In this study, we evaluate the use of radio-frequency identification (RFID) technology for improving remanufacturing efficiency. We report the results of discrete-event simulation model that analyzes how RFID creates value within the remanufacturing operation. We find that the simulated gains from using RFID are quite modest, and propose alternative justifications for the major benefits seen in practice. We then provide a framework for deciding on the adoption of active RFID technology such as real-time location system (RTLS) for easy identification of components in the remanufacturing process and the adoption of passive RFID for permanently tagging components of remanufacturable products.
In this paper, we study how radio-frequency identification (RFID) technology, including active RFID technology such as real-time location system (RTLS), may generate value in remanufacturing operations. The US Department of Defense (DoD) has capabilities in 19 depots across the US that are able to remanufacture aeronautical, automotive and naval equipment, in addition to a variety of electronic instruments (DoD, 2003). The timing for this study is opportune for two main reasons. First, the DoD's demand for remanufacturing operations continues to grow with the intensive, long-term operational demands placed on its equipment in Iraq and Afghanistan. This increased level of demand places a premium on the optimal use of remanufacturing facilities and personnel available in the DoD system. Second, RFID technology continues to evolve at a rapid pace, so understanding its benefits will help in decision-making regarding investments in this technology. With RFID technology becoming more widely integrated within the DoD infrastructure, it is the right time to analyze its effectiveness. Our study discusses the implementation of real-time location systems at the Tobyhanna Army Depot in Pennsylvania as a means to improve its remanufacturing performance. Our objective is to identify the impact of the technology on process control, and what process characteristics make the technology most valuable. Finally, we propose a qualitative framework that helps identifying the conditions under which RFID should be used in a remanufacturing job shop.
This study proceeds with a quick overview of some related work on remanufacturing in Section 2 and on the use of RFID in production environments in Section 3. Then we provide a concise appraisal of what has been learned in past studies of RTLS in a remanufacturing operation in the DoD in Section 4, which sets the scene for the rest of the paper. Section 5 reports the results of a discrete-event simulation model to analyze the narrower issue of how RTLS creates value in the remanufacturing shop through reductions in flow-times. Our results suggest that the direct gains are relatively modest, compared to the overall gains found in other studies. In Section 6 we discuss the process of selecting specific RFID technology in a remanufacturing environment and the alternative choice of directly tagging components with passive RFID at the beginning of their service life rather than at the remanufacturing facility. We argue that this choice is largely driven by the feasibility of passive tagging and the value of information gained through monitoring the tag during its entire service life. The article closes with a conclusion, implications for practitioners and suggestions for future research.
In this study, we explored the potential benefits of using RFID
in large remanufacturing job shops through a case study and a
simulation study. In addition, we focused on two issues pertain-
ing to how to implement RFID: which parts to tag in the
remanufacturing facility, and when to use passive RFID tagging
of components throughout their lifetime versus using RFID only
within the remanufacturing facilityPassive lifetime RFID tagging is beginning to happen for some
components used in the commercial aircraft industry but is not
yet embraced by the DoD. Given the contingencies we highlight in
our proposed decision framework, at the moment we see a fairly
limited scope for applying passive RFID to components in existing
systems owned by the DoD. However, as manufacturers start to
adopt permanent tagging of critical components, the opportunities
may change, which leads to the framework proposed in
Figs. 1
and 2
: if tagging individual items is not technically or economic-
ally feasible, it may be desirable to tag the containers that carry
the components as they travel through the repair processes with
RTLS tags.
Active RFID systems (including RTLS) have proven their effec-
tiveness in several applications. We simulated the use of such tags
using a model inspired by the Army Depot in Tobyhanna, PA,
where remanufacturing flow-times are often measured in
months, and components travel long distances between work-
stations. It is quite clear that substantial savings were garnered by
introducing an RTLS at Tobyhanna Army Depot (
Miertschin and
Forrest, 2005
;
Phelps and Rottenborn, 2006
), though our simula-
tion study showed only moderate benefits on our measure of
interest (flow-times). In our simulations, we learned that, if better
component tracking enables the elimination of components with
process times far greater than the average, average waiting time
prior to reassembly is greatly reduced, with substantial impact in
total flow-time, as shown in
Table 6
. Yet these results do not seem
to explain all the efficiency gains from using RTLS in remanufac-
turing operations.
7.1. Theoretical implications
One way to view the work presented here is as part of a larger
program of detective work that researchers are engaging in to find
out how, when and why RFID technology produces improvements
in manufacturing productivity. In thinking about the implications
of this detective work, it is particularly instructive to triangulate
our findings with those of
Thiesse and Fleisch (2008)
and
Hozak
and Hill (2010)
. In both cases these researchers find that RFID can
enhance efficiency, but that the efficiency gains only occur by
making changes to complimentary aspects of the manufacturing
process
—
not from RFID as a standalone technology. Our study
confirms these results by showing that there is a significant gap
between the savings predicted by our simulation model of
material flows with only the addition of RFID (an 11–15%
reduction in flow-times achieved in Scenario 5) and the actual
savings experienced at Tobyhanna as reported by the AN/TPS-75
manager (a 62% reduction in flow-times). We cannot specifically
identify what fills this gap, but we will speculate on this in a
moment. These studies collectively present an important theore-
tical implication that RFID technology should be conceptualized
and modeled as part of an ‘‘innovation bundle’’ rather than as a
standalone technology adoption. In the case of Hozak and Hill, the
innovation bundle is RFID and lot splitting implemented together;
for Thiesse and Fleisch, the innovation bundle requires defining
the appropriate dispatching rules that most benefit from the RFID
technology. For our case-study, the innovation bundle is likely the
RFID technology and a collection of low-visibility process
improvements that were implemented at the same time. The
theoretical lesson is therefore that researchers must build an
understanding of RFID by analyzing how it can be combined and
bundled with a collection of process improvements or redesign,
rather than looking at the technology as a standalone entity.
Hozak and Hill (2010, p. 2741)
make a similar point by arguing
that ‘‘Managers should therefore not think of RFID as an invest-
ment to be implemented in isolation
y
’’ Such an understanding of
RFID also has significant practitioner implicationsBased on our observations at Tobyhanna we can speculate on
some additional process changes that might enrich this theoretical
implication. The first change involved worker scheduling. In the
case of Tobyhanna worker overtime costs are particularly promi-
nent. It may be that RTLS creates information that enables and
prompts managers to address issues such as scheduling and over-
time, thus adding production flexibility and creating cost savings.
These factors are not captured in our simulation model. Another
possibility is that the implementation of RTLS in remanufacturing
processes requires substantial housekeeping and reorganization,
which can only be obtained with
unrestrained commitment from top
management
. This housekeeping benefit is the same as is often
observed during the implementation of Just-In-Time or Lean Six
Sigma programs. In order to be able to introduce RTLS in the shop
and track the movements of components, it may have been
necessary to remove excess inventory, tools, bins and other items
from the working area to allow for a smooth material flow. In doing
so, the job shop saw substantial process improvement as a spillover
effect of implementing RTLS. These housekeeping gains and top
management commitment may not be amenable to simulation
modeling but could be investigated through case study research.
Nevertheless, they represent another component in the innovation
bundle that deserves further scrutiny.
One final point with regard to seeing RFID implementation as
part of an innovation bundle: it might be argued that sometimes
efficiencies could have been realized without the use of new
technology. Innovation bundles vary in this regard. In some cases
the spillover effect of introducing RFID is motivational, in the
sense that its arrival focuses management attention on their
processes and therefore encourages improvements. In other cases
the use of RFID and another technology may have compounding
effects. Ultimately however, the larger point is that RFID has a
variety of (potentially positive) spillover effects that can only be
captured by changing other aspects of the production process.
Mapping this variety of spillover potentialities would be another
fine issue to research empirically, with recent work by
Brintrup
et al. (2010)
being an example of this kind of effort.
7.2. Practical implications
Generalized practitioner implications from our study are also
evident. One of the major puzzles RFID has posed for practitioners
is finding the return on investment (ROI) from its adoption. Many
practitioners have lamented that they cannot justify RFID adop-
tion based on the current economics of tags and readers. Our
study highlights that a key reason for this may be that the
payback from adopting an RFID system may come through its
spillover effects which (a) are not part of the business case
analysis for implementing the technology, and (b) involve other
process or technology changes in order to be realized. In short, a
main cause of the difficulty in finding the ROI for RFID adoption
may be because the payoffs lie in areas outside the scope of
traditional payback models and may not be obvious without
actually implementing the technology. Or – to paraphrase econ-
omist Paul Romer – ‘‘An RFID implementation is a terrible thing to
waste.’’
Looked at this way, this puzzle also suggests its own solution,
which is that adopters must be willing to adopt a ‘‘creative
destruction’’ approach to find the benefits that RFID implementa-
tions can provide for their system. There are two crucial issues
such experimentation must encompass. The first is that the
changes RFID can be bundled with are not necessarily obvious
from implementing RFID. What practitioners have to do is experi-
ment with changes to
associated
parts of the production system in
order to find out what new things RFID enables them to do.
Second, the costs of experimentation can be reduced if firms shareand diffuse information on their findings. This points to a con-
tinuing role for industry consortia, conferences and industry
media (such as trade journals) that share lessons-learned from a
wide variety of adoptions. Considered more broadly, these institu-
tional factors are machinery for a kind of collective experimenta-
tion for RFID adopters.
7.3. Future research directions
Further studies are necessary to evaluate how RFID may be
used to generate production efficiencies. We have already men-
tioned some of these above, such as worker scheduling and
housekeeping improvements. One type of empirical study that
might benefit research on this topic would be a large survey that
examines the impact of RFID implementation by looking at a range
of other factors and testing for interaction effects. This would be
one way researchers could empirically examine what the spillover
effects of RFID implementations are, and when they tend to occur.
For example, which manufacturing plants realize the most benefit
from implementing RFID systems, those with low or high capacity
utilization, and/or those with varied or homogeneous product
lines? This would help improve understanding of how RFID
technology would help an organization enhance its flexibility
without jeopardizing its productivity.
