Gene Fedors Vice President, Education Programs RFID Technical ...

ODETTE : RFID IN THE AUTOMOTIVE INDUSTRY
STATUS QUO
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ABSTRACT
Radio Frequency Identification (RFID) is
becoming an increasingly recognized
technology in many industries. The automotive
industry has been using RFID for a long time for in-
house or closed-loop systems. Advances in
technology and the dynamics of the market are
driving the expansion of RFID in new deployment
fields in the entire automotive supply chain.
Therefore, the need for global standards with
open-loop systems that communicate with the
wider supply network will be absolutely essential
if we are to achieve the business benefits that
are needed.
RFID is often in the news since Wal-Mart
announced its initiative to use tags with its 100
top suppliers in 2005. But RFID technology is not
new and the automotive industry in particular
has been using RFID for many years. Besides in-
house applications like local supply chain
process control or asset management, RFID is
already in use by the end customer today -
nearly every modern vehicle immobilizer (e.g.
Mercedes-Benz’ Keyless-Go) is powered by RFID.
Although the automotive industry has
been using RFID for many years in production
control, the view about the capabilities of the
technology has changed in recent years. The
focus is still on process efficiency, but it is being
extended to supply chain processes. Closed-
loop applications with a focus on local processes
and high value assets, like work-in-progress
tracking or container management, are the
starting point for RFID adoption. DaimlerChrysler,
one of the pioneers in deployment of the
technology in legacy assembly processes and
paint shops, sees the main impact of RFID not
only in its core processes, but also in the longer
term throughout the whole automotive supply
chain.
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euroRFID – your guide to RFID & GDS solutions
Patrick Schmitt
ETH Zurich
Auto-ID Lab St.Gallen/Zurich
pschmitt@ethz.ch
The automotive industry, more than any
other industry, has a comprehensive supply
chain. For example, at DaimlerChrysler’s
Sindelfingen passenger car production plant in
Germany, five different vehicle model ranges
are produced and each car contains of at least
1500 individual parts. The plant also has to deal
with 1100 suppliers. On top of this, the industry
has to deal with RFID technology issues caused
by environmental conditions. Metals and liquids
interfere with RFID technology, and solutions for
these conditions are not properly developed yet.
The Auto-ID Labs 1 St.Gallen/Zurich at the
ETH Zurich and the University of St.Gallen (part of
the worldwide Auto-ID Labs network of the
former Auto-ID Center at MIT), have been
conducting research in this field in co-operation
with industry and governmental partners for
many years. Today, the Auto-ID Labs are
participating in a RFID-Work Group at the
Dr. Roya Ulrich
DaimlerChrysler AG
Information Technology Management
roya.ulrich@daimlerchrysler.com
Figure 1: RFID implementation in Mercedes Car Group’s paint shop (Source: DaimlerChrysler)
German Association of the Automotive Industry
(VDA). 2
Most of the RFID applications which are in
use, or at the testing stage, are so called ‘closed-
loop’ systems. Prominent examples are RFID
applications for the management of valuable re-
usable containers in production processes. It is
undeniable that closed-loop applications
generate a positive return on investment and is
therefore the first RFID approach often taken by
industry. But recent trends in the automotive
value chain show that RFID could provide
opportunities in ‘open-loop’ systems as well,
especially when working externally with different
suppliers and partners.
John Canvin
Odette International
Managing Director
jcanvin@odette.org
The automotive industry operates in an
environment with strong global competition and
vehicle manufacturers and suppliers have to
save costs and improve efficiency. They are
Figure 2: Strategic Trends in Supply Chain Management (Source: Fleisch et al. (2004), p.5)
facing regularly changing market conditions and
new regulations (e.g. End-of-Life Vehicle
Directive, EU Block Exemption Regulation).
Fleisch et al. (2004) summarise the main strategic
challenges for the automotive industry as follows
(see Figure 1):
• Customer Focus: To maximize value
creation, manufacturers in the
automotive industry have to look for new
ways to offer more improved services to
their customers.
• Demand Chain (shift from push to pull): To
be able to react rapidly to customer
orders, manufacturers are shifting their
production planning from long-term to
flexible short term planning.
• Mass Customization: More and more
customers order their new cars equipped
to their own specific requirements. The
number of different variants and the
related complexity of in-house
logistics and assembly processes are
increasing with every new model.
The challenge is to achieve high
process flexibility and additionally
maintain an efficient supply chain
that supports just-in-time (JIT) and
just-in-sequence (JIS) manufacturing.
• Outsourcing: Vehicle manufacturers
are still outsourcing upstream
activities to suppliers and logistics
service providers. The result is a
downward shift along the
automotive value chain. To maintain
visibility and control over the supply
chain, the requirements for
information exchange are
increasing.
• Lifecycle Compression: The lifecycle
of vehicle models is still decreasing.
That means that there is less time to
set up or change production layout and
logistics processes.
• Total Quality Management: High quality is
demanded by customers and increasingly
enforced by consumer legislation. To
ensure the safety of cars, new laws require
the documentation of certain assembly
processes and component traceability. 3
Consequently, there is a demand for more
real-time information about processes and
products, accurate data, handling efficiency,
unique identification and the elimination of
manual handling in the supply chain.
RFID technology helps with the collection
of accurate and trusted data and as a result,
manufacturers will have a supply chain with a
much higher transparency. One outstanding
result will be the elimination of the bullwhip effect
Figure 3: Average age of vehicles in the German market
(Source: VDA (2005), p. 76)
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(build up of inventory because of uncertainty in
demand). Possible additional opportunities for
RFID in the automotive supply chain are:
• Local supply chain process control,
• asset management,
• vehicle traceability,
• fleet management,
• reduction of counterfeiting,
• improved re-call management,
• reduced spare part delivery times,
• improved end-of-life vehicle
management (recycling) and aftersales
and service information. 4
The automotive aftermarket could offer
significant opportunities for RFID applications
which improve services and customer loyalty,
aimed at increasing market share and revenues.
In addition to easier and much faster
identification of different materials during
the recycling process at the end of a
vehicle’s life, plus anti-counterfeiting and
antitheft measures, value added services
based on RFID could also be envisaged
(e.g. service history to support
maintenance programmes, spare parts
supply etc.).
The automotive aftermarket is
becoming more and more important for
the vehicle manufacturers. While new car
sales remained static in the triad markets
(Europe, USA, Asia) for ten years, the
average age of cars in use is increasing
(see Figure 2). 5 Consequently, the volume of
this market is growing, too. The International
Federation of Automotive Aftermarket
Distributors (FIGIEFA) estimates the
European spare parts market to be worth 44
billion Euros based on consumer prices. 6 An
MIT study estimates that for every car
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