How Radio Frequency Identification Affects EDI
RFID technology is emerging as a replacement for bar codes.
The primary short-coming of bar codes (physical proximity to read) has been eliminated. Second, privacy concerns are met as RFID tags will not be attached to product purchased by the consumer, as only one tag is attached per pallet or skid.
An RFID tag is a small radio transmitter capable of transmitting a number exactly 96 digits long called a “Character Number.” The transmitter is placed on an outside portion of a pallet or skid of product. At the mass merchant’s DC it is able to transmit by radio its Character Number when receiving power from the radio wave of an RFID Control Unit. The radio wave powers the RFID tag which then broadcasts its Character Number back to the Control Unit. The Control Units (whether hand-held or stationary) are strategically placed and networked throughout the mass merchant’s DC to receive the returned Character Number. The Control Units are networked to the DC business application. After the application receives the Character Number a look-up occurs that matches the Character Number to the contents of the pallet. An inventory report is then produced. The entire inventory can be taken daily.
The Character Number is also used to more accurately and quickly receive and warehouse the product. As the product is being received into the mass merchant’s DC, the Character Number is read, the work-station brings up the pallet contents, checking occurs, the pallet is racked, and the location scanned and linked to the character number in the business application. When working properly, an entire DC can be inventoried nearly instantaneously. Just as important, the exact location of each product can be determined. There are two primary types of RFID tags: UFH Passive and UF Passive.
In a recent study conducted by the Computing Technology Industry Association, the 29.2 percent of the participants indicated that their primary reason for mandating RFID was to improve visibility. Other benefits included improved collaboration with partners (cited by 11.9 percent of respondents). Although mass merchants and grocers do not provide an incentive for mandating RFID labeling, suppliers will benefit by being better organized and more responsive.
There are several upfront costs for a vendor to implement an RFID program. These costs include: integrating the RFID tags into the warehouse system (components, training, procedural changes), and the costs of the tags themselves. The actual costs for RFID tags varies from manufacturer to manufacturer. In a study conducted by the ARC Advisory Group, it was determined that in 2003 the average price for a passive UHF tag was 57 cents, and was 91 cents for a passive HF tag. The same study concluded that the cost of passive UHF RFID tags will not reach the 5 cent level until 2010
Overall, the degree of adoption of RFID by retailers is going to largely depend on how low the price of tags drops. When the price drops, use of RFID tags will not be isolated to just the Retail/Manufacturing sector. It is anticipated that most industries will adopt and mandate the use of RFID tags including the automotive, electronics, agricultural, and pharmaceutical industries.
EDI’s role in the process is to provide the pallet contents by transmission of a Shipment Notice (ASN, 856 or DESADV). The Shipment Notice must specify the precise contents of the pallet. Specifically, the creation of “perfect” pallet level contents is needed. The Shipment Notice must also contain the Character Number of the RFID tag attached to the pallet. The EDI looping hierarchy needs to reflect a “Tare” looping structure.
To capture the contents of a pallet, another step must be added to the packing process. The items on the pallet must be entered, either by hand or by scanning. Only then can the pallet be wrapped. This data capture requirement implies changes:
- Improving the Logistic’s business application to provide this information
- Improving EDI capability
- Physical and procedural changes on the shipping dock
- Maintaining accuracy during heavy shipping days
Unfortunately, the consumer or food product vendor does not receive benefit by using an RFID tag. Adaptation costs are also unlikely to be compensated. The burden needs to be regarded as a new “cost of doing business” that should not be held against the budget of the Shipping or I.T. departments. Chargebacks will be levied. The good news: a competitive advantage for several years is likely.
The technical and procedural changes required to meet the demand of mass merchants and grocers suggests the judicious use of experts. DCS, using your existing EDI system, can help because we specialize in ASN’s: assisting business by creating the correct ASN hierarchies needed for RFID. Having DCS on your team to work closely with your business applications means you can implement the change thoroughly, quickly, and economically. Second, DCS solution will be flexible so all large customers’ requirements can be met economically. Your goal of a smooth transition will be met with DCS on the team.