Intelligent Enterprise

The maker of Schwinn, Mongoose and other well-known brands of bicycles, Pacific Cycle has deployed RFID in an outbound logistics scenario. The move was driven by Wal-Mart mandates, but executives at the company hoped for benefits, including improved warehouse process flows, reduced inventory and better information from retail stores.

Pacific Cycle's RFID deployment was launched early this year at two warehouses: one in Illinois and one in California. The system comprises six dock door portals, eight RFID fixed readers, six Zebra RFID printers/encoders and several Symbol handheld RFID readers, all monitored by RFID device controllers. Also integrated is SAP's Auto-ID Infrastructure (AII) for RFID, SAP Exchange Infrastructure (XI) messaging and an SAP R/3 enterprise back end.

Configuration and development of the AII's outbound logistics scenario took approximately two months. It begins when delivery documents are created in SAP R/3 and corresponding messages are sent to the printer/encoders to commission case tags and a pallet tag. Cases and pallets are then packed at a packing station/portal, and the delivery document is assigned to a particular dock door. Next, a warehouse transfer order is confirmed, the pallet is loaded and the document status is updated to "post goods issued." Finally, SAP R/3 sends an advance shipping notification to the retailer.

The manufacturer has experienced a 90% write success rate with its RFID printers/encoders but only a 75% success rate with RFID readers. The reading problem is due to the fact that the readers had to be attenuated to approximately 25% of their power due to the close proximity of the dock doors. Higher power settings were found to cause data collision, meaning signals from tags at one dock were being picked up by readers at adjacent docks. Application logic in SAP AII compensates for the low read rates by matching multiple case tags readings to associated pallet tags.

The system filters the data generated by the more than 10,000 RFID tag events each month, posting relevant information to R/3 while logging the rest in an SAP Business Warehouse. The warehouse receives updates from retail partners as well. Mining and analyzing this data has given Pacific Cycle a better understanding of logistics and segments of its supply chain. For example, it now has more granular information about products in transit, how long those products sit in distribution centers and warehouses, and how quickly products are selling in stores. The company expects tangible benefits including reductions in freight costs, shrinkage, pricing and shipping errors, and related penalties as well as improvements in delivery times, returns management and advertising spend and promotion analysis.

Thus far, Pacific Cycle has identified hard-dollar savings of 10 cents per product shipped. Unfortunately, RFID tags currently cost about 50 cents each. "RFID infrastructure costs are dwarfed by the recurring cost of the tags," says Ed Matthews, Pacific Cycle's director of information systems. Matthews guesses it will be two years before tag costs drop to the five-cent "tipping point."

Despite the apparent gap, Matthews says many of the benefits are very real but hard to quantify. "There are [possibilities for] RFID processes we haven't event thought of," he says. That's why I'm enthused. We're ready to take advantage as costs come down."

The company's plans call for the inbound logistics scenario as well as RFID-enabled manufacturing processes to be developed by early next year with the release of SAP AII 4.0.