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RFID Could Streamline Operations for Dealerships

Fri October 06, 2006 - National Edition
Mary Sedor

Do your technicians have trouble keeping track of their tools? Do missing barcodes prevent you from knowing what parts you’ve received or shipped? Do you know precisely where every piece of equipment in your rental fleet is at all times?

There’s a better way to track your tools, parts and inventory — Radio Frequency Identification (RFID).

The idea isn’t completely far-fetched. Every day, millions of commuters use RFID when they pay highway tolls. Almost half of the United States has electronic toll collection, made possible by RFID-enabled transmitters.

Led by Wal-Mart and the U.S. Department of Defense, RFID is streamlining everything from grocery store inventories to manufacturing processes, and it will eventually find its way into construction equipment dealerships.

According to “Lean Distribution” by Kirk D. Zylstra, while RFID isn’t quite as popular as barcoding yet, the movement will hit its stride.

“Retailers like Wal-Mart have taken the initiative to drive tracking back from the point-of-sale device to each supplier,” said Zylstra. “Suppliers will be increasingly pressured to drive their replenishment and operational activities from this movement data.”

What Is RFID?

RFID is an automatic identification technology that uses a tag or label digitally encoded with information. Unlike a barcode, RFID technology conveys the information through radio waves.

“For retailers, the idea behind RFID is to speed up and improve how they are managing goods and how they manage returns,” said Ann Breidenbach, director of Sensors and Actuators Product Line Management & Business Strategy, IBM Software Group. “It’s also for consumer products — to know that the right item was shipped at the right time. But this technology has a myriad of uses. It could be used to manage inventory, materials on a job site, or any higher value materials and time critical items.”

The basic system includes:

• RFID transponder or tag encoded with data.

• Antenna used to transmit the signal between the reader and the RFID device tag.

• Transceiver that generates radio frequency signals.

• Reader that receives the radio frequency transmissions from the device.

• A host system for processing.

The RFID tag has a computer chip and an antenna, and it stores information in numeric format that correlates to a database.

“The information is unique — it’s not like a barcode where every case of Coke has the same barcode,” says Breidenbach. “The RFID tag can have information specific to the product.”

There are two different types of tags: passive and active. Passive tags look like a label but have a computer chip in them and a copper antenna to transmit the information. The information is “read” with readers similar to store checkout scanners.

“Passive tags don’t have a battery and have to be within close range of the reader,” said Breidenbach. “The reader then reads the tag and records the information. An EPC code, which is in a master table, correlates the information to a database and gives you the information.”

Suppose you were getting a shipment of parts and wanted to be sure you received the correct items. You could tag them as they come in using RFID tags and you’d know how many boxes you received and that you received the correct ones.

Active tags are larger and have a power supply. These tags transmit the signal on their own and do not have to be in close range to the reader.

“These tags are always transmitting so you can get a real-time location,” said Breidenbach. “It’s not just when the backhoe goes by the reader — at any time on the site you can find out its location. These are great when you want to know where your equipment is at all times.”

While real-time locations are possible with active tags, the tags are unable to keep time, such as the number of hours used on a machine.

The biggest difference between active and passive tags is price. Active tags can range from $20 to $100 per tag, while passive tags are 15 cents and up.

“The cost depends a lot on the tag and what the project is they want to do,” said Breidenbach. “We tell clients to understand what they’re ROI is going to be. What retailers and other companies do is look at how much they are spending by keeping extra wheel chairs at a hospital or how much they are spending having to buy new generators. Look at the costs you’ll save and at the time you’ll save and decide if the cost savings outweigh what you’re going to spend.”

Wheelchairs, Wheel Loaders

Hospitals use active tags to manage critical equipment —expensive items such as crash carts and defibrillators.

“Hospitals are seeing a return on investment from the location awareness on their equipment, which is not dissimilar to what an equipment dealer might see when tracking wheel loaders or other equipment,” said Breidenbach.

In manufacturing, automobile companies use RFID in manufacturing and to track auto stockpiles, while Boeing uses RFID to track tools.

“Some of their tools are expensive, and they are usually customized,” said Breidenbach. “It’s a case of when a mechanic needs a tool he has to have it or he brings the operation to a grinding halt. That becomes expensive fast.”

Can’t Even Get Barcodes

While RFID has obvious applications in an equipment dealership, dealers are finding it difficult to even use barcodes, let alone RFID.

“I don’t know anyone using it,” said Dale Leppo, president of Leppo Rents/Bobcat of Akron, OH. “In a recent meeting of Bobcat dealers, we were talking about the fact that the industry is behind on some of that technology.”

Leppo’s dealership uses barcodes for its labor.

“It would be wonderful if we had consistent barcoding from the vendors,” he said. “We have scanners and barcoding set up to keep track of labor but we don’t have the software or barcodes on parts to make it work.”

Manually entering part numbers, invoices, rental contracts and work orders is an expensive way to do business.

“It consumes a lot of labor,” said Leppo. “There’s got to be a better way.”

The Right Tag for the Job

Equipment dealers looking to install RFID systems should work with tag vendors to understand the best fit for their equipment, says Breidenbach.

“Metal interferes with the radio waves, but there are special tags available that prevent that interference,” said Breidenbach.

Tag placement also is critical. For example, a tag shouldn’t go on a bucket, but it could be on the cab.

Breidenback recommended items that are stolen often, such as generators, are excellent candidates. And, while there are tags that can handle heat, cold and humidity, some items are more difficult to tag than others. Specialty tags cost more.

“It would be a challenge to put a transmitter on a breaker or other attachments, but it’s not unheard of,” said Breidenbach.

According to Zylstra, suppliers have been making limited efforts to use RFID since customers have been unwilling to pay the added cost of the tags.

“Like the barcode transition of 30 years ago,” said Zylstra, “the RFID movement will continue to raise cost-related objections until the technology becomes ingrained across nearly all supply chains and is nearly “invisible” to cost measurement. The benefit question remains focused on how the customer gains value and not how suppliers and their customers will transform supply chains and distribution.”

What’s the difference?

While RFID and barcoding appear similar, RFID provides much more information.

The best known use of barcodes is a Universal Product Code or UPC. The UPC on all cases of Pepsi are the same, and identify that it is, in fact, a case of Pepsi and not Coca-Cola. But an RFID tag on the same case of Pepsi can not only identify that it is a case of Pepsi, it also can identify its location — down to the specific pallet.

A barcode requires a person standing in front of the barcode using a reader. RFID tags do not require line of sight. And the location of the tag isn’t as important. Plus, an RFID reader can read multiple tags at once.

“RFID is more precise and increases productivity because information is automatically captured over radio frequency waves,” said Bill Bulzoni, director of RFID business development for Zebra Technologies. Zebra manufactures RFID printer encoders that print barcode and readable information on the face of the smart label and encode information into the label.

“We’ve seen some applications in equipment dealerships,” said Bulzoni. “They use RFID to maximize utilization of their fleets and to keep track of its location. They streamline the checking in and out of rental equipment, inventory and delivery functions through RFID.”

Data captured from the RFID tag can be used in a variety of ways, including measuring inventory turns. The data is transferred into a database, where it is decoded, which eliminates entering information by hand.

“I think knowing inventory levels on a real-time basis would be a distinct advantage for dealers,” said Bulzoni.

Getting Started

“RFID will never replace barcoding,” said Bulzoni. “The two technologies will co-exist because some companies have barcodes and need to use it, while others have RFID.”

Breidenbach recommended dealers that are considering RFID speak with the experts.

Dealers, she said, should consider tagging items that have the highest loss rate and high-priced assets, such as expensive equipment. That’s where dealers are likely to see the quickest return.

An RFID system integrator who understands your business can help identify where RFID can be used successfully.

(This article was reprinted by permission of “Construction Equipment Distribution” magazine. Mary Sedor is an associate editor of “Construction Equipment Distribution” magazine.)

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