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RFID and Logistics: Four Trends You Need to Know

Manufacturing.net has an article about RFID and logistics trends that the author: Tom Singer advises us to be aware about.
So here are the four trends,
Trend One: The High Cost of Fuel

Improving the efficiency and effectiveness of transportation spending is a hot topic for logistics operations. Approximately 80 percent of North American freight expenditures are on motor carriers. Other transportation modes also depend on petroleum-based fuels. Trying to figure out ways to save on transportation, since oil prices have risen to record levels, will become critical.

Transportation spend is on the rise especially when manufacturing has been outsourced or offshored but the effect has been offset by the advantage of lower costs of production elsewhere. So the essential question is how long is the rising oil price as a trend going to last? Tim notes the following as well,

Carriers and enterprises operating private fleets will redouble their efforts on route and scheduling optimization.

And,

In the past few years, major supply chain software vendors have taken a new look at the Transportation Management System (TMS) marketplace. A new, web-based generation of TMS software is available…

Carriers have troubles, such as driver turnover, other than the high cost of fuel which they routinely pass through onto the shipper through the fuel surcharge. Private fleet owners have the option of hedging fuel contracts in the futures market for their operations and that would take care of that issue. The final point about TMS being available more widely than before misses the fact that TMS were in vogue long before oil began trending higher. From my personal experience, I see much about the way that TMS are used that leaves a lot to be desired. Nevertheless, the efficacy of a TMS is highly dependent on processes that precede it, in manufacturing, in scheduling etc. TMSs can only work within the constraints that has been decided long before the pallet becomes ready at the dock door and that is an illustration of local optimization against global optimization.

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Cardinal Health Releases RFID Pilot Results

Cardinal Health Releases RFID Pilot Results in a recent news release. They report,

Test data shows promise and gaps of the technology that will affect widespread adoption across pharmaceutical industry

The aims of the RFID pilot program were as follows:

The pilot program tested whether ultra-high frequency (UHF) radio frequency identification (RFID) tags could be applied, encoded and read at normal production speeds during packaging and distribution of pharmaceuticals. Verifying the authenticity of medications along each step of the distribution process adds an additional layer of security to lessen the chance of counterfeit pharmaceuticals entering the supply chain. It is also hoped that RFID data could improve efficiencies in the supply chain.

The results of the pilot program:

Overall data collected by Cardinal Health supports the theory that RFID technology using UHF as a single frequency at the unit, case and pallet levels is feasible for track and trace. However, several challenges remain before it can be adopted industry-wide. Some of those challenges include:

  • Technology and process improvements to achieve:
  • Case-level reads in excess of 99 percent at all case reading stations;
  • Unit-level read rates in excess of 99 percent when reading from tote containers at the distribution center and pharmacy locations;
  • Allowing unit-level “inference” to become acceptable practice in the normal distribution process at stages where unit-level read rates are unreliable, but case level reads approach 100 percent (*Three stages marked in chart above);
  • Barcode technology to be used as complementary and redundant technology to RFID;
  • Management of the cost impact to implement and sustain the technology;
  • Improved collaboration across the industry to identify opportunities to significantly improve efficiency.

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IBM looks to RFID to fight counterfeit drugs

IBM has released a new RFID (Radio Frequency Identification) tag designed to combat counterfeit products flowing through a supply chain. Aimed primarily at pharmaceutical companies, the RFID tags are placed on the product at the unit, case and pallet level and is tracked through the entire supply chain. Apparently, a pharmaceutical product changes hands as many as 10 times from the manufacturer to the point of sale.
From the article’s description, the RFID tag seems to be largely a passive tag. As the article indicates, the RFID tracking system is described as follows:

The IBM RFID system for pharmaceutical tracking and tracing uses blended RFID software and services to automatically capture and track the movement of drugs through the supply chain, according to IBM.

I do not claim any knowledge of how the IBM system works but it does seem that its capability depends on adoption across the pharmaceutical supply chain by the many partners that are situated up and down the chain. Also, it isn’t clear whether the unit, case and pallet level tags are identical or different. Since the tag is most likely a passive one, there are software services and objects behind the scenes that collect, organize and report on the state of the products in the supply chain.
So is this Innovation or Application? The latter, I think.

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RFID ROI — Not what it seems

I was having a recent discussion over lunch with an executive from a specialty grocer out west who admittedly didn’t know what the big hoopla was about RFID. The mother of all grocers and supermarketers is into it in a big way but he didn’t know what the point of it was except maybe for pallet level or truckload level tagging. I suggested – maybe its volume throughout the entire supply chain that one surmises without accurate and up to date information, supply chain managers might feel quite out of the loop and without much control. Dr. Peter Harrop has an article RFID ROI – Not what it seems that makes several points. Here’s a sampling:

Ask someone in the street about RFID and they may say it is tagging prisoners. However, those in the industry generally talk about putting labels on pallets and cases necessitated by the commendable commands of leading U.S. retailers, which see sales increase and costs decrease as a result of their suppliers doing such tagging.

However, he says, if you follow the money and not the talk:

However, if we look at the major spend and potential spend on RFID, we get a very different picture. The global spend on RFID labels for pallets and cases alone

RFID Reshapes Supply Chain Management

Is RFID reshaping Supply Chain Management?
If you go by the talk of the town or are collared by the US Department of Defense or Walmart, then chances are that RFID is one of those uber initiatives that are top priority. From my viewpoint, which is from that of a large warehouser (GENCO is a large warehousing company principally) and that of a 3PL provider, RFID is at the pilot stage but nothing more than that.
What RFID does of course, in theory, is create a feedback situation i.e. if you’re aware or even comfortable using an analogy from Control Theory. In the past, the only recourse that managers typically had to determine whether something was stocked in the warehouse was to trust that the ERP/WMS system said that it was so. Frequently, such trust could often turn out to be misplaced, the magnitude of the error quite likely to be directly proportional to the state of completion/success/health of the ERP/WMS processes.
So along comes RFID (there are two main kinds: Passive and Active RFID) to close the loop in a sense that a WMS/ERP system could ascertain the actual state of affairs (I guess damaged tags being an issue not addressed yet).
Passive RFID refers to the technology that uses tags that need to be powered by the reader and then transmit information to the reader. They’re cheaper and will probably be the backbone of the first wave of adopters.
Active RFID refers to tags that contain power elements such as batteries and transmit information to the reader by themselves and also can be linked to other sensors (such as temperature/pressure sensors).
No new technology comes into being without a wrangle over standards. However, RFID seems to have escaped the brunt of such a battle. The EPCGlobal standard for RFID is the standard for embedding information in RFID.
What is of great interest to me is the increase in SKU level informaiton that is going to at once flood all levels of the supply chain. In order to manage a supply chain information, one thinks that one would require accurate and detailed information. That will quite likely happen with the widespread adoption of RFID. However, what are also equally necessary are data collection, manipulation and reporting tools (such as those from Business Objects or the like) that create a better reporting structure.

About me

I am Chris Jacob Abraham and I live, work and blog from Newburgh, New York. I work for IBM as a Senior consultant in the Fab PowerOps group that works around the issue of detailed Fab (semiconductor fab) level scheduling on a continual basis. My erstwhile company ILOG was recently acquired by IBM and I've joined the Industry Solutions Group there.

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