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Avoiding RFID "over sale" – Part II
Issue #115 | Sept. 14, 2007 | by Byron "Woody" Blackburn
Last week I explained how reaching ROI and saving $600,000 in your first year of implementing an RFID solution was a bad thing.
Matching the tools to your process is the key to unlocking value in RFID. You may find that a broken process needs to be fixed and RFID may not even be needed. Barcode solutions can make more sense.
We talked about a large manufacturing-based logistics company that distributes replacement parts, which estimated it lost more than $4 million each year through lost and damaged totes, which carry product in and out of fifty dock doors in their main building.
When the most economical of the active and semi-active RFID solution they were offered cost $3.375 million, the prospect of ROI the first year seemed mighty tempting. [See Part I]
So what did our team find?
As advertised, all the totes exit the distribution system by one of 50 dock doors. But to get to those egresses, they all travel on one conveyor, where they are barcode scanned for content, destination, and routing to the proper loading docks for distribution.By adding one RFID portal at the existing barcode scanning point you can identify exactly which totes leave. You can record the totes’ destination from the barcode scan process at the same time.
All returning totes are also placed on just one conveyor, to enter back into the system.One way out, one way back in, how much simpler could this be? It makes sense to make that consistency work for the manufacturer. This is another no-brainer – put one portal on the return conveyor to record the return of a tote.
There are other goals that might require placing readers at all 50 docks; but all we need to do here is recoup the losses. So by taking advantage of one choke point – the conveyor – we eliminate the need to rig the 50 sets of doors.
Synopsis
Simple processes with limited points of failure are the key here, allowing us to record departing totes at one portal, collecting their unique ID and destination. At the other portal, located on the return conveyor, the RFID reader records each tote’s ID upon return. We already know how many totes went to each particular recipient. By crediting returned totes from the total of how many a customer or warehouse has received, you find "black holes" appear where your totes have not been returned.
Once you know which totes were shipped to and never seen again, or who is slow in the return process, you have the data to assess customer performance. This should lead to retention fees or charge-backs for late, damaged or lost totes. The RFID tags add credibility to the process, eliminating counter-accusations that our client simply misplaced them.
The suggested Plan B
As I promised last week, compared to the best of the proposals this company received, they are now saving more than $2½ million. Like I said up top, saving a mere $600K and reaching ROI in a year is a bad deal – at least when you compare it to the estimated $3.2 million in savings they are beginning to see as ROI is reached in less than six months!
The numbers don’t lie. Tighter portal control in a conveyor environment allows the use of lower cost passive tags. I estimate them as high as $5, opting for semi-active tags. We quoted ruggedized, heavily encased tags to meet the needs of their unique environment. These babies can take some punishment.
They can probably get away with ruggedized passive tags; but I like that battery kicker to improve the reads with so much metal in this manufacturing environment. And saving those extra few bucks at this point is anti-climactic. Special requirements cost much more then the single use, retail style tags, like the now common Gen 2 variety. | Item/Task | Number Required | Cost | | Readers, no antenna array @ $5000 | x 2 conveyors | $10,000 | | Semi-active tags @ $5 | x 150,000 totes | 750,000 | | Infrastructure of network and power at dock doors; software integration | | 10, 000 | | Software | |
25,000 |
| | | | Grand Total | | $795,000 |
Bottom Line: Net savings of more than 2.6 million dollars ($2,625,175) off the RFID tag vendors’ solution. Now not every project or analysis is this dramatic and one sided, but this shows how much RFID can be over sold and still have a very attractive ROI.
Just remember
Start with the big picture view. Make sure the process, requirements, tools, and solutions fit together seamlessly. The desired outcome, of course, is to end up with the simplest and most logical approach.
1. Fix process first.
2. Planned deployment is the key to successful RFID.
3. Spend time with a good integration consultant that is not selling you a solution.
4. Avoid being over-sold
5. Slow down, time is on your side and insures results
Byron W. Blackburn is the principal at Blackburn Global and specializes in vendor relationship management. www.BlackburnGlobal.com
Last edited by sanhan : 09-14-2007 at 11:58 AM.
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