BEYOND THE TAG

Over the course of our investigation into automotive returnable container tracking, we have consistently found that most of the problems in today’s business processes relate to a lack of visibility – the inability to see what is happening across an entire returnable supply chain in near real time. It often became apparent very early that automotive OEMs and their suppliers struggle with locating returnable containers and isolating issues when these containers are missing in the field.

In a typical supply chain, returnable containers are shipped on full pallets from an “empties warehouse” to the supplier, where they are filled with automotive parts and components that are then shipped to the manufacturer’s assembly line. Once the parts in a container have been consumed, empties are shipped on mixed pallets to the warehouse (often operated by a third-party logistics company) where they are sorted, treated and refurbished. They are then reloaded on full pallets and are ready to ship out again to the supplier.

In this system, there are several nodes where containers check in and out. These include sequencers, third-party logistics providers, suppliers manufacturing facilities, OEM manufacturing facilities, OEM warehouses, etc. The lack of proper container management leads to serious inefficiencies for the auto manufacturer.

These include:

Cycle time and handling costs

Because of a lack of visibility, the speed of cycling containers through the system is not optimized. This results in more containers than manufacturers need. Additionally, the cost of managing and handling these assets often exceeds many times over the asset investment value. Faster cycle times for containers lead to improved use, fewer containers and less handling costs overall.

Excess container inventory

In one project, we took 30 percent of containers out of the cycle and observed no effects to the operation, its efficiency, or its ability to cater to peaks in parts demand. Here, the lack of visibility clearly leads to mounting safety stocks, and it shows that the OEM did not fully know how many containers are truly needed in the process when they were initially purchased.

Container shrinkage & attrition

When containers are lost, it is often impossible to pin down the source, and, typically, the OEM will bear the cost. The reasons for returnable attrition are many and range from misshipment and misplacement to the use of returnables as work in process (WIP) storage at supplier facilities.

Substitute cost

This becomes a very important factor over time when suppliers run out of returnables to ship parts to the OEM. Substitutes are one-time corrugated containers and add to the cost of the overall container management process.

THE CASE FOR RFID

Most recently, RFID has been discussed in the light of Wal- Mart and the US Department of Defense (DOD), the two largest supply chains in the world, who have mandated their suppliers to use the technology on all inbound shipments. RFID tags are attached to items, cases and pallets, and, when the items arrive at a loading dock, the tags can be read automatically, alleviating the need for a manual, laborintensive reconciliation.

However, the true value lies in the visibility that RFID provides – seeing inventory whether in motion or in stock at all times. By installing readers at all major choke points and know exactly when and where an item was last seen, for both Wal-Mart and the DOD, the technology ultimately enables more intelligent planning, inventory management and procurement.

The same can be said for the application of RFID to returnable containers. If OEMs place a tag on every container and install RFID readers at key choke points, they are able to know exactly when and where each container was last seen. Take the issue of substitute packaging where suppliers charge the OEM for one-time corrugated containers because they do not have enough returnables in stock. If the OEM can check the number of containers shipped to the supplier in the asset management application, he can then establish that the supplier still has enough returnables.

Passive RFID technology rests on three main components: a small tag attached to an item; a reader that identifies tags in its proximity; and a computer system that processes information when tags are seen by readers.

The reader initiates a conversation with tags in its proximity, receives the respective tag IDs (with data formatted as an Electronic Product Code), and hands the information to a RFID middleware platform, such as the IBM Premises WebSphere Server, which connects to an enterprise-level asset management system, such as the IBM Maximo Asset Management Server, Asset which can perform a complex set of analytics and can provide either active alerts (i.e., lack of reconciliation of check-in and checkout containers) or on-demand visibility, depending on requests.

ENABLING THE PROCESS

The process flow for an RFID-enabled container management solution is fairly straightforward, and begins with the OEM placing tags on all containers and inserts. Reading the combination of container and insert tags allows the OEM to determine which returnable container type is on hand.

RFID readers are placed at the inbound and outbound dock doors of the empties warehouse, at the receiving and shipping docks of key suppliers, at sequencers’ and 3PL providers’ facilities if they are used, and at the OEM’s manufacturing facilities. As pallets of empty returnable containers leave a facility, tags are read and associated with a specific shipment so that the OEM knows to which supplier the returnable containers are going.

Once the truck is loaded, all transactionrelevant information is passed from the RFID middleware to the asset management application, where the information is permanently stored and available for reporting and analysis. A reconciliation between a returnable container order in a backend system and the asset management application or in the RFID middleware can be automated to a point where the warehouse manager receives an instant alert when too many or too few containers are about to be shipped to the supplier.

Once the truck arrives at the supplier’s facility, readers will perform a second scan of the empty returnable containers and allow for a second reconciliation of what has been shipped. If the same containers do not show up at the manufacturing site within a reasonable time, then it is the supplier’s responsibility to account for their whereabouts.

There is an interesting extension to the returnable container tracking: the supplier can now link the parts that go into a specific returnable with the container tag and thus create an automated advanced shipping notification (ASN). As full returnables leave the supplier’s facility, they are once again scanned and associated to a shipment. In this way, it is possible for the OEM to receive an automated estimated time of arrival (ETA) as well.

As the truck is unloaded at the assembly plant or line, the returnable containers are scanned and there is reconciliation between what was shipped and what was received. The OEM now knows which returnable containers have been received and the receipt can be compared with prior shipments of empties to accurately establish how many containers of any given type are still in the possession of the supplier. By closing the loop up to this point, the OEM has full visibility into each container by supplier.

Finally, as returnable containers are used at the OEM’s assembly line, they are emptied and stacked on mixed pallets to be shipped back to the empties warehouse. In this last step, the warehouse can be notified of which empty returnables are moving into the warehouse next through scans of outbound RFID tags at the plant. The visibility that this system creates allows for a shared ownership of returnables, which enables all participants in the automotive supply chain to handle each container to the best of their ability. This provides the foundation of a truly valuable returnable container management solution.

LEVERAGING THE DATA

Although vital, the automation of data capture is just one ingredient to sophisticated returnable container management. However, receiving reliable, accurate and complete data from the field is not the end. Rather, additional value in returnable container management lies in how we leverage the data across multiple business processes, across several locations and in innovative ways. This is where the asset management software comes into play.

In a nutshell, asset management is an application that resides on top of a data capture layer and provides further value not just in returnable container management, but also in many related areas such as parts management. The general architecture for this solution rests on the combination of the RFID middleware layer with asset management on the application layer.

The RFID middleware can run as a local instance in each facility such that the RFID tag data captured by the middleware is filtered and smoothed to eliminate duplicate reads and to distill businessrelevant events like a returnable leaving the supplier’s dock. All data is then sent to the asset management application via a secure network and is processed there for reporting, alerts and backend system transactions.

With this architecture in place, the asset management application can manage the returnable container population in the entire system. An order for new empty returnables that need to be sent to a specific supplier can be generated in an ERP application that ties into the manufacturing planning and execution system, or it can be triggered by the supplier directly through a web GUI.

Once the order is received, the asset management application will identify the inventory in the empties warehouse and initiate the transfer of returnables. The user in the warehouse will receive a pick order for the containers and once returnable containers and inserts have been picked, shipment quantities and supplier information are handed from the asset management application to the RFID middleware server so that an easy reconciliation between the planned and actual shipment becomes possible.

If the forklifts in the empties warehouse are also equipped with RFID readers, then it is possible to monitor and control the pick order itself. Otherwise, the required pallets are staged, and, once the truck arrives, an operator indicates on a handheld device or PC that the order will be shipped through a specific dock door.

This information is passed on to the RFID middleware, which now sets the RFID portals at the dock door into a read-ready mode. As pallets pass through the portal, the RFID tags on returnable containers are read and reconciled against the order. With the last pallet, the user can indicate to the RFID system that the shipment is now complete and the RFID middleware will perform an automated reconciliation to ensure that there are neither missing nor surplus returnable containers on the truck.

The system will indicate that all items have reconciled and that the system can prepare an ASN for the supplier, who now knows that the containers are on their way. In parallel, the RFID middleware will send the serialized ID for each returnable container and insert to the asset management application where the information is stored and further processed. The status for the shipped returnable containers changes from “in stock” to “in transit.” This concludes the shipping transaction in the empties warehouse.

Important in this context is the integration between OEM and supplier systems that happens at the asset management application layer. Suppliers can access and manage their own returnable containers through a webbased GUI that links into the OEM asset management application. Naturally, the supplier will only see data and be able to transact in the system as it pertains to himself.

Typical transactions include the transfer of filled containers to the OEM and the acknowledgment of empty returnable receipts. Likewise, suppliers will have a real-time view of the returnable container inventory that they still hold and they will be able to initiate shipments of empties to the OEM under exception conditions, such as when a different supplier or the OEM needs the containers out of the supplier inventory. In situations when container inventory is lost at the supplier location, it is possible to generate invoices out of the asset management application to the supplier for the missing returnable containers.

The asset management application also allows the OEM to view the history of each returnable container. It is thus possible to derive performance data about the business process once the container’s location has been established over the past few cycles. This is an important feature when linked with the management of the container’s condition. The asset management application allows users to input and carry a wide variety of statuses in the system. These can range from trivial “new” versus “used” and “retired” to more specific assessments of a container’s value.

A given container can be valued at a percentage of its initial monetary value, for example, which allows for a tight control of the overall cost of the container population. This feature is important when containers need to be accounted for and also when they need to be replaced. Container values can be set manually or automatically over a period of time or based on the number of cycles that the returnable container has performed. In conjunction with RFID, this feature can be used for returnable container refurbishment.

For example, it can tell users to pull out a specific returnable container that has just completed a predefined number of cycles. Likewise, it may be of interest to a returnable container manager to take a handheld device, read the RFID tag, and view a history of the specific container, where it has been and for how long, when it was last used, and, potentially, even which parts it has carried over its life cycle.

Alerts and escalations are other key features that we have indirectly used for many of the use cases described above. The asset management application generates a variety of important alerts whenever things do not happen as planned. Typical examples of alerts and escalations are that a given returnable container has not moved in the system for a certain number of days. As we have discussed, this can trigger an inquiry when containers are shipped to a supplier, but do not return in time.

The combination of RFID technology with a sophisticated asset management application allows users to know where and when the container was last seen, which, in turn, provides the necessary information to take corrective action. Alerts are also useful when full returnable containers begin a journey by truck, but do not arrive as planned. In this case, the RFID middleware is able to immediately notify the user so that the issue can be investigated before the driver leaves the lot.

In addition to real-time notifications, there is a need to leverage alerts in foresight of events that may take place at some point in the future. An example is the ability in the asset management application to predict that the next container order cannot be fulfilled unless a certain number of containers is freed up at the manufacturing plant over the next two hours.

INCREASING APPLICATIONS

Ultimately, detailed knowledge of how returnable containers move through the system allows reliable assessment of how many returnable containers are needed and helps reduce inventory as well as avoid excessive spending for the next program.

The asset management application allows the creation of availability models, which, in turn, can be used for sporadic, ad hoc or continuous simulation of returnable container needs and peak (container management) system performance. It is obviously just as important to identify the least number of needed returnable containers as it is to identify potential situations in which the available container population may not suffice.

RFID technology creates visibility throughout the process, which, in turn enables shared ownership of containers. However, the application of RFID and asset management applications to returnable container tracking is just a first step. There are several applications that can be built on top of returnable container tracking to leverage its infrastructure and its advantages even further. While parts management is an obvious extension, the asset management application along with RFID technology can be used beyond that for manufacturing or yard and fleet management.

Once the existing infrastructure is put in place, all of these applications become available within a short time, and they not only carry their own business cases, but also contribute to container tracking by sharing the overall cost of the system. This creates a synergistic situation where the solution cost for returnable container tracking is reduced while new application spaces are fully leveraged.