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Process Improvement Drives Manufacturers' RFID Implementations

A study by ChainLink Research shows a third of all manufacturers deploying RFID in response to customer mandates, though more than 40 percent of companies say they are motivated by the opportunity to improve operations.
By Beth Bacheldor
Dec 18, 2006More manufacturing companies are implementing RFID technology to improve their operational processes than to comply with customers' RFID mandates, according to a new study released this week by ChainLink Research, a research and consulting firm focused on supply chains.

"One of the surprising findings was that I expected a higher ratio of manufacturing implementations to be driven by mandates," says Bill McBeath, ChainLink's chief research officer. The study was based on a survey of 275 manufacturing companies of different sizes and industries; many of those surveyed were located in North America, but the respondents also included international firms.

Approximately a third of the companies surveyed said they either had already implemented RFID technology or were planning to do so in 2007 because of mandates dictating RFID's use. More than 40 percent, however, either had implemented RFID or planned to do so because they wanted to improve processes, McBeath says. About a quarter of the respondents indicated they were driven by both customer mandates and process-improvement goals.

According to McBeath, the process-improvement objectives identified by survey respondents were extremely varied. In evaluating respondents' answers, ChainLink outlined eight different processes in which RFID was being applied: manufacturing and plant-floor operations; outbound shipping; distribution and logistics; invoice and dispute resolution; service and support; supply chain and custody tracking (which includes e-pedigrees, or electronic documents used to trace a product's manufacturing and distribution history); recall and product expiration; and asset and capital-equipment tracking.

"What people forget is there's a lot of RFID going on that has nothing to do with mandates," McBeath says. "The bulk of this report is all about taking each of the process areas and drilling down into them." For example, McBeath cites one RFID application designed to improve manufacturers' ability to track the quantities and quality of the bulk loads they receive, such as sugar and nuts. In another application, RFID is being used to ensure automobile parts are assembled in the correct sequence. One automaker using RFID in its assembly operations is Nissan (see Nissan North America Installs RFID-based Real-Time Locating System).

Of the eight categories identified in ChainLink Research's study, outbound shipping garnered the most votes, with 53.8 percent of companies indicating they are using RFID to streamline their shipping operations or planned to do so by the end of 2007. In second place, at 45.7 percent, was using RFID for distribution and logistics.

The study found that the technology isn't only for big companies' use. Although manufacturers with $1 billion or more in revenue were more aggressive than their midsize ($25 million to $1 billion) and small (up to $25 million) brethren, McBeath says the study showed small and midsize manufacturers to be stepping up their RFID efforts, as well.

The report found that about two-thirds of smaller companies are implementing or planning to implement RFID. These smaller firms are the most likely to be driven by process-improvement goals (63 percent) or both process improvement and mandates (27 percent), rather than by customer mandates alone (10 percent).

Ten percent of small companies replied that they had already implemented RFID (compared with 8 percent of midsize and 13 percent of large), while 43 percent of small and midsize firms said they plan to implement RFID by the end of 2007 (compared with 36 percent for large companies). Eighteen percent of small companies and 10 percent in the midsize class are in the process of implementing RFID, compared with 27 percent of large companies.

ChainLink Research will host a webinar on its findings on Tuesday, Jan. 10. More details on the research results and the webinar can be found at the company's Web site.
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