Empowering Distribution Center operations with RFID Angeliki Karagiannaki SmartRFID Unit of the ELTRUN E-Business Research Center http://www.eltrun.gr; akaragianaki@aueb.gr In the following few minutes I am going to present you a real case of a 3PL company in Greece that decided to invest in RFID in order to improve its processes with the distribution center. In addition, I am going to present you how we can use simulation modeling in order to give a credible assessment between the current and the RFID-enabled processes and moreover to test various RFID scenarios. Angeliki Karagiannaki has just completed her PhD at Athens University of Economics & Business and is responsible for the SMART RFID Unit in the ELTRUN E-business research laboratory.

The Diakinisis Case Company Diakinisis- a 3PL operator Sector Distribution Year 2008 Format Passive UHF RFID Application Storage and Shipment Tag/Reader Supplier Alien Technology System Integrator Business Effectiveness Status Roll-out Labeling Pallet Country Greece Diakinisis is the largest third-party logistics operator in Greece, offering comprehensive supply chain management services. In 2007, Diakinisis decided to reengineer the processes of one of its warehouses that stores and distributes products of one of the world’s largest foodstuffs companies. Diakinisis worked with Business Effectiveness as a provider of RFID integration services and Alien Technology as a supplier to implement an inventory and shipment tracking system based on RFID. The main target of this project was to lock in 100% traceability for reception of pallet shipments and to establish communication between forklifts, pallets, shelves, and trucks, requiring no human intervention. To sum up, the objectives of the RFID project were automation and traceability of incoming shipments.

Inefficiencies before RFID Time –consuming and unreliable stock taking Remarkable variances between accounting and physical stocks Overstated or understated inventory levels Difficulty in locating the pallets on storage racks during order assembly Mistakes during loading Product obsolescence due to overstocked inventory. No establishment of unforgiving rules for pallet storage As with all warehouse settings, Diakinisis operations suffered from significant inefficiencies, as forklift operators wasted time and resources hunting and digging, because they lacked adequate information on the location of items and the optimal route for put-away, replenish and retrieval actions. In addition, remarkable variances between the actual and the system inventory had led to overstated or understated inventory levels. On any given day, having hundreds of pallets carried out manually resulted in mistakes and delays of all processes. As a result, all the processes were labor-intensive, time consuming and subject to human error. Having to encounter all these inefficiencies the company decided to invest in a RFID solution.

RFID Solution Components TRUCK TAG RFID PORTALS FLOOR TAG RFID TAGGED PALLETS LOCATION TAG RFID-ENABLED FLTS RFID PRINTER The RFID implementation that the company decided to employ incorporates the following components. First of all, the tagging is made on pallet level. Upon receiving, a pre-printed RFID tag is attached on each pallet. The RFID tag is linked to the pallet bar code via a hands free bar code scanner and WMS is updated accordingly. All the pallet racks are equipped with specially designed durable RFID tags, suitable to operate in a non friendly RF environment (metal). In addition, all floor pallet storage locations are identified with RFID tags stuck on the floor itself. Tagging the shelves and the floors was challenging, as they are concrete and contain metal. All Fork Lift Trucks are equipped with UHF readers and antennas that wirelessly communicate with the main server and the WMS system. Finally, the loading docks are equipped with RFID Portals that are water resistant.

RFID-enabled processes Storage Picking Shipping Inventory Physical Count Having the already presented RFID solution, four main processes of the warehouse are supported by RFID and in the following slides I am going to give you a decription of how exactly RFID is integrated within each of these processes.

RFID-enabled Storage Process 1. Attach RFID labels on pallets 1 2 2. Link Pallet Barcodes with Pallet RFID Label – Update WMS 3. Forklift Truck reach Pallet RFID Label 5. Reading of Storage Rack RFID Label – Confirmation of correct storage location 4. The Storage Location is shown on the terminal via WMS As we have already mentioned, upon receiving a pre-printed RFID tag is attached to each pallet. The RFID tag is linked to the pallet bar code via a hands free bar code scanner and WMS is updated accordingly. Then pallets taken by forklifts for storage are detected and identified when the forklift reader captures the RFID tag attached to the pallet. Information is then sent to the warehouse management software, which directs the forklift operator to the target location for the pallet. As soon as the pallet is placed in a location, the forklift reader checks the tags of both the location and the pallet, and informs the operator of whether or not the location is correct. If the pallet has been incorrectly placed and this is not immediately rectified, the system will not allow the forklift driver to move other pallets.

RFID-enabled Full Pallets Picking 1. FLT Driver reads on the terminal Pallets & Location to retrieve 3. Pallet pickup 2. Confirmation of correct Pallet pickup Επιβεβαίωση Εξαγωγής Παλέτας 4. Automatic Loading Control (Correct pallet, carrier, order) ORDER 3 ΟΚ During the picking process, the forklift is driven to the position indicated by the WMS and the RFID reader captures the RFID tags for both the pallet and the shelf location. If the pallet is not the one specified by the WMS, the driver is alerted and told how to correct the situation. If the pallet selected is correct, it is taken to the picking area for preparation for shipment.

RFID-enabled Shipping Process ORDER 3 ΟΚ 2. Automatic Loading Control (Pallet, carrier, order) – Loading 1. Move assembled orders to the loading area As we have already mentioned outdoor RFID portals are located at every dock door. As soon as a truck backs up, the RFID portal reads the truck’s tag. The system verifies with the ERP system which pallets should be loaded onto the truck. Every pallet is read and verified as it is loaded. If a pallet is loaded on the wrong truck, the portal’s light stack and alert the loading personnel.

RFID-enabled Inventory Physical Count Stock Taking by moving properly equipped FLT through the aisles Finally, the process of stock taking is supported by the RFID technology. All items in the entire warehouse can be quickly counted, by driving a forklift through all areas of the warehouse.

Remarkable Benefits Achieved near 100% pallet traceability of pallets through the distribution center Improved correct storage location of pallets by more than 25% Expedited stock taking improved by 40% Faster pallets movement by 30% – The FLT operator completes pallet storage and retrieval on his driver’s seat – no need to get off for pallet – rack scanning etc 80% reduction in shipment errors Overall process improvement of 20% Diakinisis has achieved measurable business benefits by automating its distribution center processes with RFID. Pallet traceability is near 100 percent. It has improved the correct placement of pallets in the racks by more than 25 percent, and expedited stock-taking by 40 percent. Diakinisis has also seen a 80 percent reduction in shipment errors, which eliminates the cost associated with correcting these errors. Overall, the automation has resulted in a process improvement of 20 percent.

An interesting outcome of the Diakinisis Case NEW Process (RFID LABELING) Process C (Picking) Process D (Shipping) Process B (Storage) Process A (Receiving) …is not supported by RFID… RFID IMPLEMENTATION of DIAKINISIS CASE SHIPPING RECEIVING AN ALTERNATIVE RFID IMPLEMENTATION STORAGE ORDER PICKING Alternative RFID implementations Numerous possible ways of implementing RFID within an warehouse processes RFID process redesign problem Different implementation  different value of RFID no clear cut answer as to which RFID implementation is the best IT IS IMPORTANT TO design differently configured to-be implementations and decide on a specific one based on a credible evaluation of the alternatives An interesting outcome of the Diakinisis case was that although Diakinisis implemented a specific RFID solution, there were numerous possible ways of implementing RFID within warehouse processes. Let me give you an example of what we mean when we talk about alternative RFID implementations. As you can see in the first picture, the products arrive at the warehouse without RFID tags. Then the tagging process is done in-house and on pallet level. Also the storage locations are equipped with RFID tags and the forklifts and dock doors with RFID readers. As such, the processes of storage, picking and shipping are supported by RFID. Now lets see another implementation that Diakinisis could have chosen. In the second implementation the products arrive with RFID tags. As such the receiving process can be supported by RFID. However, in this implementation we assume that the storage locations and the forklifts are not equipped with RFID. As such the processes of storage and picking cannot be supported by RFID. Finally we assume that the dock doors are equipped with RFID portals. As a results, the shipping process is supported by RFID. It seems obvious that different implementation may result in different value. However, there is no clear cut answer as to which implementation is the best transition? So it seems very important that before investing in RFID to design alternative implemenwe use simulation to design and evaluate the alternatives.

A generic warehouse simulation model Video (SIMUL8 software) We can customise many parameters of the model in a very easily way.

Simulation Results As-is DIAKINISIS CASE Implementation 2 The diagram represents the percentage of labor utilisation. So the better scenarios are these with the smaller percentage. So for example for the AS-IS scenario= without RFID, the percentage of labor utilisation is about 70 percent. As we can see from this diagram, the most notable results are the following: firstly, the RFID scenario implemented by Diakinisis has significant differences with the previous system in terms of labor utilisation. However, we see that there are many other scenarios that can bring significantly better results. Another interesting outcome is when we compare RFID implementation 8 with 6. The mixed experiment that incorporates the tagging process by both the focal firm and the large suppliers seem to have significant difference in some of these outputs from the experiment that incorporate the tagging process only by the large suppliers. This indicates that if the large suppliers take the responsibility of tagging the products, it is of value for the focal firm to tag the remainder products, although having a mixed model may have a negative effect in some parts of the warehouse. 13

Thank you for your attention! akaragianaki@aueb.gr www.smart-rfid.eu