screen. The benefits to material handling and logistics operations have been becoming more and more obvious. But with the growing industry buzz

CribMaster

Inventory Management System | WinWare, Inc.

becoming more and more obvious. But with the growing industry buzz CribMaster Inventory Management System |

Crown Equipment: Case Study

Crown Equipment: Case Study 2 around RFID, Crown began to investigate the possibility of expanding their

2

around RFID, Crown began to investigate the possibility of expanding their RFID use to manage indirect materials and solving the challenge of provid- ing 24-hour access.

Conceptually, Crown believed with RFID its employees could simply walk in a crib, pick up their supplies, and get back to work. Was this possible? Their research uncovered the CribMaster Accu-Port (illustration 2:1), which is a commercial off the shelf (COTS) inventory management system geared specifically for managing indirect materials. CribMaster has partnered with Symbol Technologies to provide the antennae and readers to power the Accu-Port and have designed a plug-n-play portal specifically for managing indirect materials. The CribMaster sys- tem utilizes passive RFID technology and Gen2 passive tags.

This system offered Crown many benefits.

Gen2 passive tags. This system offered Crown many benefits. Illustration 2:1 1. Ability to access their

Illustration 2:1

1. Ability to access their tools at any time without staffing the crib.

2. Reduction of a 24-hour position to an hour and a half restock- ing job.

3. The use of light-duty workers for restocking.

4. Establishing organized delivery of items.

5. Retaining an already effective replenishment method by integrating with their current system.

CribMaster

Inventory Management System | WinWare, Inc.

Crown Equipment: Case Study

Crown Equipment: Case Study 3 Tag You’re It Even with all these advantages, the common issue

3

Tag

You’re

It

Even with all these advantages, the common issue of tagging small, expendable items with RFID was still on the table. It is hard to imag- ine attaching a tag to a screwdriver or drill bit, but with WinWare's help, Crown discovered another way: tag the packaging , not the prod- uct. (illustration 3:1) Crown implemented a system where items are placed in bags with the corresponding label and RFID tag. A great advantage here is once a worker takes their item and walks out of the crib, they simply remove it from the bag, place the bag in a 'mailbox' and that packaging can be used again and again. This not only mini- mizes the cost of tags, but also limits the effort of restocking.

Crown's employees could now find items and even move the entire crib with ease. All items have been tagged and stocked according to a coordinate system (illustration 3:2). Then, if for any reason the crib needs to be moved, the walls can be taken apart, shrink-wrapped, and moved with all prod- ucts still attached. The dismantling and reassembly can be completed in one day. It doesn't get much easier than that.

With tagging taken care of and the 'mailbox' system in place, restocking became easier than ever. At Crown, each crib monitors the movement of two to three hundred items each day. In crib 1, every one of these products is an expendable item, and therefore must be replaced. This process reduces restocking time and allows Crown employees to focus on other aspects of their indirect supply chain. With RFID the employee can simply refill the bags and take as many as 30 items back into the crib at a time. Here, all thirty are recorded and assigned to the tag instantly.

all thirty are recorded and assigned to the tag instantly. illustration 3:1 illustration 3:2 CribMaster Inventory

illustration 3:1

recorded and assigned to the tag instantly. illustration 3:1 illustration 3:2 CribMaster Inventory Management System |

illustration 3:2

CribMaster

Inventory Management System | WinWare, Inc.

Crown Equipment: Case Study

Crown Equipment: Case Study

ROI - The Determining Factor of Success In the end, having the CribMaster Accu-Port in just one area of their opera- tion is benefiting Crown. ROI studies have proven a substantial impact, and this savings has allowed Crown to justify the system with reduced inventory usage alone. Using reportable purchasing information, Crown has acknowl- edged that since implementing the Accu-Port crib, their daily average inven- tory usage has been reduced by 21.65%. This has proven a return on invest- ment of less than four months.

 

Other Soft Cost Reductions Acknowledged by Crown The other reductions, not taken into consideration, are also substantial and can dramatically shorten the ROI even more. The other cost considerations are listed below.

1. Labor Savings - the reduction of a 24-hour position to an hour and a half was a great reduction in labor cost.

2. Walk Time - having a central crib reduced the employee's travel time.

3. Improved Productivity and Less Down Time - with the easily accessible tools, Crown employees can now grab what they need and get straight back to work.

Continuous Improvement Initiatives Some continuous improvement plans for Crown include expanding their RFID network. Brenda Hughes foresees 9-10 Accu-Ports across her facilities by 2010. This consolidation will give her the ability to utilize bulk buying incen-

9-10 Accu-Ports across her facilities by 2010. This consolidation will give her the ability to utilize

CribMaster

Inventory Management System | WinWare, Inc.

4

Crown Equipment: Case Study

Crown Equipment: Case Study tives, while the mobility and easy "go-live" of the cribs will make

tives, while the mobility and easy "go-live" of the cribs will make this transition period run smoothly. RFID ended up being a no-brainer for Crown. They saved on tags and reduced restock time with the innovative identification scheme by tagging the packages. Their employees could maximize the sys- tem's potential with ease, but more importantly, they could finally reach the tools they needed around the clock.

Crown has proven that RFID tagging and the CribMaster Accu-Port are the necessary means for solidifying their indirect material inventory management. Imagine their savings once all five plants are up and running with RFID. It may be a long shot, but if the rest of the world would catch up with Crown Equipment, there may be a day when we actually can get a Michelin star meal or have something besides an infomercial to watch at 3am.

or have something besides an infomercial to watch at 3am. CribMaster Inventory Management System | WinWare,

CribMaster

Inventory Management System | WinWare, Inc.

WinWare, Inc.

1130 Northchase Pkwy

Suite 100

Marietta, GA 30067

p: 770.419.1399

f: 770.419.1968

tf: 888.419.1399

www.cribmaster.com

5