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Meeting Wal-Marts Mandate


June 2003: Wal-Mart mandates use of radio frequency identification – RFID – technology by its vendors in order to track its inventory. The Bentonville, Ark.-based retail giant says RFID will let it see all merchandise in its farflung supply chain, from factory floor to warehouse to any of its 6,500 stores. In Lexington, Ky., Valvoline, one of the worlds 10 largest lubricant marketers, starts its program to comply.

Fast-forward to the third week of September 2005: Valvolines RFID implementation team is poised to launch the new technology at its Deer Park, Texas, lubricant blending and packaging plant. Our initial on-site implementation was all set up, recalls Dennis L. Martin, manager of supply chain connectivity. We got back to our hotel after the first day of RFID; it was a long, hot day, and we were tired. The hotel staff told us to leave town. Hurricane Rita was coming, and they were closing the hotel. It took three weeks before we could go back.

While hurricanes arent among the usual obstacles to adopting RFID technology, not even Ritas wrath could dampen Valvolines commitment to implementing the product-tagging and data-collection technology.

We enabled a plant to tag cases and pallets and implemented a back-end system to aggregate the [electronic product code] numbers, the unique numbers on each case and pallet, to track products through the supply chain, says Bradford K. Ward, manager of supply chain planning. You know exactly where the product is in the supply chain, from the manufacturer to the customers shelf, and ultimately to the box crusher.

In the summer of 2003, Ward formed Valvolines RFID discovery team, with the job of learning the technology and the players. Ward, who headed the team through the discovery and pilot phases, brought together a cross-functional team. We had about a dozen people in the beginning, Ward says. Functions on the team included supply chain, operations, purchasing, IT – several people from IT – engineering, and we stayed in close touch with sales.

Once the project moved from the pilot stage to implementation, Martin took over leadership of the RFID team, now a smaller working group of about eight.

The Process

Our first decision was whether to slap-and-ship vs. tagging products on the production line. Slap-and-ship has the lowest cost to enter the [RFID] system, Ward says. But slapping cheap, passive RFID tags on cases and pallets as they go out the door is labor intensive, adding labor costs without any benefits. We wanted to be as minimally disruptive as possible, and keep our people-processes as unchanged as possible, so we chose to tag on the [packaging] line, says Ward.

We had to test how tags behave differently on different products, to get the right tag and the right placement, continues Martin. People said RFID is not effective with liquids. We had heard horror stories.

But we found that lubes appear to amplify the [radio] signal, and the air space at the top of cases was conducive to placing the tags at the tops of cases.

It was a relief that the oil didnt mask the [radio] signal, adds Steven B. Ruble, senior packaging engineer. It made us comfortable moving ahead with the project.

We didnt want to use special tags because of the cost, which can be prohibitive, Martin goes on. We were eager to use a standard, commodity tag, and we were able to do so.

The cost of readable-writable tags has declined steadily, with the least expensive tags now selling for as little as 12 cents apiece, while specialty tags can cost $250 or more.

We tested multiple packaging types, including greases with foil linings, and we found solutions for all the problems. All our products could be tagged, Ward notes. Valvoline is now tagging two types of quart-case packaging, and is ready to begin tagging a third, a large-pack case.

Three Chances

The RFID tagging, reading and writing equipment installed on Valvolines packaging lines starts with an applicator that applies the label with the embedded tag. An antenna attached to a reader interrogates the tag to make sure it is good, then encodes it. Light stacks signal that the labels are encoded properly. Finally, a middle-ware system manages the information.

We apply the label as the case comes down the line, Ward explains. We write the code to encode a unique EPC number on each tag, then all the cases are aggregated and associated with the pallet EPC number. All the inventory for select products is now labeled with RFID tags.

RFID technology is evolving rapidly. Were now using Gen 2 tags, which are more accurate and effective, Martin notes. Tag read rates in the 90 percent range are good, he says. We expect 97 to 98 percent [readability] with the Gen 2 tags. The key to achieving higher read rates is through redundancy, creating repeated chances to read the tag.

Ward notes that there is nothing unique to lubricants in any failures reading tags; problems are generally caused by bad tags or the physics of a moving production line.

Looking Ahead

Will Valvoline move toward RFID-tagging all its products? Thats possible at some point in the future, Ward replies, but it will be driven by return on investment and by customer expectations.

The most challenging part of adopting RFID technology is integration with existing enterprise data collection systems. Most large manufacturers have data collection systems that can cover receiving, production, quality management, warehouse management, shipping and distribution, and third-party processing. If RFID technology is to be a valuable tool that helps lower costs, the data generated must be integrated with the centralized enterprise planning systems.

At Valvoline, the RFID team is tackling the challenge of aggregating the data to make it useful. Notes Ward, Were still evaluating how and whether to integrate the RFID data into other companywide systems.

What is the companys advice to others starting down the road to RFID implementation? Have a plan, says Ruble, involve all your stakeholders, evaluate your vendor partners stringently, and test, test, test.

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