The majority of major retailers including Wal-Mart, Target, Albertson’s, as well as the Department of Defense are instituting mandates for compliance to their major suppliers. These organizations will not be the last.  Movement toward Radio Frequency Identification initiatives can already be seen in other industries including Healthcare, Medical Devices, Automotive, and Pharmaceuticals. These new mandates leave many suppliers with two core questions:

1.      What do we have to do in order to comply?

2.      How can we turn this cost into a positive investment?

Industries Driving Adoption

In the retail industry, supply chain management is a key cost driver. Effective supply chain management is crucial to achieve competitive advantage. In an effort to increase the ability to effectively manage their supply chain, several large retailers (Wal-Mart especially) are now looking to RFID.  The benefits of implementing a full RFID program include:

• Tags can be read without contact and/or line of sight
• RFID readers can differentiate and read multiple items simultaneously
• Tags can be updated with new information as items pass through the supply chain
• Cost savings of RFID:
• Reduce safety stock and inventory requirements
• Improve inventory shrink problems
• Improve visibility and assets, fewer lost /misdirected products
• Reduce inventory while having fewer out of stock items
• More accurate shipping/order fulfillment
• Diminish obsolete inventory
• Reduce sale of counterfeits
• Better regulatory compliance
• Reduce recall costs
• Lower labor costs

Inside the Minds of the Industries Driving Adoption

Estimated benefits and cost savings for Wal-Mart’s deployment of a RFID-enabled supply chain include:

• $6.7 Billion: Eliminating the need to have people scan bar codes on pallets and cases in the supply chain and on items in store reduces labor costs by 15% percent
• $600 Million: Even with the most efficient supply chain on earth, Wal-Mart suffers out-of-stocks. By using smart shelves to monitor on-shelf availability, Wal-Mart boosts its bottom line.
• $575 Million: Knowing where products are at all times makes it harder for employees to steal goods from warehouses.
• $300 Million: Better tracking of the more than 1 billion pallets and cases that move through its distribution centers each year produces significant savings.

Wal-Mart is not the only company that understands the significant benefits of an RFID enabled supply chain.  To date, organizations such as Albertson’s and Target are also issuing mandates.  Another organization that is heavily pursuing these initiatives is the Department of Defense which announced in 2004 that they would be requiring RFID tags to be attached by its top suppliers to virtually all products delivered to the military at the lowest component level, pallet, case or individual product.

The adoption and push towards an RFID-enabled supply chain is continuing to expand beyond Wal-Mart and the DoD.  For example, the pharmaceutical industry is looking to this technology to help solve counterfeit distribution.  The counterfeiting in the U.S. has shown involvement of well-organized criminal operations seeking to introduce finished drug products that closely resemble legitimate drugs yet may contain only inactive ingredients, incorrect ingredients, improper dosages, sub-potent or super-potent ingredients.  Thus, drug counterfeiting poses real public health and safety concerns today, and an even greater threat in the future if we fail to take preventative measures now. With RFID, Electronic Product Codes would permit each drug purchaser to immediately determine a drug’s authenticity, where it was intended for sale, and whether it was previously dispensed and by whom.

SEEBURGER RFID Workbench

The majority of companies will go through an exhaustive search in order to comply; however, this search can also be turned into operational efficiency. Remember that surrounding every movement of a pallet, case, or product there are associated business documents such as Orders, Shipping Notices, and Demand Forecasts.  Because SEEBURGER’s RFID Workbench is built on top of the Business Integration Server, additional benefits can be gained as the possibilities are limitless; specific examples below:

Compliance Functionality

• Connecting to Hardware: Workbench communicates directly to printers and devices allowing organizations to seamlessly program and link EPC and UPC codes. 
• Programming of RFID Infrastructure:  Workbench provides validation and authentication functionality ensuring the tags are working correctly and can be programmed with the required EPC Codes.
• Data Catalog– Logging your Compliance: For mandates driven by companies such as Wal-Mart, an organization must validate that the tags which are being transferred work correctly.  By storing them in our system catalog you can verify that when they left your facility, they did in fact work. Therefore, your company avoids penalties or additional fees. Additionally, Workbench provides a searchable time log if research requests are initiated by the receiving organization.
•  Tag Consolidation: Throughout the RFID process, case data must be consolidated to pallet tags.  In Workbench, cases are read during packing and the combined data is matched to a single pallet tag.  This is necessary as it is very difficult to get a 100% read of packed cases on a full pallet due to interference caused by packaging, tag locations, and load types (i.e. liquids can cause interference during the reading procedure). 

Beyond Compliance

• With Workbench, companies can integrate RFID data into multiple back-end systems within their own enterprise and share that data with partners and customers via Web portals and other electronic interfaces.
• Also,  connect with UCCNet (ONS) to receive not only codes of what you are sending out, but receive verification of transferred goods, thus eliminating manual labor costs and counterfeiting. RFID makes it almost impossible to ship counterfeit products as the EPC verifies brand authenticity.
• Document Exchange – send an ASN automatically when a pallet is logged as going through the last reader to a customer.  There is no manual entry, all information is already logged in the system and when integrated into your existing ERP system, you can send an ASN automatically to the customer. This will also facilitate bill payments and allows you to streamline your customer’s receiving operations.
• Event Management:

o        Sets rules around routing procedures that can notify employees, for example, when an item is in the wrong location or when an item’s temperature drops below or above a certain point (same for humidity levels).

o        Helps to manage the flow of Vendor Managed Inventory (VMI) throughout the Supply Chain.

• Track & Trace Reporting:

o        Trace and verify what has been sent out and connect it to an Inventory Management system to compare it to what has been manufactured.

o        Improve stocking and inventory levels by cutting down need for reserves because you can see where the product is and if it has left the store via comprehensive reporting. 

In Closing

The emergence of RFID technology as a force in the supply chain has created the need for middleware that can manage the flow of data between tag readers and enterprise applications in order to facilitate intelligent use of information generated by RFID tags.  Multiple vendors are entering the RFID middleware space, but most lack the ability to provide an end-to-end solution that can serve basic needs such as reader connectivity as well as more advanced requirements such as application integration.  SEEBURGER’s RFID Workbench is designed to address the full spectrum of RFID middleware needs, enabling an organization to implement RFID on a phased-basis without changing middleware packages or engaging multiple providers. 

Mr. Sprague is the Vice President of Product Strategy for SEEBURGER North America. He is a recognized expert and frequent speaker on traditional and emerging B2B initiatives and vertical solutions. He can be reached at s.sprague@seeburger.com