CHEP?s RFID Lessons

Over the past five years, CHEP, the world’s largest pallet and container leasing company, has spent nearly $20 million in resources to get ready for the day customers started asking for RFID-enabled pallets. The leasing giant claims to have the answer.

"CHEP is 100% ready to roll out commercial contracts to meet customer needs to comply with Wal-Mart’s RFID requirements," said Deb Spicer, CHEP’s vice president of corporate communications. "CHEP is uniquely positioned to help our customers implement RFID."

Since the technology first started attracting attention a number of years ago, CHEP has been involved in the forefront of RFID research for pallet level tracking. CHEP began a Florida pilot program in May 2002 involving 250,000 pallets. CHEP tracked outbound shipments and inbound shipments as well as certain points along the supply chain at both manufacturing and distribution facilities. While it was not a completely closed loop environment, the experiment did provide real world data, which has helped the company leap ahead in its plans to offer RFID technology to packaging users.

CHEP’s initial pilot utilized pallets with RFID tags embedded in plastic lead deckboards on two sides of the pallet. Through its research, CHEP has worked to develop a tag, holder and placement strategy that only requires one tag, will allow for 100% read rate accuracy and can withstand typical damage caused by fork tines according to Deb. CHEP has a patent pending on its unique approach. Deb credited Victor Mendes, CHEP’s CEO, as the real driving force behind CHEP taking its research into a real world setting. Mendes took over for Bob Moore a couple of years ago and has been responsible for several improvements in CHEP’s business model, especially its RFID and pallet industry relations programs.

The pilot employed a mixed pool strategy where some of the pallets were tagged and others were not. This reflects what CHEP expects will happen as customers adopt RFID at different rates and locations. Currently, CHEP plans to offer RFID-enabled pallets as a premium service. CHEP will not roll out RFID across the entire pool. Instead, it will tag pallets as requested by customers. This gradual implementation reduces upfront expenditure while allowing the technology to pay for itself along the way. Although CHEP did learn improved information about pallet cycle rates in various supply chain scenarios, this information does not appear to justify the cost for tagging pallets apart from customer demand.

CHEP learned lessons in four key areas – tags, readers, the supply chain environment and enterprise (software) systems. CHEP will be using a tag placed on the center block of its standard block pallet design. Virginia Tech’s Pallet Lab has questioned the real world use of tags on wood pallets due to concerns about forklift tine damage and read accuracy being hampered by moisture content in wood. Deb has not seen Va Tech’s research but said that CHEP is confident that it has a tag system that will work for multiple trips.

When it comes to readers, multiple reads have been a problem. At first, CHEP had to experiment with how strong to make the signal so that tags coming through dock doors would get read without reading tags placed on loads near loading docks. CHEP had to build into the enterprise software a mechanism to reconcile redundant reads.

Many warehouses use wireless technology for internal communications. CHEP discovered that wireless technology tended to create interference with its RFID tracking. It had to find ways around this problem as well as account for power surges, which tend to occur especially in manufacturing plants. There has to be some way to account for tags that are traveling past a reader when a power spike occurs. Each warehouse environment offered various challenges. Some customers want tags capable of being read along conveyors traveling at fairly high rates of speed.

Enterprise software is the computer program that runs the systems and assimilates all the data at a particular facility. Finding ways to integrate current enterprise system with RFID has been a challenge. When CHEP started its research, there was no middleware to bridge the gap. Now software vendors have developed solutions for many of the enterprise systems used in modern warehouses. CHEP learned the importance of having centrally located all the RFID control and management systems. This will make any upgrade much easier because the change would only have to be made once instead of at every single read point within a company or facility.

One concern is real time scanning and data processing. Crunching data to provide immediate reports can bog down enterprise systems. Thus, a company must consider how important immediate information is and if it can wait until the end of the day to process RFID tag data. This would allow the company to have accurate daily reports and forgo the cost of a massive enterprise system overhaul.

When asked if RFID would be the next technology bomb, Deb pointed to the number of trials that CHEP has with leading manufacturers and retailers as an indicator that RFID is indeed here to stay. Deb said, "RFID adoption has a lot of momentum…many of our customers realize that they will be able to get a competitive advantage with the proper use of this technology."

CHEP will likely have rolled out its new RFID program called "CHEP PLUS ID" by the time this article reaches readers. The rental company intends to charge more for RFID-enabled pallets as one of five new service packages.  CHEP was one of the founding members of the MIT Auto-ID Center, which has pioneered the research behind much of the current RFID craze. CHEP has served on several key committees including those working on standards and policies.