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Paper Companies Realize RFID’s Promise With Integrated Solutions

They will if the supply chain management changes involve taking RFID (radio frequency identification) tagging to the next level with sophisticated solutions that make the most of RFID’s potential. Such solutions, pioneered by IBM and a host of par…

They will if the supply chain management changes involve taking RFID (radio frequency identification) tagging to the next level with sophisticated solutions that make the most of RFID’s potential. Such solutions, pioneered by IBM and a host of partners, will help paper companies throughout the globe will help paper companies throughout the globe to not only recoup their RFID investments more quickly, but to also optimize the supply chain in ways that facilitate an on-demand, customer-centric business model and unleash new competitive advantages and profit streams.

The timing couldn’t be better. Paper companies have been struggling mightily to free themselves of persistent and insidious profit challenges. Plagued by years of excess capacity, companies have been forced to lower prices and upgrade assets just to stay in the game. The result has been quarter after quarter of earnings that barely cover the cost of capital, an unprofitable and ultimately highly untenable long-term performance.

As paper companies search for ways to break out of that vicious cycle, RFID is emerging as a technology that promises to help by eliminating some of the supply chain issues that set the cycle in motion. Tagging and tracking technologies, properly planned and executed, are expected to deliver a long list of benefits including but not limited to:

reducing invoice, delivery and inventory status errors;

reducing instances of lost or damaged products;

enhancing the ability to identify priority or late orders;

enhancing flexibility and on-the-fly planning, improving asset management; and reducing logistics costs and labour inefficiencies.

If those potential benefits weren’t persuasive enough, the case for RFID got another push early this year in the United States when Wal-Mart and the U.S. Department of Defence announced that their top suppliers will have a year to begin using RFID tags on cases and pallets they deliver to the retailer or agency. The mandate further poses an interesting challenge and a great business opportunity for companies in the consumer and packaging segments to support and enable RFID adoption.

Paper companies that began planning or rolling out their programs quickly learned two important and, in some instances, unexpected lessons. First, implementations could easily rack up millions of dollars of costs, second, the realization of benefits depended upon a lot more than the deployment of tags and readers. Reconciling the significant investment with shrunken IT budgets caused some companies to overlook that several components are needed to solve the RFID puzzle. A complete solution entails selecting tags with price points and capabilities sought in the specific environment. Readers and antennas are placed in forklifts, portals, integrated into a handheld a PC and/or wirelessly connected. The tougher nut to crack is the data management component. A software solution has to be selected to integrate and turn huge amounts of data that will be captures by tags and readers into useful information to support supply chain decisions with existing enterprise systems. Tagging a roll of paper is one thing, but leveraging the data captured by that tag to streamline warehouse operations, update inventory and meet customer demand in near real-time is how true optimization and business transformation happens.

Early RFID initiatives in the paper industry that may have overlooked an integrated solution, are less likely to show benefits, or often are not hard or dramatic enough to offer a significant return on the infrastructure investment. Companies could continue to place bar codes on rolls of paper, but those tags can be easily damaged or fall off during production which renders the bar codes less than perfect. When they are not damaged, they help identify where a particular roll of paper is located, but that only helps in finding a roll, it doesn’t spark new ways of doing business or facilitate near real-time responses or demand-driven supply chain benefits.

Today, however, companies with fully integrated RFID warehouse and manufacturing systems offer a different picture. First, sophisticated tags can be inserted into valued assets such as the core of a roll, instead of the outside of a roll or on a shipping package, which eliminates the possibility of damage. An upgraded tag far more sophisticated than its earlier brethren can today be read through as much as five feet of paper. Once a tag is activated, the movements of the roll, or other asset, throughout the warehouse can be tracked accurately without installing a sophisticated robotized warehouse system.

When the chips embedded in the tags are linked to middleware programs, information about where the paper roll should be taken can be delivered in seconds. If a forklift driver happened to deliver product to the wrong loading dock or warehouse location, the error could be rectified immediately because the RFID system could send an alert to the driver thus reducing shipment errors to customers. Bringing RFID-enabled visibility into the warehouse not only automates and speed processes, but reduces errors and labour requirements, increases throughput and enables real-time decision support. When similar systems are applied to inventory and then linked directly to warehouse activities and back office operations such as billing and accounting, the supply chain becomes optimized to a degree that allows a true and total transformation of the company’s business model, enabling collaboration with external clients and suppliers as well as new sources of revenue.

RFID’s benefits to paper companies and their customers don’t stop at the warehouse floor, however. Packaging innovations that rely on RFID tags and emerging supply chain solutions are helping retailers keep track of inventory, consistently meet demand and guard against theft.

These ‘smart packaging’ initiatives, though just emerging, are helping early adopters make the business case for RFID investments. Instead of tagging boxes or pallets or paper rolls, these initiatives tag individual consumer product packages. When the retailer places these items on display, the embedded tags can be used to monitor inventory as well as provide the supplier with real-time demand forecasting information and planogram compliance using ‘smart shelves’. They are already proving their value to both retailers and consumer products companies by reducing out of stocks, streamlining receiving and inventory management process and enhancing trading partner collaboration.

Smart packaging applications are also showing promise for ensuring the safety of such perishable items as produce, meat and fish. RFID tags, when combined with the right software, can help packagers, shippers and retailers monitor temperatures thereby preventing bacteria growth and spoilage. Though emergent, these applications are being piloted by a number of forward-looking paper companies that are transforming their businesses to more readily meet the demands of their customers. These examples clearly represent an opportunity for the package supplier to differentiate its offering to customers by innovative inclusion of RFID technology.

So what is the next step for paper companies just now entering the playing field? IBM’s approach to this technology draws from its extensive experience and includes a comprehensive set of building blocks:

Assess business opportunities and requirements

Plan and design solution, complete with data and process integration

Pilot, and

Implement

While the amount of investment required for a successful RFID deployment is significant, early initiatives are showing the ultimate rewards far outweigh the up-front investment. But as the early adopters learned all too quickly, the success of an RFID system comes down to one thing: not the tags or readers, but to the overall process and technology solutions that drive results.

Claudia Fernandez is a Supply Chain Management Consultant. Prior to joining for IBM, she worked at PriceWaterhouseCoopers Consulting.

Doug Hayhurst is the Global Leader for the Forest
and Paper industry for IBM’s Business Consulting Services.