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Case Study: TNT Thinks RFID Is Dynamite

Think of radio frequency identification (RFID) as barcode technology without the hassle of getting a good read with an optical scanner. Because RFID tags can be detected and read automatically as they pass through loading docks, and distribution centers and into stores, the technology promises dramatic time and labor savings--most particularly through reductions in paperwork. Shipping, receiving, warehousing and stocking information can be updated automatically, and records of billing, transfer

Think of radio frequency identification (RFID) as barcode technology without the hassle of getting a good read with an optical scanner. Because RFID tags can be detected and read automatically as they pass through loading docks, and distribution centers and into stores, the technology promises dramatic time and labor savings--most particularly through reductions in paperwork. Shipping, receiving, warehousing and stocking information can be updated automatically, and records of billing, transfer and receipt can be generated and exchanged between companies in a flash, without ever finding their way into paper form.

To date, Wal-Mart, Target and the U.S. Department of Defense have been among the biggest influence peddlers in promoting the use of RFID, imposing mandates on suppliers to apply tags on pallets, cases and even individual items of merchandise. The mandates have been crucial, as the fledgling technology needs to gain critical mass if costs are to come down. The tags alone cost as much as 50 cents a piece, and then there's the investment in readers, software and integration. Yet there's evidence that RFID is gaining grassroots support even without mandates, as in the case of TNT Logistics, a third-party provider of transportation, supply chain management and warehousing services to leading manufacturers.

Motivated by a desire for improved efficiency and reduced paperwork, TNT is piloting a supply chain logistics application for one of the big-three auto manufacturers. The application starts in one of TNT's warehouses in Michigan, where bulk quantities of auto parts are stored and must be delivered to the manufacturer's assembly line in precise quantities, at the right time and in a desired sequence.

"Wal-Mart is driving RFID so they can use it internally, but our vision is to push the envelop beyond our four walls to extend the advantages between silos," says Terry Tutt, TNT's director of technology services.

Building on messaging infrastructure from the same vendor, TNT is using Tibco RFID Interchange software to integrate the technology with its supply chain applications. In a first phase that TNT completed within about 90 days, the company installed RFID readers at two loading dock bays and installed tags on the reusable containers used to transport parts to the manufacturer's assembly line.

"We know which parts are in which containers, and I have a manifest for which containers go with which load and to which plant," Tutt says. "As a quality check, I can scan the containers and know that I have the right container going to the right location."

In the project's second phase, which is now underway, TNT is extending supply chain visibility to the customer, giving it real-time information on where the parts are and when they arrived. This is dependent in part on installing RFID readers at each plant location, a step that has yet to be taken.

"The people who need the parts are often isolated from the material handling group," Tutt says. "Once Phase II is completed, the information will be available from a portal, they'll see where the parts are and won't have to make phone calls."

In the projects third phase, TNT plans to work with the customer to extend RFID more deeply into the manufacturing process. For example, as the returnable containers are emptied and moved back to the plant loading dock, it could automatically trigger a pickup and preparations for the next shipment back at TNT's warehouse.

"We're preparing a prototype that we'll be presenting to a particular customer, but we could then extend that solution to their other facilities and to other customers," Tutt says.

What's the payoff for TNT? Tutt says the company is accumulating data and analyzing trends on misleads, average pickup and ship times, and gaps and lags in the loading process. The company is setting up key performance indicators and corresponding alarms that will spot abnormal conditions. Paperwork and process times have also been reduced, with signoffs at the loading dock and advance shipment notices to customers now generated automatically.