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Where's My Stuff ?! Managing Work-in-Process with RFID
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Where's My Stuff ?! Managing Work-in-Process with RFID
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Where's My Stuff ?! Managing Work-in-Process with RFID
1. Where’s My Stuff ?! Managing Work-in-Process with RFID June 2007
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 2 Executive Summary The advent of Radio Frequency Identification technologies (RFID) has allowed Quote everyone from shipping companies to hospitals to reduce costs and overhead by creating visibility into inefficient business processes. Aberdeen’s research “RFID helps us understand shows that 38% of enterprises using RFID are doing so to improve the cost, where our flowers are, where safety, and reliability of managing work-in-process (WIP). Best-in-Class they have been and for how organizations are leveraging RFID to both improve the the productivity of their long, and where and when workforce all the while simplifying the implementation and ongoing they are moving. It even lets us adjust the temperature of management costs of their networks. The findings are drawn from a survey of our facility by zone depending 220 organizations, a subset of the 1100 organizations participating in on what kind of flower is there. Aberdeen’s RFID research. At the end of the day, the Best-in-Class Performance FloraHolland value proposition is all about "Flower Aberdeen used three key performance criteria to distinguish Best-in-Class Pedigree". Flowers command companies from all other organizations. These key performance indicators (KPIs) a higher price at the auction if are the operational metrics most frequently touted as the key benefits of the buyer has a well deploying RFID to manage WIP: documented trail confirming the freshness of the flowers. • 100% of Best-in-Class organizations reduced incidence of process failure This document provides the by at least 20%; necessary granularity and • 100% of Best-in-Class organizations improved process throughput by at accountability of where, when least 10%; and how long of each flower received and shipped from • 81% of Best-in-Class organizations experienced at least 15% labor cost FloraHolland. “ savings in the management of work-in-process. Competitive Maturity Assessment ~ Hans Uithol, CIO Survey results show that Best-in-Class organizations shared several common FloraHolland characteristics: • Best-in-Class organizations are 50% more likely than all others to modify existing process workflow as a result of inefficiencies identified by event- level data; • Best-in-Class organizations are three times as likely as all others to engage in proactive maintenance of workflow components and scheduling of labor; • Best-in-Class organizations are 25% more likely than the industry average to measure and validate key KPIs at multiple touch-points. Required Actions In addition to the specific recommendations in chapter 3 of this report, to achieve Best-in-Class performance, organizations must: • Measure performance both from a business process and technological perspective, at key choke.-points and between choke-points. • Engage vendors or 3rd-party integrators with internal stakeholders to select the appropriate RFID technology for the job. • Develop management and line-of-business awareness of and sensitivity to the usage and advantages of monitoring work-in-process in real time. © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 3 Table of Contents Executive Summary.......................................................................................2 Best-in-Class Performance................................................................2 Competitive Maturity Assessment ...................................................2 Required Actions................................................................................2 Chapter One: Benchmarking the Best-in-Class .........................................4 The Right Parts in the Right Place at the Right Time .....................4 Maturity Class Framework.................................................................5 Best-in-Class PACE Model.................................................................6 Chapter Two: Benchmarking Requirements for Success ........................11 Competitive Assessment.................................................................11 Organizational Capabilities and Technology Enablers .............13 Chapter Three: Required Actions..............................................................16 Laggard Steps to Success ..............................................................16 Industry Norm Steps to Success .....................................................17 Best-in-Class Steps to Success ........................................................17 Appendix A: Research Methodology ......................................................19 Appendix B: Related Aberdeen Research ..............................................21 Figures Figure 1: Pressures Driving Use of RFID for Asset Management ................4 Figure 2: Best-in-Class Are Guided by Peers and Vendors.......................7 Figure 3: Even Best-in-Class Struggle to Measure the ROI ......................10 Figure 4: Process Monitoring as a Key Performance Differentiator ........14 Tables Table 1: Top Performers Earn “Best-in-Class” Status ..................................5 Table 2: Best-in-Class PACE Framework .....................................................6 Table 3: Competitive Framework...............................................................12 Table 4: PACE Framework...........................................................................20 Table 5: Maturity Framework ......................................................................20 Table 6: Relationship between PACE and Competitive Framework ......20 © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 4 Chapter One: Benchmarking the Best-in-Class The Right Parts in the Right Place at the Right Time Fast Facts Process-intensive organizations continuously face competitive √ 93% of all organizations surveyed expect RFID to help pressures to increase throughput while decreasing the cost of doing cut the cost of doing business business. According to Aberdeen research, the majority of the costs (as opposed to help increase that can be optimized without adverse impact on throughput fall into revenue). four categories: labor, excess spare inventory, loss due to mishandling √ 72% of respondents consider or misplacement of key components, and exception-handling. the first step in work-in- process optimization to be While the strategies for addressing these four cost areas are understanding how many procedural and organizational, none is possible without visibility into items are on hand. They use the inefficiencies of asset management, technologies for identifying RFID to accomplish this. and addressing under-utilization and waste, and a willingness within √ Best-in-Class organizations the organization to adapt their processes. In a recent survey, 220 are able to decrease the total organizations identified work-in-process (WIP) as a “top-two” asset value of spare parts on hand management application area driving their adoption of RFID. by 21% leveraging their RFID data – a rate that is 50% Figure 1: Pressures Driving Use of RFID for Asset Management higher than all other organizations. Inventory Manage ment 57% Definition: Work-in-Process (WIP) 57% “Throughput” Throughput is the rate at Raw Materials Manage ment 41% which a system generates revenue through sales. If the Valuable Asset Se curity 22% throughput of the organization Fleet Manage ment is increased while maintaining 21% the same level of inventory Document Manage ment 2% and operating expenses, then net-profit, return-on- 0% 10% 20% 30% 40% 50% 60% 70% investment and cash flow will increase. % of respondents asked to identify their top two objectives Source: Aberdeen Group, June 2007 Looking more deeply at how those 220 organizations are attempting to accomplish their goal, Aberdeen’s research shows that the strategies they are employing vary greatly depending on the nature of the business and the maturity of the RFID initiative within the organization. RFID tags on fire-fighters’ clothing and equipment help them make sure they have what they need before they leave the firehouse, and then that they are all out of the burning building before it collapses. RFID tags on coal miners’ headlamps allow them to be located in the © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 5 event of disaster. RFID tags on live preservers allow safety workers to Quote query the maintenance history of each vest and take them out of the field when it is time for service. RFID wristbands assure parents that their “Currently we are concentrating on the implementation of RFID in children can be found easily if they get lost at a theme park. In each our logistical processes. Since case, the value of the asset is nearly immeasurable. November 2004 we are applying In general, the more recent adopters tend to focus on data gathering the technology on pallet level. In August 2006 we started using and visibility for: inventory accuracy, safety and security, proper RFID on case level as well. The handling, timely delivery, documentation, reporting and mandate experience we made so far is compliance. The more mature initiatives focus on ways to leverage the very positive. Besides an gathered data for: logistical efficiency, preventative maintenance, acceleration of the incoming improved asset utilization, and customer service. goods process we could clearly enhance our data quality was In all cases, the key metrics measured by organizations to determine the raised significantly.” success of the initiative were similar (though measured differently depending on the nature of the business and the value of the assets). ~ Dr. Gerd Wolfram Metro AG Maturity Class Framework The value of RFID in a process-intensive environment is tied to the quantifiable improvements in logistical efficiency that it can deliver to an organization. Aberdeen used three key performance criteria to distinguish Best-in-Class companies from Industry Average and Laggard Quote organizations. These key performance indicators (KPIs) are the Our long-term strategy for the operational metrics most frequently touted as the key benefits of use of RFID in our enterprise is to eliminate manual deploying RFID to improve WIP management: (1) reduced incidence of confirmations of manufacturing process failure; (2) improved process throughput; and (3) labor savings. processes. Table 1 summarizes Aberdeen’s findings and defines Best-in-Class Martin McCloy performance for this study. F.G. Wilson Table 1: Top Performers Earn “Best-in-Class” Status Definition of Maturity Class Mean Class Performance Best-in-Class: • 100% reduced incidence of process failure by at least 20%; Top 20% of aggregate • 100% improved process throughput by at least 10%; performance scorers • 81% realized labor savings in the management of work-in- process by at least 15%. Industry Average: • 62% reduced incidence of process failure by at least 20%; Middle 50% of aggregate • 10% improved process throughput by at least 10%; performance scorers • 21% realized labor savings in the management of work-in- process by at least 15%. Laggard: • 0% reduced incidence of process failure by at least 20%; Bottom 30% of aggregate • 4% improved process throughput by at least 10%; performance scorers • 1% realized labor savings in the management of work-in- process by at least 15%. Source: Aberdeen Group, June 2007 © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 6 Best-in-Class PACE Model Achieving Best-in-Class performance requires a combination of strategic actions, organizational capabilities and enabling technologies. Based on the research, top performers exhibit common characteristics that can serve as a roadmap, to the benefit of Industry Average and Laggard organizations as well as future stakeholders interested in achieving excellence. Table 2 summarizes the top pressure, strategies, organizational capabilities and enabling technologies that characterize the Best-in-Class. Table 2: Best-in-Class PACE Framework Pressures Actions Capabilities Enablers Establish a Improve the Automated RFID tag competitive ability to collection of technology advantage in manage work identification, appropriate to the market by in process location, and the process reducing the while reducing condition data (active, cost of doing the cost of for WIP passive, business while labor hybrid, or Ability to increasing multi-function) Reduce the recognize and throughput incidence of act on process Mobile and loss, failure, flow fixed-location damage or exceptions RFID readers liability due to Real-time RFID data mishandling of monitoring of integration DEFINITION components, work in with ERP, MRP, tools, and work process configuration ERP: Enterprise product. management resource planning Proactive Reduce the and/or maintenance carrying cost workflow MRP: Materials of tools, requirement planning of spare parts systems components Learn from and finished Automated pilot projects goods manifesting, conducted by receiving and Willingness to peers and cross-docking change and vendors with adapt Real-time alert domain workflow monitoring expertise processes Management Formal training dashboard of line-of- “Rapid business Development” personnel Source: Aberdeen Group, June 2007 © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 7 The Best-in-Class actions in Table 2 show that top performing organizations emphasize leveraging the technology enablers as a means to an end and Case in Point not an end to itself. For this reason, the willingness to change and adapt Clamp trucks are responsible workflow processes is absolutely critical to Best-in-Class performance. Our for mishandling large research shows that the materials, the working environment, the number of appliances in-transit. touch-points, the cost of detecting and handling exceptions, and the Traditionally, the process financial risk of failure in the process are all determining factors in successful relies on the clamp operator to RFID technology selection and deployment. determine clamp pressure. But mistakes happen. If you It is, therefore, impossible to generalize about the best tag, reader, neglect to reduce the pressure frequency and network topology across all applications. Instead, when you switch from refrigerators to dryers, the organizations that have demonstrated Best-in-Class use of RFID looked to clamp will crush the first dryer peers with similar processes and environments for their roadmaps to it lifts. An RFID sensor on the adoption. In addition, Best-in-Class organizations engage vendors or 3rd- clamp can prevent that error. party integrators with their own internal stakeholders to select the appropriate RFID technology for the job. It is interesting to note that Laggards do not tend to rely on (or trust) the advice they receive from Quote technology vendors. “We use RFID to establish Consistent with earlier Aberdeen studies on RFID adoption, these findings the location and condition show that peer groups and vendors with specific domain expertise are the of our critical assets and best source of advice when developing a corporate roadmap for RFID components in the manufacturing and adoption. assembly process. Our operations require RFID Figure 2: Best-in-Class Are Guided by Peers and Vendors read-ranges of 10 to 30 feet, compatibility with Top Solution Selection Resource metals and other challenging environmental 23% conditions as well as Peers 69% integration with our ERP and MES systems. For this, we use a combination 1% Vendors of active, hybrid and 24% passive RFID tag technologies. With help 20% from other heavy Conferences 5% equipment manufacturers, we selected a vendor with 41% deep domain experience Online Research 2% and quality strategic partnerships. Doing so 13% helped us meet a complex Internal R&D 0% challenge and realize positive ROI in less than a 0% 10% 20% 30% 40% 50% 60% 70% 80% year.” Best-in-Class All Others Nathan Wall, Manager Caterpillar Source: Aberdeen Group, June 2007 © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 8 The reason that peer and vendor experience are so important is that each type of work-in-process requires a distinct configuration of hardware, software and workflow solutions to improve throughput and reduce the cost of labor effectively. In some cases, the risk or cost of failure is so great that even a single failure prevented can make the whole project worthwhile. In other cases, the volumes are so enormous that taking the rate of failure or the number of exceptions down a fraction of a percent can result in a positive ROI. In still other cases, the value of the assets and/or cost of labor make waste and mishandling unaffordable. For each of these pressures, there is an RFID adoption strategy best suited for the task. In the next section, we will look at a specific example of each to understand how the correct solutions were selected and what difference the technology made in the business case. Case Study: Passive Tags on Surgical Sponges In the USA, in about 1,500 operations each year, something is left behind in the patient. Often during emergency operations and despite careful checking before closing up the patient, the problem persists. Over 60% are sponges which, left inside, can go unnoticed for years and can lead to serious and sometimes fatal infections. Alex Macario, MD, MBA, professor of anesthesia, said that although procedures are in place to track objects during surgery, "this risk significantly increases in emergencies, with unplanned changes in procedure and with patients that have a higher body-mass index." Three baseline counts (before surgery, prior to closing the incision, and prior to closing the skin) and in some cases an X-ray before leaving the operating room, protect from this type of mistake. But for all the labor and expense, the problem persists. In eight cases at Stanford, patients consented to be part of a trial in which a surgeon left one or two RFID-tagged sponges inside the cavity. Another surgeon used a scanning wand to detect the sponge while the first surgeon held the incision closed. In each case, the wand accurately located the inserted sponge or sponges in less than three seconds. The wand never failed to detect a sponge and never indicated a sponge when none was present. The FDA has recently approved RFID-tagged sponges for use in surgery. Macario said, "We need a system that is really fail-safe; where, regardless of how people use it, the patient doesn't leave the operating room with a retained foreign body." RFID for medical patient care pays for itself when one life is saved. Thus, we have seen many field examples of RFID use in hospitals (to make sure that the right medication is given to the right patient at the right time, to make sure that the right equipment is sterilized, ready for © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 9 use and on-location when it is needed, even to locate doctors and patients on the campus in case of emergency). Exhaustive testing was conducted by the early-adopters: the vendor community, dedicated 3rd-party testing facilities, and, in some case, by governmental approval boards. Hence, these groups become the ideal strategic advisors to the next generation of Best-in-Class adopters. When volumes are enormous, taking the rate of failure and/or the number of exceptions down a fraction of a percent can result in a positive ROI. Improving the throughput is a natural byproduct or the process visibility that RFID technology can provide. It can be accomplished without adding staff or increasing anyone’s workload. A textile plant is an excellent example of the kind of process manufacturing operation that can benefit tremendously from such visibility and optimization. Case Study: Sabara International, Textile Manufacturer Sabare International, manufacturer of home textile products located in Karur, India, buys bale from many sources and after stringent quality checks and a multi-stage cutting, stitching and packing process, ships out finished bed sheets, towels, rugs and fabric for Quote curtains and upholstery. “The objective of our RFID initiative is to monitor each In such a large facility, timely stock updates, rejection tracking and line efficiency individual production batch measurement was a struggle. The company suspected that stitching was a process necessary for order fulfillment. bottleneck but all inputs to the ERP system were done manually. As a result of the program, our on-time delivery rate has The company began to affix HF RFID tags to raw materials and readers to their cranes and improved by 15% and our forklifts, passing inspection and movement-tracking information to their ERP system. Cut manufacturing cycle time was cloth, re-tagged in bundles, is also updated in the ERP system automatically as it moves cut in half” from cutting to stitching. Tags are read again prior to and after stitching, defects are VP of Finance recorded on the tag and updated to the ERP system. Finished product is electronically US Metal Products manifested as it leaves the facility. Manufacturer The results: defect rates dropped from 3% to 2% and line efficiency rose by 5%, a productivity increase and cost savings significant enough that the company is now rolling out an RFID initiative to cover its entire production facility. The value of RFID to any process depends on many factors: (1) the value of the tagged asset or of its contents; (2) the number of discreet, critical touch-points or choke-points and the value of tracking items between touch-points; (3) the cost to detect a failure (based on the number of uses, the age of the asset, whether it has been subjected to certain conditions, etc.); (4) the labor cost incurred by each exception to or failure of the business process; (5) the value of improved asset utilization (keeping it in the process for more time or more turns). Generally, the higher each of the values, the less time it will take to achieve positive ROI on the RFID investment. The overall financial © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 10 implications of RFID to asset lifecycle management is difficult to quantify, another reason industry peers as well as vendors who have domain expertise are so often considered invaluable by the Best-in- Class. Figure 3: Even Best-in-Class Struggle to Measure the ROI 60% 43% 40% 27% 20% 9% 0% BIC Average Laggard Percent of Respondents Able to Estim ate Tim e to Positive ROI Source: Aberdeen Group, June 2007 Aberdeen Insights – Strategy Whether for calibration of equipment, testing tools for WIP materials, tracking re-usable trays in a manufacturing line or between facilities, monitoring the assembly of parts on a chassis, or for documentation and compliance, RFID delivers visibility into the business process where there was none. Using the variables identified in this chapter and accurate measurement of a process unaided by RFID, it is possible to leverage results from studies conducted in the field and in test facilities to build a compelling business case without undertaking a costly and time-consuming pilot program. © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 11 Chapter Two: Benchmarking Requirements for Success Fast Facts The selection of RFID solutions and their integration with business √ Best-in-class intelligence and business process management systems plays a organizations are crucial role in the ability to turn process optimization strategies into twice as likely as all tangible cost savings. others to leverage Case Study: Beth-Israel Deaconess Medical Center RFID for proactive maintenance and The hospital emergency room is busy, crowded and often chaotic. Equipment and people predictive asset move from place to place in a hurry, often responsible for several critical jobs at the same retirement. time. When a piece of equipment is out of place or not clean, or when the doctor or nurse √ Laggard organizations is needed and not in the vicinity, the system breaks down. Valuable time is lost and a are less than one third patient in pain might suffer longer than necessary – worse yet, might receive erroneous as likely as the rest to treatment. In 2004, the Beth Israel Deaconess Medical Center looked at ways to combat offer a formal training this problem. Throwing more staff at the problem was not a workable solution. They program to their line- called on the CIO who realized that a sophisticated asset tracking system was needed. of-business personnel. In the beginning, a figure of $300-$400K/year in lost and stolen equipment was used to √ Best-in-Class justify the expense of the project. The system was able to prevent the orderlies from organizations are three accidentally discarding a $1000 piece of equipment down the laundry chute with the times as likely as the linens, to prevent a monitor from walking out the door with a patient, and to keep the rest to leverage RFID doctors from misplacing the patients’ charts. to monitor work-in- process in real time. With the assets tagged and the hospital able to track their movement around the organization, two new optimization opportunities became apparent. First, it became √ Rapid development obvious that a lot of time was spent searching for equipment that was not in its proper and prototyping is in place; from something as simple as a patient’s chart or a glucometer to larger equipment use by twice as many that might be needed urgently to save a life. Being able to locate an item to within 80% Best-in-Class accuracy in a particular room and 90% accuracy within a two-room area, the hospital organizations as by Average and realized an enormous savings in staff hours and, in some cases, a patient’s pain could be Laggards; but is still an reduced more quickly. underutilized Second, it was discovered that equipment was being deposited in the “dirty utility” room technology in RFID and then forgotten. The hospital had to stock two to three times the number of devices it adoption. needed just to be sure that a clean one was available when it was needed. The RFID- enabled asset tracking system let the hospital process dirty equipment pro-actively, prioritizing based on availability of stock. The supply chain, which had been broken due to underutilization of equipment, was thus repaired. Competitive Assessment Survey respondents fell into one of three categories – Laggard, Industry Average, or Best-in-Class — based on their characteristics in five key categories: (1) process (adapting existing processes to take advantage of the visibility offered by RFID); (2) organization (willingness and ability of the organization to understand, use and manage RFID-enabled processes); (3) knowledge (ability of the © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 12 organization to learn from the collected data and leverage that knowledge to inform key stakeholders); (4) technology (selection of appropriate tools and intelligent deployment of those solutions); and (5) performance management (ability of the organization to measure the benefits of technology deployment and use the results to further improve key business processes). Table 3: Competitive Framework Laggards Average Best-in-Class Automated collection of identification, location, and/or condition data for WIP Process 79% 88% 100% Faster recognition and response to process exceptions 62% 74% 100% Proactive maintenance or predictive asset retirement 32% 55% 89% Rely on peers, vendors, and/or 3rd-party integrators for assistance determining the optimal Organization strategy 10% 31% 93% Formal training of line-of-business personnel 29% 92% 94% Location and condition data captured by the read event along with tag identification Knowledge 58% 65% 94% Key touch-points in the process workflow are identified and incorporated into the RFID solution 14% 62% 88% Supporting technologies in use: Technology 21% automated manifesting 43% automated manifesting 90% automated manifesting 54% management dashboard 68% management dashboard 94% management dashboard 22% Rapid development 22% Rapid development 45% Rapid development 32% integration with 64% integration with 81% integration with operations management operations management operations management systems systems systems Performance measurement as a key differentiator: Performance 5% monitor work-in-process in 43% monitor work-in-process 74% monitor work-in-process real time. in real time in real time 81% monitor work-in-process 83% monitor work-in-process 100% monitor work-in- at key choke-points at key choke-points process at key choke-points Source: Aberdeen Group, June 2007 © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 13 Organizational Capabilities and Technology Enablers The essential ingredients of successfully deploying and reaping the benefits of RFID for work-in-process optimization include process, organization, knowledge management, and technology enablers that come together to form a working solution, translating into cost savings Quote and improved throughput. “We are focused on • Process using RFID to manage labor and In this survey, Best-in-Class organizations are more likely to work-in-progress from automate the collection of process data, including condition and piece work through to location data as well as asset identification. They are more likely finished goods.” to monitor event data in real time which leads to faster ~ CIO recognition of and response to exceptions. John Forsythe Shirt • Organization Company In addition to taking cues and coaching from peers, vendors and other experts, Best-in-Class (and Average) organizations are three times as likely as Laggard organizations to offer formal training to line-of-business staff. It is clear from the data that ensuring operational familiarity with new RFID-enabled tools and processes is critical to the success of the initiative. • Knowledge Management The number of key touch-points in a process workflow in many ways determines the most appropriate type of RFID technology. It impacts the volume of data, the complexity of the business analytics, and level of granularity to which the process can be managed. Best-in-Class organizations identify key touch-points and design to them more than five times as often as Laggards. In addition, Best-in-Class organizations identify places where multiple tags might be read at once and places in the process where a tag might be in range of multiple readers. Understanding the dynamics of workflow is the first step to identifying its inefficiencies and correcting them. • Technology No clear differentiator emerged among the tag types, readers form factors, or RF frequency. Each technology type improves performance when it is deployed into the processes and environments appropriate to it. However, once the right tags, readers and intelligent network management layers are in-place, key differentiators were clearly visible when looking at how RFID event data is used by the organization. Management reporting via portals and dashboards, labor-saving process automation © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 14 such as automated manifesting and integration with core management systems correlated with Best-in-Class performance. Finally, while still underutilized even by the Best-in-Class, Rapid Application Development (RAD) and rapid prototyping using dedicated simulation software greatly reduces the time and cost of RFID deployment. Best-in-Class organizations reporting RAD technologies in use also reported improved ability to identify key choke-points and touch-points, faster integration with ERP and MES systems, and more formal training, all of which are facilitated with RAD prototyping and simulation tools. • Performance Measurement In addition to the clear performance measurement differentiators evident in Table 3 (above), Best-in-Class organizations reported improvement in many of the more tactical process measurement and analysis capabilities that stem directly from real-time monitoring of key choke-points (see Figure 4). They have also begun to gain visibility into the location, movement, and condition of WIP between key touch-points. Figure 4: Process Monitoring as a Key Performance Differentiator 97% Assets counts 91% 90% 87% Turn rates 74% 48% 81% Loss rate 81% 65% 76% Bottleneck source 44% 43% 54% Request-to- 32% Resolution time 12% 23% Reason for failure 13% 2% 0% 20% 40% 60% 80% 100% % Reporting Improved Ability to Measure or Determine Laggard Average Best-in-Class Source: Aberdeen Group, June 2007 © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 15 Aberdeen Insights – Technology The value proposition of RFID to the process-intensive industry includes: • Reducing loss • Reducing time-wasting manual intervention • Reducing the time it takes to get from information request to information delivery and resolution • Visibility into asset lifecycle management • The ability to find and fill process flow gaps with idle equipment, parts and people • The ability of an organization to structure its pricing to reflect the actual cost of doing business In order to realize the potential, an organization must be able to measure its performance at key points in the process, identify waste, and be willing to adapt existing processes to take advantage of the business intelligence that these actions deliver. All of which rolls up into an opportunity for optimization and competitive advantage. © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 16 Chapter Three: Required Actions The adoption of RFID technology solutions for the purposes of improving process efficiency is driven by organizations’ need to reduce costs and Fast Facts risks without compromising throughput. The effectiveness of RFID √ Performance depends on the strategies that an organization is taking, the degree to measurement is key - which the solution selection matches the conditions and processes, as both from a business well as the organization’s willingness and ability to adapt its operations process and to include RFID events at key points in the process and then take full technological advantage of the resulting data. perspective. 100% of best-in-class Whether an organization is trying to improve its workforce’s productivity, organizations flexibility and collaboration from “Laggard” to “Industry Average,” or measure the “Industry Average” to “Best-in-Class,” the following actions will help spur performance of their the necessary performance improvements: production process at key choke-points. Laggard Steps to Success √ Engage vendors or • Rely on peers, vendors and/or 3rd-party integrators for assistance 3rd-party integrators with internal determining the optimal strategy stakeholders to Best-in-Class organizations are more than nine times more likely select the than Laggard organizations to turn to domain experts for help in appropriate RFID their RFID planning. Instead, Laggards and Industry Average technology for the organizations send employees to conferences, do research job. online, and appoint internal IT staff to evaluate solutions. Outside √ Develop expertise costs money. Laggard organizations often do not know management and what their process failures cost; therefore, they can’t justify the line-of-business cost of hiring experts. awareness of and sensitivity to the • Engage in formal training of all stakeholders, including line-of- usage and business staff advantages of monitoring work-in- Aberdeen’s research shows that less than 30% of Laggard process in real time. organizations have dedicated training available to their line-of- business staff for RFID usage. If an organization does not give its managers and staff the proper skill set to use and take advantage of RFID tools properly, the results will suffer. • Identify key touch-points in the process workflow and incorporate them into the RFID solution Eighty-six percent of Laggard organizations slap RFID tags onto work-in-process and never track them where it matters most. Whether to satisfy a compliance mandate or to reduce the time it takes to pack and ship finished work, Laggards use RFID to accomplish the bare minimum required and ignore the real value of the technology. © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 17 Industry Norm Steps to Success • Capture location and condition data In addition to knowing what is moving past a reader or what is inside a carton, Average organizations leverage RFID to understand the condition, movement and movement history of assets, thereby taking steps toward Best-in-Class performance. • Monitor work-in-process at key choke-points in real time and provide the data via a management dashboard As with Laggards, who tend to slap tags onto assets and then ignore them, Average organizations gather RFID event data at touch-points where items are at risk of being mishandled or misplaced. However, less than half report the results in real time, many fail to study their process data to identify key choke-points and bottlenecks, and some do not have the capability to deliver the event data to management in a meaningful way. All of these are steps that average companies can take to move toward Best-in-Class. • Use rapid application development (RAD) tools As 45% of Best-in-Class organizations have already discovered, visual design tools, rapid development platforms and process simulation environments dramatically reduce the time it takes to develop a complete solution, improve the overall quality and completeness of the system, and reduce errors in and revisions to the deployment plan. Best-in-Class Steps to Success • Leverage RFID data for proactive and preventative maintenance While 89% of Best-in-Class organizations surveyed reported using RFID data to schedule and signal equipment retirement, significantly fewer are using their data to manage proactive and preventative maintenance efforts. One of the most compelling sources of return on investment from an RFID deployment in a process-intensive environment is the ability to prolong the lifespan of the assets and prevent failure during critical parts of the process. • Leverage RFID data to help determine cause of failure and to track request-to-resolution time When failure does occur, all of the Best-in-Class organization responding to this survey indicated they are better equipped to recognize and handle the problem than they were prior to © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 18 implementing RFID. However, 77% have shown no improvement in their ability to determine the cause of failure. This is an indication that the RFID deployment has missed some key touch- points in the process. Review the entire lifecycle of process- related assets to make sure management has total visibility. Aberdeen Insights – Summary Aberdeen research shows that RFID-enabled operations monitoring at key touch- points in a process coupled with the ability to turn event data into actionable intelligence and a willingness to adapt workflow to correct inefficiency leads to labor optimization and cost savings. Furthermore, visibility into the location, movement and condition of assets can expose bottlenecks and waste. Capitalizing on the opportunity to improve utilization of key assets leads to lower spare part inventory and safety stock, further reducing the cost of doing business. From aircraft assembly to automobile production, mining to medical equipment maintenance, and textiles to tire pressure, RFID can help companies understand their production processes and be proactive in managing and maintaining key assets. © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 19 Appendix A: Research Methodology During the past year, Aberdeen has conducted over 1100 surveys and Survey Questions interviews with organizations using or planning to use RFID. Of those, 68% Responding are using the technology to track assets of one kind or another. Half of organizations those are focused on work-in-process. In April and May 2007, Aberdeen completed an online Group examined the use of RFID technology and the experiences and survey that included intentions of 220 enterprises in a diverse set of industries using or planning questions designed to to use RFID to manage assets with a focus on work-in-process. determine the following: Aberdeen supplemented this online survey effort with telephone interviews with select survey respondents, gathering additional • The degree to which information on RFID strategies, experiences, and results. RFID is deployed in their operations and Responding enterprises included the following: the financial • Job title/function: The research sample included respondents with implications of the the following job titles: CIO or other C-level officer (29%), VP or technology; Director (27%), Manager (22%); and staff members/consultants • The structure and (22%). effectiveness of • Industry: Manufacturing and assembly organizations represented existing RFID 28% of the sample, followed supply chain companies which implementations in accounted for 21% of respondents. Other sectors responding WIP management; included health care (14%) automotive (12%), energy and utilities • Current and (9%). Retail, construction/engineering, aerospace, and planned use of RFID to entertainment each accounted for 5% or less of the survey aid operational and population. asset management • Geography: Half of respondents (48%) were from North America. activities; An additional 35% were from Europe, Middle East and Africa and • The benefits, if any, 13% from the Asia-Pacific region and less than 5% were from that have been South and Central America. derived from RFID • Company size: 26% of respondents were from large enterprises initiatives. (annual revenues above US$1 billion); 32% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 42% of respondents were from small businesses (annual revenues of $50 million or less). 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 AberdeenGroup to make these findings available to readers at no charge. © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 20 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, competitive) 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: Aberdeen Group, June 2007 Table 5: Maturity Framework Maturity Framework Key The Aberdeen Maturity Framework defines enterprises as falling into one of the following three levels of practices and 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. Industry norm (50%) — RFID practices that represent the average or norm, and result in average industry performance. Laggards (30%) — RFID practices that are significantly behind the average of the industry, and result in below average performance In the following categories: Process — What is the scope of process standardization? What is the efficiency and effectiveness of this process? Organization — How is your company currently organized to manage and optimize this particular process? Knowledge — What visibility do you have into key data and intelligence required to manage this process? Technology — What level of automation have you used to support this process? How is this automation integrated and aligned? Performance — What do you measure? How frequently? What’s your actual performance? Source: Aberdeen Group, June 2007 Table 6: Relationship between PACE and Competitive Framework PACE and Competitive Framework How They Interact Aberdeen research indicates that companies that identify the most impactful pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute. Source: Aberdeen Group, June 2007 © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
Where’s My Stuff ?! Managing Work-in-Process with RFID Page 21 Appendix B: Related Aberdeen Research Related Aberdeen research that forms a companion or reference to this report include: • RFID: Finding the Technology’s Tipping Point (December 2005) • The New Retail Differentiator (April 2006) • RFID: From Pilot to Production (June 2006) • Finding the ROI in RFID (September 2006) • Achieving Total Supply Chain Visibility with RFID (November 2006) • RFID in the Pharmaceuticals Supply Chain (December 2006) • The Value Proposition of RFID to the Manufacturer (January 2007) • RFID: Roadmap for Retail (March 2007) Information on these and any other Aberdeen publications can be found at www.Aberdeen.com. Author: Russ Klein VP Research Development Senior Research Analyst, Emerging Technology and Information Management firstname.lastname@example.org Founded in 1988, Aberdeen Group is the technology- driven research destination of choice for the global business executive. Aberdeen Group has over 100,000 research members in over 36 countries around the world that both participate in and direct the most comprehensive technology-driven value chain research in the market. Through its continued fact-based research, benchmarking, and actionable analysis, Aberdeen Group offers global business and technology executives a unique mix of actionable research, KPIs, tools, and services. This document is the result of research performed by Aberdeen Group. Aberdeen Group believes its findings are objective and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, stored in a retrieval system, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com
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