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Part 7: Transforming the Factory

Manufacturers were among the earliest users of RFID. But the shift to open systems with benefits across the supply chain will have a huge effect on the way companies run their operations and work with suppliers and retailers.
Feb 09, 2003—Feb. 10, 2003 - Large manufacturers were among the first businesses to discover the benefits of radio frequency identification. Mercedes-Benz embeds RFID tags in chassis going down the assembly line, so both men and machines can identify the type of vehicle they are working on and perform the correct operation. Dell uses RFID to track components, so they can be sent to the assembly line when they are needed. Even big consumer packaged goods companies like Procter & Gamble have been using RFID to identify and track raw materials stored in reusable plastic containers.
RFID gives robots new flexibility

So it might seem that the manufacturing sector has the least to learn about implementing low-cost RFID successfully. Nothing could be further from the truth. The systems used today are closed loop -- that is, the manufacturer uses RFID to track items internally, and the benefits remain within the four walls of the business. The shift to using open systems, where data is shared with suppliers and customers, heralds changes as profound as any that retailers and distributors will undergo.

In this section of our ongoing Special Report, Low-Cost RFID: The Way Forward, we examine how radio frequency identification is likely to change the way manufacturers run their operations in the short-, medium- and long-term. The aim is to show how manufacturers can take advantage of the opportunities and adjust to the demands of real-time information.

One of the big questions surrounding RFID is: Who will bear the cost of tagging items? Many people believe that large retailers like Wal-Mart, Target, Tesco and Metro will eventually insist that manufacturers put RFID tags on the products they ship to retail distribution centers and stores, just as they have done with bar codes and electronic article surveillance (EAS) tags.

That makes RFID an added cost for the manufacturer. But manufacturers like The Gillette Co. and Kodak are hoping that RFID can be used both for tracking and theft prevention. If RFID can be used to replace EAS tags, then manufacturers will get some of the benefits from putting the tags on. Today, most of the benefits of EAS go to the retailer, while manufacturers absorb the cost.

Some people doubt that smart shelves can be used to prevent shoplifting. Trials are currently underway (see Is This the Future of Retailing?). But even if manufacturers have to put both RFID tags and EAS tags on their products, they can still get a return on investment (ROI), even in the short term.
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