Uncover the ROI in RFID...

Closed Loop Systems Provide Savings

RFID Proves Benefits With Asset Tracking and Indirect Material Management

..............................................................................executive white paper

WinWare Incorporated
1130 Northchase Pkwy
Suite 100
Marietta, GA 30067
..........................................
Phone: 888.419.1399
Fax: 770.419.1968
..........................................
www.cribmaster.com
..........................................
January 2007
 Contents

1 ..... RFID is Not All the Same

2 ..... The New Bar-Code vs. Process Automation

3 ..... Compliance / Process Discipline

4 ..... Cost Reduction Capabilities

5 ..... Taking Away the Guess Work - Making RFID Repeatable

6 ..... Growing Beyond a Single Solution

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 RFID
It’s Not All the Same
Away with the Standards...a Simpler, More Focused Approach
Wal-Mart and the DOD have done amazing things for the movement of RFID technology.
Their mandates forced the compliance of a single use of RFID and has brought a great deal
of attention to the 900mhz passive technology. It also seems that, because of these man-
dates, the development of this technology has moved quite rapidly and the Gen2 releases
are proving the speed of maturity is at a good pace. RFID has come a long way in the last
two years and with so many suppliers being forced to tag pallets and containers, RFID
remains in the spotlight. So that’s it...we tag our pallets and boxes, but what else?

OK...in a fairly short period of time, RFID technology has developed the necesssary stan-
dards to function as a way to improve the logistics operations of suppliers and manufactur-
ers. Hats off to EPC Global, Spec 2000 and some of the other organizations that put their
best foot forward to make sure these standards were established. Thanks to those compa-
nies who have focused on the movement of this technology to improve the logistics / supply
chain operations, a new breed of asset management and indirect material management sys-
tems have surfaced.

The New Breed of RFID (Closed Loop Systems)

Closed loop, indirect material, asset management...these are terms commonly
used by companies to describe the means in which they have utilized this
technology to prove real results in everyday operations. Almost every opera-
tion has challenges associated with managing assets or indirect material of
some type. It may be a large office who can’t keep control of office supplies, a
technology company who can’t keep up with their laptops or hand-held com-
puters or a manufacturer who can’t keep up with spare parts or tool inventory.

A closed loop RFID system is described as a system that basically completes

an entire task and is not required to have standardized information to share
amongst systems of other organizations. The system may share information
with other internal software, but the tag will not have information embedded
into it that will make sense to any other software system. The RFID tag of a
closed loop solution will often times have a unique identifier that will marry to
more extensive information about the item contained in a database. When this
tag is viewed by RFID readers attached to the closed loop system it will make
the match and know that the ID number of 12874537 embedded on the tag is
identifying the tagged item as a Black and Decker Cordless Drill with a serial number of
BD567-9823-DR. To any other RFID system it is simply 12874537 and we know nothing
else about it.

AMR Research has stated that it finds, “companies that take a more simplified and focused
approach to the use of RFID technology incur much less risk in implementation, receive tan-
gible value, and build capabilities that give them significant differentiation from their competi-
tors. - "Finding the ROI in RFID", by Jon Fontanella and Matt Bilodeau, AMR Research,
October 31, 2003

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 The New Barcode vs.
Process Automation
RFID...the New Barcode?
How many times over the last few years have you heard that RFID is going to be the new
barcode? Well there may be some real truth to that, but in reality it isn’t a new bar code it is a
whole new way to look at business processes. RFID tags provide a new level of automation
that far outweighs that of barcodes. Although barcodes may be replaced by RFID, the poten-
tial to further automate processes and reduce human interaction provides much greater effi-
ciency than a barcode system. You probably aren’t going to find too many instances where
you will replace your barcodes with RFID technology and the processes remain the same.

RFID technology is very flexible and radio waves can be read through most solid objects
(excluding metal) which does not require the tag to be visible. This fact is a far stretch from
that of a bar code and can create a whole new way to look at the business process associat-
ed with this new level of auto identification. Looking at these processes and the opportunity to
streamline current methods, will identify areas where human interaction is reduced greatly,
which directly relates to cost reduction.

Bar Codes vs. RFID for Asset Tracking and Indirect Material Management

Bar Code Technology RFID Technology

Creates a high level of hands-free automation X
Is a mature technology X
Can be used to monitor and store information X
Is “Read and Write” capable X
Does not have limited industry expertise X
Proven ROI from implementations X X
Allows uninterrupted process flow X

As you can see from the above chart, RFID can be utilized as more than a data collection
technology. In fact, RFID can be used to further streamline the flow of material or more close-
ly monitor the movement of assets around a facility. Any process that can benefit from having
an uninterrupted flow, because it currently requires manual barcode scanning or manually
entering data, are prime starting points for potential projects that will prove ROI with RFID . A
common area where ROI has been proven in multiple installations by WinWare, Inc. has been
in store rooms, tool cribs or maintenance storage areas that contain indirect material or
assets.

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 making the process work
Compliance & Process Discipline
Employee Compliance
Make it easier to do the right thing than it is to the wrong thing and people will do the right
thing every time. This is the theory that should be applied to the increased process automa-
tion provided by RFID technology. Every work environment is different and the level of
employee compliance you will receive when implementing new processes varies. Often
times it even varies from one shift to another. You may find that the day shift is more likely
to comply to a certain process than those who work afternoons or an overnight shift. One
thing for certain is that the more obtrusive the process is, the less compliant people will be.
This is not always on purpose. When retrieving needed inventory, if the process requires
slowing down to scan a barcode or count inventory, it just gets forgotten because their
number one goal is to make production numbers or whatever the next step might be to
complete that task. This is exactly why RFID has such a tremendous upside when applied
to every day asset tracking and indirect material management.

For example, let’s take a look at an operation that requires machine operators to check out
their own machine components before performing changeover to make a different product.
These machine components consists of dies, punches, tools and mill parts. All of the
machine components are located in an unlocked room and each operator is responsible for
removing the components and corresponding tooling to perform the change over. They are
also scanning a barcode on each piece when removing inventory. It is important to have
open access to this inventory because the operators are required to make production num-
bers and are alloted a certain amount of time to complete the changeover and continue
production. Then these items have to be scanned back in when they are returned.

During the process, machine operators gather all of the parts he/she needs and gets back
to his/her machine to perform the changeover. While performing the changeover, which is
pushing the alloted time, the operator realizes they forgot the gage needed and goes back
to the room and retrieves it. He/she forgets to scan it out. When another operator goes to
use it, it comes up missing. After searching for hours, a new one is ordered for overnight
delivery...about the same time the other one is found. This entire mishap is not uncommon
and has a great deal of cost associated with it. Again, this is an example where taking the
required human interaction out of this process would have improved this greatly. This is
possible today with RFID.

Looking at this scenario, each machine component needed for changeover can be kitted
into a custom kit box or rolling cart. That box or cart is identified with a single RFID tag
which is associated with each item in the database of the closed loop system we talked
about earlier. On issue, the employee is required to identify themself to the system before
entering the room through a locked portal or opening a locked cabinet. Upon identifying
themself access is permitted and the box can be removed from a RFID equipped cabinet or
the cart can be rolled back through a RFID portal. This requires little to no human interac-
tion and dramatically improves a process that will provide measurable ROI.

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 how do we save money with rfid
Cost Reduction Capabilites
How Do I Determine if I Can Make My ROI?
Cost reductions vary based on the process you are looking to enhance with an RFID solu-
tion. You may be looking at managing expendable tool inventory through an automated
RFID tool crib or tracking specialized test equipment that requires a high-level of calibration
and certifications that are logged with digital signatures confirming that they have been per-
formed. No matter if it is a durable asset or a piece of expendable inventory that requires
continual replenishment, it is all inventory. As a matter of fact, if the item does not become
part of the product you are manufacturing, it can be considered indirect material inventory
and there are many ways to determine ROI based on different cost saving categories.

These can be broken down into 4 areas of cost reduction.

On-H
Hand Inventory Reductions
Overstock Inventory Redcutions
Carrying Cost (Overstock and Obsolete)

Inventory Spend Reductions

Inventory Reduction Based on Usage Accountability
Inventory Reduction Based on Optimization
Lost Inventory Reductions
Reductions in Carrying Cost

Operational / Labor Reductions

Reduced Red Ticket Shipments
Reduced Searching Time
Reduced Purchasing Task Time
Reduced Planning Task Time
Reduced Wait Time
Reduced Walk Time (Inventory Relocation in RFID Cabinets)
Reduced Issue Time (Organization and Kitting)

Obsolete Inventory Liquidation

Revenue Received from Inventory Liquidation

Once you have taken the management solution to an enterprise level, you begin to see
these results at each plant but additional savings become apparent by a much higher level
of management. These savings are seen enterprise-wide, in both “Hard” and “Soft” cost
reductions. Hard costs at this level are those costs that are directly associated with the cost
of inventory and “Soft” costs are generally associated with time spent by corporate man-
agement analyzing spend or usage information.

With the proper system and enterprise view at the corporate level you can identify weak
spots across your organization. As well, you will be able to identify areas of surplus and
enable transfers of indirect materials. This is a “Hard” cost savings that can sometimes be
dramatic.

For a complete cost savings worksheet call 1.888.419.1399

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 taking away the guess work
Making RFID Repeatable
Look for Successes in an Emerging Market
With an emerging technology there are going to be early adopters who struggle through
“science projects” to achieve results. Typically there are technology companies who take on
these science projects and learn a little more every step of the way. There are also those
who find a successful means of utilizing this technology and those companies are the ones
you should look for when deciding to venture into an RFID project. Like any process
change, it is important that your company take complete ownership of the project and man-
age the change internally. In these early days of RFID asset tracking, it is important that
you look to partner with a company who can:

- Be the single partner for the project

- Provide a complete solution for the task at hand
- Provide a solution that easily expandable plant-wide and enterprise wide
- Provide expertise in a niche use for RFID
- Prove a successful implementation history
- Prove ROI from other installations
- Uses RFID to enhance a technology shortcoming or human process

Literally Plug-n-Play
Those are words I bet you never heard being applied to RFID, yet it is possi-
ble. I know it seems like an RFID solution that was literally “plug-n-play”
should be in a Ripley’s museum somewhere but instead they are being used
by companies like ATI Wah Chang, Crown Equipment, the USAF, Bassett
Industrial and others to rapidly improve processes. They do this without need-
ed trial periods and an average installation time of two days. How can it be?
They have implemented a COTS (commercial off the shelf system) that serves
a specific purpose. These solutions are built into products that are manufac-
tured to perform a specific task. Portals to manage indirect material and tool-
ing, cabinets to also manage these indirect materials, tools or maintenance
spare parts at point-of-use or RFID enabled modular drawer systems used to manage FOD
processes.

These solutions are driven by a robust software package and were designed to provide
rapid go-live and expansion to manage indirect materials and assets within manufacturing
and other productive environments. Typical inventory items being managed in the “Plug-n-
Play” RFID devices are MRO items, power tools, safety products, expendable cutting tools,
cleaning supplies, toner cartridges, abrasives, gages or calibrated instruments, costly test
equipment like oscillospopes, IT inventory, batteries and spare parts. Using RFID for this
type of inventory has proven a very rapid payback and is a very good use of the technolo-
gy.

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 continuous improvement
Growing Beyond a Single Solution

Why Implement a Corporate-W Wide Solution

Back to the basics. The ultimate leverage you have when negotiating contracts with suppliers
is order quantity. You certainly stand a greater chance of getting a better deal on 70,000 pairs
of safety glasses rather than 10,000 pairs of safety glasses. Do you have a system in place
where you can confidently attempt to establish corporate contracts based on actual usage fig-
ures (not order figures) of each of your facilities? Do you have a single system that has
tracked usage, replenishment, maintenance tasks and optimized inventory levels for each of
those facilities? Does this system enhance processes and accurately monitor these indirect
materials or assets with the use of RFID?

Wouldn’t it be nice to be able to run a usage report on every common mro item, tool, comput-
er, or lubricant of all of your facilities? If you can clearly see actual usage of like items across
your entire enterprise, you can negotiate contracts with confidence that you are not over pur-
chasing your indirect material or needed assets. All of this inventory should be linked by a
common item number and be pushed to a data warehouse so that you have enterprise wide
reporting at your finger tips. Optimum order quantities, optimum inventory levels and enter-
prise-wide transferring and reporting...an incredible impact on your bottom line.

Single Location Contract Corporate Contract

10,000 Pairs of Safety Glasses Yearly = $6.00 per pair 70,000 Pairs of Safety Glasses Yearly = $3.50 per pair
25,000 Carbide Inserts = $43.50 per 10
25,000 Drills = $2.00 each
VS. 175,000 Carbide Inserts = $33.50 per 10
175,000 Drills = $.95 each
5000 Vice Grips = $14.00 each 35000 Vice Grips = $9.00 each

=
Contract Savings
$420,000 vs $245,000 = $175,000 difference
$761,250 vs $586,250 = $175,000 difference
$350,000 vs $166,250 = $183,750 difference
$490,000 vs $315,000 = $175,000 difference

TOTAL COST SAVINGS = $708,750 with 4 products

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 Crown Equipment: Case Study
A Common Scenario
There are some things we all wish we could have 24 hours a day. Like a
nice meal, or a quality TV program in the middle of the night. Much like the
rest of the manufacturing world, Crown Equipment, the makers of the num-
ber one brand electric lift trucks in the US, is no exception. They require
access to their inventory 24 hours a day, 7 days a week. But unlike their
peers, Crown took the necessary steps to ensure their employees could
access what they needed no matter what time it was.

Crown is a corporation which has received over 50 product design awards,

been nationally recognized for their DP (Demonstrated
Performance) QuickStart™ training program, and honored by the
EPA for their waste minimization efforts. This is a company with
innovation and efficiency at the heart of its design and manufac-
turing philosophies.

There Must be a Better Way

It became apparent to Crown that there must be a better way to
manage indirect materials than what was currently in place.
Brenda Hughes, Supervisor and Buyer for Crown Equipment
noted, "We really needed to get product to the operators on the
machines. We felt our replenishment was effective, but unavail-
ability for all three shifts was hurting production." Crown, being
the forward-thinking organization that they are, began to look at RFID (Radio
Frequency Identification) to help with their indirect material challenges.

Being a manufacturer of lift trucks, RFID had certainly been on Crown's

radar screen. The benefits to material handling and logistics operations have
been becoming more and more obvious. But with the growing industry buzz

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 Crown Equipment: Case Study

around RFID, Crown began to investigate the possibility of expanding their

RFID use to manage indirect materials and solving the challenge of provid-
ing 24-hour access.

Conceptually, Crown believed with RFID its employees could simply walk in
a crib, pick up their supplies, and get back to work. Was this possible? Their
research uncovered the CribMaster Accu-Port (illustration 2:1), which is a
commercial off the shelf (COTS) inventory management system geared
specifically for managing indirect materials. CribMaster has partnered with
Symbol Technologies to provide the antennae and readers to
power the Accu-Port and have designed a plug-n-play portal
specifically for managing indirect materials. The CribMaster sys-
tem utilizes passive RFID technology and Gen2 passive tags.

This system offered Crown many benefits.

1. Ability to access their tools at any time without staffing the

crib.
2. Reduction of a 24-hour position to an hour and a half restock-
ing job.
3. The use of light-duty workers for restocking.
Illustration 2:1
4. Establishing organized delivery of items.
5. Retaining an already effective replenishment method by integrating with
their current system.

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 Crown Equipment: Case Study

Tag...You’re It

Even with all these advantages, the common issue of tagging small,
expendable items with RFID was still on the table. It is hard to imag-
ine attaching a tag to a screwdriver or drill bit, but with WinWare's
help, Crown discovered another way: tag the packaging , not the prod-
uct. (illustration 3:1) Crown implemented a system where items are
placed in bags with the corresponding label and RFID tag. A great
advantage here is once a worker takes their item and walks out of the
crib, they simply remove it from the bag, place the bag in a 'mailbox'
and that packaging can be used again and again. This not only mini-
mizes the cost of tags, but also limits the effort of restocking.

Crown's employees could now find items and even move the entire crib with illustration 3:1

ease. All items have been tagged and stocked according to a coordinate
system (illustration 3:2). Then, if for any reason the crib needs to be moved,
the walls can be taken apart, shrink-wrapped, and moved with all prod-
ucts still attached. The dismantling and reassembly can be completed
in one day. It doesn't get much easier than that.

With tagging taken care of and the 'mailbox' system in place, restocking
became easier than ever. At Crown, each crib monitors the movement
of two to three hundred items each day. In crib 1, every one of these
products is an expendable item, and therefore must be replaced. This
process reduces restocking time and allows Crown employees to focus
on other aspects of their indirect supply chain. With RFID the employee
can simply refill the bags and take as many as 30 items back into the
illustration 3:2
crib at a time. Here, all thirty are recorded and assigned to the tag instantly.

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 Crown Equipment: Case Study

ROI - The Determining Factor of Success

In the end, having the CribMaster Accu-Port in just one area of their opera-
tion is benefiting Crown. ROI studies have proven a substantial impact, and
this savings has allowed Crown to justify the system with reduced inventory
usage alone. Using reportable purchasing information, Crown has acknowl-
edged that since implementing the Accu-Port crib, their daily average inven-
tory usage has been reduced by 21.65%. This has proven a return on invest-
ment of less than four months.

Other Soft Cost Reductions Acknowledged by Crown

The other reductions, not taken into consideration, are also substantial and
can dramatically shorten the ROI even more. The other cost considerations
are listed below.

1. Labor Savings - the reduction of a 24-hour position to an hour and a half

was a great reduction in labor cost.

2. Walk Time - having a central crib reduced the employee's travel time.

3. Improved Productivity and Less Down Time - with the easily accessible
tools, Crown employees can now grab what they need and get straight
back to work.

Continuous Improvement Initiatives

Some continuous improvement plans for Crown include expanding their RFID
network. Brenda Hughes foresees 9-10 Accu-Ports across her facilities by
2010. This consolidation will give her the ability to utilize bulk buying incen-

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4
 Crown Equipment: Case Study

tives, while the mobility and easy "go-live" of the cribs will make this transition
period run smoothly. RFID ended up being a no-brainer for Crown. They
saved on tags and reduced restock time with the innovative identification
scheme by tagging the packages. Their employees could maximize the sys-
tem's potential with ease, but more importantly, they could finally reach the
tools they needed around the clock.

Crown has proven that RFID tagging and the CribMaster Accu-Port are the
necessary means for solidifying their indirect material inventory management.
Imagine their savings once all five plants are up and running with RFID. It
may be a long shot, but if the rest of the world would catch up with Crown
Equipment, there may be a day when we actually can get a Michelin star meal
or have something besides an infomercial to watch at 3am.

WinWare, Inc.

1130 Northchase Pkwy

Suite 100

Marietta, GA 30067

p: 770.419.1399

f: 770.419.1968

tf: 888.419.1399

www.cribmaster.com

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