Forklift drivers at Genco's McDonough, Ga., DC tempted to dash over to a remote aisle for a quick smoke or a short break from the action are out of luck. Their vehicles will give them away. Among other features, the trucks they pilot come outfitted with RFID readers and active RFID tags, which track their every move throughout the 208,000-square-foot DC.
Introduced as a lower-cost alternative to the RFID readers designed for dock doors, RFID-enabled forklifts appear to be gaining traction in America's DCs. It's not hard to see why. Though the investment is comparatively modest, the payoffs are big. Companies that are using the mobile systems, which can identify and track products onboard a forklift from loading to unloading, report improvements in picking and shipping accuracy, enhanced productivity and better vehicle utilization.
The prospect of improved vehicle utilization figured largely in Genco's decision to put five RFID-enabled trucks—a mix of Toyota sit-down trucks and Crown reach trucks—to work in the McDonough DC. Genco, which is a third-party service provider, has been using the trucks for over a year at the facility, a returns center that it runs for Sears. (It has five more in pilot mode at another facility.) And it hasn't been disappointed.
The active tags affixed to the forklifts allow Genco to track the X/Y coordinates of each truck, giving managers a better understanding of the travel times and distances required for various tasks. The tags also help them gauge how efficiently the trucks are being used. "We want to see how often our operator is driving with no product on the forks," says Cary Cameron, Genco's vice president of strategic technologies. "If I can maximize the use of my forklift, then we can minimize maintenance on the forklift."
Genco plans to use the data it captures to track operator productivity and to model daily workflows via the magic of computer simulation. It has hired a graphic artist for the project, which will translate the tracking data into animated forklift images. Once the project is completed, a manager who wants to check up on a forklift's movements anywhere in the DC will be able to call up an animated live-action image of that same truck on his computer screen.
Not only will Genco's managers be able to track a forklift's movements in real time, but they'll also be able to reconstruct the trucks' movements at a later date. A team called in to investigate a forklift collision or accident, for example, will be able to pinpoint a forklift operator's exact location at a specific time during his shift.
Don't go there
Beyond vehicle utilization, Genco reports that the RFID-enabled forklifts have pushed shipping accuracy to new levels. The RFID-enabled trucks alert drivers if they attempt to load an item onto the wrong truck, which has virtually eliminated the problem of shipping products to the wrong facility. Genco reports that shipping accuracy has jumped from 95.0 percent to 99.7 percent on the 45,000 pallets it has shipped since the company began using RFID-enabled trucks.
And Genco has achieved these savings without blowing the budget. Outfitting the McDonough facility with mobile RFID equipment will cost half what it would to set up RFID pOréals at dock doors, says Cameron. She estimates that it would cost Genco about $6,000 per door to install RFID readers at 160 dock doors—a total of $960,000. By contrast, equipping approximately 60 lift trucks at about $8,000 per truck will run about $480,000. Furthermore, Genco believes that RFID-related productivity improvements will cut the number of forklift trucks needed at each DC.
That's not to say that Genco hasn't hit a few rough patches in its transition to mobile RFID. Cameron says the biggest problem she faces right now is getting her hands on Gen 2 equipment. Though her suppliers have promised to get her the equipment, they have yet to give her a firm delivery date.
She's also working with her hardware vendors to solve an ongoing problem with unread tags. Signals emitted by the forklift-mounted readers aren't always strong enough to read through an entire pallet, which means tags on some of the cases go unread. That's not a problem with dock door pOréal readers, which provide enough coverage to ensure that none of the cases on a pallet (or to be precise, the tags on those cases) will be missed.
Spreading the word
Those startup difficulties notwithstanding, word about the savings offered by RFID-enabled forklifts is spreading fast. So it may come as little surprise that Wal-Mart is giving the technology a try. At its test lab in Bentonville, Ark., the mega-retailer is currently testing an RFID-enabled forklift that reads tags on pallets and transmits data through a wireless network to a warehouse management system, which sends data on inventory to other business applications.
Some of Wal-Mart's suppliers are experimenting with the technology as well. Michael Smith, business development manager at LXE Inc., says his company has pilots under way with several of Wal-Mart's 100 biggest suppliers. These clients, major consumer packaged goods manufacturers, believe RFID-enabled forklifts offer great potential to streamline their operations. For example, if the tests confirm that the RFID-equipped forklifts provide reliable data on the number of cases picked, the manufacturers will be able to eliminate some redundant quality control checks.
They're hoping for productivity enhancements as well, which shouldn't be much of a stretch. RFID-equipped trucks allow drivers to focus on driving, not scanning. It may only take 10 or 20 seconds to scan a bar code, Smith says, but if you eliminate that task, the savings accumulate quickly.
"It does add up when you consider the number of moves [forklift operators] are doing," Smith says. "You are really paying these guys to [move goods], not collect data. So the more moves you get out of these guys, the more work you can do. If you can do 100 moves with a bar-code scanner and 120 with a forklift, you can put 20 percent more product through the facility." For companies hard-pressed to show some returns on their RFID investments, that kind of opportunity will be hard to ignore.
just show them the money
Maybe they're trying to placate an ROI-obsessed CFO. Or maybe they're simply trying to add luster to their reputations. Whatever the reason, it appears that managers have engaged in some dubious accounting practices when reporting returns on their RFID investments. Steve Banker, a research analyst with ARC Advisory Group, says reports have surfaced of managers' padding their RFID returns with savings actually earned through automation and other cost-cutting initiatives.
"If the CFO becomes very concerned and [demands] an ROI, then some people will try to bundle in other things to the project," says Banker. "If they haven't implemented a warehouse management system yet, they'll see an opportunity to bundle RFID into the WMS project and then attribute any sort of ROI that emerges to RFID instead of the WMS."
It might appear to be a relatively minor type of malfeasance, but Banker warns that the practice could have serious consequences. For one thing, a company that submits falsified financial reports risks running afoul of Sarbanes-Oxley regulations. For another, the inflated ROI figures could encourage the company to move forward with RFID faster than caution would dictate, sending costs spiraling upward.
Finally, overstating ROI numbers could deprive the company of its best bargaining chip when a big customer issues its next RFID mandate. "The people [who] have piloted RFID [but have yet to see any] ROI have some good ammunition when Wal-Mart asks them to increase tagging from 10 SKUs to 100," says Banker. "They can go to Wal-Mart and say 'This is what we did, [this is] how much money we spent, and we haven't seen one penny of ROI yet.' It gives them a strong argument for continuing to go slow."
Wreaths Across America
