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Markets in Transition: RFID and Finding Lost Pallets
Some distribution level mangers and executives generally feel the frustration of trying to control or keep track of reusable pallets and containers. Lost containers are very real, and the cost of replacing them can run into the millions of dollars.
By Rick LeBlanc
Date Posted: 2/1/2008
What does reusable asset management have to do with Disneyland? Not much yet, but a lot of people are hoping that sometime soon their legions of reusable pallets and containers will magically spring to life and, if not burst into song, at least shout out at roll call.
Some distribution level mangers and executives generally feel the frustration of trying to control or keep track of reusable pallets and containers. We’ve highlighted some of this bunch in the past. For example, the automotive industry spends $750 million per year replacing reusable pallets and containers. The dairy industry spends $80 million to replace AWOL milk crates. The U.S. Postal Service spends millions of dollars annually to replace missing plastic pallets, and so on.
Diligent, consistent attention from front line employees typically has been required to ensure that reusable pallets and containers are controlled, although it is still usually imperfect. For many companies, container management seems needlessly complex. In addition, the cost of so many distribution employees riding herd on bread trays or milk crates, for example, may feel more painful than the probability of loss. Lost containers are very real, however, and, as reiterated above, the cost of replacing them can run into the millions of dollars – or tens or hundreds of millions.
One of the benefits of applying radio frequency identification (RFID) for controlling reusable pallets and containers is that it eliminates the need for employees to laboriously count and record movements of these assets. When reusable pallets or containers are equipped with an RFID tag and there are enough ‘readers’ connected to the tracking system, the containers essentially count themselves. However, unless a supply chain is adequately equipped with these devices at various points, the tagged assets still will be vulnerable to loss in zones of inadequate visibility. No one will hear their desperate cries for help as they are driven off in the back of someone’s pick-up truck.
For the most part, vendors indicate that there is no compelling cost justification yet to install an RFID solution to track inexpensive containers. A spokesman for Intellident, an RFID system integration company in Great Britain, indicated as much to me recently.
Eric Swanson of Orbis made a similar observation in a recent article in Pallet Enterprise. “Most RFID projects involving the supply chain can be very capital intensive,” Eric said. “It is not only the cost of the tag but the infrastructure (readers) required in expanding supply chains to gather the information. There must be tangible, specific benefits identified to justify the capital investment of the RFID infrastructure, which in many cases could dwarf the investment in reusable packaging. The packaging can be a vehicle for the technology, not necessarily the reason to invest.”
However, as Michael McCartney of QLM Consulting has pointed out, where RFID is applied to track valuable products, the RFID-enhanced management of the reusable assets can provide added benefits.
This seems to be the scenario for a new RFID application for reusable bread trays. Alien Technology recently announced a number of new RFID applications, including one at Penam, a leading bakery business in the Czech and Slovak republics.
“Currently, RFID has been deployed in process automation within production,” said Ronny Haraldsvik, vice president of marketing & industry relations for Alien Technology. Alien RFID tags were used in the application.
“Soon they plan to deploy RFID to track the reusable packaging (crates). They expect significant savings in elimination of lost crates. The long-term goal is to deploy RFID to automate and speed up the finished goods shipping as well.” The company expects to reap benefits in eliminating errors, automating shipping and the capability to trace products, he said.
For now, this seems to be the path of least resistance for introducing RFID to track pallets and containers: focus on the products first, and then the pallets and containers as a secondary benefit. Of course, the economics are more attractive in relatively closed loops with fewer read points than in open loops of retail distribution.
For those distribution executives out there wearing Mickey Mouse ears and waiting patiently for their wayward pallets and containers to break into song as millions of dollars worth of them disappear annually, please take note.