| | Riding the Wave: Haier America Implements RFID Technology | VAI designs fully integrated, customized system to meet the requirements of big box retailers
Background
As inventory control technologies continue to evolve, opportunities for distribution and manufacturing companies to streamline warehouse and shipping operations increase. The evolution of Radio Frequency Identification (RFID) technology comprises a prime example. RFID is a method used to identify, store and remotely retrieve data using RFID tagging devices. These RFID tags, which can be attached to materials or merchandise and then scanned, transmit information via radio waves to a database. The RFID tag may contain information such as product type, quantity or suggested retail price. |
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Recently, Wal-Mart required select suppliers to apply RFID tags to all shipping containers, whether individual boxes or pallets, shipped to its warehouse facilities. For Wal-Mart, and any vendor looking to implement RFID tagging, this requirement represented a strategic opportunity to increase efficiency and reduce staffing requirements in the warehouse. To further enhance the capabilities of RFID tagging, Wal-Mart places its scanners at the doors to its warehousing facilities, thereby allowing RFID-tagged boxes and pallets to be scanned automatically upon arrival. Thus, before the shipment fully enters the warehouse, all the relevant information has been transferred into Wal-Mart’s inventory database.
Haier America is a New York City–based company that manufactures and distributes appliances, refrigerators, air conditioners an electronics to big-box retailers. Haier possesses well-established retail and service networks across the United States and also sells its products in Canada and South America. Haier is known worldwide for innovation and high quality; the firm now seeks to become a household name in America.
Haier recently implemented an RFID tagging system to meet new Wal-Mart requirements for select vendors. The company partnered with VAI (Vormittag Associates, Inc.) to develop the solution.
Challenges
While researching RFID technology and the various products on the market, Haier recognized that RFID implementation had the potential to be a massive undertaking or a simple label-and-ship process. Haier simultaneously recognized that, over time, the requirement for RFID would likely expand dramatically in the industry. The company reviewed several large RFID software packages, but found most cost tens of thousands of dollars. Mike Moser, Director of IT for Haier, summarized the problem, “To implement the technology successfully, yet remain cost effective, we needed a software solution that we could integrate seamlessly and securely with our existing enterprise resource planning (ERP) package.”
Solution
In January 2007, Haier chose VAI to design and install an RFID software solution. This decision reflected three key factors: (1) VAI’s posture as an industry leader in developing ERP software for mid-size businesses, (2) VAI’s demonstrated expertise in custom-designing seamless software solutions to meet Haier’s unique business requirements, and (3) cost. In 2000, VAI implemented S2K Enterprise for Distribution for Haier. Later, VAI designed an integrated software modification for this ERP package. Over the years, VAI successfully upgraded Haier’s S2K to newer versions, up to and including S2K version 3.7.4. According to Moser, VAI’s unique capabilities afforded strategic advantages, “The knowledge that VAI could design a secure and seamless RFID solution to work as a part of our ERP package—and not function as a mere add-on—was perceived as a tremendous benefit. The fact that VAI’s ultimate solution had broad applicability, beyond Wal-Mart’s requirements, put us way ahead of the curve in anticipating future demands for RFID tags.”
The project was relatively inexpensive to design and only required several months to implement, according to VAI Project Director Mike Morano. “The solution encompassed creating a program that adds identification markers in Haier’s ‘ship-to’ files. These markers define for distribution when an order requires an RFID tag and automatically prints the appropriate label.” The RFID tag replaces the regular shipping label used on all other Haier product shipments. Morano adds, “Then, the system queries the operator to determine if the shipment will use pallets. If so, the system adds RFID tags to all units and pallets. As a security precaution, we ensured that the encoded RFID chips contain only fixed data about the shipped carton. Therefore, there is no connection between the RFID chip and Haier’s network, eliminating opportunities for hackers to infiltrate its network. “
As part of the RFID design effort, VAI also incorporated interpretation of Haier’s universal product codes (UPC) to Wal-Mart’s Global Trade Identification Numbers (GTIN). This important component guarantees that Wal-Mart’s RFID system recognizes Haier’s products at the point of delivery.
Currently, the RFID label is used exclusively on Haier’s shipments to Wal-Mart, although the firm foresees a time when all large retailers will require RFID tags. Haier will be immediately ready to meet this requirement. Since VAI designed the software without hard coding, it generates formatting within the program using data inputs. Therefore, Haier can easily add more customers over the next few years.
Results
Since its implementation in January 2007, the completely integrated system has provided increased coordination and a higher level of efficiency between Haier’s distribution operations and Wal-Mart’s warehousing facilities. Haier is now equipped to handle Wal-Mart’s mandated RFID system as well as the anticipated future requirements of other big-box retailers. Aside from minor visual changes to Haier’s shipping labels, VAI’s solution has made this changeover a seamless, simple process.
Haier ultimately believes that RFID will offer an additional solution for its internal logistics and is considering the installation of warehousing equipment to meet this future need. If RFID does offer future benefits, Haier will be one-step closer to leveraging this advantage.
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