Using RFID to gain competitive advantage at the heart of the true value creation activity
By formulating mandates and forcing manufacturers to slap radio frequency identification (RFID) tags and ship their products, retailers are sending the unambiguous message that they intend to take customer satisfaction to the next higher level. Initially, by tapping into the fundamental application of RFID accurate and beyond line-of-sight tracking and tracing of their stock retailers plan to enhance the shopping experience of their customers by giving them what they need when they need it, and, more importantly, driving their costs down while doing it.
At the same time, progressive manufacturers are also thinking beyond, what is in it for us? Incidentally, today's manufacturers are also chasing the dual but equally important objectives of higher service levels and lower supply chain costs. By meaningfully automating their critical value-add processes and driving the analogy of strong supplier/customer relationships deeper within the shop floor, manufacturers can develop greater agility across their supply chains and execute customer orders seamlessly and cost effectively.
This paper addresses how RFID can be leveraged to gain competitive advantage at the heart of the true value creation activity.
Background
RFID is a wireless data collection technology that uses devices like small chips or tags with antenna, which can store data and respond to signals from readers. Typically the tag is attached to an item, pallet, container or equipment, and the data embedded can include identification/location/time, specification, service or warranty information. By recording relevant information at critical control points across the shop floor and placing readers at right locations, real-time process data can be captured. This enables fact-based decisions and provides the much needed capability to flex operations just at the right time to meet the ever changing load on the plant caused either by market conditions or by any one of the dynamic situations within the plant, like a machine going down, labor allocation imbalances, wrong tooling, raw material stock outs, and so on.
An AMR research report (April 22, 2004) indicates that companies must consider transforming their current supply chains into a demand-driven supply network in order to execute demand with agility and consider manufacturing as an important node in this transformation. The report also states that demand responsiveness requires synchronous collaboration of in-house and contract manufacturing nodes, and success in providing manufacturing visibility drives responsiveness to meet demand and will yield enhanced profitability. Early adopters driving these types of demand-based transformations are looking beyond the current MES applications for tools and technologies such as enterprise manufacturing intelligence and RFID to incorporate their heterogeneous manufacturing landscape into the supply network operations, which also includes trading partners like logistics providers, wholesalers, distributors and retailers.
As these next-generation strategies start to permeate upstream across value chains, adopting and extending the right technology to support end-to-end supply processes is a requirement to eliminate any weak links and ensure the delivery of measurable benefits. RFID technology by definition provides real-time business intelligence that can be leveraged at the very least to build responsiveness and cut out waste and unproductive practices. In the world of manufacturing, any plant manager would be thrilled to hear about ways to build cohesion between different units within the shop floor. RFID enables the analogy of strong supplier-customer relationships to be applied within and between the units of an enterprise. For example, by knowing real-time event occurrences in the sub-assembly unit, its supplier the parts room can develop responsiveness. Or, by knowing real-time event occurrences in the final assembly unit, its supplier the sub-assembly unit can flex at the right time to meet the changing demand. And across the enterprise, the same is applicable to distribution center final assembly, and the point-of-sale distribution center relationships. The benefits of leveraging RFID technology within complex manufacturing environments can be accrued to achieve the following operational as well as financial advantages. Some of these are explained later in the paper.
- Cut labor costs by tracking and maintaining accurate inventories. End material hunting trips.
- Eliminate material stock outs on the manufacturing line. Improve utilization.
- Set up time reductions by matching jobs to equipment/tools and tracking tool life.
- Elicit quicker response times to customer order changes.
- Minimize instances of quality non-conformance.
- Full utilization of planned maintenance time to prolong planned machine run times.
- Reduce obsolete stock and improve space utilization.
Making the Business Case for RFID Adoption in Manufacturing
Hitting the business goals of satisfying the shareholders and customers alike is becoming an uphill battle in an ever expanding global marketplace. To meet the expectations of the demanding customer and staying ahead of the competition requires manufacturers to cut the gap between the needed and available capabilities. Customer-centric companies have realized that in addition to being customer focused, reducing the information time lag across all functional units will add value faster. RFID technology will augment the available capability by providing new real-time intelligence across the shop floor that can be used to feed and recalibrate plant-centric applications, and enable them to deliver reliable decisions and operate close to the needed capabilities.
Manufacturers may have no choice but to comply with government and retailers' mandates, but the potential of deploying RFID upstream in their supply chains will allow them to recoup their cost and more by realizing the following benefits.
High-impact Applications of RFID in the Manufacturing Space
Planned activities constantly change in any manufacturing operation. Variability is inherent and is more pronounced as the complexity increases. Application of RFID in such a dynamic system to capture and eventually act on those types of information that have a direct influence on disrupting efficient throughput will yield consistent benefits. The following applications can be used to sense and control critical processes to enable sustained plant load handling to meet demands on time.
Real-time Manufacturing Optimization
Typically manufacturing operations run on schedule for the first few hours (or minutes) after the new schedule has been generated. Regardless of the reason, conditions change and can become chaotic if not properly monitored. Operators are usually expected to make changes on the fly without holistic visibility or information about order priorities, and this causes a lot of knee-jerk reactions and, hence, inefficiencies. Manufacturing decisions require real-time execution of complex logic to help make the right decisions using a variety of shop floor data.
By leveraging RFID to track raw material levels and WIP, reusable assets, and recording operator- equipment status provides visibility into the changing capacity landscape and triggers informed re-routing, re-scheduling and load add-on decisions to quickly reclaim lost utilization.
Matching Tools and WIP to Equipment
Fluctuating demand and the focus on pushing volume out of the door for cost purposes takes attention away from ensuring the right tools and WIP are used on the right equipment. There is not much detail on the events performed on the machines as to which tools were used, the remaining life of tool bits, which equipment is better suited for specific operations, etc. In the case of downtimes, operators are expected to get maintenance help and quickly fix it. But without a database of what has gone wrong in the past, there can be frequent tool and equipment breakdowns, which raises scrap rate.
Tagging WIP/tools and reading at the equipment just before set-up prevents resource mismatch. Additionally, the tool bits usage can also be monitored and pulled out at the right time to avoid breaking and damage.
Accurate Product History Tracking
One of the important objectives of any manufacturer is to minimize product recalls by consistently delivering quality product. But during the undesirable event of a recall, manufacturers want to quickly pinpoint the cause and minimize effects of the recall. Generally the details of the materials and sub-assemblies going into finished products, like the supplier name, material specs, operation details, completion times, etc. are not accurately recorded. This can cause double handling, higher scrap rates, unnecessary cycle counting and an overall drop in productivity.
RFID technology, with its natural tracking and tracing capabilities can help the manufacturer record quality compliance at each step of the process. Expensive materials and sub-assemblies can be wasted if out-of-spec materials or wrong processes are used. RFID can provide timely and accurate information to enable bill of material (BOM) compliance and to quickly identify root causes of quality defects.
Enterprise Asset Tracking and Control
Tracking both fixed assets and mobile assets in an enterprise facilitates capital expenditure decisions, provides visibility to the condition of assets and prevents misuse. Formulating tight policies and procedures for tracking ensures assets are being used in designated places to achieve the desired results. Typically when it comes to mobile/reusable assets like laptops, expensive tools and other accessories, theft is a common occurrence, and interplant material movement of assets like pallets, racks and totes are often not managed properly and become dilapidated. Large manufacturing operations spend a significant amount of planned labor allocation in hunting for the right resources to keep production lines running. Lack in equality of focus and attention in tracking reusable assets vs. assets like finished goods and raw materials can have the potential to shut the whole operation down.
The standard track-and-trace application of RFID can provide valuable ongoing information about the location and condition of both fixed and mobile assets. This prevents theft, misuse, prolongs the life of assets and facilitates write offs at the appropriate times.
Summary
Limiting the use of RFID to just comply with customer mandates is not realizing its full potential. Developing agility, especially in manufacturing, is a survival requirement in today's competitive global market place. By smartly leveraging the track-and-trace capability, the effects of random process variability across supply chains can be minimized. RFID enables meaningful process automation and provides real-time event information, and that can be a powerful combination for businesses to deliver superior value to their customers at a lower cost.
References
Collin Mason, David Caruso, Roddy Martin, AMR Research, April 2004, Next Generation Manufacturing: Integrating Manufacturing into DDSN.
Manish Bhuptani, Shahram Moradpour, 2005, RFID Field Guide, Deploying Radio Frequency Identification Systems. Sun Microsystems Press, and Prentice Hall
Greg Aimi, AMR Research, August 2004. Reusable Mobile Assets: An RFID project waiting to happen.
John Fontanalla, Matt Bilodeau, AMR Research, October 2003. Finding ROI in RFID.
About the Author: Subramanyam Venkataraman is a senior consultant in the Supply Chain Management domain at Infosys, an end-to-end business solutions provider.
