Fixing the Warehouse

By Mark Roberti

With companies seeking to cut costs and wastes wherever they can, problems in the warehouse are getting more focus, and RFID can help.

I received an e-mail the other day from René Jones, founder of warehouse efficiency firm Total Logistics Solutions. It offered some interesting statistics regarding warehouse inefficiencies, including some that radio frequency identification could likely solve.

According to Jones, inventory value ranges between 6 percent and 20 percent of most companies' top-line sales. That means a business with $100 million in sales will generally have, on hand, between $6 million and $20 million worth of inventory. "Assuming you are generating a 4 percent margin," he says, "your hard-working sales staff must generate $2,500 in new sales to make up for the $100 of inventory your warehouse lost. If a warehouse loses $100 worth of product each week, the sales staff has to generate $130,000 to make up for the $5,200 of inventory lost in the warehouse."

RFID could help reduce warehouse losses by preventing items from being misplaced until they become obsolete, and it could potentially reduce theft. Several companies have begun tying RFID to closed-circuit cameras so that when specific items go missing, the time they were last read by an RFID system is matched to a video recording to determine who last handled that product.

Warehouse personnel responsible for picking and put-away spend 55 percent to 60 percent of their time traveling to and from storage locations, Jones indicates. When a worker finds that the rack where he's supposed to store a product is full, or that the product he's supposed to pick isn't in the assigned location—which, according to Jones, happens fairly frequently—he has to spend approximately an hour searching for the product, or for an alternative put-away location. RFID can be used to associate a pallet or tote with a specific location within a warehouse, so that workers spend less time searching for products to be picked, or for empty locations for products that need to be put away.

For most distributors, Jones says, 3 percent to 8 percent of orders are returned, and the cost of handling a return can be two to three times that of an outbound shipment. RFID can reduce returns by reducing shipping errors. As items, cases or pallets are picked, an RFID reader can confirm that they match the purchase order and alert warehouse personnel when they don't. Moreover, tagged items are easier to track when they are returned.

There are challenges with using RFID systems in warehouses. Active tags tend to be too expensive to put on every pallet and tote, let alone each case or item. The range of passive high-frequency and low-frequency tags tends to be too short to read tags on pallets on racks high up from the ground, or on units entering via a wide loading bay. And the metal racks in most warehouses play havoc with many ultrahigh-frequency (UHF) systems, making it difficult to associate a tagged pallet or tote with a tagged rack location.

But that's changing as RFID technology companies innovate to overcome these issues. In January 2009, M/A-COM Technology Solutions, a provider of microwave and RF products, introduced a new EPC Gen 2 RFID solution for forklifts that includes laser and acoustic sensors designed to help improve tag-read and accuracy rates (see M/A-COM Combines RFID and Sensors for Smarter Forklift).

I've heard some end users are experimenting with embedding tags in the floor, and are utilizing sensors that can determine the height of the forklift's arms. The idea is to put a tag in the floor in front of each rack location, and to use the height sensor to determine whether a pallet is being put on the ground, on the top shelf of the rack or somewhere in between. Software would associate the tag on the pallet with that in the floor, and determine which shelf the pallet is put on.

As the physics issues are resolved, companies will need to determine whether RFID can significantly reduce the time spent searching for items or empty locations, as well as the time spent scanning bar codes to identify items and bin locations. It seems pretty clear to me, based on the figures Jones provided, that RFID can have a significant impact on warehouse management.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog or click here.