RFID in Manufacturing

RFID in Manufacturing A practical guide on extracting measurable value from RFID implementations in plant and warehousing operations

RFID in Manufacturing Executive Summary Wal-Mart, the world’s largest retailer, announced in June 2003 that its top 100 suppliers would be required by January 2005 to put Radio-Frequency Identification (RFID) tags on cases and palettes of consumer goods shipped to Wal-Mart distribution centers and stores. The consequence? RFID sensor technology has been given its first broad, real-world test, prompting Wal-Mart suppliers and competitors to learn about this wireless technology, which enables companies to automatically identify and track items in the supply chain. While Wal-Mart’s mandate compels RFID awareness, it really is already a global phenomenon, with applications outside of commercial retail. Global companies such as Tesco, Marks and Spencer, Nokia and others are implementing certain aspects of RFID. Several industry groups are driving their own requirements, affecting manufacturers and suppliers alike. The potential impact of such requirements on manufacturers could be even bigger than that of Wal-Mart initiatives. The U.S. Department of Defense (DOD) met with over 200 of its suppliers to explain its RFID strategy. And it’s not just about goods; the U.S. Department of Homeland Security recently showed how RFID technology can speed the movement of people across borders while reducing the threat of terrorism. The potential benefits to large suppliers of deploying RFID on a wide scale across the supply network are now well documented. Precise, real-time forecasting yields tangible benefits in Across industry, companies with supply chain performance. Across industry, companies with better demand forecast accuracy better demand forecast accuracy also have 15% less inventory, 17% better perfect order ratings, and 35% shorter cash-to- also have 15% less inventory, cash cycle times than their peers, AMR Research's benchmarking studies show (see the 17% better perfect order ratings, AMR Research Report “The Hierarchy of Supply Chain Metrics: Diagnosing Your Supply and 35% shorter cash-to-cash cycle times than their peers… Chain Health,” February 2004). But do these companies also lead their industries in bottom- (AMR Research Report line financial and market performance? Based on the leading manufacturers that make up “The Hierarchy of Supply Chain AMR Research's Consumer Products benchmarking group, the answer appears to be “yes.” Metrics: Diagnosing Your Supply (AMR Research Report “The Hierarchy of Supply Chain Metrics: Diagnosing Your Supply Chain Health,” February 2004). Chain Health,”February 2004). Several vendors in peripheral, related industries have geared up to help manufacturers and retailers comply with the challenge of meeting RFID regulations and mandates. In conjunction, global software suppliers such as Oracle, SAP, Microsoft and IBM are all accelerating efforts to meet the RFID challenge. Business consulting services firms are helping customers with business performance issues related to supply chain network integration and changes in customer management, or front- and back-office business processes impacted by RFID. IT services organizations in particular are creating specialized packages to develop the software that their clients will need to link their RFID networks to existing enterprise systems. IT specialists are focusing on addressing the complexities arising in applications, event management, product directory services, networks, and RFID equipment.

RFID in Manufacturing But what about the impact of RFID on the plant floor? RFID efforts aimed at inventory visibility across the supply chain are closely tied to the control systems and execution processes driving production. To fully realize the proposed benefits of RFID, control systems that drive manufacturing execution need to be modified. Retooling manufacturing assets, revamping execution strategies, recalibrating plant-level information systems, and integrating new RFID-enabled manufacturing data to enterprise systems will be critical for synchronizing the plant floor with the RFID-enabled supply chain. Since powerful retailers have imposed rigorous mandates and the United States Government and Department of Defense have developed new RFID regulations, manufacturers and suppliers often have no other choice but to bear the cost of compliance. For these manufacturers, the central issue is how to convert the potential of RFID into a business case that not only is aimed at recovering some of those costs, but also results in a sizeable return on their investments. …while slap-and-ship may be In searching for the return on investment, many manufacturers now believe that for them, a safe choice in the short term the plant floor presents a vast, untapped opportunity for value creation and even strategic given companies' questions advantage, as RFID moves upstream from the supply chain and into the heart of about standards, they may well manufacturing operations. be gearing up for enterprise- wide implementations. Add to By applying RFID technology incrementally across the plant floor, manufacturers can that the expectation that 50 seamlessly integrate the new information captured by RFID, without disruption, into existing, percent of responders were pursuing AIDC solutions to proven, industrially hardened control, visualization and information infrastructure, reducing improve efficiency, the idea the need for purchasing new infrastructure or investing in expensive, time-consuming, and that companies will primarily unproven IT integration projects. Existing Manufacturing Execution and Information Systems pursue slap-and-ship does can then be updated to deliver robust and reliable real-time information flow to drive not hold up in the long term. manufacturing execution in tune with the RFID-enabled supply chain. Only by synchronizing (RFID Survey Results, AIM Inc., Tuesday, August 10, 2004) an RFID-enabled plant floor with the RFID-driven supply network will a manufacturer achieve the true benefits across the supply chain realized from out-of-stock reduction, counterfeit prevention, efficient inventory management, shrinkage reduction and just-in-time production. Rockwell Automation's customers can use a four-step methodology developed by the company to take them from RFID pilot projects to full-scale implementation of RFID, starting at packaging lines, across plants, and out to the supply chain. The methodology incrementally integrates and customizes the manufacturer’s existing investments in control systems, assets, plant management and execution software, and information solutions to help manufacturers extract value from RFID more quickly and cost-effectively than any other competing alternative. (This methodology will be discussed further in the section titled: Rockwell Automation Methodology to Support RFID Initiatives).

RFID in Manufacturing RFID Adoption Lifecycle Even though significant business value can be gained by deploying RFID technology, a and Deployment Strategies: supplier can’t simply slap a smart label – one with an RFID tag embedded in it – on 60 cases of coffee cans, stack the cases randomly on a pallet, and read every tag as a forklift carries the pallet through a dock door at five miles per hour. There are many questions to be answered by both retailers and suppliers. For example, retailers must figure out sensible solutions for hundreds of products with high liquid content or that are made of metal. Suppliers may have to follow different compliance requirements for different retailers, and it’s safe to say that the requirements will change over time, as the technology matures. Solutions might include using a specific type of tag, placing the tag in a precise location on the case and arranging the cases in a special configuration on a pallet. Clearly, the ability to know where every item is in the supply chain and store could save retailers billions of dollars per year. But companies deploying RFID technology must be prepared, because the changes will affect virtually everyone in the organization, from the forklift operator to the head of logistics; however chances are that the IT department will be most affected. Procter & Gamble (P&G), Procter & Gamble (P&G), for instance, expects to reduce its $3 billion in inventory to $2 billion expects to reduce its $3 billion by combining real-time information about its operations with more timely data about sales in inventory to $2 billion by from its retailer partners. If it can achieve this, P&G will free up $1 billion in working capital combining real-time information and cut inventory carrying costs by $200 million per year. That will offset most of the cost of about its operations with more timely data about sales from the infrastructure and tags, and all the other savings will help bolster P&G’s bottom line. its retailer partners. If it can According to several industry analyst groups, the RFID adoption lifecycle for manufacturers achieve this, P&G will free up $1 billion in working capital progresses from pallet-level tagging to possibly tagging individual products. Full-scale RFID and cut inventory carrying deployment and its impact on manufacturers, suppliers, and consumers can potentially take costs by $200 million per year. several years depending upon existing and developed technology, and return on investment (RFID Journal, Case Study: projections in the early adoption stage. Procter & Gamble) Fig. 1 (Phase 1 and Phase 2 of RFID lifecycle adoption, projecting the rise in implementing RFID technology into more and more industry segments as it becomes practical to apply tags more specifically.)

RFID in Manufacturing Leading manufacturers are quickly investigating and adopting RFID initiatives from both short-term and long-term strategic perspectives. This is being accomplished in a two-phased approach, summarized as follows: Phase I: “Slap and Ship” (By January 2005) This phase predominantly consists of closed-loop piloting activity that is internally managed through pilot teams consisting of engineering, warehousing, IT and plant managers. The goals are to: • Meet retailer (Wal-Mart) mandate, which impacts post-production, repackaging processes, and out to supply chain. • Identify integration components into supply chain resulting in minimal impact on current production operations. • Selection of a few product SKUs for piloting purposes. • Building a broad business case and strategy for broader RFID integration across the enterprise. Examples include devising solutions that trace products at the pallet level and matching the information to a production order. The main issues being surveyed in this phase revolve around tag validation, error checking, and reliability standards superior to bar code technology. … once companies made the Phase II: RFID Deployed As an Integral Part of Operations and to Gain initial capital investment, they Strategic Advantage (Post January 2005) found that successive This phase includes tactical and execution plans surrounding increasing levels of integration applications could be deployed of RFID deployment into mainstream business operations. As part of this phase, manufacturers that leveraged the same are asking key questions such as: infrastructure. Typically, the recurring costs decreased and • How far downstream into manufacturing and out into the supply chain should RFID the benefits increased over time be implemented? as end users found new ways to take advantage of the • How far upstream and at what level of granularity and into the production process should infrastructure to improve RFID be implemented? business processes and • Which types of standards, software, and integration should be deployed? become more responsive to customers. The Wal-Mart RFID mandate is significant to all manufacturers because it means its top (RFID Journal, Unlock the suppliers not only have to put tags on pallets and cases, but they must also install RFID Business Case for RFID, readers in their manufacturing facilities, warehouses, and distribution centers. They, in turn, Feb. 16, 2004) can require their suppliers to tag shipments, a requirement that is then passed on throughout the supply chain. As more and more suppliers adopt RFID, it will make sense for other companies to take advantage of the technology, which will eventually drive down the cost of tags and readers and encourage still more companies to comply.

RFID in Manufacturing This assertion is supported by leading industry analysts, who now predict that RFID use at the pallet and case level will increase rapidly due to what economists call the “network effect,” which means that the more people use a physical network (say, the Internet) or shared service (like eBay), the more valuable it becomes. That encourages even more people to use the network, creating exponential growth. A recent report from IDC, entitled, “U.S. RFID for the The Big Jump Retail Supply Chain Spending Forecast and Analysis, 1,200 Projected U.S. retail supply chain 2003-2008,” focuses only on the retail supply chain 1,000 spending on RFID (US$ millions) and tries to quantify the impact of Wal-Mart’s 800 mandate – and to a lesser degree, the U.S. Department of Defense’s – on RFID sales within the 600 Hardware CPG industry. It also covers retailers that will follow 400 Software in Wal-Mart’s footsteps and issue their own tagging 200 requirements for manufacturers, wholesalers and Services logistics providers. 0 2003 2004 2005 2006 2007 2008 source: IDC In the study, it is predicted that the bulk of the $1.3 billion spent on RFID will be for hardware, including RFID tags, readers and antennas, as well as servers to run those readers, and network equipment to handle the data. The balance will come from spending on middleware and services related to business consulting, systems integration and maintenance and support. New manufacturing capacity, In February 2004, ABI, a technology market research firm based in Oyster Bay, N.Y., additional retailer mandates, announced a study that predicted that by 2007 the amount of spending on RFID integration and the emergence of supply services worldwide will exceed spending on RFID hardware. In fact, the study shows that chain benefits for leading RFID integration services spending will rise to approximately $580 million in the year 2005 suppliers will help to drive tag from about $135 million in 2004. Most of these services revolve around ensuring that prices down, but cheap (5 cents or below) tags won't see the information captured by RFID tags and readers would be transformed into action both at light of day until at least 2008 the ERP level as well as at the manufacturing level. to 2010. (AMR Alert: First Thing Monday Given such predictions, it is no surprise that the RFID hardware, software, and services for August 2, 2004) markets are becoming better defined and are on a strong growth track.

RFID in Manufacturing The Business Value of RFID According to an IBM Business Consulting Services analysis, the following flowchart outlines the business value that RFID will bring to corporations: …it is predicted that the bulk While many questions remain unanswered regarding how RFID technology will be deployed of the $1.3 billion spent on – such as what information will be shared between Wal-Mart and its many suppliers, and RFID will be for hardware, how companies will track goods with both bar codes and RFID tags during the transition including RFID tags, readers period – Wal-Mart is moving to deploy it at the pallet and case level and intends to expand and antennas, as well as servers to run those readers, the requirements soon. According to an AMR Alert for June 21, 2004, Wal-Mart announced and network equipment to that in spite of difficulty experienced by manufacturers gearing up to meet the mandate, handle the data. “that it is in fact moving ahead with its rollout. RFID tagging requirements will be expanded (IDC, U.S. RFID for the Retail in June 2005 to include three additional Distribution Centers (DCs), representing an Supply Chain Spending additional 100 stores. By October 2005, the mandate will be expanded to seven additional Forecast and Analysis, 2003-2008) DCs and 350 stores.” Why? Because the technology has the capability to improve efficiency, cut costs, and boost sales. Below are the significant benefits and initial savings estimates to Wal-Mart: • $6.7 billion in reduced labor costs (no bar-code scanning required) • $600 million in out-of-stock supply chain cost reduction • $575 million in theft reduction • $300 million in improved tracking through warehousing and distribution centers • $180 million in reduced inventory holding and carrying costs This represents an $8.4 billion in annual savings, which is greater than the total revenue of half of Fortune 500 companies combined – ROI Watch, Nucleus Research; December 30, 2003 edition.

RFID in Manufacturing The Impact of RFID In this section, we discuss the broad scale impact of RFID in manufacturing operations – on Manufacturing: including information management, manufacturing execution, quality control, compliance, tracking and genealogy, asset management, inventory visibility and labor productivity. For years, manufacturers have made investments in providing production with supply chain information that it depends on to optimize inventory, while at the same time improving production efficiency, flexibility, and responsiveness. Accurate, detailed and timely information delivered by new generation MES systems is being viewed as critical in getting the most value out of existing investments in automation. For a broad cross-section of manufacturers that have not made substantial investments in MES, RFID provides a method to close some functional gaps particularly related to tracking and genealogy, and compliance management. For these manufacturers, a combination of RFID investments and incremental, but functionally focused MES applications such as scheduling, can quickly and cost-effectively deliver functionality that parallels comprehensive MES solutions. “Speaking of sleeping well, An Accenture white paper entitled “Auto-ID on the line: The value of Auto-ID Technology in Wal-Mart’s top suppliers Manufacturing,” has described in detail the potential opportunities to leverage RFID on the will likely be investing some plant floor. The key areas that will be immediately impacted as a result of RFID initiatives are: sleepless nights – and painful dollars – to comply with Manufacturing Information Management Wal-Mart’s RFID push. By combining RFID with existing manufacturing information systems investments that drive The spending should drive both MES and ERP, a much more potent information supply can be created that can drive increased R&D and innovation, making RFID a better ROI production efficiencies, asset utilization, quality and other production measures to much prospect for companies not higher levels. pressured by Wal-Mart for accelerated adoption.” RFID readers will capture data, but companies need middleware to process the data and (Accenture, Auto-ID on the feed it to enterprise systems. Completely new middleware software and technologies are line: The Value of Auto-ID evolving to provide for dynamic near-real-time communication between readers and software Technology in Manufacturing) using the Internet or other networked platforms. A recent article from RFID Journal categorized middleware technologies to include: Software applications that solve specific vertical market connectivity and monitoring requirements. The most powerful of these applications will allow for rapid development and interaction with other specific applications, with the goal of solving problems in particular verticals, or processes across verticals. Application management technologies are focused on taking full advantage of the open data standards and protocols to connect disparate applications within the enterprise. This is the place where devices and databases come together, at the highest level, where that transparency and near real–time information is available to the enterprise, often being provided autonomously. These are features that will be seen in the third phase

RFID in Manufacturing of connectivity (beyond the first two phases shown in Fig. 1 and discussed in the RFID Lifecycle and Deployment Strategies section) where function is maximized and the user interface is standardized around the browser. Device Brokers allow for open data protocols but tend to be more segmented in solving specific areas of the enterprise such as ERP, CRM or IDM. To get the most out of their RFID In order to deliver information from RFID downstream out to the supply chain (ERP) and systems, companies will have upstream into production (MES), existing information infrastructure must be converted to to deploy both new RFID co-exist with emerging EPC standards and IT that includes software, and application middleware and conventional management such as device brokers. integration middleware. The key to success will be knowing Once this information is shared across the enterprise and plant floor, receiving, when and how to use each. manufacturing, warehousing, and shipping operations must be coordinated and executed (RFID Journal, April 5, 2004) in the context of orders and customers. Regardless of how much effort and dollars are spent on RFID on the enterprise level, poor management and execution of RFID efforts at the plant level could drive down potential benefits. To Supply Chain ERP Integration RFID Information (Integration with Local Databases) Shipping Warehouse Control System Receiving Plant Integration For manufacturers, it is becoming increasingly important to design and integrate RFID information and solve connectivity issues related to plant floor and warehousing execution in such a way that the new information is integrated into plant floor reliably and through industrially hardened conduits. In addition, deploying an RFID network for a manufacturer is of little or no value unless the information it provides can be accessed and managed using an array of hardware and software that has to be brought together and tied back into the plant for execution and action.

RFID in Manufacturing For the most part, manufacturers have to take raw data from RFID readers and determine how to get it into MES and control systems that drive manufacturing. In addition to delivering the right information at the right time to an MES or control system, the rules concerning manufacturing execution such as control, scheduling, routing, tracking, and monitoring must all be modified to collect and be responsive to new RFID-information. In addition to managing operations on the plant floor, warehousing operations must also be supported from an information perspective to ensure that the right products are released to the supply chain at the right time. Operating benefits derive Manufacturing Execution, Quality Control and Compliance: from greater availability of RFID has the potential of complementing MES in terms of providing new streams of real- operating data and more time data that can support existing Lean and Six-Sigma programs. RFID information can be efficient collection. The pace of used to ensure that the correct labor, machine, tooling, and components are available and operations can be sped up for ready to use at each processing step, thereby eliminating paperwork, and reducing data collection tasks such as component verification, where downtime. Furthermore, process steps could be controlled, modified, and even reconfigured the RFID reader could collect in real-time as inbound materials, parts and assemblies move through manufacturing. the information without human intervention. As raw materials are consumed and assemblies created, triggers could be set off, (AMR Alert; on Manufacturing controlling either inbound materials and thereby impacting work-in-process inventory, for March 18, 2004) or post-process inventory. By tagging raw materials with detailed specification information, alerts could be automatically triggered at mixing operations if an incorrect formulation is imminent. This can help reduce scrap rates and increase yield, assuring a high degree of reliability and quality in processing. For manufacturing operations that require a high degree of compliance with governmental standards and regulations in particular, RFID can provide additional information streams to support existing MES activities enabling tighter tracking, verification and validation of processes including those involving 21 CFR Part 11 compliance. Tracking and Genealogy Increasingly demanding FDA quality requirements are forcing consumer packaged goods, food, and beverage companies to manage product information, lot tracking, and related quality standards across their entire supply chain network. If there ever is a need for a product recall, it must be done as quickly and as precisely as possible. Reliable, accurate and up-to-date information is absolutely critical to achieve recall objectives. In addition, as contract manufacturing increases, suppliers are more and more dependent upon information from their trading partners.

RFID in Manufacturing RFID can complement existing MES efforts in genealogy tracking. MES for the most part is already collecting information such as product ID, time stamp, physical attributes, machine, order numbers and lot number at each step of the processing. This information can be encoded onto an RFID tag and then passed downstream into the warehouse at a pallet level, and then out into the supply chain, greatly enabling the ability for a manufacturer to re-trace steps in a product recall. RFID systems enable reduced Plant Asset Management: stockouts and other benefits Tagging assets provides information about its location, usability status, maintenance by improving data visibility. requirements, contents, inventory levels and so on. Devising production steps, maintenance, This type of visibility is also a labor schedules based on this information can help increase asset costs, optimize asset powerful tool for tracking, performance, and maximize asset utilization. Tagging reusable assets such as machines, tracing, and recalling both regulated and non-regulated fork trucks, tools, fixtures and material handling devices is one of the easiest ways for products alike. companies to test RFID in a closed loop environment. (RFID Systems in the Manufacturing Supply Chain By helping reduce downtime, and managing scheduled (as well as unscheduled) Worldwide Outlook, ARC, 2003) maintenance more effectively, manufacturing performance parameters such as Overall Equipment Effectiveness (OEE) can be positively impacted. Inventory Visibility: As contract manufacturing becomes increasingly important, visibility into supplier as well as customer activity becomes critical in order to achieve supply chain synchronization. Inventory tracking and visibility is directly related to information management described earlier. The better a manufacturer is able to collect, manage, and use information to drive production assets and processes, the more visibility it can provide to its trading partners. Depending upon investments in automation and MES, RFID could be used in varying scales, either locally or across the entire facility to provide visibility into incoming raw materials, WIP, production sequencing, packaging, palletizing, and warehousing operations, as well as final shipping to the next destination in the supply chain. Labor Usage: Bar coding is very common in today’s manufacturing environment. However in many bar coding activities, manual intervention is required for capturing data. An immediate impact of RFID is eliminating those requirements, thereby freeing up labor to perform other, more value- added tasks. Effective deployment of RFID also has the potential to quickly provide accurate and reliable data that exceeds the bar coding or manual capabilities available today. This can have major impact, particularly in high-volume and high-speed manufacturing operations, where speed, accuracy, and timeliness are critical for throughput and performance. As discussed earlier, information management is critical in how RFID-enabled information can be used to link man/machine tasks, gain visibility into labor usage and productivity, setting the stage for redistribution of related tasks and processes.

RFID in Manufacturing As we can see in the chart below, RFID can dramatically impact critical performance issues for all manufacturers, including machine performance, line performance, plant performance and, ultimately, supply chain performance. Improve Quality Improve Production Control by tagging raw Execution and Supply Improve Inventory material, WIP, and Chain Performance Tracking and Visibility finished goods inventory Provide accurate, with real-time tracking Improve Asset Utilization and automatic timely, and detailed by tracking reusable assets synchronization information to ERP and providing visibility into and MES their location and usability Improve MRO Reduce Scrap and Support 21 CFR Part Deliver Surgical Precision in Product Operations Increase Line 11 Compliance with Tracking and Genealogy by collecting by providing accurate, Performance by complete tracking, historical information on product ID, timely and detailed controlling line time stamp, lot number at each step information to CMMS operations based on verification and validation of processes of manufacturing process and across applications tag information supply chain Many tag and reader The primary drivers of RFID implementation in manufacturing operations that go well beyond manufacturers are already part current mandates are more likely to be specific industries such as pharmaceuticals. A recent of the gold rush surrounding the report published by ARC Group titled RFID Systems in the Manufacturing Supply Chain Wal-Mart, US Department of discusses the pharmaceutical industry as one in particular that possesses the unique Defense, and other mandates... attributes that are most receptive to RFID implementation in the manufacturing supply chain ARC believes another potential gold rush is lurking after these following the rush to fulfill retailer driven mandates. mandates have taken flight: Regulatory and anti-counterfeiting requirements within the pharmaceutical industry place a pharmaceuticals. (RFID Systems in the premium on accurate and real-time tracking and tracing capabilities to facilitate product recalls Manufacturing Supply Chain to effectively track products across the supply chain. The U.S. Food and Drug Administration Worldwide Outlook, ARC, 2003) has already recommended that RFID be part of an incremental approach to prevent theft, augmenting other tools such as tamper-proof packaging, bar codes, and hidden inks. In addition, pharmaceuticals in general have a higher price tag and profit margin on a product basis as compared to typical retail supply chain products. As RFID tag prices continue to fall, pharmaceutical manufacturers will likely lead the drive to begin applying passive RFID tags at a product or item level. In the next section, we describe how Rockwell Automation can help manufacturers address the issues discussed above and help extract sustainable value out of RFID implementation today and into the future.

RFID in Manufacturing How Rockwell Automation RFID deployment aims to provide accurate, real-time information about consumer demand Can Help Manufacturers and about goods that are in the supply chain – what they are and where they are. If Create Value Through retailers share real-time or near real-time data about what is happening in the store and RFID Deployment what is available in the back room of the store, manufacturers can better match supply to demand. As was discussed earlier, how manufacturers filter, use, and share that data will decisively impact the end benefits that can be derived. To get all of the potential benefits, manufacturers will need to enhance their Manufacturing Information Systems to enable them to react to the real-time data, whether it’s a sudden spike in demand or a glitch on the assembly line. They will also need to change their business processes and train people to use the data that will be at their disposal. It’s a difficult task, but its one that manufacturers will have to undertake to remain competitive. Rockwell Automation’s extensive experience dealing with automated process data collected at shop floor level gives customers implementing RFID a way to accomplish that task. As RFID deployment proliferates across the plant floor, the new information captured by RFID can be seamlessly integrated into Rockwell Automation's Integrated Architecture. In addition, Rockwell Automation can help update MES and information solutions (hardware and software) to deliver robust and reliable information in real-time to drive manufacturing execution and ERP. That information also can flow out to the supply chain. By incrementally RFID-enabling existing investments in control systems, plant management, and execution software and information solutions, manufacturers can extract value from RFID more quickly and cost-effectively than competing alternatives. Rockwell Automation’s Methodology to Support RFID Initiatives: Rockwell Automation provides a compelling, four-step methodology to assist manufacturers not only in achieving compliance with impending retailer mandates, but also ensuring that they are able to generate sustainable value from their RFID deployment. 1. Business Case Justification and ROI Analysis This first step includes developing a complete ROI analysis to support budgetary needs and investment outlays across the entire supply chain. Numerous business issues are addressed: Where will the production and service disruption be minimal, but the returns the fastest? What incremental investments will be needed as part of a long-term strategy, and during what time frame? What’s the IT strategy for full- scale rollout at the MES level?

RFID in Manufacturing Through simulations and pilot programs, ROI can be projected. Various components of Rockwell Automation offerings include simulation, custom EPC ROI assessment tools and knowledge sharing from partners. Simulations for experimenting with RFID With simulation, the effectiveness of deploying RFID technology is “test-driven” implementation strategy within your organization in a controlled (simulated) environment under varying Business Analysis and RFID “relevance” Tools and Templates from Business alliances and third parties conditions and decision criteria before it is implemented on “live” operations or Share ROI experience from other engagements customers. Coupled with Manufacturing and Assessment (MAP) services and Manufacturing Assessment Planning (MAP) Services RFID training, Rockwell Automation can provide concrete answers to business RFID Training Course/Workshop issue questions. In particular, in Phase 1 Pilot implementation efforts, Rockwell Automation’s combination of process simulation services and optimization technologies provide a quick, cost-effective way to identify the real impact of proposed improvements of deploying RFID technology, helping reduce the risks associated with this capital investment, and ultimately improving business performance across the entire organization. Companies seeking selective changes to meet initial retailer mandates can look to Rockwell Automation for help developing scalable, tactical plans that impact production and warehousing execution surrounding RFID deployment at each node of the supply network. The company can help determine which assets should be tagged (tools, trucks, machines, and robots) to help synchronize manufacturing operations and processing steps and cost- effectively track components, sub-assemblies and final assemblies to help minimize lost production time and labor consumption. Production control and process changes will inherently accompany the new process. Control system behavior, MES data collection and manufacturing process routing need to automatically and efficiently match production to specific customer orders. In addition, the solution should leverage existing real-time data management and MES to preserve these IT investments. The fastest returns, and the RFID implementation necessary for initial compliance, can be realized in End of Line and Warehousing operations. Rockwell Automation is developing and refining these applications in its RFID lab and pilot program, which aim to increase warehouse productivity throughput by productively using warehouse resources with wireless warehouse phased technologies, including Wireless LAN, Bar Codes, and EPC. Through these efforts, the company is testing in real world scenarios the integration of RFID technology into labor operations, palletizing, conveyor lines, material handling, storage, and robots that facilitate the movement of goods from production (End of Line) to the warehouse with new RFID data and mobile readers, so that information accuracy and reliability is assured.

RFID in Manufacturing By working with manufacturers to address these issues, Rockwell Automation can help customers gain strategic advantage through RFID and help solve critical issues in strategy and operations integration, as well as execution across manufacturing, warehousing, and the supply network. 2. Design and Architecture This step involves assisting manufacturers in selecting tags and readers that are most suited to their environment. It includes piloting assistance related to RFID laboratories, setting up Share Tag/Reader usability results from mobile labs for testing in the customers’ environments and arranging lab tours at other engagements existing internal or customer sites, if possible. It also includes both design and Facilitate Lab design and commissioning Arrange RFID Lab Tour for quick learning architecture for complying with the Wal-Mart Mandate at the case and pallet Slap and Ship – Phase 1 – Meet Compliance level, as well as setting the strategy and foundation for future expansion of RFID Meet Compliance into the plant. Design integration strategy with existing bar codes Components include designing an integration strategy with existing bar-code Design, software/hardware integration and testing implementations, designing methodology for integrating RFID information into Integrate EPC information with ERP ERP, as well as case-to-pallet validation at end-of-line operations. Case-to-Pallet verification at the end of line operation Foundation for future plans – Phase 2 Another important aspect of this step includes synchronizing RFID information Synchronize EPC data with Control System with control systems in the most reliable and cost-effective fashion; identifying Process Data Association – leverage process and how to coordinate RFID with existing MES implementations and designing product information for tracking and genealogy (MES)) RFID upstream – integrate with warehouse and process and automation capability to facilitate item level tracking and factory automation tracing functionality. 3. Software and Systems Integration: Data filtering from RFID readers, This step includes comprehensive integration of RFID implementations into mainstream middleware integration manufacturing and warehousing operations – from the ERP to the control level. It includes Control System integration with RFID information custom services, such as software and engineering services that facilitate integration Custom software design and development with middleware, to integration with local database management systems, ERP systems, MES/ERP integration with RFID information control systems, and MES. 4. Maintenance and support: Global services and support Step 4 includes the ongoing maintenance and support required to ensure that all aspects of On-line monitoring the RFID implementation are continuously monitored and supported at an engineering, as Preventive Maintenance well as from an information service, perspective.

RFID in Manufacturing In summary, Rockwell Automation's four-step methodology offers a wide array of services to support immediate compliance needs as well as position customers for future value extraction. A summary of capabilities is shown below. Supply Chain Modeling with Consolidated report on tag/readers Data Filtering and Global services and support Simulation in live settings Internal Pilot Support: Lab Design Middleware connectivity On-line monitoring Custom ROI Development and Commissioning Logistics/Warehouse Preventive Maintenance RFID Relevance Tool Laboratory Learning Modules software integration RFID Demonstration Lab ROI tool based on UWC Phase 1 – Meet Wal-Mart Mandate Custom Software Development (Slap and Ship) 1 day Training Workshop - Integrate with existing Bar Code Integration with Local DBMS - Software, Hardware design and Lab Visits Testing Integration with MES and product Preliminary Integration with ERP level tracking and genealogy Architect for Phase 2 RFID in factory Integration with external database Track and Trace, Genealogy or ERP - Integration with MES - Integration with ERP - Integration with ControLogix Rockwell Automation To demonstrate its breadth of RFID services and capabilities, Rockwell Automation has RFID Test Lab: has opened an RFID test lab at the company’s global headquarters in Milwaukee. The lab is designed to help manufacturers that are facing production and inventory mandates from retailers understand how they can make RFID technology an integral part of their distribution operations. With this lab, Rockwell Automation is helping manufacturers look beyond the current, short-term mandates, and understand how they can integrate RFID as tool for improving future manufacturing efficiencies and distribution. The RFID test lab replicates situations that are designed to help manufacturers capture detailed, real-time information that drives line production and synchronizes supply chain tracking and tracing. The lab combines existing Rockwell Automation expertise with a simulated factory environment to allow accurate testing and evaluation of a wide variety of RFID products. Demonstrating how Rockwell Automation integrates RFID data into the existing control architecture of manufacturing, and how different RFID readers and RFID tags perform on a closed-loop conveyor are just two examples of activities in the lab that will result in benefits for customers.

RFID in Manufacturing Additionally, Rockwell Automation test lab engineers offer visitors advice on the best methods for leveraging RFID-gathered data to improve factory efficiency and productivity. Simulating a factory conveyor, packaging station and a dock door, the Rockwell Automation test lab currently incorporates the company’s own products as well as elements from Alien Technology Corporation, FKI Logistex, SAMSys Technologies Inc., ConnecTerra Inc., and Zebra Technologies Corporation to help test and integrate RFID technology in distribution centers and factories. Rockwell Automation Champaign Distribution Center Pilot Project In addition to the RFID lab, where applications, software and hardware can be tested in proof- of-concept and what-if scenarios carried out, Rockwell Automation has been conducting a pilot project in its own manufacturing and warehousing facilities in a live setting. The “Champaign Distribution Center Pilot Project” replicates a manufacturer's RFID/EPC process from “end-of- line” packing to warehousing and distribution. As part of the project, specific products from the company’s Twinsburg, Ohio manufacturing facility, are RFID-tagged and shipped to its central Champaign, Illinois warehouse. The project activity includes utilizing RFID technology in parallel with existing bar-coding methods, integration of RFID information with existing databases, reliability studies that include tag and reader selection. The project also includes a business case analysis providing an assessment of business process changes related to quality and verification procedures, and the future impact on annual labor costs, labor force counts, order cycle times, and order throughput associated with the RFID implementation.

RFID in Manufacturing Conclusion Retailers are increasing their requirements to deploy RFID technology because the benefits are so significant. Financial analysts agree. Sanford C. Bernstein & Co., a New York investment research firm, estimates that Wal-Mart alone will save nearly $8.4 billion per year when RFID is fully deployed throughout its supply chain and in stores. With those kinds of benefits in sight, it’s not hard to understand why retailers are forging ahead so aggressively. Companies who are just beginning to look at this technology have a huge task in front of them if they want to be fast followers. RFID is not a simple, plug-and-play technology. Given the complexity of implementing RFID, companies that don’t move quickly – and choose the right strategic partner to deploy the technology correctly throughout its operations – will finish at a severe competitive disadvantage. In particular, “End of Line” operations such as packaging in manufacturing and sorting in warehousing will be the central and significant points of leverage in the initial phases of RFID deployment. Manufacturers who are seeking a long-term competitive advantage will likely gauge their long-term ROI based upon several internal or closed-loop pilots in these areas as they continue their drive toward full-scale Electronic Product Code deployment. Rockwell Automation offers a comprehensive, four-step methodology that helps manufacturers not only achieve compliance, but at the same time design and execute a sound strategy that provides for sustainable value-extraction from RFID over the long term. The methodology includes business case development, component (tag and reader) selection, piloting laboratories, system design and architecture services, and comprehensive systems integration services to the plant level as well as to the enterprise level. As deployment is scaled up from slap-and-ship warehousing activity and pulled deeper into the plant floor, Rockwell Automation’s value proposition is significantly amplified. As RFID deployment proliferates across the plant floor, the new information captured by RFID can be seamlessly integrated into Rockwell Automation's proven, industrially hardened control, visualization, and information infrastructure, reducing the need for purchasing new infrastructure or investing in expensive, time-consuming, and unproved IT integration projects. Existing Rockwell Automation MES and information solutions can be easily updated to deliver robust and reliable information flow in real-time to drive manufacturing execution, as well as to ERP, and out to the supply chain. By incrementally leveraging existing investments in Rockwell Automation, plant management and execution software, and information solutions, manufacturers can extract value from RFID more quickly and cost-effectively than any other competing alternative.

RFID in Manufacturing Vivek Bapat is member of a core team responsible for RFID Business Development and Strategy related to Rockwell Automation's supply chain performance offerings including Simulation, Manufacturing Information and Execution Services. Vivek’s experience spans business management, product management, consulting, sales development, and solutions marketing. From 1998-2000, one of the product businesses that Vivek led received worldwide acclaim by winning a record eight Industry Awards. Vivek is co-author of a book entitled “Call Center Performance Enhancement Using Modeling and Simulation” published by ICHOR. Vivek’s formal education includes an M.B.A. from Robert Morris University, an M.S. (Industrial Engineering) from Clemson University, and a B.S. (Mechanical Engineering) from College of Engineering Poona, India. Vivek also completed an intensive program on Business Marketing Strategy at Harvard Business School. Vivek currently serves on the Board of Directors of MESA International and can be reached at vrbapat@ra.rockwell.com Ken Tinnell is Rockwell Automation's Practice Leader of Wireless Warehouse RFID Solutions and brings 12 years of Logistics Engineering & Information Management experience to the team. Having worked for Rockwell Automation as Geographic Logistics Manager, and then as the Global Warehouse Management System Program Manager at Procter & Gamble, Ken built the basis for leading Global Manufacturing Solutions into the Warehouse Automation space. Studies include Electrical Engineering at the University of Kentucky, an M.B.A. at the University of Cincinnati and a Masters of Industrial Engineering also at the University of Cincinnati. Ken is also the Software Action Committee group leader for the University of Wisconsin's e-Business Consortium for RFID. Ken Tinnell can be contacted at katinnell@ra.rockwell.com Resources: www.RFIDupdate.com – Free, daily news on RFID technology and trends www.rfidjournal.com – Radio frequency identification for business source www.aimglobal.org/technologies/rfid/ – A link to happenings in the RFID world (sponsored by AIM GLOBAL) www.idtechex.com – Independent analysis on the development and application of RFID, Smart Label and Smart Packaging technologies www.rfidgazette.org – Weekly newsletter covering RFID across broad spectrum of industries www.bitpipe.com – IT related information, including whitepapers, industry reports and Webinar notices www.rfidworld.com – Source for information, education and resources to aid in understanding RFID technology and solutions, for a wide variety of enterprise applications

www.rockwellautomation.com Corporate Headquarters Rockwell Automation, 777 East Wisconsin Avenue, Suite 1400, Milwaukee, WI, 53202-5302 USA, Tel: (1) 414.212.5200, Fax: (1) 414.212.5201 Headquarters for Allen-Bradley Products, Rockwell Software Products and Global Manufacturing Solutions Americas: Rockwell Automation, 1201 South Second Street, Milwaukee, WI 53204-2496 USA, Tel: (1) 414.382.2000, Fax: (1) 414.382.4444 Europe/Middle East/Africa: Rockwell Automation SA/NV, Vorstlaan/Boulevard du Souverain 36, 1170 Brussels, Belgium, Tel: (32) 2 663 0600, Fax: (32) 2 663 0640 Asia Pacific: Rockwell Automation, 27/F Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong, Tel: (852) 2887 4788, Fax: (852) 2508 1846 Headquarters for Dodge and Reliance Electric Products Americas: Rockwell Automation, 6040 Ponders Court, Greenville, SC 29615-4617 USA, Tel: (1) 864.297.4800, Fax: (1) 864.281.2433 Europe/Middle East/Africa: Rockwell Automation, Brühlstraße 22, D-74834 Elztal-Dallau, Germany, Tel: (49) 6261 9410, Fax: (49) 6261 17741 Asia Pacific: Rockwell Automation, 55 Newton Road, #11-01/02 Revenue House, Singapore 307987, Tel: (65) 6356-9077, Fax: (65) 6356-9011 October, 2004 Copyright © 2004 Rockwell Automation, Inc. All rights reserved. Printed in USA.

RFID in Manufacturing

by PeterSam67

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