The Value Proposition of RFID to the Manufacturer

  • 1,143 views
Uploaded on

 

More in: Business , Technology
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
1,143
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
63
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Can RFID Deliver the Goods? The Manufacturer’s Visibility into Supply and Demand January 2007
  • 2. Benchmark Report: RFID in Manufacturing Executive Summary D uring the last six months, Aberdeen’s Emerging Technology Practice surveyed more than 150 Manufacturers using or planning to adopt RFID (Radio- Frequency Identification) technology. They expect the technology to help in three general areas: 1. Optimizing the procurement and management of raw materials 2. Monitoring tools, equipment, parts and personnel in the production environment 3. Providing forward demand visibility into the supply chain Penetration of RFID into the manufacturing sector is only three or four percent today; but, growth is strong -- over 112% in 2007 -- and the average manufacturer’s RFID budget will grow from $50,000-$75,000 per year in 2006 to $100,00-$200,000 in 2007. Key Business Value Findings • New RFID initiatives in manufacturing planned for 2007 will add 51% new demand into the RFID market in that sector, and RFID budgets for manufacturing initiatives already underway in 2006 will increase an average of 61% • Best in Class manufacturers are twice as likely to select an RFID vendor based on the customer service and infrastructure maintenance record (and half as likely to select a turn-key solution) than average manufacturers. • Sixty-two percent of manufacturers cite data integration as their top cost concern when they consider an RFID initiative. Implications & Analysis There is a direct correlation between best-in-class performance and compatibility of the RFID solution to installed process management systems; to the type of manufacturing, industry, or materials; and to the manufacturer’s primary performance objectives. Recommendations for Action 1. Anticipate a massive influx of real-time data and verify that your critical systems and business processes are ready to adapt to new sources of business intelligence. 2. Prepare for close collaboration with supply chain partners. Your data-sharing policies and integrated systems will help reduce inventory overhead and out-of-stocks. 3. Automate manual processes to reduce the likelihood of errors. Then leverage real- time alerting so that your staff can focus on the exceptions. 4. Understand the big picture and the constraints that your legacy systems place on the RFID solution; start small, measure often and plan to grow rapidly. All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group • i
  • 3. Benchmark Report: RFID in Manufacturing Table of Contents Executive Summary .............................................................................................. i Implications & Analysis ................................................................................... i Recommendations for Action.......................................................................... i Chapter One: Issue at Hand.................................................................................1 Chapter Two: Key Business Value Findings .........................................................4 Vendor Selection............................................................................................ 4 By the Numbers............................................................................................. 5 Key Findings Summary.................................................................................. 8 Chapter Three: Implications & Analysis...............................................................9 Process, Organization and Knowledge........................................................ 10 Technology Usage (Industry “Ah-ha”) .......................................................... 11 Chapter Four: Recommendations for Action ...................................................... 13 Laggard Steps to Success........................................................................... 13 Industry Norm Steps to Success ................................................................. 14 Best in Class Next Steps ............................................................................. 14 Author Profile ..................................................................................................... 16 Appendix A: Research Methodology .................................................................. 17 Appendix B: Related Aberdeen Research & Tools ............................................. 19 Figures All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group
  • 4. Benchmark Report: RFID in Manufacturing Table of Contents Figure 1: Top Objectives of RFID Initiatives in Manufacturing ..............................1 Figure 2: Data Integration Emerges as Top RFID Cost Concern..........................3 Figure 3: Most Valued Characteristics of an RFID Vendor ...................................5 Figure 4: Manufacturers’ 12-Month Average KPI Improvement............................6 Figure 5: Process and Discrete Manufacturers Tackle Different Challenges ........7 Figure 6: Manufacturers Leverage RFID with Other Sensor Capabilities .............7 Figure 7: RFID Tag Technology Growth in Manufacturing .................................. 11 Figure 8: Tag Type Migration Map ...................................................................... 12 Tables Table 1: Three Objectives – Three Strategies ......................................................2 Table 2: Companies With Top Performance Scores Earn “Best-in-Class” Status: 4 Table 3: RFID Competitive Framework.................................................................9 Table 4: PACE Framework ................................................................................. 18 Table 5: Relationship between PACE and Competitive Framework ................... 18 Table 6: Competitive Framework........................................................................ 18 All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group
  • 5. Benchmark Report: RFID in Manufacturing Chapter One: Issue at Hand • RFID solutions take three forms in the manufacturing environment, creating integration Key Takeaways challenges for those who wish to leverage the technology across the organization. • The critical systems that manage the production process are not always able to absorb the data that RFID provides. Some legacy systems can severely limit the benefit that RFID delivers to the organization. • The correct combination of technologies (tags, readers, RFID network infrastructure, data management, vertical applications, analytics, and alerting) depends on the nature of the business. T he Aberdeen Group has surveyed over six hundred companies that are using RFID in the last twelve months. During that time, the percentage of companies adopting RFID primarily to satisfy a government or customer mandate has fallen by half. While it may still be true that many RFID initiatives begin in response to compli- ance mandates, the primary objective has changed dramatically. Today, more RFID ini- tiatives begin with other goals in mind and manufacturers are leading the way with barely 8% of projects being compliance-driven (Figure 1) Figure 1: Top Objectives of RFID Initiatives in Manufacturing 40% 34% 35% 30% 25% 20% 19% 20% 15% 11% 8% 8% 10% 5% 0% Asset Tracking Production Supply Chain Raw Materials Mandate Finished Goods Efficiency Visibility Mgmt. Compliance Inventory Control Source: AberdeenGroup, January 2007 Manufacturers are showing signs of significant maturation in their approach to RFID. Recognizing that materials management, production efficiency and supply chain visibil- ity begin with a robust data management system and a rich information stream. Manufac- turers are assuming a leadership role in both tag and sensor-based asset tracking and data management and sharing procedures. Early adopters of RFID in Aerospace, Automotive, Pharmaceutical, Paper, Electronics, and Heavy Industrial manufacturing are already leveraging the technology to drive out waste, enable just-in-time delivery of finished goods, and realize continuous improve- ment throughout the production process. Thus, the value proposition of RFID to the All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group • 1
  • 6. Benchmark Report: RFID in Manufacturing manufacturer can be segmented into Definitions three general areas: Open Loop Tags are affixed to assets and 1. Optimizing the procurement and move from one enterprise to an- management of raw materials other, the data being shared among them and often updated 2. Monitoring tools, equipment, parts along the way. and personnel in the production environment Closed Loop Tags are affixed to assets and are kept permanently within the do- 3. Providing forward demand visibil- main of the enterprise or are re- ity into the supply chain moved from the asset prior to its leaving. Each of these represents an opportu- Active Tags Tags include internal power nity for manufacturers to cut produc- source, can be read from a greater tion costs, speed the time to market, distance and may include addi- and respond to changes with more agil- tional functions such as an indica- ity. However, they also require very tor light. different technologies and adoption strategies, a condition which creates Passive Simple tags, like bar codes can organizational and technical challenges Tags hold more data and be updated for the enterprise. Generally speaking, with status changes as the asset the solutions can be characterized as moves through the process. shown in table 1 (below). Table 1: Three Objectives – Three Strategies Objective Organizational Requirements Architecture Tag Type Materials pro- Requires collaboration with suppliers or may be Open or Passive curement, supply confined to the manufacturing enterprise. Usu- closed loop management ally requires interface to ERP or APS. Production effi- Requires internal system integration (for exam- Closed loop Active ciency ple to the MES) and the organizational flexibility to adapt production procedures. Distribution, Requires highly collaborative development, Open loop Passive warehousing, complex system integration with external sup- and supply chain ply chain management systems, and data shar- visibility ing agreements. Source: AberdeenGroup, January 2007 In addition, early adopters are finding that RFID provides: • accountability; • improved safety; • a deterrent to counterfeiting; • less risk from the cost of product recalls; and, • the opportunity for proactive field service. All print and electronic rights are the property of Aberdeen Group © 2007. 2 • AberdeenGroup
  • 7. Benchmark Report: RFID in Manufacturing To realize the potential of RFID on the shop floor, careful system integration planning is required, an important step often ignored due to its cost and complexity. Especially when an RFID initiative begins as a measure to comply with an external mandate, the solution is designed with cost minimization the guiding objective. Then, as RFID becomes a key differentiator in the quest for lean operations and a flexible organization, those early cost savings become expensive mistakes. To avoid them, manufacturers focus on specific practices (described later in this report) promoted aggressively by best-of-breed RFID vendors with manufacturing domain expertise. Aberdeen research shows that the primary concern of manufacturers adopting RFID technology has changed dramatically over the last 12 months, showing clearly that lessons learned by the early adopters are not being ignored. Figure 2: Data Integration Emerges as Top RFID Cost Concern Changing Cost Concerns Percent of Survey Respondents 70% 60% Tag Costs 50% 40% Reader 30% Costs 20% Data 10% Integration 0% Dec-05 Jun-06 Dec-06 Source: AberdeenGroup, January 2007 Beyond the selection of tags, readers and data integration methodology, manufacturers must “Our long-term vision for op- also consider an intelligent RFID network infra- timal use of RFID in manufac- structure layer, a strong data analytics engine, and real-time alerting capabilities, all of which turing includes the communi- are vital for turning a mountain of data into ac- cation of current production tionable business intelligence. Taken all to- conditions and situations to gether, the optimal combination of RFID tech- enable full integration among nologies is a function of the manufacturer’s ob- suppliers, manufacturer, and jectives, the core systems in use in the back of- customers.” fice and on the shop floor, the partnerships that the manufacturer enjoys with its suppliers and - VP of Manufacturing, U.S. chemical plant downstream supply chain partners, and the prod- ucts themselves. All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group • 3
  • 8. Benchmark Report: RFID in Manufacturing Chapter Two: Key Business Value Findings • 53% of manufacturers surveyed indicated that integrating RFID with enterprise systems Key Takeaways is the top challenge facing them when moving to an adaptive manufacturing model. • 82% of manufacturers surveyed indicated that their RFID technology selection is driven in part by a hostile environment or challenging production materials. • Best in Class manufacturers are twice as likely to select an RFID vendor based on the customer service and infrastructure maintenance record. S trategies to maximize the value of RFID are only as good as the results they de- liver. Aberdeen used four key performance criteria to distinguish best-in-class companies from average and laggard companies. These key performance indicators (KPIs) represent process measures – with safety stock and cycle time reduced to improve process efficiency, and quality measures – with percent on-time delivery and change- over time improved for performance and flexibility (Table 2). Based on aggregate scores that incorporated all four of these metrics, those companies in the top 20% achieved “best-in-class” status, those in the middle 50% were “average”, and those in the bottom 30% were “laggard”. Table 2: Companies With Top Performance Scores Earn “Best-in-Class” Status: Definition of Maturity Class Mean Class Performance • 34% improvement in manufacturing cycle time Best-in-Class: • 6% improvement in on-time delivery Top 20% of Aggregate Performance • Reduction in safety stock by 4 days Scorers • 28% reduction in change-over time • 11% improvement in manufacturing cycle time Average: • 5% improvement in on-time delivery Middle 50% of Aggregate Performance • Reduction in safety stock by 1 day Scorers • 17% reduction in change-over time • No improvement in manufacturing cycle time Laggard: • No improvement in on-time delivery Bottom 30% of Aggregate Perform- • No reduction in safety stock ance Scorers • No reduction in change-over time Source: AberdeenGroup, January 2007 Vendor Selection Seventy-eight percent of all manufacturers agree that the top criteria in selecting an RFID technology vendor are successes in similar environments and strategic partnerships with other leading RFID vendors. With the majority of manufacturers of all classes agreeing that their vendors must be able to demonstrate existing similar RFID solution implemen- tations, the vendor’s domain expertise and solid roster of technology partners are critical All print and electronic rights are the property of Aberdeen Group © 2007. 4 • AberdeenGroup
  • 9. Benchmark Report: RFID in Manufacturing to success. These values can be attributed to the emphasis placed on the challenges of integration and to the heavy demands that adverse environmental conditions such as heat and dust, and that materials such as liquids and metals place on the technology. A startling difference between the Best-in-Class manufacturers and the rest of the popula- tion is the criteria they use to evaluate and select an RFID technology vendor. Figure 3: Most Valued Characteristics of an RFID Vendor Existing similar 57% implementations 62% 29% Turn-key solution 47% Strategic 57% Best in Class partnerships 45% Average 29% Domain expertise 19% Customer service 43% record 17% 0% 10% 20% 30% 40% 50% 60% 70% Source: AberdeenGroup, January 2007 Best-in-Class manufacturers understand that RFID is not a panacea for their business chal- lenges. The technology cannot simply be in- ““Our long-term vision for RFID includes helping re- stalled and forgotten; it grows and changes move operator error in our with the organization as its results impact man- manufacturing operations” agement’s decision-making and as new appli- cations of the infrastructure emerge and are - VP Manufacturing Vacuum Metalizing, Co. embraced. Thus, the vendor of choice is not providing a “turn-key” solution, rather the vendor and the manufacturer are engaged in a long-term support and learning relationship punctuated by strong customer service. Total penetration of RFID into the manufacturing sector may be only three or four percent today; but, growth is strong, shown in this study to be over 112% in 2007 and the average manufacturer’s RFID budget will grow from $50,000-$75,000 per year in 2006 to $100,00-$200,000 per year in 2007. Competition for mind-share and market-share among vendors is fierce. Only those who are dedicated to educating and servicing their customers will be able to capture their unfair share of industry spend. By the Numbers Based on the data collecting in this study, the adoption of RFID in the manufacturing environment clearly yields positive results. During the same period of time, Manufactur- All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group • 5
  • 10. Benchmark Report: RFID in Manufacturing ers who have been using RFID in their processes reported a much stronger improvement this year over last in all four key performance measures than did those who have not adopted RFID. Figure 4: Manufacturers’ 12-Month Average KPI Improvement 35% 30% 27% 25% 24% 19% 20% 15% 9% 10% 6% 6% 7% 6% 5% 0% Cycle Time % On-Time Delivery Safety Stock Change-Over Time With RFID for at least 6 months Without RFID Source: AberdeenGroup, January 2007 The ROI suggested by figure 4 is obvious. Reductions in cycle time and change-over time are readily measurable in reduced cost of labor with longer-term impact on overall manufacturing flexibility. Safety stock reduc- tions translate into lower warehousing costs, reduced shrinkage, and less revenue tied up ““Our long-term vision for in raw materials inventory. While on-time RFID includes labor tracking and control, and better visi- delivery may not necessarily have direct im- bility of work in progress” plications to the value of ongoing contracts, it certainly affects overall customer satisfac- CIO tion. It is not surprising, therefore, to find Canadian Apparel Manufacturer that RFID budgets are increasing. RFID can make it easier to find inventory on hand and to identify inventory that is missing or in low quantity. It helps manage the movement of people and equipment around the shop floor, thus eliminating waste and improving cycle time. RFID gives production line workers and equipment a kind of “pre- monition” with respect to the next job, reducing change-over time and improving worker safety. The technology can also report supply chain information back to the manufac- turer’s ERP system to provide forward visibility to demand and thus reduce the need for excess safety stock. Beyond differentiated vendor selection, best-in-class manufacturers are those who use RFID to tackle the business processes most suited to the technology and to their product. To illustrate this, we looked at the primary objectives cited by best-in-class process and discrete manufacturers and found that process shops focus primarily on location of peo- ple and assets while discrete shops focus more on inventory and production management (figure 5). In almost all cases, discrete manufacturers focusing on personnel and mobile All print and electronic rights are the property of Aberdeen Group © 2007. 6 • AberdeenGroup
  • 11. Benchmark Report: RFID in Manufacturing asset security had more trouble realizing performance improvement, as was the case with process manufacturers focusing heavily on finished goods inventory and production management applications of RFID. Figure 5: Process and Discrete Manufacturers Tackle Different Challenges 40% Personnel identification 16% 40% Mobile asset tracking 24% 20% Asset security 12% 27% Condition monitoring 20% 33% Tools and parts location 32% 27% Finished goods location 44% 40% Production Management 72% 0% 20% 40% 60% 80% Discrete Process Source: AberdeenGroup, January 2007 Integration of RFID technology with other sensor-based technologies also separates manufacturer objectives and describes a key differentiator in best-in-class performance. Figure 6: Manufacturers Leverage RFID with Other Sensor Capabilities Heat 68% Humidity 47% Shock 37% Vibration 32% Motion 32% Light 24% Biohazards 21% Radiation 13% Corrosion 11% 0% 10% 20% 30% 40% 50% 60% 70% 80% Source: AberdeenGroup, January 2007 Environments that place unusual demands on the tag technology provide a strong incen- tive for manufacturers to forgo bar codes in favor of RFID. Of the 82% of manufacturers whose business challenge includes harsh conditions or challenging materials, those se- lecting RFID vendors with strong domain expertise saw the best performance improve- All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group • 7
  • 12. Benchmark Report: RFID in Manufacturing ment, reporting faster time to positive ROI despite significantly higher RFID develop- ment budgets Key Findings Summary Best-in-class manufac- Based on the analysis of data collected in preparation turers are 18% more for this report, there is a direct correlation between likely to capture RFID best-in-class performance and: data than average • Compatibility between the RFID solution and manufacturers and 60% MES, APS or ERP systems; more likely to do so than laggards. • Selecting an RFID solution that is compatible with the type of manufacturing, the industry or the mate- rials (for example, using passive tag technology for process manufacturing and active tag technology for discrete manufacturing generally produces better results); and • Compatibility between the RFID solution and the manufacturer’s primary objectives with respect to performance improvement. All print and electronic rights are the property of Aberdeen Group © 2007. 8 • AberdeenGroup
  • 13. Benchmark Report: RFID in Manufacturing Chapter Three: Implications & Analysis • RFID adapts to the business process, not the other way around. However some business Key Takeaways processes can be improved to better leverage RFID. • Best in class companies develop an internal strategy for RFID deployment, then collabo- rate with trading partners on data integration strategy and master data management. • RFID data has tremendous value as an enabler for actionable business intelligence. Sharing that data makes the entire supply chain more intelligent. • Incompatible technology infrastructure across enterprises is the biggest barrier to true collaborative supply chain management. A s shown in Table 2, survey respondents fell into one of three categories – Lag- gard, Industry Average, or Best in Class — based on their characteristics in four key categories: (1) process (ability to address exceptions, turn data into action- able business intelligence, and to innovate); (2) organization (collaborative strat- egy, design expertise, and staff training); (3) knowledge (enterprise data management strategies, visibility, and real-time process management); and (4) technology (infrastruc- ture excellence, analytics and performance improvement). In each of these categories, survey results show that manufacturers exhibiting best-in- class RFID usage characteristics also enjoy best-in-class financial performance. Table 3: RFID Competitive Framework Laggards Industry Average Best in Class Process • RFID initiative • RFID initiative moti- • RFID initiative is driven by mandate vated by need to part of a general or regulatory com- solve a particular strategy. ROI based pliance. Process set of business on actionable busi- remains ignorant of problems. ROI is ness intelligence, the potential im- calculated using forward visibility to provements intro- point solution-based demand and proc- duced by RFID. metrics. ess improvement. All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group • 9
  • 14. Benchmark Report: RFID in Manufacturing Laggards Industry Average Best in Class Organization • RFID solution ex- • Business and IT • Multiple business pected to conform collaborate on the units, senior man- to existing business adoption process. agement and IT processes. Man- Willingness to ad- share strategy and agement is passive. just business proc- actively seek in- Knowledge workers ess to take advan- volvement of trading focus on mainte- tage of the technol- partners in design nance. ogy. Senior man- and implementation. agement has regu- lar involvement. Knowledge • Knowledge com- • Internal expertise • Innovation re- promised by out- developed as re- warded. Business sourcing system quired to complete process data is lev- management. Data and maintain the eraged to improve capture limited to solution, data production effi- minimal require- shared within the ciency and facilitate ment, not leveraged enterprise for im- extra-enterprise col- or shared. proved business in- laboration. telligence Technology • Turn-key solutions • Priority placed on • Solution selected to preferred. Lowest technology com- optimize perform- cost solution patible with existing ance across the en- adopted, even at infrastructure. Solu- terprise. Data cap- the expense of do- tion selected for ap- tured and distrib- main expertise. Lit- plication to top busi- uted to analytics tle or no attention to ness challenge. In- systems and shared performance meas- tegration sufficient with suppliers and urement. to leverage data. distributors. Source: AberdeenGroup, January 2007 Process, Organization and Knowledge • In the process category, best-in-class firms consider Best-in-class manufac- RFID to be a part of an overall strategy for per- turers are 18% more formance improvement, focus on data analytics to likely to capture RFID put RFID data in context, and turn it into actionable data than average business intelligence. At every stage, RFID data is manufacturers and 60% considered for its ability to improve process effi- more likely to do so ciency and enable forward visibility both for the organization itself and for its trading partners. than laggards. • As reported in “Achieving Total Supply Chain Visibility with RFID” (Aberdeen Group, November 2006), it was reported that the average manufacturing organization can expect to recover the technology investment All print and electronic rights are the property of Aberdeen Group © 2007. 10 • AberdeenGroup
  • 15. Benchmark Report: RFID in Manufacturing in about 31 months. Current research suggests that this figure can be greatly reduced by taking the proper organizational approach to the initiative. When operations and management collaborate on an RFID initiative, the time to positive ROI ranges from 9 to 24 months; whereas, when IT is solely responsible for the initiative, the time to positive ROI ranges from two to five years. • Approximately one third of the manufacturers surveyed indicated that improving the delivery of real- Best-in-class manufacturers are time information was a high prior- 37% more likely than average to ity and likely to be a significant have the improvement of real-time source of ROI. Demonstrating the value of this priority, 57% of them delivery of process information as a can be found among the best-in- stated priority. class performers. Technology Usage (Industry “Ah-ha”) As shown in Table 1, the research shows the typical tag type and architectural composi- tion for each of the three major types of RFID implementations in manufacturing. Figure 7 shows an updated projection of RFID tag adoption by manufacturers within the next 12-18 months. Figure 7: RFID Tag Technology Growth in Manufacturing Class 2 Passive 19% 41% Active 8% 48% Integrated Sensor 8% 38% Hybrid 28% Semi-Passive 21% Class 1 Passive 13% 9% Class 0 Passive 11% 0% 10% 20% 30% 40% 50% 60% 70% Current Planned Source: AberdeenGroup, January 2007 It is interesting to note that 45% of the manufacturers surveyed who planning to adopt active tags are currently using passive tags whereas only 5% of manufacturers consider- ing adopting passive tags are currently using active tags; the rest are either upgrading older passive tag technology or not using RFID yet at all. Furthermore, over 90% of manufacturers who are considering adopting semi-passive, hybrid or integrated sensor tags are already using either active or passive tags (Figure 8). All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group • 11
  • 16. Benchmark Report: RFID in Manufacturing Figure 8: Tag Type Migration Map Manufacturers Planning to Adopt Manufacturers Planning to Adopt or Upgrade Passive RFID Active RFID Technology Technology 70% 70% 63% 60% 60% 55% 50% 50% 45% 40% 40% 32% 30% 30% 20% 20% 10% 5% 10% 0% 0% 0% Already Already Not Using Already Already Not Using Using Using RFID Yet Using Using RFID Yet Active Passive Active Passive Tags Tags Tags Tags Manufacturers Planning to Adopt Advanced RFID Technology 60% 50% 53% 47% 47% 40% 40% 33% 20% 10% 14% 6% 0% Already Using Active Already Using Not Using RFID Yet Tags Passive Tags Semi-Passive Hybrid Integrated Sensor Source: AberdeenGroup, January 2007 The optimal combination of tag and reader hardware, edge device management systems, RFID network infrastructure, and vertical application architecture varies based on the type of product, the business objectives of the manufacturer and, to some extent, the ability of the supply chain partners to achieve consensus on standards. All print and electronic rights are the property of Aberdeen Group © 2007. 12 • AberdeenGroup
  • 17. Benchmark Report: RFID in Manufacturing Chapter Four: Recommendations for Action • Automate manual processes to reduce the likelihood of errors. Then leverage real-time Key Takeaways alerting so that your staff can focus on the exceptions. • For early ROI, look to reductions in cost of labor in inbound logistics and receiving, stock- taking and warehouse movement, in reduction of clerical errors and improved asset utilization. • Anticipate a massive influx of real-time data and verify that your critical systems and business processes are ready to adapt to new sources of business intelligence. T he promise of RFID to deliver visibility and efficiency to the manufacturer ap- “We see RFID as a very plies to all firms that are committed to promising technology, use- optimizing their use of the technology. Aggres- ful to increase networking sive activity around planning, technology selec- within the business, inte- tion, collaboration, prototyping and deployment grated throughout the will yield results for companies large and small, value cycle from NPI [New in CPG, industrial equipment, apparel, aero- Product Innovation] and PLM space, or elsewhere. [Product Lifecycle Management] throughout the supply Whether a manufacturer is trying to move its chain and all the way to the RFID initiative from “Laggard” to “Industry consumer.” Average,” or “Industry Average” to “Best in Class,” the following actions will help spur the - Director of Procurement, Major necessary performance improvements: European Telecom Equipment Manufacturer Laggard Steps to Success 1. Select technology vendors and solutions based on best-practices. Select technology vendors based on their customer service history and their abil- ity to demonstrate successful deployments within your domain. RFID is designed to fit into your existing business processes. You should not have to compromise the way you conduct your business in order to incorporate RFID technology into the enterprise. 2. Encourage collaboration between management and line of business managers. Even if RFID is being employed in a very limited scope to solve a specific busi- ness challenge, the implications of the technology to other parts of the organiza- tion and outside the enterprise should not be ignored. Collaboration among line of business managers and management can greatly enhance the value of the tech- nology and reduce the time to positive ROI. All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group • 13
  • 18. Benchmark Report: RFID in Manufacturing 3. Measure results often and adopt process efficiencies suggested by the data. Even if RFID is strictly a matter of compliance for your organization, keep in mind that the data may have tremendous value to you. Intelligent data capture, storage and analysis will reveal opportunities for further process efficiency on the shop floor and in the warehouse. Industry Norm Steps to Success 1. Build internal expertise and reward innovation. Industry consultants with deep domain expertise are invaluable in the early stages of any RFID initiative. However, the long-term success of an RFID initia- tive requires building in-house expertise. Watch the industry and communicate with experts but focus on adapting your own business processes to innovative ideas that come from within the organization. 2. Enlist major system vendors to aid in leveraging the RFID capabilities. Encourage collaboration between your major software system suppliers and your IT group to share strategy and actively seek design improvements. Include trad- ing partner objectives in the architectural design and share ideas for feature en- hancements with ERP, APS, SCM and MES system vendors. 3. Build awareness with trading partners to use RFID beyond the four walls. Once RFID is in use in the organization, look for ways to leverage it. RFID tech- nology in one part of your organization or one part of the supply chain can greatly enhance efficiencies elsewhere. You are a leader in supply chain innova- tion. Implement a data sharing program that opens the possibility for adding value to your partners. 4. Focus on master data management. Real-time business process data and visibility into the location and condition of assets becomes actionable business intelligence when it is placed into context and served to decision-makers in a timely way. Performance analytics and proc- ess monitoring can catch and handle exceptions before they become problems. Best in Class Next Steps 1. Continue to innovate and experiment with emerging RFID technologies. Despite the many years since its invention, RFID is still emerging. Tag, antenna and reader technology is improving and getting less expensive. The opportunities for making use of new developments are available to companies with existing in- frastructure. Maintain a competitive advantage through experimentation and make sure that you are on the distribution to receive new product announcements from your vendor. Manufacturing Business Technology Magazine, other trade journals, and of course Aberdeen’s continuing research into RFID technologies are all good sources for news and ideas. All print and electronic rights are the property of Aberdeen Group © 2007. 14 • AberdeenGroup
  • 19. Benchmark Report: RFID in Manufacturing 2. Leverage the RFID infrastructure for further process efficiencies. A well-designed and successful RFID solution opens opportunities for process efficiency beyond inventory management, asset tracking, and security. Improved use of environmental control, real-time management dashboards, and proactive alerting outside the organization widen the competitive gap. For more informa- tion on technologies for manufacturing flexibility, read Aberdeen’s current benchmark publication on the topic. 3. Participate in standards organizations. Manufacturers that participate actively in standards-development organizations have the opportunity to direct the future of the technology. RFID is still develop- ing. Don’t miss the opportunity to leverage a position of leadership. Join EPC Global, the Auto-ID Center, or AIM Global. All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group • 15
  • 20. Benchmark Report: RFID in Manufacturing Author Profile Russ Klein Director of Emerging Technology Edge/Retail Research AberdeenGroup, Inc. Russ Klein is Senior Research Director of the Emerging Technologies Practice for Aber- deenGroup, Inc., a Boston-based market research and positioning services firm. In this role, Klein provides analysis and assessment of software and services that automate and streamline retail operations. He also keeps a close eye on emerging technologies and their impact on the organization, its key processes, and its knowledgebase. Klein specifically focuses on emerging technologies, data integration, collaboration, and e-commerce, and on best-practices in knowledge discovery. His passion is in realizing potential value in corporate data warehouses and employing emerging technologies to enhance data capture and directed data analysis from the edges of the enterprise to the central databases. He has more than 20 years of experience developing database software applications, ad- vising companies on developing and refining knowledge acquisition systems, and har- vesting business intelligence from transaction data. He brings a wealth of knowledge and experience to Aberdeen in the areas of online transaction technologies, business intelligence systems and data warehousing as well as familiarity with emerging technologies, some of which have yet to find applications in the real world. His current research efforts include Aberdeen’s benchmark studies on RFID, GPS, and Master Data Management technologies, pervasive retailing and supply chain logistics, as well as real-time process monitoring, handheld database application technologies, and information architecture. All print and electronic rights are the property of Aberdeen Group © 2007. 16 • AberdeenGroup
  • 21. Benchmark Report: RFID in Manufacturing Appendix A: Research Methodology D uring November and December, 2006, Aberdeen Group examined the proce- dures, experiences, RFID buying intentions of hundreds of manufacturers. The research focused on many specific industries, such as CPG, industrial equipment, high tech, food and beverage, health care, pharmaceuticals, apparel and foot- wear, chemical, and consumer electronics. Responding business line managers, IT executives, and corporate application developers completed an online survey that included questions designed to determine the following: • How RFID technology facilitates the manufacturing process; • Current and planned use of RFID technologies; • Risks and challenges in adapting RFID manufacturing processes; • The benefits that have been derived from RFID; • The importance and methods for measuring the ROI. Aberdeen supplemented this online survey effort with telephone interviews with select survey respondents, gathering additional information on RFID strategies, experiences, and results. The study aimed to identify emerging best practices for maximizing the benefits of RFID in manufacturing initiatives and provide a framework by which readers could assess their own deployment strategies and performance. Responding enterprises included the following: • Job title/function: The research sample included respondents with the following job titles: line of business managers (22%); C-level officer (35%); director (11%); devel- opment staff (12%); and consultants (10%). • Industry: The research sample included respondents predominantly from consumer packaged goods companies, transportation, high-tech, industrial equipment. CPG represented 13%, transportation and high-tech followed with 11%. Food and Bever- age represented 7%, with aerospace, apparel, automotive, chemical, medical devices and metals each constituting 6% of the survey pool. • Geography: 75% of the study’s respondents were from North America, 7% were from Europe, 14% from Asia/Pacific, and 1% from the Middle East and Africa. • Company size: 23% of respondents were from large enterprises (annual revenues above US$1 billion); 41% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 36% of respondents were from small businesses (an- nual revenues of $50 million or less). All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group • 17
  • 22. Benchmark Report: RFID in Manufacturing Table 4: PACE Framework PACE Key Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures — external forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competi- tive) Actions — the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product/service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities — the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products/services, ecosystem partners, financing) Enablers — the key functionality of technology solutions required to support the organization’s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management) Source: AberdeenGroup, January 2007 Table 5: Relationship between PACE and Competitive Framework PACE and Competitive Framework How They Interact Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of com- petitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute. Source: AberdeenGroup, January 2007 Table 6: Competitive Framework Competitive Framework Key The Aberdeen Competitive Framework defines enterprises as falling into one of the three following levels of RFID performance: Laggards (30%) — RFID practices that are significantly behind the average of the industry, and result in below average performance and little or no ROI. Industry norm (50%) — RFID practices that represent the average or norm, and result in average industry performance. Best in class (20%) — RFID practices that are the best currently being employed and significantly superior to the industry norm, and result in the top industry performance. Source: AberdeenGroup, January 2007 All print and electronic rights are the property of Aberdeen Group © 2007. 18 • AberdeenGroup
  • 23. Benchmark Report: RFID in Manufacturing Appendix B: Related Aberdeen Research & Tools Related Aberdeen research that forms a companion or reference to this report include: • RFID Benchmark Report: Total Supply Chain Visibility (November 2006) • RFID Benchmark Report: Finding the ROI in RFID (September 2006) • RFID Benchmark Report: Finding the Technology Tipping Point (December 2005) • RFID Benchmark Report: Scaling RFID Implementations from Pilot to Production (June 2006) • Candid Comments: RFID in Health Care (June 2006) • Service Oriented Architecture is Key to Scaling RFID Deployments (March 2006) • Mandates Temporarily Drive Mid-Size Manufacturer RFID Adoption (March 2006) • Average Change in Mobile Fleet Productivity as a result of Mobile Computing (January 2006) • RFID’s Biggest Non-Issue Now Resolved; Consortium Launched (September 2005) • RFID-Enabled Logistics Asset Management: Improving Capital Utilization, Increas- ing Availability, and Lowering Total Operational Costs (June 2004) • RFID in the Consumer Industries: Being a Winner, Not a Follower (March 2004) Information on these and any other Aberdeen publications can be found at www.Aberdeen.com. All print and electronic rights are the property of Aberdeen Group © 2007. Aberdeen Group • 19
  • 24. Benchmark Report: RFID in Manufacturing Solution providers recognized as sponsors of this report were solicited after the fact and had no substantive influence on the direction of this report. Their sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge. Aberdeen Group, Inc. Founded in 1988, Aberdeen Group is the technology- 260 Franklin Street driven research destination of choice for the global Boston, Massachusetts business executive. Aberdeen Group has over 100,000 02110-3112 research members in over 36 countries around the world USA that both participate in and direct the most comprehen- sive technology-driven value chain research in the Telephone: 617 723 7890 market. Through its continued fact-based research, Fax: 617 723 7897 benchmarking, and actionable analysis, Aberdeen Group www.aberdeen.com offers global business and technology executives a unique mix of actionable research, KPIs, tools, © 2007 Aberdeen Group, Inc. and services. All rights reserved January 2007 The information contained in this publication has been obtained from sources Aberdeen believes to be reliable, but is not guaranteed by Aberdeen. Aberdeen publications reflect the analyst’s judgment at the time and are subject to change without notice. The trademarks and registered trademarks of the corporations mentioned in this publication are the property of their respective holders.