Oct 01, 2010Most European business owners and managers, like their global counterparts, are seasoned recession fighters. They took the usual steps to cut costs and raise efficiencies, including reducing payrolls and eliminating discretionary spending. But in this historically challenging economic downturn, the usual wasn't good enough to boost profits. So many private enterprises across the continent decided they needed a new approach, and they began fighting the sluggish economy with radio frequency identification technologies.
In 2008, U.K. construction firm Byrne Group implemented RFID to improve management and control of assets at all its construction sites, including London's Olympic Stadium. "The recession was a warning sign that we needed to tighten our worksite practices," says Matthew Preston, the company's IT director. The firm, which was manually tracking assets on its various sites, estimated it was losing £100,000 ($153,000) worth of consumables and other small items annually.
"At Byrne Group, we have to manage and control more than 13,000 items of equipment and tools," Preston says. "We're always looking for a more efficient way to control these assets." He notes that detailed research showed the company that RFID, by providing a holistic approach to asset management, could improve equipment and tool oversight.
Byrne Group now uses an RFID system developed by 4hSolutions of Leicestershire, England, to speed and protect equipment deliveries, as well as to track usage. By issuing RFID-enabled ID badges to its roughly 2,000 employees, the company can maintain an accurate electronic record of which workers use which assets. This enables the firm to prevent unauthorized employees from operating equipment, and to track the consumables used on specific projects. The system can also pinpoint workers who use too many consumable items, or who take an asset and don't return it. "The system generates an end-to-end audit trail with an inspection, maintenance and hire history," Preston says.
The deployment, completed earlier this year, is already showing positive results in the areas of inventory control, accuracy and reduced costs. Before introducing RFID, the company had to process more than 3,200 job cards every year, each reporting an "incident," such as a lost tool. "There has been an 87 percent reduction in job cards processed," Preston says. "Loss and theft of equipment has been halved, and savings of more than £300,000 [$386,000] have been identified."
The European companies adopting new RFID technologies and processes don't fit into a particular mold; instead, they cover a wide swath of industries. "We've seen both big and small companies investing in RFID," says Marcus Vaenerberg, senior VP of UPM Raflatac, an RFID technology vendor headquartered in Tampere, Finland.
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What these companies do have in common is a focus on identifying the business case and targeting specific areas of inefficiency before moving ahead with the project. That's particularly important during these rough economic times, says Sanjay Chatterjee, an RFID industry analyst for Mind Commerce, a technology research, consulting and training firm headquartered in Superior, Colo. "For a new deployment, it's always a business case that holds the key to getting the whole project approved," explains Chatterjee, who is based in Gouda, The Netherlands. "If you can make a successful business case, and show supporting financial projections and process improvement points, then there is really no way that top management will hesitate to move ahead on the matter."
European businesses are deploying RFID to drive down costs and increase profits by tightening sagging supply chains, automating production processes, reducing waste and improving customer service. Companies that deployed RFID in the midst of the Great Recession include:
• Antolini Luigi & Co., an Italian producer and distributor of granite, marble and other stone products, which tracks the manufacture and location of the 900,000 slabs of polished stone it sells each year, as well as the large blocks of rock from which the slabs are cut. The company estimates the RFID system has reduced its labor costs by 40 percent and improved inventory accuracy by 80 percent.
• Azucarera Ebro, a leading sugar manufacturer in Spain, which tracks incoming and outgoing truck shipments to gain better visibility into, and control over, its operations, and has automated its billing and other processes.
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• Minera Norge, a Norwegian company that manufactures slate tiles, blocks and related products for roofing, flooring and other applications, which deployed RFID to streamline year-round production and shipping (see Minera Norge Takes RFID to the Arctic Edge).
• Würth Oy, a Finnish supplier of screwdrivers, drill bits and other industrial products, which uses RFID to help automate order fulfillment. The company says the system saves time by ensuring that the containers are routed to the correct stations, and lowers labor costs by reducing the number of manual steps in the picking process.
Government agencies in Europe are also turning to RFID to save money. Here's a look at the business cases that drove four other European organizations to implement RFID.
Streamline In-Store Inventory Management
Earlier this year, Italian knitwear company Franco Rossi began deploying an RFID system to accelerate its supply chain. The Comeana, Italy-based firm, which makes and sells a wide range of garments including sweaters, shirts, blouses and trousers, is now working to extend similar efficiencies to the retail outlets that carry its products. Working with IDNova, an RFID solutions provider in Prato, Italy, Franco Rossi is piloting an RFID system that will allow regional representatives to visit stores and check stock levels using handheld readers. The technology will help the representatives determine which items are selling best and which should be returned to the warehouse. The system can then adjust replenishment flows in lockstep with customer demand. "It will help us make necessary adjustments far more rapidly—within just hours," says Franceso Leone, the company's sales manager.
Leone believes the technology will help Franco Rossi become a stronger player in an ultra-competitive industry that has become even more cutthroat in recent years. "We are really focused on helping the [stores] make their profit margins and have a good selection of products," he says. "RFID will help us reach those goals."
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Fabrizio Innocenti, IDNova's managing director, feels that just about any fashion business can cut costs with the help of RFID. "Return on investment benefits in the fashion industry are practically guaranteed, even with medium to low production volumes," he says. "The benefits are mainly based on time and personnel savings."
Business Case:
Locate and Manage Stock More Efficiently
In The Netherlands, commercial vehicle seller BAS Trucks is fighting back against tough times with a real-time location system (RTLS) designed to make it easier for employees—and customers—to view specific trucks and trailers among approximately 1,000 vehicles sitting on lots spread across three locations. The RTLS, from Zebra Enterprise Solutions, helps employees locate vehicles, as well as prepare new vehicles faster and more efficiently. The system also allows managers to analyze the amount of time spent in the preparation of vehicles for sale, promising to further improve efficiency. "Now we can do a real-time stock check," says Theo Van Kempen, business operations director at BAS. "Previously, we did a stock check every two months—that was a four-day job, and now we can do it in one second."
Van Kempen says his company will turn over almost 6,000 trucks and trailers in 2010, making an efficient stock-management system a priority. He notes that the RTLS has fulfilled its role and paid off in a way no other approach could match. "A track-and trace-only system with handhold scanners would not do," he says. "If a truck has been moved, we want to know the new location [with] 100 percent visibility—we don't want to miss any truck."
Maturing RFID technology also played a role in BAS' decision to deploy the RTLS, according to Van Kempen. "We investigated the technology first three years ago, and we found out that RFID was very new and relatively untried at that time," he says. "Now, expenses and investments are less than they were three years ago; there's also much more experience to draw from."
Improve Customer Service and Satisfaction
In Finland, furniture manufacturer Martela launched an enhanced RFID-based inventory-management system earlier this year. The deployment is designed to help the company's customers—primarily hotels, schools and other institutional organizations—rapidly inventory their Martela desks, chairs and other furniture. Such data is necessary for internal asset documentation or compliance with government auditing regulations. The inventories, offered as a value-added service, are conducted by Martela employees who travel to customer sites and use handheld devices to read the RFID tags applied to the furniture at the Martela factory.
Panu Ala-Nikkola, Finnish business unit director for Helsinki-based Martela, says today's uncertain business environment is a good time for companies to solidify their connections to key customers by providing better and more reliable service. "The reason we decided to go ahead now is that we... needed to make our inventory service more efficient and faster," he says. "At the same time, we learned that RFID technology had matured enough that cost would not be an obstacle." So far, only three Martela customers are using the RFID-based inventory service, although the company hopes to eventually expand the offering to all its clients.
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Ala-Nikkola feels that the faster and more accurate system should go a long way toward boosting customer satisfaction. "That's a major benefit for us," he says.
Business Case:
Survive the Recession and Prepare for Future Growth
Perhaps the biggest challenge facing any European business hoping to use RFID to combat the economic downturn is the complex, sometimes lengthy process of putting ideas into action. Dwindling corporate cash flows and tighter credit means managers have to work harder and smarter to get their RFID plans off the ground. "Nearly all projects currently take longer to get approved due to the financial constraints and the need to prove a solid payback," says Andrew Davies, 4hSolutions' managing director.
Davies advises enterprises to launch their RFID strategies by focusing on a specific problem area. "Our customers have always started with a particular goal in mind," he says. "From there, they identify the main problem areas, implement a system that solves these problems and then use that deployment to secure wider adoption in other business areas."
Some European businesses are sidestepping the current financial bottleneck by partnering with a larger company, such as a supplier or logistics provider, that's willing to subsidize some or all of the RFID system's cost in exchange for increased efficiency and long-term cost savings. In Europe, government funding is sometimes available for RFID project trials and deployments. "Once a company has made a preliminary assessment of the benefits and advantages of a specific investment, my suggestion is to look for a suitable partner," says IDNova's Innocenti, noting that an experienced partner can also help a new adopter conquer the RFID learning curve. "RFID is not an easy task," he observes. "It requires a lot of experience."
Besides helping adopters survive the economic downturn in good shape, RFID allows businesses in Europe and elsewhere to deploy powerful new identification and monitoring solutions that will continue to pay dividends long after the current crisis. Martela's Ala-Nikkola expects its RFID-based inventory-management system to generate benefits well into the future. "We definitely think this will save us money," he says, adding that the company's previous manual audits were both time-consuming and error-prone.
Savvy European businesses understand that RFID will help them through today's tough times and allow them to leap ahead of competitors when better days return, says Michael J. Laird, RFID practice director at ABI Research, a technology analysis and consulting firm in Oyster Bay, N.Y. "When there are difficult economic times and tight economic conditions, you have to look at what's in the best interest of the company," he observes. "I think the cost savings and the significant value propositions RFID can bring are what's drawing more European businesses to the technology."
"The best time to do these types of projects is now," says Byrne Group's Preston, "getting yourself a competitive advantage for the future."
Private businesses aren't the only European enterprises turning to RFID in the wake of the Great Recession. Facing a government mandate to save £20 billion ($31 billion) over the next several years, the U.K. National Health Service (NHS) is pressuring its hospitals to find new ways to improve productivity and efficiencies—and save money. "Perhaps we've been hit even harder [than private businesses] as a public sector organization," says Sue Rushbrook, associate director of systems and network services at York Hospital in York, England. An NHS requirement to cut costs by 10 percent inspired York Hospital
managers to put long-dormant RFID plans on the front-burner.
"We always knew that RFID was kind of around the corner, [but] we started investigating this more fully during the past 18 months," Rushbrook says. "The issue for us was, how can we ensure that we put in applications that can improve the quality and safety for our patients... and, hopefully, save money."
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York now uses RFID to track essential and expensive equipment, such as wheelchairs and heart monitors. A separate system continuously monitors the temperature of refrigerated pharmaceuticals, reducing spoilage.
Getting the funding required to install the RFID system was perhaps the trickiest part of the project, but Rushbrook says hospital administrators understood it's sometimes necessary to spend a little money to save a lot of money. "We created a convincing argument around quality, safety and cost savings," she says, "so they approved the expenditure."
Rushbrook reports that the RFID systems are already paying dividends, helping the hospital make the mandated 10 percent cut by improving staff efficiency and eliminating pharmaceutical waste. Essential equipment is now organized and immediately available, upgrading service and enhancing patient care. "The staff doesn't waste time chasing around to find pieces of equipment," she says. "Also, we don't need to overstock pharmaceuticals."