RFID Archives

Guest Commentary: Real-World Business Cases For Real-Time Visibility Across the Oil and Gas Supply Chain

Guest Commentary | By Terence Leung • 11/18/2010

As I highlighted in a previous posting, without accurate and timely information about the location and integrity of needed parts, equipment, tools and supplies, Oil and Gas owner/operators and their partners face a number of major risks, including environmental and safety risks, operational risks as well as economic and compliance risks.

Today, I want to turn the spotlight on some industry-leading projects that are leveraging innovative and practical solutions to address these challenges and risks. Owner/operators and their equipment and service providers are increasingly utilizing a widening array of wireless tracking and sensing technologies (e.g., sensors, RFID, GPS and SatCom) tied to software platforms. These solutions help them reduce risks while also squeezing greater efficiencies, cost savings and profits from their operations and capital projects.

Business Case Studies for Smart Asset Management

Ensco International, a global offshore oil and gas drilling contractor, wanted to replace its manual inventory processes with an automated system for its warehouses and fleet of 52 rigs, including six ultra-deepwater rigs under construction. Ensco had excessive spare parts and challenges managing inventory and preventive maintenance on spares. Its existing Enterprise Resource Planning (ERP) software contributed to these challenges because of its delayed data entry, exhaustive paper work requirements, and the complexity of workers using the software in the field.

By simplifying workflows, leveraging data from barcodes and RFID, and extending its ERP system to the “edge” of the enterprise with agile supply chain execution software, Ensco now has a fully automated system that synchronizes inventory information in near real-time among its warehouses and rigs. This integrated approach, which eliminates the white space between ERP and operational activities at the execution level, automatically collects and utilizes data end-to-end across operational areas. As a result, Ensco is now able to reduce and consolidate inventory while equipment is on the move to a new drilling location. At the same time, the company has improved its efficiency and the ability to find equipment when it’s needed. “Ongoing communications and the ability to know where everything is allows us to work more offline now where it really counts,” said Dave Pascoe, Rig Manager for Ensco International.

FMC Technologies is one of the world’s largest oil field service providers and manufacturers of parts and inspection and repair services for hydraulic fracturing jobs. The company wanted to use RFID to address pain points such as redundant inspections, job delays, and job cancellations due to non-compliant parts. By attaching RFID tags to oil field parts, such as pipes, valves, swivels and other components connected to manifold trucks and pumps, FMC had a new means of automating the identification process and dramatically decreasing the time it took to process equipment into and out of the field.

“The intent is to increase safety and efficiency while also realizing cost savings for our customers,” said Adam Berg, FMC Technology’s Engineering Service Manager. “FMC has developed a comprehensive business case behind the technology and its use within the hydraulic fracturing industry. This includes estimates of $60 million in savings per year industry-wide. RFID technology provides our customers with substantial improvements in their ability to address and improve some common industry pains around parts inspections and identification. The ability of RFID to alleviate or eliminate these issues is key to our business case”.

At the Dow Chemical Company, the company wanted to track a wide range of assets, ranging from cylinders throughout the extended supply chain – from suppliers to end-users and back – as well as to monitor hazardous rail cargo in real time. In the latter case, Dow wanted to address the high cost of “exception” events or potential critical failures and stay “ahead of the curve” with impending government regulations to improve safety for hazardous material transport. By incorporating GPS, satellite communication systems and sensors affixed to tank cars, Dow is now able to “ping” on demand or receive automated alerts of possible security breaches. Geo-fencing capabilities that leverage satellite images enable identification of the nearest first responder in the case of an emergency or security threat.

“Dow places the highest priority on safe production and transportation of hazardous materials,” said David Kepler, executive vice president, chief sustainability officer and chief information officer of the Dow Chemical Company, “and we are working aggressively to reduce risk and improve performance. The Chemical and Petrochemical industries should set the highest standards with advanced technology solutions like this to address concerns and ensure safe passage of chemicals in-transit or at rest.”

The Dow project has become a role model in its industry. Because of this project, federal funds are now available in the chemical industry to help implement similar types of solutions.

From a technology standpoint, the trend is for solution providers across the smart asset management spectrum to collaborate to address the needs of the industry. For example, our partners in this area include KBR Wireless and Shipcom.

Summarizing the Benefits

The deployment of automated asset visibility in supply chain fulfillment, from requisition to rig, can help owners/operators attain four overriding benefits:

Reduce costly expenses of “hotshotting” equipment and expedited resources: hotshottings directly to the rigs; expediting resources on the rig and throughout the supply chain.
Reduce lost production: Having real-time information on equipment and parts, reduction in search and receiving time will prevent a subset of the root cause of lost production.
Enable safety and fiscal regulatory compliance: In more and more international operations, audit trail and receipt records are required for safety reasons and fiscal and customs compliance.
Reduce errors and reduce inspection resources: Automating inbound, handling and outbound processes from requisition to rig.

Upstream production facilities in remote locations present especially challenging operational and supply chain risks. As Sid Snitkin, VP at ARC Advisory Group, said in a recent conversation, “Offshore rigs, for example, have scarce storage space. The rigs essentially have to treat the supply chain as their lay down yards.” Delayed or lost parts, such as drill bits or pipe, can cost operations and capital projects hundreds of thousands or even millions of unrealized dollars.

The breadth and depth of deploying such Req-to-Rig solutions can be for a few sites or across regions, depending on the scope of operations and the benefits of shared or aggregated visibility. Partners such as service and equipment providers and 3^rd party logistics providers, in striving to serve the owner/operators better, can also attain tremendous benefits, which I will discuss in a future posting.

Terence Leung is the Director, Industry Solution Management for Commercial Industries at Savi Technology, a Lockheed Martin company. His keen interest is to bring ground-breaking and practical solutions to asset-intensive companies. Previously, he was responsible for solutions and marketing at NRX, an SAP solution partner serving asset-intensive industries in the area of asset information management. Terence was also with the High Tech business unit of i2 Technologies and supply chain and manufacturing practice of Deloitte Consulting.

Supply Chain’s Role in Brand Protection

RFID & AIDC | By Steve Banker • 11/04/2010

My colleague Janice Abel recently wrote an ARC Strategic Report called “Best Practices for Anti-Counterfeiting and Brand Protection” (available to ARC clients only). Achieving excellence in anti-counterfeiting and brand protection (ABP) is a multipronged, cross functional effort that requires the use of various technologies. But Janice makes the case that the supply chain organization has a role to play in these efforts.

First of all, counterfeiting is a significant problem. The US Department of Commerce estimates that 5 to 7 percent of world trade involves counterfeit products, costing the global economy $650 billion per year. As Janice states in the report, “Illegitimate products present risks to the manufacturer’s intellectual property, reputation and brand, warranties, and returns.”

The top four channels where counterfeit products enter the market are independent distributors, the Internet, contract manufacturers, and OEMs. In other words, key supply chain partners are often the culprits.

Before you can trace counterfeits back to the source, you need to detect them. The first step is to employ ABP technologies. ABP technologies fall into two main categories: overt and covert technologies. Overt technologies, such as holograms, bar codes, and RFID, are clearly visible or human readable. Barcodes and RFID work better when item-level serialization and supply chain visibility allow companies to track items through the supply chain.

The use of item-level serialization will increase the detection of counterfeits and serve as a deterrent, but it will also improve supply chain operations. Improvements are based on better tracking of lead times and variability of supply chain operations, which provides data for continuous improvement. It will also increase the speed of recalls and allow for improvements to that process. However, full supply chain visibility requires the cooperation of downstream partners, who need to scan and make those scans visible. It is also expensive. Major life sciences companies have told ARC they don’t intend to do this until regulators mandate it.

Companies can also use covert technologies, which include machine readable optical holograms, micro text, or encrypted RFID. A number of newer technologies are also being utilized on the product itself, such as DNA and other in-product taggants or markers.

ABP technologies can be installed on the production line, at the end of the line, or in the warehouse. The reverse logistics process is often where counterfeits are first detected. Obviously, adding an anti-counterfeiting testing and scanning step at receipt will maximize the effectiveness of this process. Some of these counterfeit goods may need to be saved to track down the source and for prosecution; the rest should be disposed of (none should be refurbished and shipped out again).

Janice concludes by saying “The first step toward an effective ABP program is to change the corporate culture and organizational structure. Next, the company needs to recognize common best practices for ABP across the global organization.”

Guest Commentary: Reducing Risk with Automated Asset Visibility in the Oil and Gas Supply Chain

Guest Commentary | By Terence Leung • 09/09/2010

Global oil and gas supply chains – upstream, midstream and downstream – are large, complex, and asset-intensive and require a number of interdependent logistics partnerships. Except for perhaps the military in times of conflict, few if any other sectors must rely so heavily on their supply chains to ensure that operations are flowing smoothly.

Increasingly, those involved in the oil and gas supply chain realize the importance of having real-time visibility of critical supplies – end-to-end, on-site and most anywhere and anytime. Knowing where things are, their condition, and when they’re arriving must be known not only by the oil and gas owner/operators, but also among their entire ecosystem of service providers, suppliers and third-party logistics partners.

Without real-time visibility and management of critical assets, three major risks confront those working together to ensure the safest and most efficient exploration, production and distribution operations. These are:

Environmental and Safety Risks. Ever-growing government oversight, whether it’s from the U.S. Department of Health, Safety and Environment, or from other international agencies, require oil and gas companies to ensure that their people are safe, materials secure and operational equipment accountable and in working condition. Accidents can be costly – both in terms of expenses and reputations. The potential for disastrous consequences rises when information is not available around the integrity of assets when they are deployed, or in certifying and identifying personnel working around high-risk operations.
Operational Risk. Upstream supply chains in particular involve production facilities that are often in remote and austere locations. As a result, delayed visibility of critical supplies means facilities don’t get drill bits, pipeline, or generators when they need them, resulting in either high-cost expedited shipments or suspension of operations or projects, which can translate into many millions of wasted dollars. Buffer inventory throughout the supply chain never seems to be enough. Reactive, rather than proactive, requisition processes with outdated and incomplete service records are not uncommon. Not always knowing the condition, maintenance and usage history of assets and parts also adds significant risk to operations.
Economic and Compliance Risk. Many regions of the world are increasingly imposing regulatory compliance on asset visibility, verification and accountability; high penalties can result if companies cannot report the whereabouts and status of assets at any time throughout the supply chain. While compliance has always been essential, proving compliance – whether it’s demonstrating chain of custody or fiscal accountability – has now become a fundamental part of doing business.

The missing link in today’ oil and gas supply chains is the ability to have automated, real-time visibility of assets that extends to partners, locations, processes, conditions and the status of working parts. This challenge has become exacerbated in recent years as general oil demand has risen while assets and equipment have been constrained, causing greater reliance on existing and limited supplies.

Technology can certainly play a role in addressing this challenge. Specifically, companies in the oil and gas industries should consider the following:

Software solutions capable of providing nested visibility of assets and shipments from requisition to production facilities (for example, oil rigs) for the ecosystem of the oil and gas owner/operator, service providers, suppliers and third-party logistics partners. The solution should leverage a Service Oriented Architecture Web Service Framework that allows users to exchange data with other systems and assess the big picture. This framework enables integration with partner information systems, or alternatively, could be deployed in a hosted environment that allows all participants in the supply chain to share or view the big picture and detailed information on an as-needed basis.
The use of low-power Radio Frequency Identification (RFID) technologies and other Automatic Identification and Data Collection (AIDC) wireless technologies such as GPS, SatCom, cellular or advanced sensor devices that detect corrosion, humidity, shock, flow rates, and more. The AIDC technologies, when affixed to supplies, turn the assets into smart ones in the new era of Smart Asset Management. By knowing the location, condition and history of assets such as parts, tools, Cargo Carrying Units, rail cars and consumables, companies can optimize operational readiness, improve asset utilization and minimize unplanned events.
A solution that can connect information from multiple operations and regions for a complete perspective and sharing of resources. As a result, an oil and gas company and its ecosystem partners can further automate its supply chains to improve asset integrity and utilization, safety, inventory management and equipment tracking, as well as reduce risks, operational cost and compliance cost

It’s also important that the solution links information “at the edge” of operations to decision-makers, which can augment traditional ERP systems in providing real-time status and condition of assets across the extended supply chain.

The value of implementing these technologies can vary depending on the user. For example, owner/operators can improve operational performance by addressing safety and compliance, lost or delayed assets, delayed production or projects, and security; service providers can enhance fulfillment processes, and manufacturers can increase customer service levels and ensure asset integrity, to name just a few benefits.

In summary, in this era of the unpredictable, unexpected and unplanned, it’s mission critical to have complete, real-time visibility of critical equipment and to monitor operations across the entire supply chain – for example, from requisition to the rig. Having “ground truth” information from AIDC technologies enables users to make better and faster decisions and to take proactive rather than reactive actions.

We will address further the business case in our next Guest Commentary.

New in Flexible Warehouse Automation: Real-Time Location Forklift Automation

Logistics Technologies | By Steve Banker • 05/03/2010

More flexible forms of warehouse automation are emerging. One example of this is real-time location forklift automation—i.e., forklifts equipped with a real-time location system that allows drivers to proceed to a specified location and pick up (or put down) a load without the need for the driver to scan the location to prove that they have picked up (or delivered) the right load. This solution is designed for full pallet moves in either a warehouse with racks or a bulk warehouse where pallets are stacked on top of each other.

Based on the number of implementations, it appears that Indyon has emerged as a leader in this area. Indyon is a 20 person firm headquartered in Pöcking, Germany. According to Korbinian Sapper, Indyon’s Sales and Marketing Director, the company has 20 implementations across sites in Germany, Italy, Croatia, and Rumania. Indyon’s customers are primarily from the food and beverage industries.

Indyon uses low-frequency RFID tags placed in the floor of the warehouse or warehouse yard, an antennae array underneath the fork lift, a height sensor that ensures the right pallet in a stack is being picked, and a load sensor that signals the company’s transport control software that a pallet has been loaded. Indyon can integrate its solution with other WMS solutions or implement it with its own software that the company defines as a “lean” solution. However, its lean solution uses real-time location data in different ways than traditional WMS solutions.

For example, through a partnership with Still GmbH, a leading supplier of forklifts, its forklifts can instruct drivers (via their in-cab computer) to slow down because they are entering a zone where foot traffic occurs, or the software can throttle back the forklift to a certain speed limit when passing into this zone. The driver could not go faster than this speed even if he wanted to.

The software can also allow for better driver assignments. By having real-time visibility to where forklifts are, what tasks have been completed, and what tasks are still in the queue, the software can make more agile assignments than a traditional WMS that only has visibility to an event following an RF scan.

The solution also provides rich visualization for both the driver and the warehouse manager. The driver can look at his computer screen and see a diagram of a stack of pallets with the one he has to retrieve highlighted in red. If the driver is facing the wrong stack, no pallet will light up in red. Further, their screen can indicate a preferred path to get to a pick location.

Managers, in turn, can look at a screen and see icons indicating the location of every forklift in the warehouse or yard. If they hover their pointer over a forklift, they can see which load was picked by order and who is driving the forklift.

There are various ways to provide RTLS automation: through location triangulation; through vision systems reading placards on the ceiling; and by starting from a known position and precisely measuring distance and turns. Indyon has experimented with several of these technologies and the company is convinced that RFID works best. With its system, Indyon can consistently, in all environmental conditions, achieve an accuracy that is not off more than 30-35 centimeters, less than half the width of a standard European pallet. If the margin of error is more than half the width of a pallet, which is Indyon’s experience with other methods, the RTLS is not accurate enough to ensure the right pallet is being picked.

The payback from this system comes from better throughput (e.g., drivers don’t have to scan pallets, racks, or trucks) and through fewer errors. Even with scanning, sometimes a driver will scan the right location and then pick from an adjacent spot. I hope to interview an Indyon customer in the near future. I’ll then write another posting on this topic highlighting the customer’s experience with this system and the ROI achieved.

Preventing Counterfeiting in the Pharmaceutical Industry

Pharma & Life Sciences | By Steve Banker • 04/21/2010

When supply chain folks think about anti-counterfeiting in the pharmaceutical supply chain, we naturally think about bar codes and RFID. Those technologies have a role to play, but the requirements go far beyond the simple tracking that occurs in many other supply chains.

My colleagues Janice Abel and John Blanchard have written an ARC Insight (available to ARC clients only) on preventing counterfeiting in the pharmaceutical industry that documents the breadth of this problem, outlines global anti-counterfeiting regulatory initiatives, and delineates the various anti-counterfeiting technologies and the primary vendors who supply them.

What I found interesting was the role of non-scan-based technologies. As my colleagues wrote:

The FDA also issued draft guidance on July 13, 2009 covering the use of inks, pigments, flavors, and other physical-chemical identifiers (PCIDs) by manufacturers to make drug products more difficult to counterfeit and to make it easier to identify the genuine version of the drug. PCIDs, inactive ingredients that can be detected and authenticated to deter counterfeiting, are added to coatings, capsule shells, encapsulated particles, or tablet layers of solid oral dosage forms (SODFs) for on-dose protection. PCIDs for SODFs include inks, molecular taggants, pigments, and flavors. The guidance recommends using PCIDs listed in the FDA’s Inactive Ingredient Guide, adding the smallest amount possible and placing them on SODFs so that they do not interact with the API or interfere with the drug release.

Inert substances that are combined with active ingredients in a drug are known as excipients. The kinds of excipients described above are used for covert identification, as opposed to bar codes and RFID tags that are typically not covert. Because of the complexity of the excipient industry, the FDA determined that a paper trail would provide the fastest and least-disruptive approach to tracking chain of custody through the supply chain.

Ideally, however, the excipient approach should be combined with technologies that aid in tracking drugs through a multi-tiered supply chain, from the factory all the way to a drug store’s shelves. Here RFID and bar coding are used to support serialization, ePedigrees, and track and trace. ePedigrees are an electronic record that contains information about each transaction that results in a change of ownership of a given dangerous drug, from sale by a manufacturer through acquisition and sale by one or more wholesalers or retailers. The pedigree needs to be created and maintained in an interoperable electronic system, ensuring genealogy throughout all stages of distribution.

End-to-end tracking and tracing goes even further than ePedigrees. In addition to tracking the changes in ownership, tracking involves knowing the physical location of a product throughout the supply chain at all times, as well as the time spent at each location, environmental storage conditions, and packaging hierarchies that answer questions such as: How many bottles in a case? How many cases on a pallet? What are the dimensions of each of those units? And how does the packaging hierarchy change at each step of the supply chain.

Creating ePedigrees and performing detailed track and trace requires serialization—i.e., a unique serial number for every unit or item produced that can be used to track and trace the product across the supply chain.

ARC is conducting a multi-industry anti-counterfeiting web survey. If you are interested in this topic, please take a few minutes to fill out the survey.

$75 Million in Drugs Stolen from Eli Lilly Warehouse

Pharma & Life Sciences | By Steve Banker • 04/05/2010

Last month, antidepressants worth $75 million were stolen from an Eli Lilly warehouse in Enfield, Connecticut. According to an article in the Spokesman-Review, “the thieves cut a hole in the roof, lowered themselves into the building on ropes, disabled the alarm system and stole enough drugs to fill a tractor-trailer. The stolen pharmaceuticals included the best-selling antidepressants Prozac and Cymbalta.”

Last August, a GlaxoSmithKline warehouse was victimized in Richmond, Virginia. Two lots awaiting distribution to retail pharmacies were stolen.

According to FreightWatch International, there were 46 pharmaceutical heists in the U.S. in 2009, up from 11 in 2006. These thefts were worth $184 million in 2009, up from $96.6 million in 2008. Most thefts involve cargo stolen from trucks or cargo containers, but thieves are increasingly targeting company warehouses. The reasons include spotty security; the fact that prescription drugs command a high price but are relatively small and easy to move; and organized crime has learned how to sell stolen drugs back into the wholesale channel. All of these factors make pharmaceutical thefts extremely lucrative.

Because these thefts are being done by sophisticated criminals, theft prevention will be difficult. Standard prevention measures include carefully screening employees before hiring them; having caged off areas in warehouses that only authorized workers can enter; installing high fences on the perimeter of the warehouse and security cameras; having security guards and requiring visitors to check-in at the entrance to the yard and the warehouse.

All of these things should be done, but they are not cheap. Having security guards on site 24 hours a day costs roughly $200,000 a year. Traditional camera security is either too expensive or ineffective. Camera systems that are monitored continuously by humans can be costly, and the person doing the monitoring can become bored or experience sensory overload, and as a result miss key events. If you don’t monitor the cameras in real time, then all you can do is potentially identify a thief after a robbery has occurred.

There are new technologies that are improving security. As I highlighted last year in “Intriguing Logistics Products,” ViewPoint CRM offers products and services for “intelligent surveillance” or “remote guarding.” This system combines digital cameras with advanced software to analyze the captured images, loudspeakers, digital storage, and fast data networks. The company monitors customer sites from a centralized remote location. The intelligent software combines motion detection and surveillance analytics to highlight events that need attention from the monitoring agents. For example, if a monitoring agent at Viewpoint’s command center sees a person engaging in potentially questionable behavior, he can announce himself to the person via the installed loudspeakers and let the person know that their action is not permitted while a different agent notifies the police.

But enhancing security in the upstream pharmaceutical supply chain will never be the total answer to this problem. The ability for companies to trace lots all the way to the retail shelf, and authenticate that products have moved through a legitimate supply chain, will also need to be part of the solution. RFID has often been touted as a solution in this area. RFID can play a role, but it is currently not a silver bullet. You can place RFID tags on large bottles of pills, but this will not stop thieves from putting those pills into different bottles.

ARC is currently conducting research on how specialized packaging, and emerging applications and technologies, are being deployed to help prevent counterfeit and stolen products from entering the legitimate supply chain. This will be the subject of a future posting.

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