The world’s largest flag manufacturer, New Jersey-based Annin & Co., is using RFID to track the cases and pallets it ships to three RFID-enabled Wal-Mart distribution centers in Texas.
Annin began implementing the RFID system in 2005, says David Smith, Annin’s corporate manager of logistics and special projects, officially launching it in February 2006. Smith says Annin’s system could be used for additional purposes, such as reconciling and confirming orders, but that the company is holding off on further investment and wider deployment of RFID until the technology is more widely requested by Wal-Mart and other retailers.
“We will continue to collaborate with Wal-Mart,” Smith says, “and ultimately wait until Wal-Mart expands [RFID-]enabled warehouses through the country.” At the time Annin launched its system, Wal-Mart was operating five RFID-enabled warehouses. Now, he says, it has three RFID-enabled distribution centers.
According to Smith, Annin would be willing to tag cases of goods directly after manufacturing them, rather than after picking and packing, if Wal-Mart were accepting RFID-tagged goods at a majority of its stores. “Right now, tagging after manufacture is not cost-effective,” he says.
“We decided for a slap-and-ship approach after looking at the total cost of tagging at the manufacture level,” says Smith, explaining that Wal-Mart buys cases of flags from Annin rather than individual flags. Were Annin to tag cases directly after manufacture, he says, it would have to tag all cases, not just those destined for RFID-enabled Wal-Mart locations.
Annin first became interested in RFID in 2004, in an effort to save labor costs by having employees use RFID instead of scanning bar codes. Expecting most large retailers to issue RFID mandates within three years, the manufacturer wanted to have the technology available to protect its existing customer base and potentially win new accounts. In addition, Annin imagined RFID could eventually provide better control of its inventory, as well as reduce the time spent confirming to retailers that their goods were shipped.
At the time, Annin’s SAP systems integrator, CIBER, was looking for a reference customer for an RFID project, and the two teamed up to design and implement an RFID system for the small business. Although Annin produces 10,000 different flags and flag accessories, the firm is still considered a small business, based on its annual sales. In the original business case it used to justify its investment in RFID, Annin calculated that using the technology would improve shipment accuracy, thereby reducing retailer chargebacks.
Since so few Wal-Mart stores are presently RFID-ready, Smith says, Annin opted not to go through the additional effort and expense involved in using the RFID system to reduce chargebacks. He states that Annin will follow Wal-Mart’s rollout plan and ultimately determine, at a later date, when to pursue and enhance its present system.
“At the time our project began,” Smith recalls, “there were numerous nuances that restricted us from integrating RFID into our order reconciliation process.” For now, Annin primarily employs RFID to satisfy the Wal-Mart mandate, placing RFID labels on master cases containing unit boxes during the last production step—packaging.
Based on a paper work order, an employee uses the computer system and a Zebra printer to encode the required number of EPC Class 1 Gen 2 RFID tags. Containing only a unique ID number, each tag is assigned to a particular order in the computer system. Alien Technology inlays, produced by the Kennedy Group, are embedded in a label measuring 2 inches by 4 inches, printed with a bar code and such human-readable information as the tag’s EPC number and the EPC trademark. A worker paper-clips an RFID label to each delivery document, then hands the stack of papers to an employee packaging orders.
After being pulled from the warehouse shelves, the order is moved to a work station containing a bar-code scanner. As the employee manually scans each carton’s bar code to verify against the order, the specific RFID tag is applied to the master case. The worker visually verifies that the label is correct by matching the global trade identification number (GTIN) from the RFID label to the existing, linear bar-coded GTIN printed on the carton’s label.
After the order has been verified, scanned and tagged, the operator moves it to the 42-feet-long RFID conveyor line, which is outfitted with a cage portal housing three Alien antennas attached to one Alien reader. Each tag is read and verified, and the information is recorded in SAP.
Once the pallet or cases have been completely loaded onto the belt, the operator closes out the order by sending a pallet RFID tag through the conveyor. “The final tag we send down the line is the pallet tag,” Smith says. “When the pallet tag is read, the system knows that all items previously read are commissioned to that particular pallet.” Data collected via RFID is compared with information in Annin’s SAP database, and if the orders placed don’t match those packed, the system alerts the staff.
According to Smith, Annin spent approximately $50,000 to implement the system, receiving financial incentives from CIBER and SAP to participate in the RFID project. For now, the company has not yet achieved an ROI because it is not using the system to reduce chargebacks. “There is no active ROI at this point in time,” he says, adding, “It’s in a dormant state.”
Since the RFID system first became operational, Annin has shipped out more than 7,500 case tags and 500 pallet tags. Although Annin is not shipping to a large number of RFID-enabled Wal-Mart sites, Smith says, the manufacturer has learned valuable lessons from its RFID implementation. These include gaining an understanding of RFID “by separating the technology from the hype” via hands-on experience.
“Every business case is different,” Smith says. “You have to learn how to deal with the changing environments—the vendors, the technology and the culture. It’s a culture change at the human level, because many people feel threatened by the technology.” He adds, “It has been a learning experience. I really felt that the car could be driven at 150 miles an hour, but the car has been driving at 55 or 65. The opportunity down the road is to drive at 150 miles per hour.”