Radio Frequency Identification (RFID) is a wireless tracking system that has been used since World War II. A basic RFID system includes three parts: a RFID tag, a RFID reader, and an antenna. A RFID tag is a device where digital data is stored and is usually attached to objects so they can be identified remotely. It may cost between 50 cents and $50, depending on the type of tag. A RFID reader is a radio frequency transmitter/ receiver that is used to capture data from the tag by using an attached antenna. RFID technology has been widely used to track products, control assets, manage inventory, identify animals, etc. The automotive supply chain is a major application area. Nowadays, almost all the top car manufacturers, such as HYUNDAI, TOYOTA, GM, CHRYSLER, HONDA, FORD, NISSAN, KIA, etc. have implemented RFID technology to increase efficiency and productivity, as well as promote supply chain integration. The purpose of this paper is to explore how RFID technology is implemented on all levels of the automotive supply chain, including automotive part suppliers, logistics providers, manufacturers, and dealers.
Automotive part suppliers
At the supplier level, RFID proves beneficial as it may identify counterfeit automotive parts and reduce inventory inaccuracy. According to the Specialty Equipment Market Association (SEMA), counterfeiting costs the automotive parts industry in the United States about $12 billion every year. As most of the automotive parts are made in Asia, it is hard to trace the origin and guarantee the quality. To fight counterfeiters, Manufacturers’ Qualification and Validation Program (MQVP) has created the Global Online Certification (GOCERTS) system for about 10,000 types of parts. Most part manufacturers and suppliers have joined the GOCERTS program and are using RFID tags to identify authentic parts. The RFID solution has successfully captured counterfeit parts, as well as reduced lawsuits between suppliers and manufacturers. Additionally, RFID tags are attached to parts to track stock information. By accurately knowing detailed on-shelf inventory, suppliers are able to do timely replenishment if the product is out of stock, as well as reducing the cost of carrying excess inventory.
At the level of logistics providers, RFID provides real-time moving process and automates data capture. Logistics include both inbound and outbound logistics. Inbound logistics is the process of moving automotive parts from the supplier to the manufacturer. Outbound logistics; also called vehicle distribution, is the process of delivering vehicles from the manufacturer to a dealer or the final customer. With RFID technology, both supplier and manufacturer are able to know exactly where the automotive parts are in moving process. TNT Logistics; the largest logistics provider in the automotive industry, has adopted RFID to track the whole process of moving parts to car manufacturers since 2005. RFID tags and a network of wireless location sensors are used to deliver visible moving process, including what material is being moved, when it arrives at the plant gate, which part is loaded and unloaded to a storage rack, etc. Both TNT and car manufacturers benefit from using RFID technology. For TNT, labor cost is reduced because workers don’t need to waste time checking on rack availability and space capacity. Car manufacturers are able to manage preproduction process more efficiently.
For outbound logistics, RFID provides a more efficient way to move cars. Gulf States Toyota; a Houston based Toyota distributor, has successfully implemented RFID technology throughout logistics to reduce cost and make dealers and customers happy. It receives about 185,000 new cars from Toyota factories in Japan and delivers them to more than one hundred dealers in the southern US annually. The distribution is very complex and supply chain costs increase year after year. After adopting RFID technology, the problem is solved. The RFID tag is attached to each vehicle, which records all the detailed information, such as car serial number, body type, chassis number, engine number, car color, date of manufacture, etc. The RFID readers are installed at some key locations, such as warehouses, railway stations, docks and airports. Whenever the tag is read by the reader, the car’s location is identified and updated on the computer digital map. A notification or alert will be sent if the vehicle is missing in the process. The system saves a large amount of labor cost since everything is automated.
Manufacturers benefit the most from RFID with the faultless assembly and customization. According to statistics, an average car is composed of 30,000 parts. Imagine such large number of parts being assembled in the plant. When a part or critical item is missing or incorrectly placed, the extra work of looking for a right item to keep the assembly line operating could result in additional cost and low efficiency. According to research, almost $ 750,000,000 is lost due to misplaced and lost containers. RFID acts as a type of business radar that detects any errors and ensures the right part is always in the right place. With the vehicle identification number (VIN) code being attached on a RFID tag, the RFID system is able to identify each item and send alerts if there is any error during work-in-process (WIP). For example, if a worker makes a mistake by putting a part in the wrong place, the RFID tag will instantly send an alert before the part goes to the next assemble line station.
In addition to ensuring accuracy on assembly lines, RFID also makes customization possible. One of the buyers may want a car with music system, the other does not. One wants an upgraded rearview mirror, the other does not. The customization scope is infinite, ranging from components to finished products. Therefore, Item-level identification is required to ensure the right parts are installed to the specific models. RFID can simplify such customization. For example, BMW’s production is based on customer requirements and specifications. A customer can configure his own BMW by selecting the color, body style, engine model, tire specification, etc. from thousands of internal and external options. By adopting RFID, each part is attached with a tag which stores identification details and final assembly information. If the RFID reader can read the tags from the assembly and the parts on the assembly line, then it means all the parts are fitted correctly. Otherwise, it will send an alarm or a notification.
At the dealer level, RFID can reduce theft and provide personalized service for customers. Across all levels of the automotive supply chain, thefts are everywhere. From inbound to outbound logistics, from automotive parts in a supplier’s warehouse to a finished new car in dealer’s showroom, thefts are unavoidable. According to a study, car theft costs the dealership about $420,000 per year, and lost keys cost $2,000 annually. The typical car thefts across North America are carried out by organized crime. The thief may pretend to be interested in a specific car; usually a high-priced brand such as a BMW, and take it out for a test drive. When returning the vehicle to dealer, he may replace the authentic key with a counterfeit one. Then, with the authentic key, he later drives the car into an arranged truck and quickly disappears. To prevent such key theft, dealers began to implement a RFID tag which stores an encrypted unique ID number in each key. The tag becomes inoperable and will send an alert if the thief attempts to remove it from the key. With this RFID security system, thefts have largely been reduced.
RFID has been utilized by car dealers to provide personalized service for customers. Car dealer Mercedes Benz of Buckhead; located in Atlanta, has had such a system installed since 2008. The system includes four components: a RFID tag that has been placed on the rearview mirror of each vehicle, an antenna that has been installed in the service lanes, a tag ID that contains a unique ID number linked to that vehicle’s identification number (VIN) and the customer’s name, and a computer that displays a greeting and other information on two plasma screens within 2 seconds of the tag being read. With the system, dealers will immediately get notification when a customer arrives, where the car is located, and then provide personalized service immediately. It also promotes car sales since the personalized service improves the after-sale service experience and makes customers feel happy.
RFID technology is an innovative solution for the automotive industry. The benefits that RFID offers to the automotive supply chain, from car parts suppliers, logistic providers, to manufacturers and dealers, are accuracy, visibility, traceability, and added security. With the lower cost of RFID tags, RFID will be implemented more broadly in automotive supply chain.