Wal-Mart and DoD Unscramble RFID Buzz

Dec. 1, 2004
There's so much noise going around about RFID that core learnings tend to be drowned out. That's why Material Handling Management decided to get some answers directly from the pioneers who are currently implementing RFID throughout their supply chains.

Roundtable Participants:
John Nofsinger
, CEO of the Material Handling Industry of Ame rica
Alan F. Estevez , Assistant deputy undersecretary of defense, U.S. Department of Defense
Rick Blasgen , Senior vice president integrated logistics for ConAgra Foods
Kerry Pauling , Directorof Information Systems Division for Wal-Mart

MHM organized a roundtable discussion involvingtwo of the leading drivers of RFID implementation, Wal-Mart and the Department of Defense as well as one of their top suppliers, ConAgra Foods.

Representing Wal-Mart was Kerry Pauling, director, Information Systems Division. For the Department of Defense, Alan F. Estevez, assistant deputy undersecretary of defense (supply chain integration). On the supplier side was Rick Blasgen, senior vice president integrated logistics, for ConAgra Foods. And representing RFID technology was John Nofsinger, CEO of the Material Handling Industry of America, the association representing some of the key RFID hardware and software vendors.

MHM's purpose in hosting this roundtable was to put an end to speculation on the part of end users regarding RFID's direction, and to begin a constructive dialogue among vendors, suppliers , OEMs and consumers. This is especially important now that those January compliance mandates are only a month away.

Challenges and opportunities

Nofsinger: Much of our work is in building a consensus in the supplier community on how to serve the user communities. Where RFID is concerned, we need to make sure that we're taking every step we can to bring these communities closer together for a better understanding. Companies are entering a high-stakes game and we want to make sure they get it right and that we don't somehow, by benign neglect, fail to lead them in the right directions.

Pauling: We encourage everybody to get started in RFID, to get your labs up and running. There are a lot of resources from EPCglobal that can help you along the way. Just by starting, you'll be able to clarify the RFID initiatives that will benefit you the most.

Estevez: Our supply chain can be fairly complex because of the places in which we fight. We believe RFID is one of the key enabling technologies. In and of itself, it's nothing, but RFID can really facilitate business processes to make us more effective in supporting our forces in the field.

Blasgen: We are redefining the packaged foods business of ConAgra and beginning to integrate a bunch of companies that were acquired over a number of years. Integration has become our mantra. Our go-to-market strategy will have an ingredients channel, a food service channel and a retail channel. We'll consolidate inventory that would have been sent from a number of different distribution channels, sales organizations, systems and buildings into a more unified and harmonized approach. Everything we do now is all about finding ways to be more efficient and streamlining our assets to move inventory faster.

Learning phase

Blasgen: We're piloting and trying to understand how the technology can improve the process. We want to find out how we can import information from way back in the supply chain. Someday, for example, the corrugate will come into the manufacturing facility with the tag already on it so we don't have to manually apply tags. We want to harness real-time information and take action on it to make our supply chain more effective, and then to also make the supply chains of our customers more effective. We're still evaluating the technology. We have a lot of liquid product and canned food, so there are still technical issues that have to be overcome. And they will be.

Estevez: The DoD has 43,000-plus suppliers ranging from sophisticated companies like Boeing, Lockheed Martin, Northrop Grumman and Raytheon, to suppliers that are smaller than the number of people sitting in this room. I encourage anyone who is going to do this — and everyone is inevitably going to do it — to look at their own business processes and figure out where their own benefit can be. I know both Lockheed and Boeing, which have very advanced RFID programs, are looking backward in their supply chain as well as within their own four walls. Once people get some experience and see what other folks are doing with DoD and Wal-Mart through EPCglobal, you'll see greater benefit throughout the supply chain. Pauling: Wal-Mart will move forward in January 2005 with case-and pallet-level applications. We have proven that you can read a pallet tag going through a pallet portal 100 percent of the time with RFID technology. We have also proven that we can read cases traveling on our high-speed conveyor systems 100 percent of the time. As far as all the suppliers to Wal-Mart, I think you'll see many different implementation plans. We do work with our Top 100 suppliers one-on-one, reviewing their tagging plans from a case and pallet level. We've started reviewing the tagging plans with the next set of 200 suppliers as well, sharing information and sharing what we've learned in the lab. At the same time, they're sharing with us what they've learned.

Nofsinger: Research was recently conducted at best-practices companies that adopt methodologies like six sigma and lean manufacturing. The secret seemed to be not which one you did. It's that you did one. It's that somebody looked at the details of their business again. We've got big vendors in our industry that are household names in our sectors. They're going to be there right away because it's commercially practical. There are smaller companies that will try to stay out of their way and will get dragged into the vortex at some point, and they'll get involved a little bit later. But I think it's going to create a huge opportunity for infrastructure investment because it's not just as simple as going in and retrofitting.

Testing

Pauling: A lab should replicate what you do in your normal day-to-day activities. If you have large conveyance systems in your network, you'd just need a circular conveyor. You could do testing with tag placement and with reader placements. If you're roller driven, then you can experiment with the impact the metal rollers have on the reads. You need to have something that replicates what you do in your day-to-day activities. From a hardware component perspective, it's not that complicated. There are a lot of basic RFID readers that you can get from several suppliers. We were able to write our software in-house very quickly, without a lot of resources, and started getting data back.

Estevez: We're doing some testing, but more in the real world than in a lab environment. Larger companies can better afford to do that than smaller ones. There are ways around setting up your own lab. When Gen 2 comes out, EPCglobal will have test conformance/performance testing facilities that will essentially put the Good Housekeeping seal of approval on vendors and vendor equipment so that people can buy with assurance. Large third parties will also set up lab opportunities for you so you don't have to worry about placement of tags or how it will work. The marketplace will take care of that.

Blasgen: The physical part of it is not as daunting as one might think. It's just trying to understand how your business process should augment it, enhance it or change because of it. Most major manufacturers of our size, with our customer base, are national in scope. So you're going to want to have this capability ramped up rapidly once you prove it and once you have a business process that supports it. After that learning period, we'll rapidly move into something more broad scale so we can begin-to reap the benefits on a wide scale. It's going to take some time to really understand how everybody is going to take the information and do something more with it than just putting a label on a box.

Standards

Blasgen: I lead the Grocery Manufacturers of America logistics committee and we're trying to work with all these parties on standardization. The other thing to note is that most major companies that have gone through acquisitions and mergers on the manufacturing side serve many different channels now. We serve 10 or 11 different channels, everything from Department of Defense to Wal-Mart to individual drug stores. We must put together a process to satisfy the needs of all these different channels. Therefore, it's in our best interests to work with those folks on developing a standard that the industry can use cross channel and cross industry. We're working with other non-food consumer packaged goods companies and we're looking at synergy as we go to these channels and how we partner up to try to drive some standardization to make it better for everybody.

Estevez: Even with EPC global, it's still not quite plug-and-play. But you have to crawl before you walk and walk before you run. Pretty soon it will be plug-and-play. There is so much good middleware out there right now that will take care of some of those data issues. Tomorrow that will all be embedded in the reader. And don’t underestimate the flexibility of our work-forces. While there’s resistance out there, once they say, wow, this works for me, they’ll em-brace it, and then they’ll figure out better applications than anyone in this room is going to think of.

Generation 2 will be here soon, and by February you’ll have chips. There’s nothing wrongwith the Gen 1 products, and there are multi-protocol readers that read both. The people who learn quicker will have a competitive advantage.That’s the way of the marketplace. And Gen 2 won’t be the end. There will be Gen 3, Gen 4;things will get better and better and better. So sitting back and waiting for Gen 2 is just not the answer.

Pauling: In some cases, smaller companieswill have an advantage because they have a morestraightforward business model to deal with.They may not have the number of distribution centers in which to address RFID. I think the in-dustry is realizing that this is a very doable, a very usable technology and they no longer have to start at the beginning. They can start with someof the learnings that have come out of EPC-global already and not have to reinvent the wheel.

Future

Estevez: I probably have the most advanced active network on tagging containers and air pallets that there is. What we’re trying to design our system to do is, when that passive tag gets read as I load a truck, the data from that passive tag will load automatically to an active tag. And then what I really would like to have happen is that when I pull that box out of that container,that decrements it automatically from the activetag without anyone having to do anything. So I’ll have accurate manifest data on that tag at alltimes. We’re working on that with two passivetag makers and our active tag maker. So both Alien and Symbol, Matrix and Savi are working together on those issues for us.

Blasgen: Some day we’ll make the shelfsmart, so it knows it’s out of stock, sends a signal somewhere and somehow we replenish the shelf in a more proactive way than we do today. We’ll all win because of that. The question is, how will we do similar type things further up the chain,where inputs are coming from the manufacturing side and as it goes through the manufacturing process and exits out the other end as a finished good? And, oh yes, maintain complete control and understanding of all those ingredients and raw material. If there’s an opportunityto secure ourselves there, we’ll definitely go down that path.

Estevez: We’re going to put out a supplier guide on our Web site to help suppliers address key issues, and we will keep that updated based on learnings. Kerry and I have talked about what’s working, what’s not working, so together our organizations can drive adoption of this technology to the benefit of all.

Pauling: It’s so important to just get started.Today we’re live in one distribution center.We’re installing hardware as we speak into three DCs in the Dallas area and 150 stores in preparation for January 2005. Looking forward, we have identified 12 distribution centers and approximately 600 business units to be in by January 2006, and we’re obviously leaving the door open should we want to accelerate that rollout process. One of the areas where there are still alot of opportunities is in integrating readers into lift trucks and pallet jacks. There’s a lot of engineering work left to be done, in the material handling industry, and I’d like to see it expand.

Our supply chain can be fairly complex because of the places in which we fight. We believe RFID is one of the key enabling technologies. In and of itself, it's nothing, but RFID can really facilitate business processes to make us more effective in supporting our forces in the field.

Alan F. Estevez
Assistant deputy undersecretary of defense

Companies are entering a high-stakes game and we want to make sure they get it right and that we don't somehow, by benign neglect, fail to lead them in the right directions.

John Nofsinger
CEO of the Material Handling Industry of America

So you're going to want to have this capability ramped up rapidly once you prove it and once you have a business process that supports it. After that learning period, we'll rapidly move into something more broad scale so we can begin to reap the benefits on a wide scale.

Rick Blasgen
Senior vice president integrated logistics for ConAgra Foods

In some cases, smaller companies will have an advantage because they have a more straightforward business model to deal with. They may not have the number of distribution centers in which to address RFID. I think the industry is realizing that this is a very doable, a very usable technology and they no longer have to start at the beginning. They can start with some of the learnings that have come out of EPCglobal already and not have to reinvent the wheel.

Kerry Pauling
Director of Information Systems Division for Wal-Mart

About the Author

Tom Andel | Editor-in-Chief

Tom Andel is an award-winning editorial content creator and manager with more than 35 years of industry experience. His writing spans several industrial disciplines, including power transmission, industrial controls, material handling & logistics, and supply chain management.