Magazine Article | April 24, 2007

(Not So) Suddenly, It's Asset Tracking

Source: Field Technologies Magazine

It’s hardly a new application, but a convergence of technologies and expertise has pushed asset tracking and management to the foreground.

Integrated Solutions, May 2007

As recently as 12 months ago, there were a handful of buzzwords that really summed up the applications that were thought to drive the RFID (radio frequency identification) industry. Certainly, 'compliance' and 'mandates' would be a couple of top choices. Similarly, Wal-Mart and the DoD would be seen as organizational catalysts.

Today, however, this thinking is undergoing a significant change. Compliance and mandates may drive companies to deploy RFID technology, but don't expect to see production-scale implementations. Without business cases, companies are spending as little as possible to comply with particular mandates. And, that's where the deployments tend to stop.

Enter asset tracking and management. Through mandate initiatives, enterprises now know about RFID technology and have developed an internal knowledge base. In fact, they've actually deployed the technology, albeit sparingly. To leverage this internal expertise, future deployments of the technology need to be based on a compelling business case. And, this is why asset tracking and management applications have gained mindshare. (Asset management applications have been around for years and involved a range of identification technologies, from bar codes to RFID to direct parts marking. These deployments have offered solid and timely returns.) According to a 2006 report from research firm AberdeenGroup, RFID-based deployments focused on compliance should produce a payback in about 45 months. On the flip side of that lengthy timeframe, the same report concludes that an enterprise can expect a payback from asset tracking deployments in about 29 months. Solutions providers and end user enterprises may state that AberdeenGroup's numbers might be off somewhat. Many people will add that compliance apps such as slap-and-ship will never produce a payback, while asset tracking can produce a payback in less than 29 months. It's an argument over degrees and not the fundamental conclusion. The reports states, "Compliance is a good excuse to begin thinking about RFID, but the ROI is likely to be discovered elsewhere." In many cases, that 'elsewhere' is in asset tracking applications.

While the general class of asset tracking applications may be gaining traction, it's entirely clear that end users have different opinions as to the definition of the central term in the application — asset. Some refer to assets as property. In IT circles, asset management can include patch management. And some shipping containers are more valuable than the contents within them. Ed Flaherty, president and CEO of TrenStar, has a three-part criteria that defines the high-value assets being tracked by his clients. "The asset might be an expensive container used in the supply chain. The asset might be an expensive product or good. Or, the asset might be product security, such as with perishable goods," says Flaherty. "Sometimes, the need to track assets cuts across a couple of categories. For instance, a company might have a high-value product shipped in an expensive container. So, both assets need to be tracked."

It's also worthwhile to note that different stakeholders within a company will have different ideas on the value of tracking and managing assets. It's not an uncommon application to track an expensive tool that is used in the manufacturing of a product, for instance. A floor manager may use that asset tracking data to ensure that tools are available so the manufacturing process is not interrupted. That same data can be used by operations directors to ensure that personnel are being utilized efficiently. And, financial execs will consider that asset tracking data to be invaluable to compiling accurate accounting reports. All of these stakeholders need to be included when the initial project is considered.

Asset tracking can include many different identification technologies, but the goal is always similar: knowing the location of high value assets. Knowing the location of these assets surely leads to decreases in theft and shrinkage and increases the security around such assets, as well. Asset tracking also can ensure that operations run smoothly and process flow is not interrupted. "We're working with a customer that is tracking large engine subassemblies worth hundreds of thousands of dollars. The company is certainly not misplacing these subassemblies, but they want to know their precise location and be prepared when they arrive on the production floor," states Tuomo Rutanen, vice president of business development for Ekahau. "Work stops without these subassemblies. There's no margin for error in the manufacturing process." The same applies to production processes in which tools or parts are moved throughout a facility on mobile carts. Again, process flows can be interrupted or stopped if carts can't be located and aren't in designated areas at specific times.

Asset tracking may improve process flows, but it also allows companies to better optimize the assets they have currently deployed. It's not uncommon for hospital staff to hoard wheelchairs, for instance, if they can't be located when needed. The hoarding leads to more shortages, which in turn, leads to urgent leasing requests at premium pricing. When assets seem scarce, employees tend to keep them close and out of circulation. Conversely, asset tracking solutions also can pinpoint when too many assets are deployed in a current environment. Rutanen cites a client that started tracking forklifts within a large distribution center. "When the client looked at the data, he saw that several forklifts were idle for long periods throughout the day. He was able to adjust the picking and putaway processes to better optimize the forklifts. In the end, he was able to eliminate several forklifts from the lease agreement," adds Rutanen.

Flaherty has seen similar WIP (work in process) scenarios where asset tracking played a key role in maintaining production schedules. If products can't ship without specialized containers or pallets, then having enough of those containers and pallets on hand is a point of constraint. "I worked with a company that had this type of bottleneck. The pallet was the asset, because production stopped when the pallets ran out," explains Flaherty. "This led to overstocking of pallets and then disproportional inventory cuts in pallets. An asset tracking solution allowed the company to track pallets and keep levels at a minimum without interrupting production."

In addition to multiple definitions of assets within a company, asset tracking solutions typically have multiple stakeholders within an organization. It's not unusual for an operations manager to pursue an asset tracking solution to address a specific pain point, only to have the CFO become intimately involved in the overall solution. "We want to see a more strategic person get involved as early as possible," says Flaherty. "CFOs, for instance, will eventually have to sign off on the project. They need to understand the data that will be generated and how the asset tracking solution will impact their responsibilities. Once that happens, the project moves along at a faster pace." The accounting requirements of Sarbanes-Oxley, for instance, are burdensome. Data generated from asset tracking solutions allows reports to be compiled more quickly and — most importantly — accurately.

"The financial executives at companies are completely focused on accurate and timely reporting," states Rutanen. "Asset tracking data can address many pain points throughout a company. For the accounting department, that pain point is Sarbanes-Oxley. They care less about production efficiencies and much more about where the assets are located and their condition."

The financial department will be focused on accurate reporting. The operations people will be focused on personnel and equipment optimization. The logistics managers will be focused on timing and delivery. And, asset tracking and management solutions can address all of these varied issues and goals.