July 1, 2005
enroute | RFID on the Road

Many happy returns

many happy returns

Perhaps you've heard that no one's seeing any real returns on their RFID investments? Then you haven't talked to America’s truckers.

By John R. Johnson

Run a Google search for Wal-Mart and RFID, and you'll get a half million hits in just under half a second. If only the opportunities to obtain a return on investment for radio-frequency technology were as numerous (and quick). It's now been two years since the retail giant issued its first RFID mandate to suppliers. And although Wal-Mart promises payback in the form of supply chain efficiencies and reduced stock-outs, most suppliers report that the return on investment (ROI) continues to elude them.

But that's not to say no one's achieving timely returns on their investment in the technology. Reports from the transportation sector, specifically trucking, indicate that carriers have every expectation of earning prompt returns. Many transportation experts consider the carrier community to be a genuine sweet spot for the exploding technology. They expect fleets to leverage RFID not only to enhance profitability by increasing productivity within their own operations, but to bring additional value to their customers too.

It's entirely possible that in the near future, carriers will be taking advantage of readers already installed at toll booths, ports and other areas along freight lanes to read RFID tags and provide valuable in-transit information to their customers. In addition, fleets that run cross-docking facilities can also make use of RFID to create dockside efficiencies. As a truck enters a cross-docking facility, a reader at the gate could pull load information from a tag on the trailer, match it to shipping manifests and automatically direct the driver to the appropriate dock.

"The overriding premise behind RFID in transportation is that there is real value there," says Mike Dempsey, company strategy leader at RedPrairie Corp., a Waukesha, Wis.-based company that provides RFID and other supply chain technology solutions. "Clearly, everything that went on with Wal-Mart and the other big box retailers has aided RFID technology overall, regardless of whether you think there is ROI in the retail supply chain. The mandates helped to bring some attention to the ROI-driven applications in the transportation sector."

New ways at Old Dominion
Take the case of Old Dominion, a less-than-truckload carrier based in Thomasville, N.C., that has invested nearly $4 million to outfit its 12,000trailer fleet with RFID tags and install readers at its 150 service centers (which have anywhere from 20 to 300-plus dock doors). The company is a multi-regional carrier that specializes in commodity shipments like consumer goods, textiles and capital goods.

"We've seen a tremendous amount of progress with RFID in many areas of our operation," says Old Dominion vice president Chip Overbey. "We've realized advantages in planning, tracking, security, and over, short and damaged cargo. In today's economy, information has become just as important as timely movement and delivery of goods."

RFID is helping Old Dominion increase efficiency at its service centers. As trucks arrive at the centers, they're automatically identified by an RFID reader. (Old Dominion uses passive tags, which don't have their own power supply, on the trailers and cabs, and active tags, which are powered by an internal battery, on the "jiffs" that connect two trailers.) The information is relayed to Old Dominion's dock and yard management software application, which looks up the shipment information and determines how the load should be handled.

Handling instructions are immediately relayed to "switchers," who operate tractors in the yard to receive trailers from the over-the-road drivers. Switchers receive their pickup and handling instructions via a wireless transmission to an Intermec computer mounted in the cab. Managers receive notification of arrivals in real time on handheld wireless computers, which they also use to view all work activity, redirect resources and make updates as necessary.

Before the wireless systems were installed, drivers had to park their rigs and report in at the office upon arrival. Loaded trailers sat idle in the yard as the shipment information was located and processed. At a time when many states have begun mulling legislation to limit diesel trucks' idle time, eliminating the need for this stop could prove to be a real benefit of RFID.

"Now our switchers are making a lot more moves per hour," says Mike Nagle, Old Dominion's director of field service. "Productivity has really improved." Nagle notes that Old Dominion has been able to eliminate switcher labor positions at some locations and re-deploy tractors used for the operation. "That's been a big savings in equipment and maintenance costs," he says.

Overbey also says that RFID has led to improved driver satisfaction, a key consideration in an era when drivers are in short supply. Once a driver enters an OD facility and the reader scans the tag on the equipment, the reader signals for the gates to open for the driver, eliminating the need for the driver to climb down and open the gate. "Not only does this provide for improved employee job satisfaction," says Overbey, "but it also helps to provide improved security by helping to control the length of time a gate is open."

In addition, Dempsey predicts an explosion in RFID use over the next two years for preventive maintenance applications by using RFID tags in conjunction with GPS (global positioning system) units and cell phone technology. Readings from engines and wheel hubs, for example, could be relayed back to a system for monitoring against warranties and maintenance schedules.

RFID on the road
Though the benefits to truckers are undeniable, customers also stand to gain from carriers' adoption of RFID technology. For one thing, they'll enjoy increased visibility of their products—a big advantage for those shipping expensive perishable items like pharmaceuticals that require refrigeration and are susceptible to rapid spoilage. Many carriers are starting to use RFID as an adjunct to GPS and cell phone technology to relay exact positions of trucks back to transportation management systems. With the data captured by so-called "read-write" RFID tags that can update information, shippers can monitor their products' condition in real time.

"This is one application that has huge value because the waste that can be associated with high-value cold chain or pharmaceutical products is significant," says Dempsey, who notes that an active read-write RFID tag would be needed for this application.

"I think the customer has much more to that gain [from] this than the carrier," says Tom Weisz, president and CEO of TMW Systems Inc., which provides software for the trucking industry. "Carriers like Old Dominion are doing this primarily as a customer service. It certainly helps them in their terminal operations in cross docking and such, but shippers will be able to take much better advantage of it in that OD can tell them on an SKU level what's coming to them, and when. It's pretty much like FedEx and UPS's being able to trace your 10-ounce letter. Now carriers can tell you where your five cases of shoes are."

Perhaps one of the unforeseen benefits of RFID is that improved efficiency at the dock can ease the sting of the new driver hours-of-service regulations by allowing drivers to enter and exit their destinations more efficiently. In addition, shippers can use RFID for record-keeping at the dock, providing the proof necessary to contest carrier-imposed demurrage charges and charge-backs levied by retailers for supposed late deliveries.

"We've seen an improved ability to provide our customers with more timely and accurate information as it relates to their shipments," says Old Dominion's Overbey. "We've seen improved ability to monitor our runs for efficiency in scheduling. Prompt and effective scheduling can often help improve transit times and service. We live in a just-in-time environment and speed is of the essence in the supply chain. We have embraced that realization and we are using the technology to help our client base get their goods to market faster."

About the Author

John R. Johnson
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.

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