The Present and Future of RFID in Logistics
Article Dated: November 16th, 2005
By Noha Tohamy, Forrester Research
Forrester Research attended eyefortransport’s RFID Opportunities for Transport and Logistics Providers event held last month in Las Vegas. At the event, some of the leading logistics providers described their current progress with RFID and provided an analysis of the long-term potential of the technology’s role in their operations.
A number of providers, including DHL, UPS, and TNT, shared their RFID experiences to date. Many of them have experimented with RFID technologies to gauge the applicability of the technology in their operations. Most believe that RFID can make their operations more efficient and build a competitive edge in their market. Specifically, logistics providers that have advanced in their RFID adoption shared that they:
* View RFID adoption as a business imperative for company growth. Most logistics providers present indicated their belief that adopting RFID is not a matter of if, but when. With most expecting RFID to become a minimum customer requirement, logistics providers seek to capture a first-mover advantage in offering RFID-based logistics services. This will give them a significant competitive advantage against other providers that are taking a wait-and-see approach. Additionally, large providers like DHL are interested in shaping the adoption progress through thought leadership, and working with standard bodies like EPCglobal.
* Use nontraditional ROI modeling when choosing to invest in RFID. Logistics providers like Ryder have indicated that, although traditional ROI models might not justify individual RFID project investments, they take a more holistic approach to understand the benefits of early adoption. For example, implementing RFID at their warehouses might not generate much added visibility, but acts as a building block toward uninterrupted, end-to-end visibility services that they can offer their clients. However, logistics providers acknowledge that convincing stakeholders of the future benefits is often a challenge.
* Continue to tackle operational challenges with RFID deployments. While read rates have generally improved in the past year, logistics providers still face many hurdles in collecting accurate RFID data. For example, given proximity of two items, a logistics provider like Schneider Logistics must ensure that the data read that it captures corresponds to the right item. Almost all large logistics providers have invested in their own RFID labs, to research their unique operational needs. Logistics providers also discussed the business challenges, such as the timely return of active tags, to ensure their reuse and to justify their high cost.
Indicative of the increasing penetration of RFID adoption in logistics, providers presented some strategic plans to leverage RFID in their supply chains. And while logistics providers still offer cost-effective services to shippers that are looking to comply with retailers’ mandates, their plans have evolved to analyze the long-term applicability — or lack of it — in different supply chain processes. For instance, FedEx indicated that there is very limited potential in implementing RFID technologies in its already optimized, highly automated package-sorting centers. But many logistics providers see strategic benefits in implementing RFID technologies to:
* Eliminate plant interruptions at just-in-time clients. Logistics providers struggle to meet service-level commitments in industries like electronics and automotive, in which just-in-time replenishment and lean manufacturing frameworks are practiced. It is not uncommon for a logistics provider like TNT Logistics to commit to parts delivery within an hour of a customer placing an order. But, with limited visibility of the location and availability of the parts ordered, logistics providers resort to expedited shipping to meet service-level agreements. This avoids production interruptions or worse, plant shutdown. Using RFID to determine the location of the part and the progress of fulfilling a customer order, logistics providers can determine the time of delivery for this part, and determine if expedited service is necessary.
* Offer less costly transportation services, with guaranteed visibility. Logistics providers are challenged by the inability to offer any visibility of the product flow, as soon as it departs their distribution centers. This is a major problem for logistics providers looking to serve verticals with high product value or strict regulatory requirements. Shippers in these verticals avoid what a logistics provider referred to as the “black hole” of transportation, by opting for the more expensive, more secure air freight services. With RFID, a logistics provider like Horizon Lines can target importers in these verticals, as long as the logistics provider guarantees uninterrupted visibility, from the time the product leaves the distribution center to the time it arrives at its destination.
* Optimize internal operations with accurate asset management. Logistics providers are continuously challenged by the lack of visibility of assets like trailers and pallets in their yards and distribution centers. Using RFID to gauge the location and the status of these assets, logistics providers can significantly reduce asset use. For example, Menlo Worldwide can use RFID-based technologies to assess whether a trailer is present in the yard, and if it is empty or already loaded. Additionally, using RFID-based triangulation techniques, the provider is kept up to date on the location of assets and space availability in its yard, minimizing the efforts of drivers and yard operators to place and locate trailers.