RFID Strategy -- RFID: The Lean Machine

Marlo Brooke is president of Avatar Partners (www.avatarpartners.com), a consulting services organization specializing in strategic planning and systems integration for supply chain.

All this talk about "compliance" can overshadow the fact that RFID's greatest value is to help companies become more lean, efficient, and competitive. Yet what if RFID is required by an external source, such as Best Buy or the Department of Defense, and must be implemented in order to simply keep doing business with its existing customers? Even then, a lean approach can make or break a successful implementation.

There is a subtle but significant difference between a typical project approach and a lean approach.

In typical projects, a problem is already identified, and the solution is either already known or greatly narrowed down.

With a lean approach, neither the problem nor the solution is known. Starting with the latter mindset keeps us open to seeing things that we were not previously aware of. It initiates the opportunity for return on investment, finding greater value and competitive advantage, even through externally placed compliance initiatives. Lean asks the tough questions, without assuming an answer.

Six Sigma -- a lean methodology well known for breakthrough benefits -- can provide a valuable weapon for RFID. "RFID can essentially computerize every widget produced, trigger actions, and eliminate human errors," explains James Williams, partner at Avatar Partners. "Even our customers that are not entrenched in Six Sigma benefit from using this methodology with RFID."

Six Sigma places great emphasis on measurable project payback. Furthermore, financial results are validated by customer satisfaction, or CTC. CTC stands for "Critical to Customer" -- those elements that matter the most to your customer. Every use of RFID should add the value of positively impacting how your customer perceives and experiences your company.

There are three approaches that one can take to RFID implementation to ensure Critical to Customer value:

1. RFID for new processes. Many companies fall into this category because they are not currently tracking items through RFID. In this case, compliance is the impetus, but should not dictate the solution. Otherwise, there is no value to the company doing the implementing. Six Sigma can best serve this category with DFSS -- Design for Six Sigma, which involves the stages of DMADV -- Define, Measure, Analyze, Design and Verify. The design of a new process through Six Sigma standards will enable a company to get RFID right from the start, with optimal positive financial impact to the organization, and minimal risk.
   
2. RFID to replace manual or suboptimal processes. RFID can be used to cut out the non-value-add "fat" in the enterprise in several key areas. In Six Sigma, we eliminate or modify processes that add no value to the customer. Six Sigma identifies five phases of implementation, known as DMAIC -- Define, Measure, Analyze, Improve, Control. The areas we generally identify the greatest opportunity with RFID are as follows:
   • Receiving process
   • Inventory control and visibility (Raw and Finished Goods)
   • Warehouse management, including picking and packing
   • Manufacturing process
   • Distribution and logistics
   
   
   Any process that is currently being done manually might indicate an opportunity for RFID. Hewlett Packard, for example, is creating efficiencies between its different sites. Frank Lanza of HP explains, "We use inbound tagging to automate the receiving process, which is not just a matter of labor savings, but an advantage of optimizing the timing element of inbound items." We have experienced similar successes at much smaller manufacturers, such as food growers."
   
   
3. RFID as analysis tool. RFID provides great visibility into processes that were previously invisible or visible after it was too late to do something about it. Deon Nel, RFID engineer for Avatar Partners, says that manufacturers are beginning to see the value of RFID in real time. Nel explains, "Manufacturers are learning things they didn't realize they didn't know. They're getting a lot of data about product and product movement, and it is completely altering the way they do business." In this instance, RFID is more of a tool utilized during the Six Sigma process, and assumes RFID is already in place. But if a company is already going to invest the money for its customers, it may as well see what kind of new information it can use for improving its operations and increasing sales.
   
   
4. RFID will not benefit an organization if they simply slap RFID into existing processes and procedures. The technology should be seen as an enabler of supply chain and manufacturing efficiency: our only challenge is to find the opportunity in the leanest of machines, RFID.

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