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Reduce the Cost of Tagging and Reading

ARC Advisory Group's Chantal Polsonetti herein argues that end-users can achieve better value from RFID deployments in their warehouses and distribution centers by relying more on the automation offered by fixed RFID readers and less on the common (and costly) practice of manual tag-reading using portable readers.
Jan 24, 2006This article was originally published by RFID Update.

January 24, 2006—Today's typical EPC RFID compliance tagging scenario involves labor-intensive, end-of-line, slap-and-ship operations that are usually performed in a warehouse or distribution center. This approach is costly to manufacturers because of the typical reliance on standalone stations that employ manual handling, exception routing, and increased labor requirements. It also typically reflects the smallest investment necessary and an attempt to minimally disrupt existing operations. It has limited, if any, integration with the remainder of the operation, and product data is typically not leveraged for internal decision-making. More ominously, slap-and-ship is not a scalable approach that can be ramped up to production volumes in conjunction with the rapidly escalating timelines embodied in customer mandates.

In order for EPC RFID to generate a more universal value proposition across the supply chain, the information it provides has to be generated at no cost. The question for manufacturers, then, is how to automate data generation and collection and eliminate costly human intervention. That is why ARC advocates that manufacturers look at not only the cost of tags and readers, which are beyond their control, but also the cost of tagging and reading, which can be brought within their control.

RFID tag reading/encoding is one of the first areas to evaluate for potential cost savings through automated processes. One straightforward way to assess this potential is to look at whether you are buying fixed readers that become part of your plant or warehouse infrastructure, or if you are buying portable readers that require manual operation and should only be used for exception handling. Hands-free operation through use of fixed readers and similar RFID infrastructure components that are part of the factory or distribution center infrastructure will eliminate the incremental labor and material handling costs associated with current slap-and-ship techniques. This infrastructure approach reduces or eliminates personnel requirements because fixed RFID readers can read automatically, without human intervention. Coupled with the fact that RFID reads are not dependent on line-of-sight (a key improvement over bar codes), automation can represent a tremendous savings relative to today's bar code or RFID slap-and-ship operations.

Beyond read rates, one of the most significant barometers of successful RFID implementation is the ability to capture the RFID information automatically, without disrupting product flow and without manual intervention. RFID enables this automated process and improves product flow through the supply chain since products can be moved without stopping for manual tagging and reading.

Data collection occurs automatically with RFID as tagged items, cases, or pallets pass fixed readers mounted on conveyors, shrinkwrap stations, dock doors, or forklift trucks, with no human intervention required. The reduced need for manual handling associated with this approach has been attributed to anywhere from a 5 to 35 percent reduction in labor costs for a given distribution center. The promise of greater accuracy of shipments, plus reductions in the accompanied returns and processing, can also be beneficial. Estimates of the benefits associated with this type of automation applied to tag reading range from 60 to 90 percent cost reduction for receiving operations to virtual elimination of the labor currently associated with verifying the accuracy of incoming shipments.

We believe that the business case for automating RFID tag and reader operations at the manufacturer will be similar to the experience with automating manufacturing equipment. The first tier, when tag and reader operations are automated, will generate benefits such as manpower reductions for tag reads, verification of incoming and outgoing tagged materials, inventory counts, and other areas through hands-free operation and increased product output relative to slap-and-ship. The second tier of benefits will be generated when the information generated by RFID is made available for use by other enterprise-level applications. The next tier of benefits, and the one touted by many consulting firms and enterprise software suppliers, will be realized when the RFID data is used in real-time decision-making throughout the supply chain.
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