RFID-based solution for logistics hub

By Tan Chye Luan - Nov 15, 2006
AsiaOne

Using RITS is helping Mitsubishi Electric Asia to increase workflow efficiency and improve productivity.

In early 2006, TCM RFiD Pte Ltd was engaged by Mitsubishi Electric Asia to develop a Radio Frequency Identification or RFID-based inventory tracking system (RITS) to manage its logistics hub in Asia.

The development of the RITS and its complementary supply chain fulfilment system and process platform will, according to Mr Tatsuya Saito, Deputy Managing Director of Mitsubishi Electric Asia (Mitsubishi), "roll out in phases for all product lines and markets in Asia". The company intends to invest some $5 million in the project over the next few years and will be looking to introduce the RITS to businesses in the region, including SMEs.

AsiaOne chats with Mr Saito, Mr Dennis Wong, General Manager of Strategic Planning Department, Mitsubishi Electric Asia, and Mr Michael Oh, TCM RFiD's Managing Director, about how their technology product can help Mitsubishi as well as how SMEs can use technology, such as the RITS, for their business.

Tatsuya Saito (TS): The RITS is a breakthrough for the company. It will cut down our manpower by up to 10%. As the system offers quick information on the status and movement of inventories, it will facilitate timely, accurate and sound decisions on the supply chain management and thus help to achieve customer satisfaction and workflow efficiency. We estimate that the benefit will enable the company to improve productivity in the logistic function by up to 25%.

Overall, the RITS system will tighten our cost structure, enhance our operating efficiency, and quicken our response to customer needs. The increased nimbleness will give us a competitive edge in this fast-changing business environment.

Michael Oh (MO): For some SMEs, they suffer from indirect costs because of the inefficiency in their current system. With this RFID application, we give management real-time information for them to make better decisions, such as if they need to reduce buffer stock. Hence, by reducing indirect costs arising from inefficiency, SMEs can also enjoy indirect savings. SMEs must use technology to improve their work processes.
Sometimes, however, technology is not the solution. We need to change behaviour and mindset first. For instance, Mitsubishi has formed a committee to look into best practices to incorporate into the system, and to ensure that measures proposed are effective and relevant, the company has involved the users, such as storemen.

Dennis Wong (DW): Startup costs can be expensive because of hardware, but we try to keep things economical when it comes to the perishables. For example, we use reusable tags for the application to save some money. At the same time, our system is scalable, so it is possible for cost-conscious businesses to manage their costs by keeping the settings fundamental and going for a system that bestsuits their budget and scale of operations. Besides these, the main element will be maintenance and operational costs.

TS: But, we increase customer satisfaction when they use a good system because the system can help them improve their cash flow.

MO: That's why SMEs must have clear objectives about what they want and how they want technology to help them do what they want to do. Otherwise, technology does not provide the answer.

The RFID application we offer is a scalable system, suitable for SMEs in supply chain and industrial automation businesses. In fact, one company, Intermech Machinery Pte Ltd, has started using our RFID system in July. We also use this application for human tracking when we were involved in the Charity Bike 'n' Blade 2006 for St Andrew's Community Hospital. During the event, people may go missing, but by using the RFID tags, which contain vital information such as date, ID, etc., we can help to locate any missing person.

DW: Also, SMEs can lower their tech spending by buying off-the-shelf products which contain only core functions. But, of course, they will have to adopt a give-and-take approach and consider carefully cost versus efficiency issues. For instance, they'll have to adapt processes to products bought off the shelf.

MO: For the RITS, we're looking at less than $100,000 for our basic model. Costs, however, will depend on factors including warehouse size, interfacing with other systems, number of RFID readers and the degree of customisation.

To successfully implement a new system, change management is inevitable. Therefore, we would expect our client to set up a change committee made up of the various departments that will be using the system. The committee will gather best practices and we will use this to customise the system to fit the business processes.

DW: Well, another way for SMEs to offset some costs when implementing technology is for SMEs to get their business associations involved. Through such organisations, SMEs can collaborate and have customised systems developed for their use.

MO: They can also consider outsourcing. For example, what are their core functions? What can they replace? Consider the costs of automation versus the cost of manpower. If it's not core, then consider outsourcing, for example, servicing PCs in the office.

In the current climate, SMEs need the support of large companies like Mitsubishi. In our case, Mitsubishi could have chosen a big company like HP to work with, but they chose us instead. With their active support, we were able to complete the implementation within six months. The results prove that the system is effective in helping the company to achieve substantial cost and time savings while raising overall productivity and efficiency.

About TCM RFiD Pte Ltd

Established in 2003, TCM RFiD Pte Ltd is a RFID consultancy and solutions integrator. To date, the company has completed four major RFID projects.

Website: www.tcm-s.com

About Mitsubishi Electric Asia
Mitsubishi Electric Asia Pte Ltd is an affiliated sales company of Mitsubishi Electric. Established in 1977 as Mitsubishi Sales Singapore, it has developed and expanded its products and expertise in the engineering arena and currently boasts a range that includes factory automation and industrial products, home appliances, visual and imaging products, and public utility systems.

Website: www.MitsubishiElectric.com.sg

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