"Slap and Ship" for RFID Less Common than Many Believe

ARC study reveals more automation, process variation in application of radio frequency ID tags at distribution centers

ARC study reveals more automation, process variation in application of radio frequency ID tags at distribution centers

Dedham, MA — January 5, 2005 — When Wal-Mart last year issued its mandate requiring the retailer's top 100 suppliers to adopt electronic product code (EPC) radio frequency identification (RFID) technology at the case and pallet level by this month, many industry observers predicted that companies would resort to a largely manual "slap and ship" approach to compliance.

But a new study from the ARC Advisory Group shows that complying with the mandate has required much more that simply slapping an RFID tag on at the distribution center (DC) and shipping the box off to Wal-Mart.

"Even when tags are applied at the DC, the term 'slap and ship' does not fairly reflect what is going on at many DCs," said Steve Banker, service director for supply chain management at ARC. "There is both more automation, and more process variation, than has been generally recognized."

The Mandate

Wal-Mart has mandated that by January 2005 its top 100 suppliers must apply passive RFID tags based on EPC-global standards to cases and pallets headed toward three specific DCs in Texas. Virtually all manufacturers of consumer goods will eventually be affected by this because Wal-Mart's moves in RFID are being copied by other retailers.

"Slap & stick" is the term that has been used for the process of applying RFID tags in the DC. "Slap and stick" reflects the idea that applying tags in the distribution center will be a more manual, labor intensive process than applying tags at the factory.

ARC conducted a best practices study in which the technology consultancy talked to 24 companies that were actively investing in EPC RFID (electronic product code radio frequency identification). RFID tags can be applied at the packaging line or the DC, but Banker said that in ARC's sample, 85 percent of the facilities where tags were applied were DCs.

More than Slap & Ship

Broadly speaking, ARC identified three methodologies that suppliers can use to apply tags in a DC. Under the first method, the manual "slap and ship" methodology, the general process for applying RFID tags at the DC would be to identify the orders that need RFID tags, divert those pallets to a special value added service (VAS) station where shrink wrap is removed from the pallet, cases are taken off, tags applied to cases, the tags are verified to be good, cases are reloaded onto the pallet, shrink wrap is reapplied to the pallet, a pallet tag is applied and verified, and the pallet is sent to the appropriate loading dock. Tagging cases in the DC wastes labor because previously assembled pallets have to be broken down and reassembled.

The second method involves the use of conveyors either to move pallets or cases to the VAS tag application station, or from the RFID tag application station to a palletization station, or from a palletization station to the appropriate shipping dock. Conveyor lines may also contain start and stop gates and diverts. "Start and stop gates" are necessary when tags cannot be encoded or applied at high speed. These gates stop the line and allow tag application to proceed. A "divert" allows cases whose tags cannot be verified to be diverted off to a side station for reapplication of the tag.

The third methodology is to preprint encoded RFID labels and then apply these labels to the cases upon picking the cases. Typically this would be pick-to-cart for mixed pallet orders. Finally, these methodologies are not mutually exclusive. A company may chose to do this in more than one way in the same DC. There are valid reasons for all these approaches.

Even the "slap and ship" methodology can be more variable than many recognize. For example, while RFID tags will usually be applied at a preexisting RFID VAS station, in some cases, depending upon staffing and capacity issues, it may make more sense to apply these tags at an ad hoc station set up on the receiving dock.

ARC reports on its study in a new report, "RFID Deployment Best Practices." This study offers information on the status of the Wal-Mart mandate and advice on how to prepare for mandate meetings with retailers; an analysis of how companies are changing their processes to meet these mandates and the strengths and weaknesses of the various process choices; and an analysis of three critical inflection processes when it makes sense to move from handling RFID in a certain way to doing it differently.

In addition, the report offers an analysis of the reliability of RFID technology, as well as companies' satisfaction with various RFID solution providers; the costs of preparing the RFID infrastructure; and the benefits of RFID and what will be necessary to reap those benefits.

The study includes key recommendations that ARC estimates could save companies hundreds of thousands of dollars if they must implement RFID to meet a mandate.