Background:
Innovative technologies help to improve the execution and management of business processes and ensure that a competitive position can be achieved or enhanced. Radio frequency identification is such an innovative technology with a high potential of optimization within business processes for example for reduction of processing time and failure rates.
Objective:
To implement a RFID-based tracking and inventory management solution for beer kegs (barrel) and its financial implications. Annually approximately 30,000 kegs are in circulation. However, an accurate number of which kegs are within the brewery and which kegs are outside the brewery is unknown. Until now, the brewery uses a manual system for counting and capturing the kegs and a barcode system for tracking pallets. Thus, it is difficult to monitor which customer is currently in possession of which keg and who is responsible for replacing damaged kegs. The goal of the RFID implementation in the use case is to automate the keg management process and to collect information about the location and circulation time of the kegs. The RFID-based tracking solution gives detailed keg numbers and locations, movement history information and provides accurate turn and loss data about the kegs.
Description of Current Business Process
This process consists of the following steps:
(1) When a customer has placed a new order empty kegs are transported by a truck. With this truck the newly filled kegs will be picked up from the brewery (see process step 12).
(2) The empty kegs are counted by an employee and captured on the delivery receipt for the new order.
(3) After the counting process the kegs are moved to an off-site warehouse.
(4) Data indicating the arrival is transferred into the brewery IT-system manually.
(5) For filling the kegs they are transported to the ampoule filling system. The kegs are inspected for visible damages by an employee. If a keg is damaged it will be ?rejected and repaired later.
(6) At the ampoule filling the residual pressure is controlled and the kegs are cleaned. ?Afterwards the kegs are filled.
(7) After filling the kegs their weight is controlled.
(8) The keg identifier is captured manually and documented on paper by an employee.
(9) At the end of the day the data on the paper is transferred into the brewery IT- ?system manually.
(10) The kegs are transported to the warehouse.
(11) The kegs are transported with a fork lift to the picking location and composed on ?pallets.
(12) After composing kegs a fork lift loads the truck with the ordered kegs.
(13) The loaded kegs are counted manually by the fork lift driver.
(14) Once the truck is loaded, the delivery receipt data is transferred into the brewery ?IT-system manually.
(15) The truck takes the order to a distributor. Afterwards, the distributor delivers the ?beer to bars, restaurants or liquor stores and returns to the brewery for servicing and refilling.
It is important to point out that the manual activities 2, 4, 9, 13 and 14 are highly error- prone. Additionally, the transfer of data from paper to IT-systems is time-intensive and also error-prone. Therefore, a seamless integration of data is required.
Description of Proposed Business Process
(1) Delivery of empty kegs.
(2) The empty kegs are transported to the off-site stock ground by a fork lift. The fork ?lift drives through a RFID gate which automatically captures all kegs and sends the number of kegs to the brewery IT-system. Additionally, the number of filling circuits and the date of the last service are checked. If a keg has passed too many filling cycles or if a maintenance service is necessary, the keg is transported to the clearing location.
(3) Before filling the kegs they are inspected for visible damages by an employee.
(4) Cleaning and filling the keg.
(5) Measuring the right weight of the filled kegs. Additionally, an installed RFID reader captures the transponder identification number (ID) of each keg. This number is automatically combined with the keg number, the beer charge, and the date of filling. All data is sent to the IT-system of the brewery.
(6) The kegs are transported to the warehouse.
(7) Composing the kegs on pallets according to the delivery receipt.
(8) When a fork lift loads the truck with the ordered kegs it passes another RFID gate. ?The transponder ID is captured and stored automatically within the brewery IT- ?system.
(9) Shipment to the distributor.
The results of the changed processes are:
Reduction of the number of activities
Transformation of manual to automatic activities
Decrease of error-prone activities
Increase of process transparency
Decrease of process execution times.
Initial (Capital Costs):
Hardware (1 server, 2 workstations and 1 RAID hard disk array) $27,000
RFID readers, antennas and RFID gate equipment $68,000
Networking equipment $6,000
Inventory Management software - $50,000
Initial Training and Testing - $7,000
Workstations (4) - $16,000
Consulting Fee (First Year) - $2,000
Recurring Costs
Hardware Replacement, Maintenance and Repair $4,000 per year
Machinery Operating Cost (power, backups, etc.) $6,000
Training and Consulting - $750 every year after first.
Training – 40 hours Administrative personnel, 20 hours Management personnel, 6 hours Warehouse Workers.
Imaging supplies, Media, etc. - $3,000 per year
Average Salaries:
Administrative personnel (6) - $35,000 per year
Management personnel (4) - $48,000 per year
Warehouse Workers (15) - $20,000 per year.
The analysis should track the costs and benefits for five years.
Anticipated Benefits:
Reduction of kegs kept in inventory – better tracking of the location and availability of empty kegs will allow the brewery to reduce the number of spare kegs kept in inventory. (Currently there are 30,000 kegs in inventory or circulation ($130 per keg). The system will all allow the brewery to reduce this number by 500 in years 2-5).
Reduction in loss of kegs - due to the real-time information about the location of kegs a reduction of asset loss can be achieved. Thus, a significant added value - a new keg costs $130 but the keg deposit is only $30 - can be generated. ?It is estimated that the brewery will reduce losses by 200 each year in years 2-5.
Reduction of customer complaints - The regular maintenance of kegs enables the reduction of faulty kegs delivered to the customer. As a result the number of complaints can be decreased. In addition the customer loyalty is strengthened. It is estimated that the time saved resolving customer issues uses about 100 hours of Administrator time and 50 hours of Managerial time each year. The system will reduce this by 90% for both managers and administrators.