ARC Study Shows ''Slap and Ship'' for RFID is Less Common than Many Believe.

DEDHAM, Mass. -- The ARC Advisory Group conducted a Best Practices study in which ARC talked to 24 companies that were actively investing in EPC RFID (Electronic Product Code Radio Frequency Identification). RFID tags can be applied at the packaging line or the DC. According to Steve Banker, Service Director for Supply Chain Management at ARC Advisory Group, "in our sample, 85 percent of the facilities where tags were applied were DCs. However, even when tags are applied at the DC, the term 'slap and ship' does not fairly reflect what is going on at many DCs. There is both more automation, and more process variation, than has been generally recognized."

Background

Wal-Mart has mandated that by January 2005 its top 100 suppliers must apply passive RFID tags based on EPC-global standards to cases and pallets headed toward three specific Distribution Centers (DCs) in Texas. Virtually all manufacturers of consumer goods will eventually be impacted by this because Wal-Mart's moves in RFID are being copied by other retailers.

"Slap & stick" is the term that has been used for the process of applying RFID tags in the DC. "Slap and stick" reflects the idea that applying tags in the Distribution Center will be a more manual, labor intensive processes than applying tags at the factory.

The general process for applying RFID tags at the DC would be to identify the orders that need RFID tags, divert those pallets to a special Value Added Service (VAS) station where shrink wrap is removed from the pallet, cases are taken off, tags applied to cases, the tags are verified to be good, cases are reloaded onto the pallet, shrink wrap is reapplied to the pallet, a pallet tag is applied and verified, and the pallet is sent to the appropriate loading dock. Tagging cases in the DC wastes labor because previously assembled pallets have to be broken down and reassembled.

More than Slap & Ship

Broadly speaking, there are three methodologies that suppliers can use to apply tags in a DC. The first method, the manual "slap and ship" methodology, has already been described.

The second method involves the use of conveyors either to move pallets or cases to the VAS tag application station, or from the RFID tag application station to a palletization station, or from a palletization station to the appropriate shipping dock.

Conveyor lines may also contain start and stop gates and diverts. "Start and stop gates" are necessary when tags cannot be encoded or applied at high speed. These gates stop the line and allow tag application to proceed. A "divert" allows cases whose tags cannot be verified to be diverted off to a side station for reapplication of the tag.

The third methodology is to preprint encoded RFID labels and then apply these labels to the cases upon picking the cases. Typically this would be pick-to-cart for mixed pallet orders. Finally, these methodologies are not mutually exclusive. A company may chose to do this in more than one way in the same DC. There are valid reasons for all these approaches.

Even the "slap and ship" methodology can be more variable than many recognize. For example, while RFID tags will usually be applied at a preexisting RFID VAS station, in some cases, depending upon staffing and capacity issues, it may make more sense to apply these tags at an ad hoc station set up on the receiving dock.

RFID Deployment Best Practices

ARC Advisory Group is now selling "RFID Deployment Best Practices." This study offers information on:

--The status of the Wal-Mart mandate and advice on how to prepare for mandate meetings with retailers;

--An analysis of how companies are changing their processes to meet these mandates and the strengths and weaknesses of the various process choices;

--An analysis of the three critical inflection processes when it makes sense to move from handling RFID in a certain way to doing it differently;

--An analysis of the reliability of RFID technology as well as companies' satisfaction with various RFID solution providers;

--The costs of preparing the RFID infrastructure;

--The benefits of RFID and what will be necessary to reap those benefits;

The study includes 13 key recommendations which can conservatively save your company hundreds of thousands of dollars if you must implement RFID to meet a mandate.

Note to Editors: This document can be used with attribution to ARC Advisory Group. For a graphic containing "DC Tag Application Methodology by Frequency," please contact [e-mail].

About ARC Advisory Group

Founded in 1986, ARC Advisory Group has grown to become the Thought Leader in Supply Chain solutions. No matter how complex your business issues, our analysts have the expert industry knowledge and first-hand experience to help you find the best answer. We focus on simple yet critical goals: improving your return on assets, operational performance, total cost of ownership, project time-to-benefit, and shareholder value. Further information can be obtained from ARC, Three Allied Drive, Dedham, MA 02026, 781-471-1000, Fax [phone], E-mail [e-mail], Web www.ARCweb.com.