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Automakers Seek Fast ROI From RFID

The global economic crisis is driving the automotive industry to adopt RFID to cut costs and improve efficiencies in the manufacture and distribution of cars—and to embrace standards to provide visibility in the global supply chain.
By Elizabeth Wasserman
Feb 01, 2010—In June 2009, the world watched as General Motors filed for bankruptcy protection and took steps to become a leaner company—closing facilities and cutting jobs. Behind the scene, the Detroit-based auto giant also participated in a weeklong RFID pilot that tracked shipments of headliners—the foam-backed fabric adhered to the interior roof of automobiles—from the supplier to a GM assembly plant. An automotive industry standards group watched this test carefully, because it was designed to determine whether RFID technology could streamline manufacturing processes and reduce costs.

GM sequences its auto production so parts, such as headliners, arrive in the proper order at the assembly line. It usually tracks headliners with a combination of bar codes and paper-based sequence numbers taped to the headliners. Different vehicle models have different headliners, and an incorrect shipment throws off production and leads to costly delays.

Daimler is RFID-tracking custom-made returnable transport items to reduce costs and improve production processes.

During the pilot, though, the headliners were shipped in RFID-tagged containers from supplier Grupo Antolin in Lake Orion, Mich., to GM's nearby Lake Orion plant, where the Pontiac G6 and Chevy Malibu are assembled. The ultrahigh-frequency tags stored Electronic Product Codes and auto industry data identifiers, so the supplier, logistics company and automaker could track the containers and their contents. The trial found that RFID container tracking could help both GM and its supplier gain visibility into the supply chain to achieve just-in-time, just-in-sequence manufacturing.

While GM has not yet decided to move forward with the deployment, the underlying goal of the project represents a sea change in the auto industry, which for years has been reluctant to develop standards for use in tracking parts throughout the worldwide automotive supply chain. The pilot showed that two different types of standards-based information can be carried on the same RFID tag and provide benefits for partners throughout the supply chain, says Bill Hoffman, managing director of the Hoffman Systems RFID consulting firm, who supervised the pilot for the Automotive Industry Action Group (AIAG), a U.S.-based trade group that develops technology standards for the auto industry.

As GM and other automakers retool to eke out profits during these challenging economic times, they're realizing the role RFID can play in helping them remain competitive and respond to changes in customer demand. The auto industry recognizes that RFID "is one of the things that could have helped alleviate some supply-chain pain during the economic crisis," says Michael Liard, RFID program director at ABI Research.

Many in the auto industry agree. "Demand fluctuated greatly with everything that occurred," says Morris Brown, program manager of supply chain for AIAG. "Companies had to dramatically shift their product mix from sport utility vehicles to more fuel-efficient vehicles. There were also dramatic changes in demand in response to government incentives—there were big upswings. Anything you can do to have better visibility in the pipeline can help the industry better meet customer needs."
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