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Studies show manufacturers are using RFID to improve asset tracking More and more manufacturers are turning to RFID technology to aid their asset tracking operations. These internally-focused RFID projects are not only providing real-time data for equipment and tool tracking applications, but also serving as a proving ground for the technology among end users. According to several recent market reports, these internal applications are providing a better return on investment (ROI) than implementations spurred by mandates from large customers. "Compared to the challenge of generating ROI from mandate-driven RFID implementations, numerous opportunities exist for internal RFID applications to generate ROI for manufacturers," says Chantal Polsonetti, vice president at ARC Advisory Group and author of a recent study on RFID in manufacturing applications. RFID tracking can improve asset utilization and manufacturing processes, and reduce equipment hoarding by employees. Typically, manufacturers use the technology to track reusable containers, consumables, fixtures, tools and testing instruments. "When you know where something is, you can use it more effectively and efficiently," says Polsonetti. According to ARC's "RFID in Manufacturing Applications Worldwide Outlook" report, the worldwide market for RFID in manufacturing will grow at a compounded annual rate of 8.9% in the next five years, from $208.8 million in 2006 to more than $319.5 million in 2011. Many of these projects remain in the pilot phase, however, because of the cost of tags and the difficulty of deploying the technology in RF-averse manufacturing environments. These findings echo a study by ChainLink Research (reported here), which found that 40% of companies that had implemented RFID or were planning to do so in 2007 were using the technology for internal process improvements. A quarter of respondents used RFID for asset tracking. "The biggest benefit in these applications was reducing the time spent looking for tools," says Bill McBeath, ChainLink's chief research officer. "RFID could also reduce the number of tools needed, increase utilization, and monitor usage. Companies could also keep track of very expensive cutting or drilling tools, or dies and molds, and keep track of when they should be replaced or sharpened." In some applications, RFID is used to tag containers or totes rather than the items themselves. This helps amortize the cost of the tags over time, and minimizes the challenges associated with tagging RF-unfriendly materials such as metal or liquids. Manufacturers have deployed a variety of RFID technologies for these applications, including active and passive tags, as well as Wi-Fi-based real-time location systems. Aberdeen Group also found that most RFID implementations in manufacturing are not being driven by customer mandates. In "Can RFID Deliver the Goods?", Aberdeen says that in its survey of more than 600 companies that are using RFID, 34% were using the technology for asset tracking. Total penetration of RFID in the manufacturing sector is still only around 3% to 4%, but Aberdeen expects the market to expand at a rate of 112% in 2007, with the average manufacturer's RFID budget growing from $50,000 to $75,000 per year in 2006 to $100,000 to $200,000 per year in 2007. According to the survey, there is some variation between how process and discrete manufacturers use the technology, with process shops focusing more on location of people and assets, and discrete shops focusing primarily on inventory and production management. While 40% of process manufacturers using RFID were doing so for mobile asset tracking, only 24% of discrete manufacturers had deployed it for that application. Asset security showed a similar discrepancy, with 20% of process and 12% of discrete manufacturers using the technology. The numbers were nearly equal for tool and part location (33% of process manufacturers, 32% for discrete). The next phase in RFID-based asset tagging will be integration with environmental sensors. "That's a step beyond just asset location," says Polsonetti. By integrating heat, humidity, vibration and other types of wireless sensors, users can not only monitor location of an asset, but also its condition. Such systems can be used for maintenance, repair and operation (MRO) applications. According to ABI Research, aerospace and defense companies are increasingly turning to RFID for these types of maintenance applications. Boeing, for instance, plans to tag approximately 700 different parts on its new 787 Dreamliner aircraft for maintenance and lifecycle tracking. "Integrated MRO strategies based on RFID tagging can deliver marked efficiencies to the processes of locating parts, tools and materials, and to producing the significant amounts of documentation required to meet regulations in the aerospace and defense industry," says Mike Liard, ABI Research director. "RFID is an enabling technology that can facilitate a shift from corrective to predictive maintenance strategies." Polsonetti emphasizes that RFID is not a panacea for industrial asset tracking. Many assets do not require that level of real-time tracking, either because they are inexpensive, disposable, or rarely utilized. However, Polsonetti says that ARC has "seen even some low-value assets that are tagged because they are critical to operations." "Asset tracking is still subject to the same ROI requirements we see in the market as a whole," Polsonetti says. "The success of these projects is always subject to whether or not this is the best technology for the application. RFID is not always the best technology, but the market is growing." The Asset Management Conference & Expo in San Diego will include a pre-conference workshop on Feb. 20, "Understanding Data Collection, RFID & Software Applications in Asset Management." For more information, click here.
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