Calhoun: The NPS Institutional Archive DSpace Repository Acquisition Research Program Acquisition Research Symposium 2015-04-01 Improving Warehouse Inventory Management Through RFID, Barcoding, and Robotics Technologies Burke, Eric M. Naval Postgraduate School http://hdl.net/10945/53789 Downloaded from NPS Archive: Calhoun NPS-LM-14-197 ACQUISITION RESEARCH PROGRAM SPONSORED REPORT SERIES Improving Warehouse Inventory Management Through RFID, Barcoding, and Robotics Technologies 8 April, 2015 MAJ Eric M. Burke, USA LT Danny L., USN Thesis Advisors: Nicholas Dew, Associate Professor Geraldo Ferrer, Associate Professor Graduate School of Business & Public Policy Naval Postgraduate School Approved for public release; distribution is unlimited. Prepared for the Naval Postgraduate School, Monterey, CA 93943.
Acquisition Research Program Graduate School of Business & Public Policy Naval Postgraduate School The research presented in this report was supported by the Acquisition Research Program of the Graduate School of Business & Public Policy at the Naval Postgraduate School. To request defense acquisition research, to become a research sponsor, or to print additional copies of reports, please contact any of the staff listed on the Acquisition Research Program website (www. Acquisition Research Program Graduate School of Business & Public Policy Naval Postgraduate School About the Authors Major Eric M. Burke Army Acquisition Corps, United States Army MAJ Eric Burke graduated from the University of Tampa in Tampa, FL, in 2001 with a degree in economics.
He was commissioned as an armor officer through ROTC and is now a member of the Army Acquisition Corps. He has served two combat deployments in Iraq as a tank and scout platoon leader from 2003 to 2004, and as a Stryker infantry company commander from 2007 to 2009. After command, he served as a contracting officer under the 409th Contracting Support Brigade (CSB), the Regional Contracting Office–Italy Deputy Director, and 414th CSB Brigade S-3. Following graduation, he will transfer to Program Executive Office Intelligence, Electronic Warfare & Sensors to serve as an assistant program manager for position, navigation, and terrestrial sensors.
Supply Corps, United States Navy LT Danny Ewing, Jr., is currently a candidate for a master’s degree in business administration with an emphasis in supply chain management at the Naval Postgraduate School. LT Ewing enlisted in the Navy as an undesignated airman in June 1997. He was commissioned in the Navy Supply Corps following graduation from Officer Candidate School in May 2005. He holds a Bachelor of Science degree in political science from Excelsior College.
LT Ewing previously served as supply officer department head onboard USS Shiloh (CG 67). He has also served as fuels officer at Defense Fuel Support Point, Diego Garcia. His other shore assignment included duty as fuels intern at Naval Operational Logistics Support Center–Petroleum at Fort Belvoir, VA, now NAVSUP Energy, where he earned supply sub-specialties in petroleum management and operational logistics, non-critical certification in acquisition logistics. LT Ewing’s enlisted sea tours included USS Independence (CV 62), USS Kitty Hawk (CV 63), and USS Harry S.
LT Ewing performed duties as an assistant supply officer onboard USS Stethem (DDG 63). i THIS PAGE INTENTIONALLY LEFT BLANK ii NPS-LM-14-197 Acquisition Research Program Sponsored Report Series Improving Warehouse Inventory Management Through RFID, Barcoding, and Robotics Technologies 8 April, 2015 MAJ Eric M. Burke, USA LT Danny L., USN Thesis Advisors: Nicholas Dew, Associate Professor Geraldo Ferrer, Associate Professor Graduate School of Business & Public Policy Naval Postgraduate School Disclaimer: The views represented in this report are those of the author and do not reflect the official policy position of the Navy, the Department of Defense, or the federal government. iii THIS PAGE INTENTIONALLY LEFT BLANK iv IMPROVING WAREHOUSE INVENTORY MANAGEMENT THROUGH RFID, BARCODING AND ROBOTICS TECHNOLOGIES ABSTRACT The purpose of this MBA project is to explore the potential value of combining automatic identification and robotics technology in order to improve asset visibility within a warehouse environment.
The Defense Logistics Agency (DLA) experiences high costs associated with inventory inaccuracies and annual inventory audits. Our project examines technologies that could be used to improve the DLA’s asset visibility. This study examines current industry applications of viable technologies in the marketplace and whether implementing these technologies would provide a sound economic solution. A cost–benefit analysis is included to determine the affordability of efficiencies that RFID and barcoding bring to warehouse operations.
This analysis encompasses costs for systems purchase, implementation, and integration. Benefits are measured by determining cost savings in manpower requirements, increased efficiencies in order and restocking times, and improved accuracy in inventory management. The qualitative analysis addresses the advantages and disadvantages of an automatic identification system implementation. It also addresses future potential for the use of robots to improve inventory management.
Ultimately, the project concludes that 2D barcoding is far more cost effective within 10 years; however, both 2D barcoding and RFID can provide a positive return on investment. v THIS PAGE INTENTIONALLY LEFT BLANK vi TABLE OF CONTENTS I. PURPOSE OF STUDY. SUPPLY CHAIN MANAGEMENT IN THE DEPARTMENT OF DEFENSE.
DEFENSE LOGISTICS AGENCY. THE ASSET VISIBILITY PROBLEM. TECHNOLOGIES FOR DISTRIBUTION AND ASSET MANAGEMENT. RADIO FREQUENCY IDENTIFICATION TECHNOLOGIES.
Introduction to Radio Frequency Identification. BENEFITS OF RFID. RFID CHALLENGES TO IMPLEMENTATION. RFID in DOD Supply Chain Management.
What Is a Barcode?. History of the Barcode. Barcodes: How They Work. Benefits of Barcoding.
Introduction to Robots. ROBOTS AND RFID. INDUSTRY’S APPLICATION OF TECHNOLOGIES FOR ASSET VISIBILITY AND DISTRIBUTION. ZAPPOS INTEGRATES KIVA SYSTEMS.
WHY THE DLA EASTERN DISTRIBUTION CENTER. UNDERSTANDING THE PROBLEM. WHAT ITEMS ARE CONSIDERED FOR TAGGING?. ASSIGNING COST OF LABOR.
INFRASTRUCTURE COST BASELINE. ASSESSING TECHNOLOGY READINESS LEVELS. COST–BENEFIT ANALYSIS. Business Case #1: Full RFID Implementation.
Business Case #2: Full 2D Barcode Implementation. Business Case #3: RFID Implementation for Highly Active Bulk and Rack Storage. Business Case #1 and #2: Full RFID or Full 2D Barcode Implementation. Sub-Analysis for RFID Implementation of only Highly Active Bulk and Rack Storage.
Other Benefits Not Included. Full RFID Implementation. NPV for Full 2D Barcode Implementation. NPV for Sub-Analysis for RFID Implementation of Highly Active Bulk and Rack Storage.
ANALYSIS OF ROBOTIC SOLUTIONS. RECOMMENDED FURTHER RESEARCH. TECHNOLOGY READINESS LEVELS .87 LIST OF REFERENCES .89 viii LIST OF FIGURES Figure 1. Main Components of an RFID System (from GAO, 2005, p.
Illustration of How RFID Works (from Napolitano, 2013). 1D Barcode (from White et al. 2D Barcode (from White et al. Kiva Robotic Drive Unit and Mobile Inventory Shelf (from Kiva, 2014).
Kiva Work Station (from Kiva, 2014). Kiva Vertical Lift Solution (from Kiva, 2014). Kiva Software Integration Model (from Kiva, 2014). Predicted Unfilled MRO for FY2011–FY2014.
Statistics of Predicted Unfilled MRO for FY2011–FY2014. Left Tail of the Predicted Unfilled MRO for FY2011–FY2014. Predicted Unfilled MRO for FY2013. Statistics for the Predicted Unfilled MRO for FY2013.
Left Tail of the Predicted Unfilled MRO for FY2013. Correlation of Total MROs and Unfilled MRO % .67 ix THIS PAGE INTENTIONALLY LEFT BLANK x LIST OF TABLES Table 1. Defense Logistics Agency Obligations for New Technologies (from GAO, 2013). Common RFID Operating Frequency for Passive Tags (from GAO, 2005, p.
EDC Annual Inventory Induction, for fiscal years 2012, 2013, and 2014. Storage Locations by Type within the EDC. Average Annual Inventory Requirements within the EDC. Average Annual Salary for FTEs Conducting Inventories.
Calculation of Hourly Wage Rate for Enlisted Personnel. RFID/Barcode Tags and Printer Costs. Reliability Comparison (after White et al. RFID Errors in Scanning (from White et al.
Barcode Errors in Scanning (from White et al. Estimated RFID System Acquisition Costs. Estimated Labor Costs of Implementation. Sensitivity Analysis of Initial RFID Tag Cost.
Sensitivity Analysis of Annual Passive RFID Costs. Estimated 2D Barcode System Acquisition Costs. Tagging Costs at Implementation. System Implementation Costs: Rack and Bulk Storage.
Items by Storage Location Type. Sensitivity Analysis of Implementation Passive RFID Costs (Partial). Sensitivity Analysis of Annual Passive RFID Costs (Partial). Total Annual Inventory Costs (Normal Operations).
Potential Savings in Inventory Auditing Costs. Estimated Average Unit Price. Estimated Cost of Unfilled MROs. Potential Savings in Inventorying Auditing Costs (Partial).
Estimated Cost of Unfilled MROs: Bulk and Rack. DOD Wages Saved by Reduction in Required Labor Hours. RFID NPV Sensitivity Analysis. Barcode NPV Sensitivity Analysis.
Bulk and Rack Storage RFID NPV Sensitivity Analysis. Comparison of Analysis. Comparrison for Conclusion. Technology Readiness Levels (from DOD, 2011) .87 xi THIS PAGE INTENTIONALLY LEFT BLANK xii LIST OF ACRONYMS AND ABBREVIATIONS 1D one-dimensional 2D two-dimensional AIS automated information system AIT automatic identification technology ALOC airlines of communications ASN automated shipping notice AT asset tracing Auto-ID automatic identification AWOS automatic weigh and offer system aRFID active radio frequency identification COCMS combatant commanders DC distribution centers DLA Defense Logistics Agency DOD Department of Defense DORRA DLA Office of Operations Research and Resource Analysis EDC Eastern Distribution Center FTE full-time equivalent FY Fiscal Year GAO Government Accountability Office GS General Schedule HERE hazards of electromagnetic radiation to ordnance HF high frequency IA information assurance ISR intelligence, surveillance, and reconnaissance ITV in-transit visibility IUID item unique identification JTF Joint Task Force KVL Kiva vertical lifts LCL lower confidence level xiii MRO material release order NPV net present value PMT positive material transfer POM Program Objective Memorandum QR quick response RF radio frequency RFID radio frequency identification TRL technology readiness level UHF ultra-high frequency UPC Universal Product Code UCL upper confidence level USD (AT&L) Under Secretary of Defense for Acquisition, Technology, and Logistics WAWF Wide Area Work Flow xiv ACKNOWLEDGMENTS We would like to thank our advisors, Dr.
Nicholas Dew and Dr. Geraldo Ferrer, for their outstanding support and expert guidance during the study and development of this MBA project. We are very grateful for the guidance and support from Dr. Kenneth Doerr and Dr.
Tali Freed in providing analysis and technical expertise. From the DLA Office of Operations Research and Resource, we would like to thank Mr. Lawrence Vadala and Kenneth Mitchell for providing us with a topic and allowing us to do the research. We would like to thank Mark Lea for being patient and for giving us direction and an understanding for how a distribution center works.
He was an outstanding advisor who provided us with guidance and data that was necessary. We are especially grateful to Belinda Isbell and John Radford for providing us with data and helping us understand the data that was pivotal to our cost base analysis. Finally, I am very thankful to the editing staff at ARP and Thesis Processor Michele D’Ambrosio. xv THIS PAGE INTENTIONALLY LEFT BLANK xvi I.
PURPOSE OF STUDY The purpose of this MBA project was to analyze whether Radio Frequency Identification (RFID) technology and robotic technology is both mature and reliable enough to integrate in a Defense Logistics Agency (DLA) wholesale warehouse environment. The DLA commissioned the study to explore, discover, and evaluate the potential applications of integrating both technologies to perform inventory functions within their warehouses. Furthermore, they wanted to examine whether the sources of hardware and software would be applicable to the DLA’s distribution wholesale warehouse operations. This study was commissioned to improve asset visibility within the normal operations of a large distribution center.
The Government Accountability Office (GAO) has published multiple reports identifying the Department of Defense’s (DOD) supply chain management as a high-risk area. These reports focused specifically on the requirement for improvement in material distribution and asset visibility. The DLA is the DOD’s primary combat support logistics agency. In providing this support, the DLA experiences high cost associated with annual inventory audits and seeks to improve its asset visibility.
In August 2006, nuclear parts were mistakenly sent to Taiwan, which resulted in an investigation into the handling of classified materials in DLA warehouses (White, 2008). Wall-to-wall inventories had to be completed in order to ensure that all the classified parts were accounted for.