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Part 5: Warehousing Efficiencies

Squeezing inefficiencies out of the supply chain will mean turning transshipment points into engines of efficiencies. Here's how to do it step by step.
Oct 18, 2002—Oct. 14, 2002 - In Part 4 of our Special Report Low-Cost RFID: The Way Forward, we described the importance of having a vision for what your company will look like when it is gathering data on everything it makes, moves or sells using RFID. We also talked about the importance of a step-by-step approach. In this section, we'll look at the use of RFID in warehouses and distribution centers, which will likely be where many implementations start. And we'll show you how you can move from automating some simple data collection tasks to totally transforming your supply chain.

Labor accounts for more than half of warehouse costs
Members of the Auto-ID Center who are participating in the field test and running their own pilots say that they will start deploying RFID in warehouses and distribution centers by simply using RFID tags instead of bar codes. Initially, they will likely track just what's coming into and leaving the warehouse with RFID and use bar codes to identify the goods within the warehouse. The benefit: a reduction in the amount of time it takes to match actual goods received or shipped to what the paperwork said should be shipped or received. This is a very basic first step, but the savings involved are significant enough to encourage companies to begin adopting RFID technology.

Labor costs account for 50 to 80 percent of the overall cost of running a distribution center, according to IBM Business Services. Twenty to 30 percent of labor is typically devoted to receiving. If pallets are delivered to the DC with RFID tags, the amount of time it takes to compare the items delivered to the expected delivery can be cut by 60 to 90 percent. (Obviously, much more time is spent confirming goods on a mixed pallet, so it depends on the type of warehouse or DC.)

Installing portal readers is not hard, but it still requires sound engineering. During the first phase of the Auto-ID Center's field test, portal readers were placed at the exit doors of manufacturing facilities, and at the receiving dock at a Sam's Club in Tulsa, Oklahoma. Off-the-shelf tags and readers were used to track pallets of All Liquid Detergent, Gillette Mach3 razors and Bounty paper towels as they moved from manufacturing to the retail store. The Intermec tags were read just 78 percent of the time. (The system was designed to make sure that one of two tags on the pallet was read.)

The field test used wooden pallets with two tags in diagonally opposing corners to improve the odds of identifying the pallet. The system was not set up to achieve a 100 percent read rate. It was designed to pick up only one of the two tags on the pallets. So even though the tags were read only 78 percent, 96 percent of all pallets were properly identified. Still, that's not good enough to justify huge investments in an RFID system. Some of the problems were attributable to human error. Pallets went out doors without readers. Goods were put on pallets without tags. Once, the system was accidentally unplugged. One reader failed, and one antenna was damaged.

The field test used only portal readers, and some sponsors concluded that portal readers alone won't guarantee a high enough read rate in a DC or warehouse. One solution is to put a reusable, active (battery-powered) tag on the pallet. The tag broadcasts a signal, which is easier to pick up as a forklift moves through a portal than the signal from a passive tag. The ID on the pallet tag is associated in a database with all the goods on the pallet. Such a system can achieve a 100 percent read rate. Then companies can move on to the next level – tracking goods throughout the warehouse or DC.
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