The Supply Chain's Dynamic Duo:RFID and EPC

Tue, 09/05/2006 - 6:47am

EPCglobal US's Bob Celeste offers help to plants hoping to quantify the benefits of this technological combination

Bob Celeste, director of adoption tools By Joy LePree RFID is the current buzzword in just about every industry from retail to transportation to chemicals. RFID, of course, stands for radio frequency identification. There is a lesser known phrase, however, that is equally important. It's EPC or an electronic product code. An EPC is a number used to identify a unique item in a system, and experts believe EPC and RFID — together — can enable accurate, cost-effective visibility of information in the supply chain. This dynamic duo is top-of-the-line technology when it comes to keeping track of product and, thus, a pricey investment. To help interested members of the chemical processing industry determine whether the expense of an EPC/RFID combination is worth it, EPCglobal US has developed a "value model" that can help manufacturers quantify the financial benefits of EPC/RFID. EPCglobal US is a Lawrenceville, NJ-based not-for-profit standards body that supports low-cost, high-quality EPC/RFID supply chain implementations. This month's Q&A is an interview with Bob Celeste, the organization's director of adoption tools. Celeste says EPCglobal US worked with Stanford University's global supply chain forum and the University of Eindhoven to develop a value model that would provide detailed analysis of the primary, industry-specific business drivers for adopting EPC/RFID. "The software is designed," he explains, "to provide companies with specific projections based on real-world variables they input themselves." Q: On what parameters was the EPC Value Model for the chemical processing industry developed? A: Working with our partners, we interviewed industry leaders about the technology and what they see in it. What are the business drivers, positive reasons, for looking at the technology? And what are the business issues, the negative things, they think they can mitigate through the use of the technology? In the chemical industry, some of the drivers we looked at were supplier and customer relationship management, operational efficiencies, inventory management and management of hazardous products. Some of the issues were rising feedstock and transportation costs and more stringent regulations. Our goal was to create software that could determine if and how using EPC/RFID to provide better visibility of the supply chain and better control over inventory could help mitigate costs associated with these issues. Q: In addition to helping determine if the software can help alleviate costs, can it also demonstrate whether the investment will provide return on investment? A:Yes. The software serves as a financial tool that they can use to look at their processes and perform the financial calculations with cost versus benefit. The Value Model is available to our subscribers free of charge, which is part of the benefit of being a subscriber and being part of the standards development. Subscribers receive a white paper of the benefits of EPC and RFID as seen by the industry, the model itself, which is an Excel workbook with about 15 or 20 spreadsheets inside that look at each of those business drivers and issues from a financial cost benefit standpoint and then rolls it up to a summery level for people building business cases. And, there's a manual that explains how to use the tool. Q: Do you find many chemical processing plants interested in the technology and the Value Model? A: As soon as we put the announcement out, the phone started ringing. When people begin to use the model, there's a lot of questions. We help them through the calculations and modifying the sheets for their own needs. After people start seeing the value, they start to get quiet. That's my way of knowing they are using it and are seeing the benefits. They no longer want to talk about what they see as far as numbers. Q: From what you can tell, is the chemical processing industry seeing financial benefits from the technology? A: In the chemical industry, there are a number of companies that have done some analysis and are really excited about the technology and are driving forward with it. But there are a lot of companies that are simply curious and want to see how the technology could be applied to their process. So, some are driving to use it, and others are in the education part of the curve. Q: Is the chemical processing industry under pressure to adopt RFID/EPC in the same way that retail is being forced? A: No one will tell chemical manufacturers that they must adopt the technology as happened in the retail industry. So, they are taking their time and doing analysis. They are hearing more about the technology if they deal in pharmaceuticals and coatings because they have consumer aspects. And for the rest, there are certain general pressures, such as regulatory and customs issues, so they are looking to the technology to help alleviate those things. Q: Where in the process could plants apply the technology to help mitigate these issues? A: They are looking at two main areas. First, within their four walls, they can tag goods as they go through the manufacturing process. They may tag bins that hold the chemicals to identify them as they go through and mix recipes. They can also be used to identify equipment or other assets that they need during the process. In the larger sense, the technology can also be used along the supply chain to tag and identify product as it moves on railcars or trucks or ocean freight carriers. There is also interest in working with our transportation and logistics group, which is working with customs agencies on the "green lane" concept, which follows the premise that if something is clearly identified and well documented, it will move faster through customs. Joy LePree is a contributing writer for CHEM.INFO. She has worked as a journalist for 13 years, covering a variety of issues and trends involving chemicals, processing, engineering and maintenance.

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