Zebra Supports Philips Roll out Largest RFID Supply Chain

Challenge

Philips Semiconductors is a top 10 supplier of semiconductors with several top three positions in targeted markets such as RFID technology, where over 1 billion chips are sold into RFID & contactless smartcard markets. From its manufacturing facility in Kaohsiung Taiwan, to its distribution center in Hong Kong alone, the company ships and tracks several million wafer cases and carton packages per year. To ensure warehouse efficiency and customer service satisfaction, Philips’ semiconductor manufacturing and distribution supply chain must operate at the most efficient levels of inventory turns, stacked lead time and delivery reliability.

Philips looked to the latest in radio frequency identification (RFID) technology to improve efficiency in its supply chain. A leader in the RFID market, Philips has been offering business improvement solutions to its customers since 1988. “We decided to take the RFID technology we’ve been offering customers and use it internally to get the benefits ourselves,” said Mathieu Clerkx, CIO and senior vice president, Philips Semiconductors. “We have a great deal of experience in providing RFID chips to the market, and we decided it was time for us to benefit from the technology ourselves by implementing it in our own supply chain.”

With implementation costs of RFID in the supply chain still high, and the long time needed to achieve quantity at a low cost, most vendors have taken a ‘wait and see’ attitude. Philips knew that RFID would be advantageous to its business processes and thus to its customers. This was the impetus for Philips: to prove that RFID could benefit the integral supply chain and at the same time, be at the forefront to showcase a successful deployment of RFID on such a large scale. With goods being RFID-ready, Philips and its customers could benefit from low cost and time efficiency. This in turn would eventually generate maximum returns on investment.

As with all changes to existing workflows, it was necessary for Philips to first identify the areas which could benefit from the introduction of RFID. Philips decided to carry out an initial rollout in Kaohsiung Taiwan manufacturing facility and Hong Kong and identified a number of processes in both locations which could be improved. The company then developed a view of the future processes they wanted to implement and installed a change process to manage the transition. As RFID technology addresses operating efficiencies, Philips focused on getting benefits as quickly as possible by addressing those areas which would gain most.

Solution

Philips chose Zebra Technologies as a partner in the project because of its diverse product portfolio and leadership in RFID. Globally, Zebra and Philips already had a long history of collaboration on RFID projects. As a pioneer in RFID printing/encoding technologies, Zebra has been researching and developing RFID ‘smart label’ technologies for over 10 years and was the first company to produce an integrated, on-demand RFID printer/encoder. Zebra has been working with some of the industry’s foremost technology companies in the advancement and development of RFID solutions.

An RFID test lab in one of Philips’ warehouses was set up by Zebra to conduct the initial tests, where Philips analyzed the results to calculate the potential ROI and benefit to customers. Based on the potential savings the RFID system delivered and the effective trial run, the company’s senior management made the decision to deploy the technology throughout the Kaohsiung and Hong Kong supply chain operations.

The project covered the tracking and tracing of wafer cases and carton packages for flows of goods between Philips’ manufacturing facility in Kaohsiung, Taiwan and their Asia Pacific distribution center in Hong Kong. While barcoding is easy to use and costs less, RFID brings greater speed, security and accuracy to the table. Philips understood that ROI would result from integrating barcode and RFID, capitalizing on the efficiencies that both technologies bring to generate greater value-add in the supply chain.

At the manufacturing facility in Taiwan, microchips are typically packed into boxes or in plastic tubes that are then placed in cartons. The Zebra R2844-Z RFID printer was used to print both bar codes and encode information on the RFID label. Workers stacked the boxes on a pallet and then used a handheld reader to read the tags on the boxes before they left the facility for Hong Kong. When the pallet arrived at the distribution center in Hong Kong, the RFID tags on the cases were read with a handheld RFID reader and inventory was updated automatically.

Previously, the same task used to take twice the time. Employees had to print out individual barcode labels, then scan each box and pallet one by one using handheld barcode readers before they left the Taiwan facility. Unlike RFID where multiple boxes on the pallets can be scanned instantaneously, once the pallets arrived in Hong Kong, each box then had to be scanned individually once again before the information was updated in the database. With RFID, the whole process is made simpler, faster, more accurate and less prone to human errors.

“Zebra’s R2844-Z RFID printing and encoding technology has great synergy with the rest of Philips’ RFID infrastructure. As an RFID pioneer and leader, Zebra has been an ideal development partner in demonstrating, how RFID can be swiftly integrated with legacy systems and operational practices to enhance productivity and efficiency” said Mathieu Clerkx, CIO and senior vice president, Philips Semiconductors.

Philips is currently using twenty-one Zebra R2844-Z RFID printers throughout its supply chain. A second generation 13.56 MHz RFID printer/encoder, the printer is built on a proven platform for printing and encoding RFID wristbands, smart labels, and smart-cards.

Results

Following Philips’ deployment of RFID in its Asian semiconductor supply chain, it has seen substantial inventory management benefits. These include a significant reduction in lead time from finished products to the customer. Philips also benefited from increased inventory turns, reduced stacked lead time, enhanced shipped order reliability, warehouse efficiency and reduced manual intervention in material handling, freeing up time for further improved customer service.

Semiconductor companies have used RFID technology for several years to track the location of wafers within their manufacturing facilities. But this is one of the largest-scale deployments of the technology in the supply chain. The semiconductor industry was a good place for a major rollout of RFID, primarily due to the need for flexibility in the supply chain as a result of fast-changing customer demands and the high value of items being tagged. Currently, each wafer case is being tagged and each case only holds one wafer essentially this is ‘item-level tagging’.

Philips’ RFID supply chain operation is a significant project for the industry as a whole due to its sheer size and complexity in volume. It will act as an effective proof-point at a time when implementation of RFID technology is still developing globally and industry analysts are looking for proven business cases.

Moving forward, Philips plans to partner with Zebra Technologies on future implementations of RFID in its supply chain.