RFID
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How Automated Distribution Centers Can Benefit from RFID

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By Phil Fisher and Mike Guiher, Checkpoint Systems

Despite the advances made in distribution center operations over the years, many of today’s automated DCs are not fully automated. This is true even though the role of the DC has evolved to meet the faster pace of retail and to adapt to more flexible fulfillment options.

In fact, some areas of the DC are still labor intensive and, as a result, error prone. Below, we review three challenging tasks and how RFID can be a major part of the solution.

Pick to Light/Pick & Pack 

While it’s true that some distribution centers have become highly automated (picture Amazon, Wal-Mart, etc.), the reality is that most still continue to have manual

Mike Guiher is Sr. Director of Product Management, DC Solutions at Checkpoint

processes. A prime example is picking orders. One of us worked as a picker back in college and the basic processes that we see today are in many ways similar to what existed two decades ago. Back then, you printed out the order, ran down an aisle, found the goods, brought items back to your area, packed it up and shipped it out. The problem is that beyond this being time consuming, there were opportunities for errors to creep in at every point.

Add to this challenges today imposed by rush shipments and an increasing number of omni-channel orders — which must be picked at the individual level and then shipped directly to customers – and it’s easy to see why problems persist.

This situation exists despite the fact that pickers in DCs are evaluated on accuracy as well as speed. When they get it wrong, they hear about it from managers. But at month’s end, they may be overwhelmed with more orders, many of them rush by. There may be pickers whose bleary eyes start to see all item numbers as the same. And that’s when errors really start to crop up. It’s to their credit that they achieve the accuracies they do.

Solutions:

Managing shipment accuracy by exception isn’t much of a solution, since you are simply adding labor to the process and examining a small percentage of boxes overall. So by its very nature, it can’t put a major dent in inaccuracies.

Even some automated solutions, such as light systems that indicate general areas where pickers can find what has been ordered, don’t completely eliminate the scavenger hunt.

But RFID does. It enables DC staff to manage order variability with process automation. Using RFID, pickers can quickly find items, reserve and confirm them. They can even pick multiple orders at once – in an efficient manner that optimizes the pick path. In instances where consumers are expecting a good fit and finish, RFID can help pickers automate shipping labels and even choose the right boxes for efficient packaging.

Inbound Receiving to DCs

While some errors are inherent in the picking process, still others originate at the factory. Any of those errors are likely to propagate downstream or end up in limbo if identified in the DC and put in quarantine.

Solutions:

To address this, new hardware systems, often called tunnels, can be connected with standard conveyor systems and verify that items within each bulk shipment are 100 percent accurate. Any errors can be instantly identified and triaged before the shipment leaves DCs, allowing DCs to make necessary corrections and avoid added cost and time. Valid shipments generate automatic advanced shipping notifications and are sent for delivery.

In addition, many retailers are ramping up their RFID tagging at the source at either an item or shipment level. In this manner, they can verify the inbound ASN against the physical contents of the shipment, and provide alerts, such as alarms, bells or lights, to focus staff on exception handling versus ordinary day-to-day operations. If it’s not practical at the source, bulk encoding can take place at the DC, using tunnels described above or tables to ensure the correct inventory allocation for items.

Shipments to Stores

Phil Fisher is Director of Product Management, RFID Supply Chain Solutions at Checkpoint Systems

Stores are the last stop in the supply chain network and suffer the impact of all errors made earlier. An Auburn University study found nearly six percent of ASNs are wrong, which means there are inventory errors before merchandise reaches the store. This impacts on-shelf availability, omni-channel fulfillment and customer satisfaction, since store associates have to deal with errors instead of customer-facing activities.

Solutions

This is where automated verification of merchandise via technology such as RFID tunnels pays dividends. Whether pick and pack, or boxes simply passing through the DC, RFID can identify errors before they leave the DC, generating correct shipping notices 100 percent of the time.  And when trucks unload at the backdoor, RFID allows store associates to know immediately upon its receipt what is in a box and compare it to the shipping notice.

Additional savings can be realized as well. A University of Arkansas study demonstrated that charge backs cost about one-half to one percent of sales. Increased accuracy of shipments reduces or eliminates those chargebacks. Another benefit is that it eliminates errors that reach the sales floor and the possibility that sales associates aren’t checking incoming shipments because they are too busy. In fact, some DCs have taken to shrink wrapping packages sent through their tunnels to assure retailers that they are accurate when received in store.

A final benefit of RFID is that by tracking missing merchandise throughout the supply chain, retailers can determine where in the process those items were lost or stolen, making theft less attractive and recovery more possible.

While DCs value accuracy and inventory management, they are often challenged by today’s retail trends. The good news is that RFID can drive many efficiencies, which can be measured outright. By driving down shrink and increasing productivity using RFID, our experience has shown that you can identify and measure KPIs as well. And as this technology becomes even more pervasive, we see the day when retailers demand the kind of accuracy that they know RFID already provides.

Phil Fisher is Director of Product Management, RFID Supply Chain Solutions at Checkpoint Systems.   He has over two decades of supply chain experience in solutions architecture, sourcing and DC operations. He often comments on supply chain and logistics topics on Twitter @fisherphi

Mike Guiher is Sr. Director of Product Management, DC Solutions at Checkpoint.   He has provided product management and business development expertise to logistics, transportation and technology firms for over two decades.

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