Magazine Article | August 23, 2007

Be Proactive With RFID

Source: Field Technologies Magazine

This third party logistics provider (3PL) implemented a passive RFID (radio frequency identification) supply chain system in anticipation of customer needs and expects $100,000 in operational savings this year.

Integrated Solutions, September 2007

The pains of implementing RFID in the supply chain are well documented. You've heard of suppliers to Wal-Mart, the DoD, and other customers incurring great costs to comply with RFID shipping mandates. You've also heard, though, that RFID can enhance supply chain visibility and improve warehouse operations. Whether you're under a mandate or just want to experience the benefits of RFID, you're probably weighing the pros and cons of implementing — and perhaps fearing the trials. Here's an example of an RFID triumph that can assuage your fears. Megatrux, Inc. recently implemented a passive RFID system to meet its retailer-supplier customers' future RFID needs. In the meantime, it streamlined its own operations to the tune of $100,000.

Megatrux is a multimodal 3PL located in southern California, with multiple warehouses and container yards in the area. Its customers include flatware and electronics companies, both of which ship to retailers such as Bed Bath & Beyond, JCPenney, Kroger, Target, and Wal-Mart. Because Megatrux's customers are shipping to retailers that currently are or might in the future require RFID-enabled shipping information, the 3PL realized it could capitalize upon that need by integrating an RFID solution. "Meeting customer needs and remaining competitive in the 3PL space was about 90% of what drove us to implement RFID," says KC Pelle, executive VP at Megatrux. "If we experienced some internal labor savings, that's great, but it wasn't the main impetus."

To implement RFID, Megatrux began looking for an implementation partner that could provide a customized software component, as well as integrate the appropriate hardware pieces. The 3PL first looked to its existing partnerships and found one with an affiliate of Ship2Save, an RFID solutions provider. "Ship2Save had strong experience working with retail-oriented RFID shipping applications," says Pelle. "Also, its solution was very 'integrateable' and customizable, which was important to us."

In early 2007, Megatrux and Ship2Save began implementing and testing the RFID system in one of Megatrux's facilities, a 200,000-square-foot warehouse that handles the majority of shipments (1 million boxes per year) to two major retailers. Most of the testing Megatrux performed dealt with the placement of RFID tags on the flatware boxes, whose metal contents caused some problems. This is a common situation in RFID deployments, as RFID has inherent physical challenges when it comes to placing an RFID tag on metal. Metal can interfere with the RF signal, and it often requires very precise placement or a specially designed pad behind the tag (which is typically only used in high-value tagging situations, i.e. in transportation, because of the expense of the pad). That challenge was overcome, and four months after beginning, the system went live in June 2007. In addition to Ship2Save's integration work, Megatrux is using a middleware application from the integrator. The RFID solution also includes two SATO CL408e RFID printers that print and encode 4-by-6-inch and 4-by-2-inch  SATO RFID labels with Avery Dennison Gen 2 RFID chips, Motorola XR-440 portal readers at 5 of the warehouse's 36 dock doors, and a Motorola MC9060 handheld computer with integrated RFID reader.

When shipments arrive at the warehouse, employees break down the containers and/or pallets, then print and apply the labels to the individual cases. The pallets are rebuilt with 40 to 50 boxes each, and another RFID tag is applied. The product SKU (stock keeping unit) and RFID label ID numbers on the boxes and pallets are associated with each other via the Motorola handheld reader. That information is sent to Megatrux's WMS (warehouse management system) and ERP (enterprise resource planning) system via the Ship2Save Operation Management System middleware application. That data is then made available to shippers through a Web portal in the form of a dashboard, with such details as each box's location and when it arrived there.

As boxes are shipped out of the warehouse, the RFID portals read the tags and create automatic invoices and advance shipping notices. The RFID system also includes 27-inch LCD screens mounted over each dock door, which provide visual confirmation of the RFID reads. If a portal reader detects that an incorrect pallet is being loaded, the screen changes color and flashes a warning of 'wrong pallet.'

With the RFID solution in place, Megatrux now has precise knowledge of whether a shipment is correct or not and has seen operational savings from reduced vendor chargebacks and higher quality control. Additionally, the 3PL no longer has to conduct cycle counts and inventories. "We know at all times, accurately, how many pallets and cartons we have because of the RFID system," says Pelle. "We have control of mispicks and mis-shipments, so our inventory accuracy is 99.9%." It is from these improvements that Megatrux expects its $100,000 savings.

Though the passive RFID system in place enables Megatrux to maintain an accurate inventory, it does not provide real-time position information of what's in a specific zone of the warehouse. To do that, you would need active RFID technology, which Megatrux included in its original RFID plans;  Ship2Save is currently performing R&D and testing solution components to deliver an active solution (see sidebar on p. 12). "We knew from the beginning that we wanted to deploy passive and active RFID, so we made sure it was something our integration partner could accommodate," says Pelle. "We looked at active RFID largely to monitor zones in the warehouse and provide real-time visibility as products move throughout. We're looking at a combination of forklift-mounted readers and active readers that periodically 'ping' the tags in a dedicated zone." Megatrux is anticipating the active solution will improve production efficiencies, asset utilization, forecasting, and inventory accuracy by pinpointing the location and status of products as they move through the supply chain.

The active RFID system should be delivered and integrated with the existing passive system in early 2008. Then, Megatrux plans to install the RFID system in all of its warehouses within the next 18 months.
Think about it. A passive and active RFID system deployed to one 200,000-square-foot within a year. The active component is not yet in place, and the 3PL is already experiencing internal benefits. Don't wait for a mandate — start implementing now.