rfid inventory management study presentation to rfid journal live 2010 20100413

RFID Inventory Management Study

methodology for selecting the optimal approach

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In July 2009, Booz Allen Hamilton partnered with large federal agency to evaluate the feasibility of implementing RFID technologies to improve inventory management

The agency has a number of key challenges that significantly impacted the performance of inventory management across the agency– Physical inventory process requires a 9 month effort and another 3 month of

reconciliation– Nearly quarter million accountable assets are on two dozen campus within 400

buildings that contain 12 million square feet of space– Receiving processes provide loopholes to not record assets appropriately– Inventories submitted contain assets previously assigned to other organizations– Inventories submitted reveal ‘lost’ assets that are not being reported

To address these challenges, we engaged a cross-functional team with expertise in supply chain management, RFID technologies and economic business analysis

The project team employed a three (3) phase approach to conduct the study– Phase 1: Baseline Assessment– Phase 2: “To-Be” Environment– Phase 3: Economic Benefits Analysis

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The current annual inventory utilizes a four color system to identify the status and year property is inventoried

The annual inventory is an enterprise function while assets are managed by sub-agencies

The annual inventory is used to validate asset information and resolve data discrepancies

The color and number system offers a visual reference as to the status and year inventoried

There are exception handling processes for “Double Decal” and “Detached Decal”

9 9 9 9

Accountable Capitalized Asset Overage Not Accountable

In Inventory System

Value at $5k or more and/or contains sensitive information and requires encryption

In Inventory System

Capital asset valued at $100k or more

Not In Inventory System

Requires action to determine if asset should be accounted in inventory management system or tagged as Not Accountable

Not In Inventory System

Non sensitive or non personal appeal item

* Number denotes inventory year

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In reviewing the key findings with the agency, we validated the program improvement goals and business requirements for the “To-Be” environment

Business Requirements for the “To-Be” Environment Receive all property centrally by site and sub-agency

Identify the location of accountable property in real or near-real time

Identify the location of accountable property by defined zones or building floors

Identify the accountable user for each piece of accountable property

Assign a unique property tag to each piece of accountable property and store detailed information in inventory management system

Generate automated inventory, shortages, overages and performance management reports

Program Improvement Goals for the “To-Be” Environment Improve the accuracy of accountable property, thus reducing overages and shortages

Reduce the time and resources required to conduct the inventory of accountable property

Enable agency staff to focus on mission critical functions

Establish repeatable and consistent processes across the agency

Help to ensure compliance to applicable agency and federal property management policies

Help to reduce redundant processes and adhoc systems

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Based on agency business requirements for the “To-Be” environment, we identified four viable RFID solutions that provide increased functionality compared to the current physical inventory processCandidate Process Description

RFID Assisted Inventory


On a defined basis, people will systematically move through buildings to inventory property using RFID readers that automatically identify property

On a defined basis, people will systematically move through buildings to inventory property using RFID readers that automatically identify property

This is the inventory process currently employed at agency supported by RFID instead of

barcode technology

This is the inventory process currently employed at agency supported by RFID instead of

barcode technology

Location Sensing Inventory


With any desired frequency, the location of the property will be automatically sensed to a specific zone or room without the need for human involvement

With any desired frequency, the location of the property will be automatically sensed to a specific zone or room without the need for human involvement

This process provides propertylocation at all times

This process provides propertylocation at all times

Entrance/Exit Sensing

Inventory


Inventory

When the property moves through choke-points, the property will be sensed without human involvement

When the property moves through choke-points, the property will be sensed without human involvement

This process provides read capabilities at key building security

checkpoints

This process provides read capabilities at key building security

checkpoints

Random Sweep Inventory


With random (or periodic) frequency, property location will be automatically sensed to a specific zone with some passive human involvement

With random (or periodic) frequency, property location will be automatically sensed to a specific zone with some passive human involvement

This process is could possible be implemented via a RFID reader on

a mail cart

This process is could possible be implemented via a RFID reader on

a mail cart

Reference Example

PhysicalInventoryPhysicalInventory

On a defined basis, people will systematically move through buildings to visually search for property and record the identity and location of the property

On a defined basis, people will systematically move through buildings to visually search for property and record the identity and location of the property

This is the inventory process currently employed at the agency

This is the inventory process currently employed at the agency

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22

33

44

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For each option, we defined the key attributes that would guide the selection process for the “To-Be” environment inventory process

ProcessData

CapturedSolution

ApproachSolution

SizeProcess Change

Value Proposition

Extensibility Challenges

Physical Inventory

RoomExisting barcode scanner method

Very limited infrastructure;

barcode readers for inventory staff

No change to existing process

Is a physical inventory, captures

overages, supports data correction for

property

None

Highly manual process, human

error, lengthy execution time


Room

Same process as physical

inventory; RFID readers replace

barcode scanners


RFID readers for inventory staff

Supports the existing process

“work at a distance” using

RF

Faster execution time; less errors than “Physical

Inventory’ process

NoneHighly manual

process, lengthy execution time

Location Sensing

InventoryRoom / Zone

Pervasive RFID infrastructure

throughout the building

RFID infrastructure

within each room or 10’s of readers on a building floor

Physical inventory is

eliminated and replaced with full

automation

No human involvement ;

real-time or near real-time location

Has the potential to add several

additional capabilities

Significant amount of

infrastructure and solution

engineering required


InventoryBuilding / Floor

RFID infrastructure

limited to entrance/exits or

choke-points

RFID readers at exterior doors, stairwells, and natural choke-

points

Property location is known when it passes through a

choke-point

No human involvement;

location specific to last choke-

point

Could be extended to

include a security solution

Property sensed only when making

transition, otherwise location is inferred

Random Sweep

InventoryZone

RFID reader is carried randomly

from room to room


could be carried by janitorial, mail or security staff

Property is inventoried at random times

Minimal human involvement; can capture data over

time

None

Property is sensed at random times and could potentially be

missed

1

2

3

4

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Based on business requirements for the “To-Be” environment, DLS selected the Location Sensing Inventory solution

Inve

nto

ryB

ene

fits

Physical Inventory



Entrance/Exit Inventory

Increasing change to current inventory process


Exi

stin

g

Ben

efi

ts Visual Inspection

Reconciliation

Shortages/Overages

Faster ProcessSignificantly Faster Process

Full Automation

Real-Time

Precise Location

Pro

per

ty

Ben

efi

ts

Security Security

New Services forProperty Mgmt.

InventoryBenefits(in scope)

Property Management

Benefits(out of scope)

Implementing central receiving and RFID technologies significantly reduces requirements for visual inspection, physical reconciliation,

and capturing of shortages/overages.

Relative CostHigh LaborLow Infrastructure

Low LaborLow Infrastructure

Low LaborMid Infrastructure

Low LaborHigh Infrastructure

High LaborMid Infrastructure

Security

Illustrative

11 22 33 44

Inventory Solutions

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Both the Zone and RTLS methodologies supports the agencies business requirements for the “To-Be” environment

ZoneZone

Each building is blanketed with reader zones

Using a fixed reader at known positions, property location is detected as it moves about a building


Using a fixed reader at known positions, property location is detected as it moves about a building

Real-Time Location System (RTLS)

Real-Time Location System (RTLS)

Fixed readers are installed at known positions within each building

Property location is calculated using the tag signal reading via the multiple reader points

Fixed readers are installed at known positions within each building

Property location is calculated using the tag signal reading via the multiple reader points

Zone by Association

Zone by Association


Using a fixed reader and reference tags at known positions, property location is detected as it moves about the building


Using a fixed reader and reference tags at known positions, property location is detected as it moves about the building

Data: Exact location (automatic) Advantages: Location accuracy

can be determined within a few feet Shortcomings: Highest reader

density and greatest engineering complexity

Data: Exact location (automatic) Advantages: Location accuracy

can be determined within a few feet Shortcomings: Highest reader

density and greatest engineering complexity

Conclusion: Requires further analysis of agencies Wi-Fi infrastructure

Conclusion: Requires further analysis of agencies Wi-Fi infrastructure

Data: Room location (automatic) Advantages: Location is known at

all times without any human involvement

Shortcomings: Many carefully placed reference tags may be needed

Data: Room location (automatic) Advantages: Location is known at


Shortcomings: Many carefully placed reference tags may be needed

Conclusion: Additional cost without significant added value

Conclusion: Additional cost without significant added value

Data: Zone location (automatic) Advantages: Location is known at


Shortcomings: Zones could be large and potentially overlap

Data: Zone location (automatic) Advantages: Location is known at


Shortcomings: Zones could be large and potentially overlap

Conclusion: Meets agencies business requirements

Conclusion: Meets agencies business requirements

Methodology Description Graphical Depiction Analysis of Methodology

Asset Tag AntennaReference Tag

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RiskStructure

Value Structure

Cost ElementStructure

Booz Allen took an economic benefits analysis tool based on the Value Measuring Methodology (VMM) and combined it with the detail engineering analysis tools required for the RFID solution.

Facilitates development and prioritization of a detailed quantitative benefits (performance measurement) analysis

RFID Solution CreationRFID Solution Creation

Asset and Facilities Data

Baseline quantities of property, building, and other relevant data

Forecasting of demand and rollout assumptions

Solution Demand Planning

Schedules & program planning

Vendor and professional services required

Solution engineering input used to create quantities of things to cost

Solution Cost Calculations

Cost elements

Cost allocation to organizational entities

Asset and Facilities Data

Baseline quantities of property, building, and other relevant data

Forecasting of demand and rollout assumptions


Schedules & program planning

Vendor and professional services required

Solution engineering input used to create quantities of things to cost

Solution Cost Calculations

Cost elements

Cost allocation to organizational entities

Identifies known factors that may impede the ability of an initiative to achieve its goals, degrading projected levels of performance and escalating estimated cost

Allows for a high-level view and Rough Order of Magnitude (ROM) estimate of the lifecycle costs to develop and deploy solution

VMM Decision Framework Components

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Within the VMM cost analysis methodology, the three-step RFID Solution Creation process transforms the business provided data to an estimated cost for the RFID solution

The Booz Allen methodology creates a completely traceable linkage between the business provided data and the resulting plan and cost estimation

Analysis and planning are performed to identify a ROM level cost estimate, but by using a detailed, comprehensive roll out plan for the RFID solution

Asset and Facility Data

Multiple data sources are combined and inconstancies resolved Tracked assets data is organized by

site, building, room, organization, etc. Facilities layout maps for site, building,

room to calculate site and location Anticipated growth & movement of

assets This consolidated data provided a baseline

year location of assets and facilities Assets assigned to org, site, and

building Assignment of org to site and buildings Square footage of buildings, distance

between sites, etc.


Creation of a multi-year forecast for the RFID solution Estimates of required RFID tags, RFID

readers, software and hardware products, etc.

Projecting key engineering decisions like what and when buildings need to be wired with RFID readers

Creation of a multi-year forecast of the RFID solutions operational impact Roll-out plan for each org, site,

building, etc. What location or floor space will

assets be tracked via RFID

Solution Cost Calculation

Creation of a multi-year forecast of expenditures for the deployment of the RFID solution Cost of all tags, readers, and

middleware Cost of installation Cost of maintenance

Projection of solutions effectiveness Quantity of assets that can be tracked

via RFID Incremental cost of tracking an asset

via RFID

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An RFID solution that tracks 97% of agencies property assets with RFID readers in 81 buildings should be sufficient

100% assets tracked and 100% sq. ft. / 267 buildings wired








Observation: The knee of the curve is a transition point where the value gain becomes increasingly expensive but it also satisfies the agencies property inventory requirements. This was identified as the optimal solution and used in the

subsequent VMM analysis.

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Direct financial benefits include a positive ROI and break even point 2 to 3 years after full deployment and indirect benefits extend positive value across the agency

Return on investment ranges between 7% and 64% (based on 15%-30% reduction in property not found) and equates to a net present value between $1.8M and $16.1M of cost savings

Break even point occurs between years 2 to 3 years after full deployment

Reduce PCO support costs for property management by $3.3M during the initial five (5) years

Reduce reliance upon annual physical inventory and achieve cost savings of $3.6M

Property not found will be reduced by 15% to 30% each year after full implementation Labor savings of 15% of PCO personnel costs after year 5 Approximately 97%* of accountable assets can be tracked at the end of year five (5) by deploying RFID

infrastructure to 20% of agency buildings

Direct Financial Benefits

Key Assumptions

Cost estimates are midpoint estimates within a range that varies approximately +/- 10%.

* Note: 97% of assets are being tracked automatically via building readers and other 3% will be tracked by handhelds readers. 100% of the assets will be tagged with RFID tags.

Reduce shortages and overages Reduce the time and resources required to support

property management Improve the accuracy and completeness of

inventories Reduce reliance upon physical inventory process

and gain the capability to conduct ad-hoc queries Increase property accountability via real-time

visibility of asset location Improve reporting capabilities Enable agency to extend the value and capabilities

offered by RFID to support mission requirements and additional functionality

Indirect Benefits

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Some Key Take Always

It is best to think of your project as “process transformation” and not just leveraging RFID technology or providing visibility to an existing process– Get a complete understanding of the strengths and weakness of the existing process– Establish a clear set of objectives for the new process

You need to educated your stakeholders on the range of possibilities that a RFID solution can reasonably provide– Walkthrough the process impact a RFID solution will impose– You need to describe and compare RFID solution alternatives in easy to understand

steps

For the economic analysis, your in search of not only minimal cost but an “optimal” approach– Be prepared to examine multiple alternatives and sensitivity analysis’– Systematically eliminate alternatives early so they can be removed for further detail

analysis

rfid inventory management study presentation to rfid journal live 2010 20100413

Business

inventory system

inventory management

automated inventory

inventory managementthe

piece of accountable

current annual inventory

accountable assets

year property