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Ravi Mathur*, CEO, EPCglobal India, highlights the benefits of RFID in the automotive industry.
 With its products being sourced by overseas auto leaders, the Indian auto industry has truly come of age. It has been a long and relentless haul getting accept in the global markets The companies first had to focus on issues like quality, vendors and marketing before they could think of going global. In the past four to five years, the more successful companies have not only fine-tuned their operations but forced transformation on the rest of the industry as well. Consequently, India has not only emerged as a low-cost base but also a source for producing quality products. India is poised to emerge as a significant exporter of Automobiles and more importantly Automotive Components, as global companies are increasingly using India as a platform for export-oriented production. According to SIAM, the performance of Indian automobile industry in exports is encouraging with a growth of almost 54 per cent. Exports of auto ancillaries (in rupees) from India expanded by 29 per cent in FY2004. In dollar terms, exports of auto components touched $1 billion during FY2004. This marks a 32 per cent growth over the FY2003 (by ICRA). What is driving India's acceptance in the global auto markets is the ability of the Indian auto and auto components suppliers' to manage supply chains efficiently. In fact, supply chains have been evolving as the most significant value driver for the industry in deriving competitive advantage in the domestic and international markets. The strong global competition left the Indian automotive industry with no option but to focus on adopting new technologies, which enabled manufacturers to improve their processes and products. Major initiatives in the automotive industry include just-in-time (JIT) manufacturing, mass customization, "zero error production", and reduced cycle time.
To accomplish these, automotive manufacturers increasingly rely on information technology to help manage processes. How low-cost RFID (Radio Frequency Identification) technology can be used for identifying and managing everyday items and how this technology might affect the automotive industry is worth looking at more closely. RFID is the next evolutionary step in automatic identification technology. It makes it possible to synchronise the physical flow of goods and the related information flow without the need for human intervention. Why RFID in the Automotive Industry?
EPC or electronic product code-based RFID technology provides solutions for just-in-time (JIT) manufacturing, mass customisation, "zero error production", reduce cycle times, stock management of raw-materials / finished goods, warehouse management, sourcing and procurement, assembly, order processing, distribution and transportation Counterfeit is one of the biggest challenges in the automotive sector. It has a large impact on the automotive spare parts business, a segment that contributes significantly to manufacturers' overall profit. It has been estimated that 10 per cent of all car parts sold globally are counterfeits. This equals a loss of $12 billion every year. EPC-based RFID technology has unique counterfeit detection features. Recalls have also been a source for major losses. Firestone recalled tyres worth $14.4 million in 2000 as a result of which Ford Motors incurred a loss of approx. $2.6 billion!. Public recalls are expensive and affect the image of the car manufacturer. Again EPC-based RFID technology enables recalls faster and in a more precise manner thereby limiting the loss. Globally RFID technology is being used in various areas. BMW uses it for identifying the car during production. Ford for identifying engines during production and for container tracking. Volkswagen uses to track engine racks and locate finished cars. The automotive industry already uses RFID technology for a variety of applications. Sokymat, the global market leader in transponder sales, sold around 30-million RFID transponders (50 per cent of its total sales) to the automotive industry in 2003. Such applications include just-in-time (JIT) manufacturing, "zero error production", reduced cycle time, stock management of raw-materials / finished goods, warehouse management, sourcing and procurement, assembly, order processing, distribution & transportation. And now with standardisation of the RFID technology through the work of EPCglobal Inc (a non-profit consortium of supply chain providers) the EPC / RFID technology has the potential to enhance those applications by an ubiquitous infrastructure that provides standardisation for automatic identification. Technology standards will significantly reduce hardware costs of RFID systems. e.g. where RFID today is only used with valuable goods (e.g. special racks) it soon will pay of for any kind of containers that are used for the transport of parts. One major area where EPC / RFID technology will have a large impact is the automotive supply chain, encompassing all tasks associated with moving goods from raw materials through to the consumer. This includes tasks such as sourcing and procurement, inventory management, assembly, order processing, distribution, transportation and warehousing. Although the automotive supply chain has the reputation of being well organised compared to other industries, supply chain visibility and information accuracy are still far from perfect. Automotive manufacturers, referred to as 'original equipment manufacturers' (OEMs) are dependent on their suppliers for a large number parts, components or modules. Because of this dependency supply chain visibility is more crucial. Some sources say that the automotive manufacturers spend roughly 60 per cent of their IT budgets for the improvement of their supply chain management systems. In addition to supply chain applications like inventory management, assembly automation and asset management, other beneficial applications are found in the area of after-sales service. Examples are maintenance support, recalls and recycling. Examples of Application of RFID:
The applications of 'electronic products code' / RFID in the utomotive Industry are: -
Just-in-time manufacturing
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Part-tracking
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Asset management
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Product recalls
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Counterfeit detection
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Raw-materials / finished goods
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Inventory management
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Distribution and transportation
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Asset tracking
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Repair history tracking Part-tracking
Part-tracking can improve supply chain related tasks such as inventory management, brand authentication theft control and assembly etc. In the case of inventory management, the goal is to keep stocks as low as possible without running out of needed parts. Large warehouses in the automotive industry can store up to 250,000 different parts. This requires careful planning based on production plans, on-hand stocks and parts in transit, and also calls for short replenishment times. It is essential not only to know what is in inventory but also what is in transit. Especially in just in time scenarios, the last few metres are the most important. In the automotive industry more and more products are delivered just in time. EPC / RFID technology can help to provide reliable information about parts in transit and parts in inventory in real time. Counterfeit detection:
Another critical issue that the automotive industry faces is of 'brand authentication'. Counterfeiting has a large impact on the automotive spare parts business, a segment that contributes significantly to manufacturers' overall profit. According to Daimler Chrysler 10 per cent of all car parts sold are counterfeits. This equals a loss of $12 billion every year. The automotive industry has a pressing need for a solution to the counterfeit problem, as a simple cost / benefit calculation can illustrate. There are two types of counterfeits. The first type is by companies that simply copy the original product without license. Good counterfeits can hardly be distinguished from originals; even by trained mechanics. A second type of counterfeit comes from approved manufacturers. These manufacturers are official suppliers of spare parts. In this case, checking a serial number, if one exists, is the only way to identify the counterfeits. This procedure is time consuming and not supported by dealers. EPC / RFID technology could solve this problem if suppliers tag their products with the EPC data identification structure stored on the tag using the EPC Network for authenticating the parts. Fully Automated Assembly:
Today's automotive production is highly automated. Building a car takes less than two days on an average. Automatic identification of parts could enable an even higher level of automation and more flexibility. Machines could be programmed to process parts according to the information that is available about the specific part. As the machines automatically check which parts fit together, errors in production could be avoided. This application requires source tagging, with common standards for suppliers and car manufacturers. Every production station in the assembly operation must be equipped with a reader, and must have the intelligence to act on the data gleaned from interrogating parts. This application has the potential to transform the car factory in a "black box" where parts enter through one end and finished cars come out the other, with no human intervention. Benefits -
Integrated total quality control
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Complete real-time information about work-in-progress supports exact output planning
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Supports continuous improvement of production process
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Flexible use of machines
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Elimination of manual tasks/labor and human error Asset Tracking
In the automotive industry there are many examples where transponders are used for identifying and locating pallets, containers and other movable assets. There are a large variety of containers used in the automotive industry, e.g. shipping containers, plastic totes, pallets, etc. Bad container management leads to misplaced or lost containers and parts. Examinations with RFID pilots have shown that container pools could be reduced by at least 5 per cent. Tracking of the containers requires transponders attached to each of them, communicating with an infrastructure of readers. Many application examples can already be found. For most containers (especially larger ones) the price of a transponder is small compared to the value of the container. Recalls
The number of automotive recalls has increased over the last few years, probably as a result of the pressure to reduce design cycle times. Public recalls are expensive and affect the image of the car manufacturer. In some cases it is necessary to recall a whole product line because traceable parts information is unavailable. A well known example is the recall of 14.4 million Firestone tires in 2000. The recall caused Ford a loss of approx. $ 2.6 billion. Being able to say exactly on what cars the tires are used would have made the recall faster, more precise and more "silent". Most recall actions are less spectacular, but the cumulative effect is still significant. In 2000, for example, 94 recalls were registered in Germany. Michelin, started to investigate RFID technology after Bridgestone was forced to recall millions of faulty tyres in 2000. The company has developed a method of placing an RFID tag on a tyre that can withstand strenuous manufacturing and distribution processes. For some products, like aircraft engines, manufacturers are required to keep detailed records, with the ID of every part logged to a database. There are about 20 automotive parts for which safety concerns might justify tagging. Again, there must be a common standard for suppliers and car manufacturers, such as that proposed by EPCglobal Inc. Readers must be available at assembly stations, and a shared database must be maintained for authorised users. Benefits -
Well directed recalls
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Compliance to laws Tracking of tires will be required in the US by law. It is estimated that another 20 to 30 parts per car could be tagged for the same reason within the next three years. For recalls it is important that information is available about the parts installed in a specific car and helps in the proper correlation of chassis with engine. Indian auto and auto component manufacturers can look forward to gains from the deployment of RFID in the following ways: Unique Identification: Since the supply chain of an automotive manufacturer handles approximately 200,000 different parts, identification technology is necessary for keeping track of parts in stock or in transit, for preventing misrouting and for minimising safety stock requirements. Full automation is the only way to keep identification free of errors. A highly JIT-optimized supply chain can easily be jeopardized if errors occur. Counterfeit: is one of the biggest challenges in the automotive sector. It has a large impact on the automotive spare parts business, a segment that contributes significantly to manufacturers' overall profit. 10 per cent of all car parts sold globally are counterfeits. Recalls: With growing consumer awareness new and more stringent consumer safety laws in keeping with global standards, could become a reality in India. EPC-based RFID tracking would enable Indian manufacturers to cut down on costs and damage to reputation in the event of recalls. An 'EPCglobal action group' is being created shortly for the automotive sector to help and hasten implementation of RFID technology, open to all EPCglobal member companies worldwide. The author is CEO, EPCglobal India, an international initiative launched in India in 2004 to lead the development of industry-driven standards for the EPC to support the use of Radio Frequency Identification (RFID). He can be reached at
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