Management Accounting

At Home with RFID

Radio frequency tags could prove to be a boon for tracking corporate assets — including people.
John EdwardsJuly 13, 2005

Despite reports to the contrary, things do occasionally work out for the best. Consider the case of radio frequency identification (RFID), or, more specifically, the June 2003 edict from Wal-Mart regarding RFID. In that pronouncement, the planet’s largest retailer indicated that it wanted all its suppliers to be shipping RFID-tagged pallets to Wal-Mart by 2006.

Suppliers grumbled, citing the cost of tags and the limitations of the technology. They complained so loudly, in fact, that Wal-Mart decided to hold a meeting where vendors could air their concerns.

Well, a funny thing happened on the way to the forum. Some businesses discovered that RFID tags generate some really useful information about parts, products — even people. Says Adam Jura, an RFID industry analyst at Datamonitor, a technology advisory firm based in London: “Some manufacturers have moved beyond ‘slap and ship’ and are looking to fully realize the benefits that RFID can bring them.”

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Where’s the Beef?

Managers at Associated Food Stores know all about those benefits. Three years ago, executives at the Salt Lake City–based food distributor, which serves more than 600 grocery stores, began considering deploying an RFID-based inventory system at the company’s Farr West, Utah, distribution center.

At the time, Associated had 125 workers entering information into a database of rolling inventory (that is, products in tractor trailers). But since the data inputting wasn’t those employees’ only job, the information was often out of date or, worse, incorrect. Tim Van de Merwe, the company’s internal logistics manager, says the information was wrong or obsolete as much as 70 percent of the time.

Looking to do better, the company rolled out an RFID-based system (by Santa Clara, Calif.-based WhereNet) in August 2002. The vendor supplied the tags for Associated’s 450 trailers, as well as readers located at strategic positions around the yard. MDS Yard & Dock Control — a program developed by Retalix of Ra’ananah, Israel — transforms the raw data generated by the RFID devices into text and graphics.

Armed with accurate and up-to-date information, workers are better able to match company trailers with the cargo, tractors, routes, and drivers. Indeed, the system has reduced the time trailers wait at the distribution center to 15 minutes. Under the old, manual system, the average wait was closer to six hours. “It’s the accuracy of the information that has made the difference,” explains Van de Merwe.

Where’s the Patient?

Given the push for demand-driven manufacturing, expect to see more businesses rolling out RFID networks. Experts warn that early adopters face a steep learning curve, particularly in integrating the RFID-generated data into existing enterprise software. But makers of the software are already addressing the issue. Says Jura: “Companies such as Oracle and SAP are building [RFID] functionality into their product offerings.”

Early reports on internal RFID projects are certainly good. At Boston’s Beth Israel Deaconess Medical Center (BIDMC), radio tags are helping hospital workers track everything from wheelchairs to IV pumps — even patients and doctors. “In our 57,000-square-foot emergency department we have 48 different rooms,” says Dr. John Halamka, CIO of BIDMC. “Can you imagine the time it would take to run from room to room trying to figure out where a strategic asset is?”

The system’s tags emit a signal that is picked up by the same Cisco Systems WiFi network that provides BIDMC’s wireless voice and data services. Physicians at the hospital carry pager-size tags while they’re on duty, allowing them to be located quickly when necessary. Since the RFID tags (from PanGo Networks) are too big to attach to a wristband, patients are tracked with removable tags that can be stuck onto gurneys and beds. Says Halamka: “The assumption is that if Mrs. Smith’s bed is in radiology, then Mrs. Smith is, too.”

John Edwards is a regular contributor to CFO.