Dec 01, 2011With the "soft" economy now entering its fourth year, by some estimates, it's easy to understand why many business leaders are tempted to belt out a few bars of the old Merle Haggard tune "Are the Good Times Really Over?"
For many companies facing dismal markets and depressing financial outlooks, it's not a question of getting back to business as usual, but grabbing onto a life ring that will keep them afloat for the duration. While radio frequency identification alone can't restore the good times, a growing number of businesses are convinced the technology can help them better survive the tough period, however long it lingers, and position them to hit the ground running once the economy gets back in gear. By powering revenue-building innovations and allowing adopters to run smarter, leaner operations, RFID is filling a critical role for companies that have already made the most of all the traditional recession-fighting tools at their disposal.
"Everybody is a little scared about what's going on in the economy," observes Drew Nathanson, VP of the Auto ID practice at VDC Research, a technology market research firm in Natick, Mass. "There's a lot of volatility, and volatility typically means holding onto your money." Nathanson thinks now is the time for businesses in almost any field to consider implementing or expanding their use of RFID. "The value proposition is proven; it's a smart investment," he says. "The benefits adopters get are immense, especially the influence on the bottom line."
Businesses that employ RFID to save money or create new revenue streams can protect their bottom line and market share, leaving budget slashing and employee layoffs as absolute last resorts, says Anthony Palermo, director of business development at the Academia RFID Centre of Excellence, an RFID training, certification and consulting firm in Montreal. "People are always looking to find ways to make things more efficient, but when the [financial] crisis happened, many organizations went overboard," he says. "I think people just cut; they cut their budgets, they cut their staff—it was reactionary. Now, businesses are being proactive by looking at ways to make things more efficient." That way, he adds, they'll be ready if the economy falls into a double-dip recession.
Here's an in-depth exploration of why four organizations in different sectors adopted RFID during these tough economic times, and how they are benefitting from the technology.
In today's ultracompetitive business world, manufacturers need to find innovative ways to speed production without sacrificing quality. This is particularly true in the surgical products field, in which quality lapses can lead to needless patient suffering and multimillion-dollar lawsuits. For Zimmer Ohio, a surgical products distributor based in Columbus, Ohio, RFID opened the door to both faster production runs and fewer mistakes.
One of Zimmer Ohio's primary services is supplying prepackaged surgery cases, including all the components necessary to complete operations, to hospitals, clinics and other health-care industry customers. Each case is custom-packed to include the implants, instruments, devices and other items specific to the individual surgery.
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Traditionally, the company's cases were assembled manually, scanned and processed. The system included a visual inspection for accuracy by a trained employee. It was the employee's responsibility to determine whether there were any missing, extra or expired instruments, a job that demanded someone who knew the appropriate contents of all the various case types. The process was inherently error-prone, dependent on the employee's skill and knowledge, as well as that person's attention level on any given day. In other words, it was a process crying out for automation.
Zimmer Ohio turned to systems integrator RFID Enabled Solutions (RES), of Dublin, Ohio, to develop a better inspection process. RES responded with an RFID solution that includes a portal to scan and verify completed surgery cases against an order list stored in a database. If the system detects an error, it alerts a supervisor to any missing, extra or expired items in the case. The new process saves Zimmer Ohio both time and money, and eliminates the possibility of surgery-case discrepancies.
"The biggest gain was quality—the ability to meet customer requirements of 100 percent accuracy, 100 percent of the time," says John Reese, Zimmer Ohio's warehouse manager and leader of the company's RFID project. "In the past, we had a preinspection system in the warehouse, and then the sales rep [stationed in the operating room] did another inspection—there were four manual inspections." Yet, warehouse accuracy rates never surpassed 98.6 percent, which meant that any overlooked mistakes had to be detected in the operating room. "It was a problem, just because of human error and the speed at which things are moving," Reese explains. "But now, we have 100 percent accuracy."
Zimmer Ohio also gained the efficiency boost it was seeking. "The new system has resulted in three hours of time savings per inventory specialist per day, a 37 percent productivity increase," Reese says.
The technology also will help Zimmer Ohio meet anticipated future growth, Reese says. "It is a growing industry, even in these recession times," he observes. "It's not as fast as in the past, but it is still growing and expected to even grow faster in the next few years just because of the baby boomers—knees, hips and things like that."
Once companies deploy an RFID system to solve a specific problem, they discover that RFID-generated data can provide actionable business intelligence. "I think people are starting to understand that more intelligent data helps you make quicker and better decisions," Palermo says. "I mean, we've always known this, but now this option is [finally] available."
Nathanson agrees, observing that RFID has already assumed its place as an essential information carrier. "It's all about business intelligence and the information the system is providing and how you leverage that," he says.
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Texas Health Presbyterian Hospital, in Dallas, for example, is fighting back against hard times by using RFID-generated visibility to squeeze more value out of its existing equipment. "We're a 900-bed acute-care facility with 3,500 employees, 1,500 physicians," says Clint Abernathy, the hospital's performance and productivity director. "We have 7,000 assets that are tagged, and I think we have somewhere around 15,000 assets total."
Keeping close tabs on various kinds of hospital equipment and allocating them intelligently creates savings by cutting down on the number of redundant items ordered. "With the data that we're getting, we're able to understand where our own assets are, and therefore we can deploy those when the need arises, rather than going and renting," Abernathy says. "Whether it's a bed, an electric wheelchair or a bariatric walker [for extremely obese patients], we're able to deploy our own resources."
RFID-enabled visibility also helps Texas Health Presbyterian get a better handle on its overall inventory needs. "Part of the intelligence we've learned is that some things, either items we're renting or some of the assets we already have, we don't have enough of," Abernathy says. Managers recently discovered, for example, that the hospital didn't have enough bariatric beds. "That was something we learned through business intelligence," he says.
The hospital is so pleased with its current RFID investment that it's planning to expand the technology into other areas, including equipment security monitoring. "We're in the middle of integrating [RFID with] our security IT cameras, so that whenever a piece of equipment gets within a certain range of an exit, the camera will turn [and begin recording it]," Abernathy says. "The system will also page our security people, so we will have the video of someone leaving with the asset, as well as a patient security officer who can meet the person at that exit to try to keep the shrinkage from occurring."
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Mark Meyer, Texas Health Presbyterian's CFO, says whenever the hospital considers a capital investment, it evaluates the potential return. "If it's not a critical piece of equipment related to patient care, then we do look for some kind of a return on that investment."
Abernathy adds that the RFID system's ROI has far surpassed the original estimates, thanks to savings in acquisition costs, inventory shrinkage and time spent searching for equipment, among other criteria. "The actual results have exceeded that [estimated] return," he says.
It's no secret that municipalities worldwide are struggling to cope with budgets diminished by falling tax revenue. RFID is a tool that can help cash-strapped governments maintain service levels without raising taxes (and public ire). In Michigan, the City of Grand Rapids optimizes recycling truck pickup routes and schedules by analyzing data collected from tagged residential disposal bins. Residents of neighborhoods with high levels of recycling participation are rewarded with points they can redeem for special offers from area merchants.
"We wanted to encourage recycling, but we also wanted to become more efficient and optimize our routes," says James Hurt, the city's public services director. "It really comes down to asset management," he says. The system uses reader-equipped trucks that tell city analysts where each bin is located, when it was last tipped into a truck, how often it's been tipped and other pertinent facts. The information is then used to coordinate pick-up schedules and allocate vehicles to specific routes.
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Refuse pick-up is tough work, particularly during harsh Michigan winters. Working with systems integrator AMCS Group, of Limerick, Ireland, and Cambridge, Mass.-based technology developer ThingMagic, the city developed a mobile RFID system tailored for the rugged world of waste carting. "It snows a great deal in the wintertime, and it's tough on our workers and our equipment," Hurt explains. "RFID technology had the [added] benefit of no extra work for our crews—you simply have to tip the cart and it's read."
City managers didn't have to wait long to see the system deliver impressive results. "In the first seven months of 2011, our refuse tonnage was down approximately 15 percent—we saved almost $75,000 by not taking that material to the incinerator to be burned," Hurt says. As trash loads diminished, recycling tonnage rose by more than 50 percent. "Our community is really recycling... well, gangbusters," he says. "We have been so pleased with it that we are moving it into the next level of our solid waste management, refuse collection, where we'll go to a pay-as-you-go system solely."
Falling RFID hardware costs encouraged city managers to adopt the technology. "Cost is always a factor, especially when you're talking about these large-scale developments and deployments," Hurt says. Further research convinced the managers that RFID had become a mature and widely adopted technology. "I've just started to learn about RFID technology, and I've been very impressed by how it works and how reliable and durable it is," he says.
It's difficult enough surviving in the ultracompetitive fashion business without losing precious market share—and revenue—to counterfeiters. That's why Braccialini, a handbags and fashion accessories manufacturer in Scandicci, Italy, near Florence, turned to RFID for product authentication, to assure that only genuine Braccialini merchandise reaches consumers around the globe.
Braccialini brands such as Gherardini, which has made leather accessories in Florence since 1885, are known worldwide, says Alvise Mariuzzo, the company's CIO. Such renown, however, makes the items a tempting target for knock-off artists who peddle cheap imitations in shops, at flea markets, on sidewalks and elsewhere for as little as one-tenth the price of the genuine equivalent. "Our goal is to make money, but in a correct and ethical way, preserving the history of our brands," Mariuzzo says.
The RFID authentication system Braccialini developed with Temera SA, of Stabio, Switzerland, enables Braccialini investigators and government customs inspectors to determine whether a product bearing the company's name is, in fact, the real thing. The system, which uses technology from Seattle-based Impinj, aims to protect consumers from purchasing inferior merchandise while also safeguarding the revenue streams of Braccialini and its worldwide distributors and retailers.
Although product piracy is an immense problem for Braccialini, as it is for other high-value manufacturers spanning a variety of fields, Mariuzzo can't pinpoint the amount of money his company loses to counterfeiters. "It's not so easy to tell the numbers, because we don't have the exact dimension of this phenomenon," he says. "Using the RFID technology, we are trying to get these numbers."
With so much money at stake, and rampant piracy threatening the very existence of some manufacturers, product verification is rapidly emerging as a major RFID application. "Authentication is going to be huge," Nathanson predicts. More businesses are choosing RFID authentication because it removes many limitations of current authentication tools, he notes, "such as those hologram stickers, for example, that are used on sports equipment for authentication."
Mariuzzo, meanwhile, is looking forward to the day mobile phones equipped with Near-Field Communication technology allow shoppers to verify a product's authenticity simply by bringing their handset close to the product. "This will be a plus," he says. "Then we could say that Braccialini bags have an electronic certificate of authenticity and are impossible to clone."
Investing Strategically
Hard-earned experience has taught many businesses the wisdom of making strategic investments in technologies that create impressive long-term gains, regardless of current economic conditions, Nathanson observes. "It translates, increasingly, to a larger group of companies that are better prepared for today's situation and a lot more forward-thinking with their investments," he says.
Palermo advises business managers planning to use RFID as a recession-fighting tool to begin by targeting a specific, high-impact application. "Start with the one thing that is going to create the most benefits," he says. Such an approach helps justify the investment to executives, while making the innovator look like a business genius. "If top management sees a big bang for the buck, then you can start to look at other applications."
Here's how companies in other industries are using RFID to increase sales, improve efficiencies, save time and money, and boost productivity. (You can read detailed reports about each deployment at rfidjournal.com.)
Apparel retail: By late 2012, all Bloomingdale's and Macy's stores will employ RFID to track the garments and personal items most often replenished, accounting for roughly 30 percent of the company's sales. Pilot tests at stores and distribution centers found that inventory accuracy—knowing which goods were located at which specific spot—increased to 97 percent, thanks to the item-level RFID application. RFID will enable employees to conduct inventory counts faster and more frequently throughout the year—and that should lead to fewer instances of out-of-stocks on store shelves and increased sales revenue.
Construction: Central Norwegian construction firm Grunnarbeid is deploying an RFID solution throughout its operations to track tools as they are transported to—and stored at—construction sites. The company currently completes 133 deliveries daily, moving equipment from one site to another, or to and from its central warehouse in Trondheim. The system is expected to reduce that amount by roughly 80 percent. The firm estimates that it spends approximately 24.5 million krone ($4.3 million) annually on unnecessary movement of equipment, or having employees drive to a location simply to discover the required assets are not there.
Logistics: One year after Kimberly-Clark installed an RFID system to better manage logistics providers at its plant in Tocancipa, Colombia, the company says it has gained visibility into operations. K-C Colombia depends on transport companies to pick up and deliver products to customers—some 2,000 to 2,500 truckloads depart the facility monthly. By tracking the arrival, loading and departure of trucks, the company can reduce delays and waiting times. K-C Colombia shares information regarding the status of the loads and their drivers with the transport companies, so the providers can better schedule their trucks. K-C intends to install a similar system at its other Colombian plants in early 2012.
Warehouse management: Sumitomo Electric Lightwave, a North Carolina manufacturer of fiber-optic cables, deployed an RFID system to track raw materials in its warehouse, to ensure parts don't run out or go missing, which would delay its manufacturing schedule. The warehouse- management solution improved efficiency, which, in turn, enabled a 40 percent increase in annual production. This year, Sumitomo plans to begin tagging smaller inventory items, such as containers of fiber and ribbon. In addition, the company plans to use the RFID system to track reusable steel cable reels, which often remain at customers' sites for months after a job.