|INFORMATION: Free information is available from Tata-TCS on the subject in this story. Click here to request a copy|
Tangible and quick return on investment (ROI) coupled with fair cost-sharing mechanisms among supply chain partners is widely seen as one of the stumbling blocks preventing business decision makers investing aggressively in RFID-enabled business processes.
However, there are many implementations around the world where organisations have reaped substantial benefits by first trying out RFID in a closed-loop scenario, where the implementation period is less and ROI is quick and the results can be scaled further down their supply chain. This article presents a case study where Tata Consultancy Services Limited (TCS) helped one client a global leader in the orthopedic implants and surgical products market deploy RFID technology in its quest to improve the overall supply chain efficiency by fine-tuning the various processes involved.
A key business process of the client involves shipping of returnable implant kits, each containing a few hundred implants, to its customers (hospitals) and distributors. Each kit is custom built with the right high value implants against a requisition order from the hospital. Verification of the kit includes checks for expiry date and quality hold status of the implants, before final dispatch to the hospital. This is critical to avoid life-threatening errors in the Operation Theater. Typical statistics show that 2-3 % of implants in a kit are used and the remainder is returned. The high rate of return is attributed to the high variability in scheduling and demography of patient operations. Returned kits are reopened to return the unused implants to the inventory while the hospital is billed based on actual usage of implants in the kit.
Before considering RFID, the client had implemented bar coding of individual implants combined with scanners for monitoring of kits at the shipping and receiving stations. Average volumes of over 2000 high-value implants processed per day made it increasingly infeasible as the process was laborious, time-consuming & error-prone and could not provide real-time visibility of inventory. Considering that inventory levels across the global supply chain ran into millions of high-value implants, real-time visibility of inventory meant better production forecasting , accurate inventory levels and greatly improved compliance situation related to expired implants.
TCS conceptualised, designed and deployed the RFID solution, conforming to the Health Industry Bar Code (HIBC) standard, for the shipping and receiving process. An RFID application was developed to integrate with the existing distribution, logistics and control applications. Special RFID tags detectable with 100% accuracy even when they in close proximity; in combination with tunnel RFID readers with the ability to detect tags with 100% accuracy, irrespective of orientation were deployed at the shipping and receiving stations.
In the RFID-enabled scenario, the pick list generated by the distribution application is transferred to the RFID repository in real-time. Tunnel RFID readers placed at the picking and packing stations read all the implants in the prepared kit, while the RFID application verifies correctness of the kit against the distribution order. During the reverse distribution process, involving returned implants, RFID tagging enables quick detection of used implants without the need for opening the returned kit. The RFID application passes this information to the inventory and billing systems to update inventory levels and enable generation of the correct customer invoice respectively. Better inventory visibility is also achieved as replenishment alerts are generated if the inventory goes below a pre-defined level.
The business case from this case study highlights a few important quantifiable benefits which justified the project and future roadmap for the initiative:
Approx 20% reduction in inventory
50% reduction in shipping and receiving effort
100% identification of implants in kits
Combining this with a RFID tagging project across the clients entire supply chain, the following non-quantifiable benefits were evident:
Uniform serialised data infrastructure for implants
Accurate distribution & sales information
Real-time Life cycle visibility within the supply chain
Faster and reliable shipping and receiving processes with less human effort
Reliable information capability for Reverse Distribution processes
Process improvements in Manufacturing Area
Real-time inventory levels and production forecasting.