Rectangular gray readers chart the course of components tagged with RFID smart labels as they become part of the
aircraft shown above in Boeing's Wichita plant.
RFID: Business Driver
When shipping goods, a company is blind, to a degree, as to what happens
to the cargo after it goes out the door. A number of bad things can happen.
Opening They can be lost or stolen, tampered with or replaced with counterfeits. And
frozen items can be allowed to thaw. Similarly, a company may be blind to
Eyes in Asset the exact location of its on-site assets, which is crucial to productivity on a
factory floor, in a healthcare facility or virtually any company with a big
Management investment in tools, equipment and machinery.
BY J. SHARPE SMITH
For example, workers would lose the equivalent of a 40-hour workweek if
EDITOR they spend only 10 minutes a day for a year searching for needed items.
Scanning barcodes is the current answer to tracking needs. And that system
works very well at locating a shipment, although it is a manual process. But
there are limitations on how much information can be gleaned from
scanning a barcode.
What is the answer to opening the eyes of today’s companies when they are
managing assets or shipping goods? RFID smart labels, which are embedded
with a microchip and an antenna, are all about visibility. An RFID system has
three primary components: the tags, the readers and the backend system.
“The backend systems have been there awhile. Nothing makes a backend
system run better than good quality data in a timely manner,” says Toby
Rush, president and founder, Rush Tracking Systems, LLC, Kansas City, KS.
“To get that data, you have to have the infrastructure: that is where the tags
and readers come in.”
ISSUE 2, VOL. 1, 2005 EWM 10
Wal-Mart has become a major driver of RFID tagging for supply chain management.
Today, RFID is all around you. You see utilization, operational compliance system to be constantly updated as to
it on toll roads where a transponder is and improved inventory management. the progress of each work order. The
attached to the windshield of the car. According to Rich Hardt, vice computer system uses the progress of
The system identifies the car and president of technology research and existing work orders to help planners
debits the amount of the toll from its development for Yellow Roadway to know which production order
account. Many entry cards for Corporation, “It can provide us with needs to be released next. Every time
entering secured areas are equipped better information to run our day-to- an operation is complete or materials
with an RFID microchip. RFID tags are day operations,” Hardt says. “Any are received, the “transaction” is
even implanted in car keys with the time you can improve access to reported back to the computer
reader in the steering wheel. information in a more automated, system.
efficient manner, it always sparks our
Point-of-Sale, Closed-Loop interest.” During 2000-2001, the Wichita
and Open-Loop Systems RFID team performed three pilot
Closed-Loop RFID Systems tests with active tags and three
RFID can be separated into three and Tracking Works-in- with passive tags. In passive tags,
categories: point-of-sale cash progress the reader initiates the
collection (Mobil SpeedPass), closed- communication with the tag,
loop and open-loop. Closed-loop User Profile while an active tag (sometimes
systems are used internally where only Boeing Commercial Airplanes, Wichita known as real time location system)
one company is reading the tags, Division, is a Kansas-based is continually transmitting its location.
usually for asset tracking. Open-loop manufacturer that produces part of “The active system was well liked,
systems, as the name suggests, are every commercial jetliner except the but the infrastructure and active
open to multiple companies to read 717, including 75 percent of the tags were more expensive than the
the tags. Supply chain management, airframe of the 737. It also designs passive system and were deemed
for example, must operate in an and builds engine nacelles and nose to be too costly at that time, says
open-loop environment. Closed-loop sections for the 747, 757, 767 and Debbie Fogg, RFID project manager
systems, on the other hand, can get 777 jetliners. The company has around for Boeing-Wichita Commercial.
by with a proprietary standard system, six years of experience with RFID.
while open-loop must be
standardized, at least with the other Business Driver Solution
companies that are involved in In 1999 Boeing-Wichita looked to After choosing a passive tag, the
reading the tags. RFID for more efficient methods for team had to decide which process
tracking and visibility. Boeing’s interest would receive the new technology.
Benefits in RFID coincided with its “Everybody wanted to use the system
The potential benefits of RFID include implementation of Enterprise and there are a variety of things that
improved shipment visibility, improved Resource Planning, a comprehensive, can be tagged: work-in-progress,
service and reliability, reduction in time-consuming material planning tools and equipment,” says Fogg.
freight claims, improved asset process that requires the computer “So, we put together 30 different
ISSUE 2, VOL. 1, 2005 EWM 12
options, and let our Director Steering of 55 antennae deployed in the the time. Another 35,000
team determine the best fit.” facility and there are 18 more ready transactions are made to legacy
to be implemented in its 1,100-acre systems unique to Boeing Wichita.
It was decided to deploy RFID in a campus, which includes a 12 million Boeing uses a closed-loop system for
work-in-progress system. In 2003, square foot covered area. “Antennas 90 percent of its RFID. About 10
the initial system was implemented are in a variety of places on the shop percent of the company’s RFID is
into production. It comprised floor. We use an incremental devoted to receipt tracking of raw
internally developed software and implementation strategy that allows materials and purchased parts where
vendor hardware to support 20 us to work with each shop floor the readers must acknowledge the
antennae. It was used to track work- team to ensure that our antenna tags used by the suppliers in an
in-progress, raw material receipt, placement supports their long term open-loop system.
loading of an Automated Storage process goals, enabling a reduction in
and Retrieval System, Order Tracking, manual tracking of each order,” says “It is harder to establish ROI for
Order Closure, Location Updates and Fogg. open-loop because determining who
automated feeds of data to multiple contributes to the costs and who
legacy systems. The process begins The Return benefits may not be well defined. It is
when the production paperwork for RFID is now an integral part of much easier to develop the ROI for a
an order is generated; a tag is Enterprise Resource Planning and it closed-loop system, because we are
attached to the supporting automates about 25,000 transactions in control of all of the components
paperwork. This tag is read through a week, updating the computer and parts. Fogg says. “After the
out the fabrication process. Upon system on the progress of the work initial implementation, Boeing’s ROI
completion, the work order is closed, orders, which increases the for subsequent implementation areas
and the tag is removed and reused. productivity of personnel. And that has been less than one year.”
The infrastructure currently consists number of transactions is growing all
continued on page 25
ISSUE 2, VOL. 1, 2005 EWM 13
RFID continued from page 13
there comes a time with every supply chain visibility and allow for
RFID is not a silver bullet for the technology when someone has to improvements in available stock for
manufacturing process. It takes a lot step forward and say the time has its customers and improved sales for
of effort and certainly won’t solve come. The time to introduce RFID its suppliers, as well as for the
every problem. It is simply a tool for solutions into the retail industry has retailer. Initially, for Wal-Mart
improving processes and for fine- come,” says Christi Gallagher, Wal- customers, better product availability
tuning the efficiency of a factory. As Mart spokesperson. is expected to be the number one
a developing technology, early benefit. However, down the road,
adopters battle product Wal-Mart believes RFID will enhance Wal-Mart sees benefits related to
obsolescence, continual upgrades
and evolution. “While there are
points of frustration because it is an
evolving technology, from a financial
perspective it has been a worthwhile
venture,” she says.
Once the infrastructure in fabrication
is complete, opportunities will open
up for other types of tracking, as
well. In the future, Boeing is looking
at using RFID in the assembly process
and asset tracking of internal
transportation and equipment, such
as forklifts. “When you have as large
a campus as we have, knowing
where all of your assets are can be a
great advantage,” Fogg says.
“However, the cost of looking for
equipment is hard to quantify.”
Open-Loop RFID Systems
and the Supply Chain
To develop an open loop RFID system
for supply chain management
demands the cooperation of a
multitude of suppliers and even
manufacturers. Setting in motion the
domino effect in RFID was Wal-Mart’s
bold requirement that its distributors,
which number in the tens of
thousands, use the technology.
“We've been moving forward with
advancing [RFID] technology in a
retail setting since 1999 when we
joined the Massachusetts Institute of
Technology’s Auto-ID Lab. RFID has
been around since the 1940s, and
ISSUE 2, VOL. 1, 2005 EWM 25
• Project how the cost of the
technology will drop in the next
five to 10 years.
• What type of effort will it take to
roll out the technology?
• What is the proper timing? You
don’t want to be early but you
don’t want to be late.
Using financial modeling as a tool,
Yellow Roadway is doing a full-blown
cost analysis to gauge its entry into
the RFID marketplace. It is looking at it
from a capital expense perspective,
returns, recalls, warranties and driving changes in the supply chain to which includes the cost of installing
battling counterfeit products, reduce cost and enable companies to readers at the doors, computer
including pharmaceuticals. both keep prices as low as possible servers, networks that will be needed,
and deliver an improved service. software engineering, construction
One of the biggest lessons for Wal- Recent ratification of the Gen 2 tags cost, on-going cost of tagging cargo,
Mart’s suppliers has been that a single will allow the cost of the tags to come training on the usage of the
type of tag (antenna design) does not down. This will, in turn, lower the cost technology, hardware/software
necessarily fit all of their products, for our suppliers and create a truly maintenance upgrades and
according to Gallagher. “However, we "global" tag. maintenance.
haven't seen a product where we
couldn’t find a tag that would deliver Is RFID for You? Then the company looks at
the read performance needed to incremental value. This includes
facilitate process improvements,” she Yellow Roadway Corporation, one of productivity improvement, asset
adds. “In fact, many of our suppliers the world’s largest transportation resource allocation improvement and
are working with their packaging service providers, ships industrial, savings on claims. “We live in a very
suppliers to have the tag fixed or commercial and retail goods measurable world. There are key
embedded prior to them receiving the domestically and internationally. Both metrics and key measures out there.
packaging. Many packaging open-loop and closed-loop systems We are well engineered; we
companies are carrying out lots of are being considered by Yellow understand our cost models,
research in this area.” Roadway, which employs over 50,000, Hardt says.
to achieve better utilization of its
Crucial to the effort by Wal-Mart to equipment as well as applying RFID to Typically, Yellow Roadway targets a
develop an open-loop system is the shipments. one-year ROI. With the current cost
standardization of RFID tags, which of the readers, Hardt doesn’t believe
allows interoperability between Here are the steps to use in he can get the ROI down to three
different companies in the supply considering RFID: or four years. The company will
chain. Late last year, EPCglobal Inc., conduct several iterations of the
a standards organization, ratified the • First, you must understand the financial model to determine if the
royalty-free UHF Generation 2 technology and its limitations impact of the new technology has
standard for RFID tags. A standard for • What is the stage of the been accurately portrayed. Based
tags also invites multiple technology: nascent or mature? on that information, the company
manufacturers, which drops prices. How is it evolving? will then know when to start
• Look at the cost of the technology investing in the technology and
“Adoption is gathering momentum, and apply it to a rigorous financial when to begin pilots with customers
and RFID is becoming pivotal in model. and internally. “We are trying to
ISSUE 2, VOL. 1, 2005 EWM 26
understand the financials surrounding to Rush. For consumer goods, RFID
the implementation of RFID and will provide inventory management
studying the most beneficial and promotions management. For
applications of the technology and retail, it will serve as a check on
the needs of the customers,” what is out of stock and as a guard
Hardt says. against theft and diversion of goods.
In the pharmaceutical industry, it will
RFID Versus Bar Codes be making sure that the right
products get to the right place at the
Perhaps one of the biggest barriers to right time and that they are not
RFID deployment might be the counterfeit.
embedded base of bar code tracking
systems in the enterprise space. Not Conclusion
only does RFID need to make
business sense for a company but it As the standards process moves
also has to be convincing enough to forward, the infrastructure is built out
move them to throw out the bar and the prices of tags and readers
code investment. begin to drop, the adoption rate of
RFID will increase exponentially. The
Yellow Roadway, for example, already future may bring new opportunities
provides many mechanisms that allow in active RFID tag use, for example, at
customers to track shipments, using Boeing Wichita. “We’ve already seen
readers, barcodes and the Internet. the costs of equipment go down. As
“We have a pretty extensive the popularity of RFID increases, we
technology infrastructure in place expect to see that continue especially
today. We scan more than 350,000 on the active tag side,” Fogg says.
images a day and company-wide we
do 30 million shipments a year,” Hardt With RFID you get the feeling that a
says. “It has to make good business new application is going emerge
sense to upgrade your current system every day. For example, I.D. Systems,
if it is already working well.” Inc., a wireless RFID-based asset
tracking and management solutions
One of the factors that separates provider, announced in May of this
RFID from bar codes is the year that it has a U.S. patent for a
tremendous amount and types of fully automated wireless vehicle rental
information that can be programmed and return system based on RFID to
in and read from the tags. “For reduce operational costs and increase
example, sensors will be integrated revenues for car rental companies.
into the tags, and the object will not
only be identifiable but it will answer “We are building out the
several other queries, such as: How infrastructure for applications that we
do you feel? Are you too hot? Are don’t even know about yet. We are
you too cold? Have you been shaken just scratching the surface,” says
or dropped?” says Rush. Rush. “Once the RFID infrastructure is
deployed and it can support all the
In heavily regulated industries, such as different tag types, it will become
aerospace manufacturing, they need more useful and beneficial for
more information, such as who everyone.”
worked on what and when, according
ISSUE 2, VOL. 1, 2005 EWM 27