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Carmakers Study RFID's ROI for Racks

An automotive trade group is researching how much money automakers might save by deploying RFID on reusable containers and racks used to transport parts.
By Jonathan Collins
May 03, 2005Looking to help determine where RFID can best provide automotive manufacturers with a way to cut operating costs and increase efficiency, the Automotive Industry Action Group (AIAG) is preparing a business case to establish the potential return on investment for automakers deploying RFID on reusable containers and transportation racks.

"Manufacturers spend a ton of money on reusable containers such as wheel pallets, and losing them is a huge cost area and a very sore point for them," says Morris Brown, the materials management product manager at AIAG, a nonprofit association focused on helping its 1,600 members companies worldwide reduce cost and complexity within the automotive supply chain. Members include automotive manufacturers and suppliers as well as the technology vendors that work with them.

Morris Brown
Brown believes that reusable containers could be a key area where automakers could quickly see a return on any investment in UHF RFID. The AIAG is currently working with a research firm to poll members of the automotive industry to try and calculate how much not being able to trace reusable containers is costing manufacturers and how far RFID can help to stem those losses.

Racks have to be specifically designed to carry a specific component. Not only are racks used in great numbers throughout the automotive industry, but they also represent a significant investment for automotive manufacturers. Each rack can cost more than $1,000. A single production plant may use between 5,000 and 10,000 racks, and a major automotive firm could use up to 1.5 million of these racks in their production systems around the world.

According to Brown, at present few of these often-customized pieces of equipment are tracked.

"It's very common to see an auto parts supplier using racks from a range of automakers because, with the manufacturing supply chain, the emphasis has traditionally been on getting the parts to the production line on time and not where racks are from and who they belong to," says Brown.

Where tracking takes place, automakers currently use bar code labels to track racks, but bar code labels must be scanned manually because they require line of sight to be read. RFID tags, on the other hand, offer a way to automatically record containers as they enter and leave a production site. Knowing where those containers are could not just help prevent their loss but also cut parts inventory and other operating costs.

In March this year, Avery Dennison, the world's largest maker of self-adhesive labels, said it had developed and tested a new passive 915 MHz RFID tag—dubbed Metal Track—that the automotive industry could use to track reusable containers (see Avery Designs Passive UHF Tag for Metal).

AIAG says the business case study, which should be ready by July, will form the basis for planned best practice guidelines that the group will develop to help its members understand the best way to implement RFID tracking in reusable containers. Those best practices should be ready for publication before the end of the year, says Brown.

The AIAG proposals will leverage existing standards and practices from ANSI and ISO and will not be a replacement for bar code and other covering automatic-identification technologies used in the automotive industry. According to Brown, any data collected by using RFID should be no different than the data collected using other technologies such as 2D bar codes.

"Our focus is on the data, not the data carrier. It should be transparent to any system what carrier the data has been retrieved from," says Brown.

Morris says that at AIAG's 10th annual Auto ID Showcase covering automatic-identification technologies held last week, attendees showed a great interest in the potential of RFID in tracking reusable containers during a presentation from The Kennedy Group, a developer and manufacturer of labeling, packaging and identification systems.
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