Intermech Uses RFID to Slash Inventory and Manufacturing Costs

Intermech expects the system to reduce materials wastage by up to 50 percent, while driving up overall business productivity by 40 percent. The RFID technology and supply-chain software are replacing manual inventory and tracking procedures that Tan says had provided very little visibility into actual inventory. Because of that lack of visibility, Intermech Machinery typically had to keep 20 percent additional on-hand inventory to serve as a buffer against out-of-stocks.

"Each touch point along the supply chain brings extra labor, expense and increased risk of manual mistakes," Tan says. "For example, the wrong product being moved to the wrong locations leads to a slowdown of Intermech's manufacturing operations and possible missed customer-delivery dates. The primary goal of the RFID solution is to help Intermech reduce overall costs of operations and increase profitability."

Intermech tested RFID for a year prior to implementing the technology fully in its new factory, which opened doors in May 2006. The company determined that it did not make economic sense to tag every item. Therefore, it figured out which items it would tag and which it would not.

Already, there have been improvements reported. Ultimately, Intermech says it expects the RFID and supply-chain management system to help reduce the man-hours required to take inventory of its stock. Prior to its RFID implementation, Intermech needed 40 employees working one entire workday to check stock. With its RFID system deployed, however, it hopes to accomplish the same task using just two employees working half a day.

What's more, Tan says the system is increasing the number of orders Intermech can accurately fulfill. "Previously, it would take up to one working day to process just one customer order," he says.

Intermech is now working with manufacturers in Germany, as well as with local suppliers, to determine how it might use RFID to improve its collaboration with those companies.