February 2002 | Case Studies | I.T. Toolkit

Playing Tag with Pallets and Containers

No tags available

A pallet-leasing firm uses RFID technology to monitor equipment so customers can track shipments through the supply chain.

Too often, CHEP International sends pallets and containers into the void. The equipment pooling organization knows when and where it ships equipment, and when that equipment comes back to its facilities. But what happens in between—how long different customers need their shipping containers, who returns equipment promptly and who lets it sit idle, or why some pallets arrive damaged and some disappear—remains a mystery.

CHEP has spent more than two years exploring technologies to help it better monitor its assets. With help from Marconi InfoChain, Norcross, Ga., and Savi Technology, Sunnyvale, Calif., it has developed a tracking system that uses radio frequency identification (RFID) technology and web-based supply chain management software. Beyond improving its own operations, CHEP wants to use the technology to help customers track their goods through the supply chain. This year, it is launching a pilot in Florida to measure the benefits the system can provide.

Headquartered in Orlando, Fla., CHEP leases shipping conveyances to companies in 38 countries. Its customers—mainly manufacturers, packers, and processors—use them to transport goods to their own customers—retail, grocery chains, and automotive assembly plants. Once the end user receives the goods, CHEP takes the shipping equipment back to one of its depots to clean it, repair it if needed, and send it out again.

CHEP knows little about what happens to pallets and containers while they're out of its hands. If the company issues 400 pallets to Procter & Gamble, for example, the manufacturer will let CHEP know when it releases 26 of those pallets to a particular Wal-Mart distribution center, says Andy Robson, CHEP's business development manager for supply chain information services. But CHEP doesn't know who has custody of which individual conveyances or how they're treated.

How Long to Cycle?

The company has several goals for the tracking system. "The first involves cycle time—understanding how long it typically takes for a given pallet or crate to cycle around the supply chain by customer," Robson says. With this knowledge, CHEP can charge customers based on how long they keep equipment. "Currently, our charges are based on industry averages and assumptions," rather than actual usage, he says.

A related goal is to discourage retailers from hanging on to empty conveyances longer than necessary. "If we can identify stores that have excessive dwell time, that allows us a more focused approach to managing our assets," Robson says.

CHEP also hopes to determine which users are responsible for pallets and containers that return in poor shape. CHEP will work with those companies to correct warehouse practices that cause damage, Robson says. The system could also help CHEP figure out when and where pallets are stolen and convert "non-legitimate users" to paying customers, he says.

The ultimate goal, however, is to track the goods that ride in tagged pallets and containers. "We do actually see this as a value-added proposition to our customers in the long term," Robson says.

CHEP's two-step approach is clever, observes Keith Dierkx, Savi's vice president of strategic markets. "CHEP justified this from an internal return on investment alone, in such a way that it could make the investment to better manage its asset pools," he says. But once CHEP installs tags on its conveyances, it can use them to offer a brand new service. Customers who purchase that service will be able to track their own products from manufacturing through distribution to retail.

How it Works

As it implements the system, CHEP will affix RFID tags to pallets and containers. Readers installed in strategic locations will capture each tag's ID number, together with the date, time, and location, thus allowing the system to monitor the location of individual conveyances in real time.

CHEP has worked with Marconi to develop a variety of readers, including units to be installed on dock doors and forklift trucks as well as handheld units. Marconi, CHEP's systems integrator, is providing RFID tags from Intermec Corp., Everett, Wash. But CHEP expects the system to work with hardware from multiple manufacturers.

Although it will encode the tags with ID numbers only, CHEP is using read/write tags, whose data can be modified. In the future, customers will be able to add temporary data to identify the goods in a pallet or container.

Savi provides the back-end portion of the system, including its SmartChain supply chain monitoring platform and its Asset Management application. Data captured from the RFID tags is transmitted to a local server, where Savi's Universal Data Appliance Protocol (UDAP) makes it available to the SmartChain system (see chart). Savi developed UDAP to put supply chain data captured through a variety of technologies—such as different RFID readers, bar-code readers, and global positioning system (GPS) receivers—into a common format.

The site server then "cleanses" the data, Dierkx says. For example, if a forklift driver carries a load of pallets through a dock door equipped with a reader, realizes it's the wrong door, backs out, and drives through a second door, the system will register those pallets twice. The server weeds out that duplication.

"The system has to be able to understand that those are the same goods with unique IDs, and confirm that they've gone out through dock door number two and onto a certain provider's truck," he says.

Once the local server aggregates and processes the data, it transmits that information, along with data from CHEP's legacy management system, to Savi's central server. Accessing that system over the Internet, CHEP's managers can produce reports to help them understand how customers are using equipment. "If we want to get a record of where tag number 123 has been over the last 10 weeks, we just interrogate the system from that point of view," Robson says.

Savi's software can also automatically trigger an advanced ship notice (ASN), perhaps when a group of pallets passes through a dock door equipped with a reader, Dierkx says. When appropriate, a tag passing a reader might trigger an alert to prevent a worker from making a mistake.

"It could be something as simple as a red light by a dock door," he says. If a worker carries a group of pallets to the wrong door, the system could detect the error and trigger the visual alert.

CHEP plans to run this year's pilot implementation in Florida for at least six months, and involve 10 to 20 of its customers, Robson says. The company expects to tag about a quarter of a million pallets.

Initially, CHEP will use Marconi readers to gather data from pallets as they leave four sites: a pallet manufacturer in Virginia that will tag new equipment before sending it to Florida; a CHEP depot near Orlando; and CHEP's equipment collection points in two Wal-Mart DCs.

In the long term, CHEP might place readers in customers' facilities as well as its own. "From that, we would begin to build a much more detailed picture of how the equipment pool operates in the field," Robson says.

The main goal of the Florida pilot is to test the tags—which CHEP has not yet used—in combination with the Savi software. "This is the culmination of our assumptions on best-of-breed," Robson says. "Certainly, we believe the Intermec/Marconi/Savi solution that we're now working with is the best available in the market, but because it's in a pilot context, we still believe there is further and better technology coming down the line."

If the system performs as hoped, CHEP ultimately would like to roll it out to its more than 400 depots worldwide, Robson says. "But clearly there are a few triggers and boxes we've got to tick between now and then," he notes.

In addition to the Florida pilot, CHEP and Savi are both involved in a project based at the Massachusetts Institute of Technology to develop open standards for using RFID and the Internet to help manage supply chains. Other members of the Auto-ID Center project include Procter & Gamble, Unilever, The Gillette Company, Philips, Johnson & Johnson, the U.S. Department of Defense, the U.S. Postal Service, and the Uniform Code Council.

The group has used tags to track pallets, linking the ID on each to a web address containing information about the pallet's contents. Later phases will test the tagging of cases and cartons and, eventually, individual items. To make item tracking work for consumer goods, however, vendors will need to develop extremely inexpensive tags.

For tracking pallets, "our business case begins to make sense at one dollar a tag," Robson says. "Different tag costs will be justified depending on what part of the supply chain you're trying to track."

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