Less than two-thirds of distribution centers use a solely slap-and-ship approach to RFID mandate compliance, in contrast to widespread perception. The rest are meeting the mandates in more ambitious ways, or are augmenting slap-and-ship methods with automation, according to a recent survey by ARC Advisory Group.
Slap-and-ship -- the process of manually applying RFID tags to cases and pallets -- is a costly, labor-intensive process performed in distribution centers. It meets the letter of RFID mandates, but not their spirit, which ultimately involves supply chain visibility across trading partners.
Of the companies involved in ARC's survey, 16% use conveyors to move pallets and cases to and from the tag application station, palletizing station, and shipping dock. Others take preprinted RFID labels and apply them to cases during the picking process for mixed pallet orders. And a growing number of facilities are mixing the methodologies, using multiple approaches in the same facility.
"Most companies have decided that it makes more sense to apply tags at the distribution center because the distribution center is already set up for various kinds of value-added service activities," said Steve Banker, service director, supply chain management, for ARC. "In general, factories are set up to be more focused on a fewer number of activities, but they try to do those activities at high speed."
Nestlé, for instance, will go live this month with an automatic pallet-tagging system at its Rangsdorf, Germany, distribution center. The system was developed by UPM Rafsec and SATO Deutschland to help the candy manufacturer put RFID tags on shipments to retailer Metro Group. The Gillette Company is rolling out an automated print-and-apply system to put RFID labels on boxes as well.
But as companies move incrementally from pure slap-and-ship operations, they are keeping their eye on the ultimate goal of RFID tag application at the factory.
"There is an inflection point at which they believe it is more economic to apply the tags in the factory rather than at the warehouse," said Banker. "Most companies think that inflection is somewhere between 40% and 60% of outbound cases that have to be tagged."
The primary obstacles to moving tagging operations to the factory are cost, efficiency, and technology. "Companies don't start tagging at the plant level because of the cost of preparing the infrastructure," said Banker. "At the factory level, tagging involves multiple factories and many factory lines. And right now companies cannot find applicators that can keep up with the speed of the factory packaging lines."
For the study, "RFID Deployment Best Practices," ARC surveyed 24 companies that are actively investing in RFID systems based on the Electronic Product Code (EPC) standard
