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As one of Wal-Mart Inc.s top 100 suppliers, Henkel Consumer Adhesives Inc. faces a daunting deadline: By January, it must place RFID tags carrying electronic product codes on pallets and cases delivered to the worlds largest retailer.
However, while many suppliers are struggling to get a handle on radio-frequency identification, Henkel is ahead of the game. The company began looking at the economics and potential of RFID technology with the 2002 deployment of a new warehouse management system and is on track to meet Wal-Marts timeline, said Gene Obrock, vice president of operations at Henkel, in Avon, Ohio.
“Two years ago, our goal was to find a solution that would increase visibility within the supply chain, and RFID fit into that vision,” Obrock said. “Then we needed an opportunity to see what the playground the world plays in would be, and we got that playground when Wal-Mart made its RFID announcement last [November].”
Like many manufacturers, Henkel is eyeing RFID as a way to create complete supply chain visibility and efficiencies within the manufacturing process. Others see the potential as well: The Insight Research Corp., of Boonton, N.J., forecasts that it will be commonplace by 2006 for even smaller suppliers and retailers to tag pallets using RFID technology.
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Henkel, the U.S. division of The Henkel Group KGaA, a multinational consumer goods manufacturer based in Düsseldorf, Germany, is best known for adhesive tapes and glue brands such as Duck Tape.
In 2002, Henkel decided to enhance its warehouse management capabilities and purchased the Warehouse Management Systems suite from Atlanta-based Manhattan Associates Inc. to automate its distribution centers and streamline supply chain execution operations.
Henkel began deploying Warehouse Management Systems in its Oklahoma City warehouse, going live in January. Obrock is currently deploying the product, which ties into his J.D. Edwards & Co. manufacturing application suite, across the companys logistics network.
When Wal-Mart announced its RFID mandate, Henkel was able to leverage the suites compatibility with RFID to prepare a business case that would assess how quickly Henkel could roll out RFID and where it would make the most sense to the business.
Henkels business case, which is still being developed, also examines the business process of RFID adoption rates, economic costs and the physical ability of Henkel to deploy RFID.
Cost remains a primary concern for Henkel, Obrock said. According to Gartner Inc., of Stamford, Conn., the price of an RFID tag ranges from 30 to 50 cents. “We constantly think about what we can afford to do and how many products we can adopt into this program to allow both Wal-Mart and us to gain efficiencies,” Obrock said. “We are constantly monitoring the behavior of the tag costs.”
During the next four months, Henkel will test RFID in its Oklahoma City warehouse, deploying software and interfaces that will enable Warehouse Management Systems to integrate with data sent via RFID tags.
However, Obrock said he plans to wait until RFID hardware matures and drops in price before making a large investment in readers and other equipment. “If you buy too early, your hardware is going to be obsolete—some of the readers change every 30 to 45 days,” Obrock said.
While the plan is to tag pallets and individual cases, Obrock said the real benefit will come from tagging individual items because pallets are eventually broken up and distributed to various retail locations. Obrock doesnt expect that to happen for some time, however.
Henkel stands to save a significant amount of money by increasing the visibility of a products movement from a distribution center to a retailer, Obrock said. For example, it currently takes three days for a product to move from a warehouse onto a pallet and into a truck. By knowing exactly when a pallet will be ready to be moved, Henkel will be able to estimate more accurately when trucks need to arrive at the companys warehouses for pickup.
“Everybody is looking for the black cat or the broken mirror for why no one is going to adopt this technology,” Obrock said. “From my perspective, though, the potential to gain insight into the availability of product is a huge opportunity for us. This is why were full speed ahead on RFID.”
Senior Writer Anne Chen can be reached at anne_chen@ziffdavis.com.
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