We are living in interesting times, a trend that is likely to continue through 2024. Organizations globally are navigating a labyrinth of technological disruptions, global market complexities, geo-political tensions, and ever-evolving consumer demands. The one certainty they have is that effective asset management is becoming a key differentiator that will determine who is likely to sink or swim. Asset management now stands at the forefront of the corporate agenda, wielding profound implications for competitiveness, resilience, and growth.
Several factors are driving this paradigm shift, but at the heart of it is the relentless need for organizations to pursue cost optimization amidst escalating economic pressures. One way of achieving this is by extracting maximum value from their asset base, another is to keep up with customers' seemingly insatiable appetite for products and services in the quickest possible time by driving operational efficiency. Effective asset management lies at the center of both these endeavors.
Recognizing the importance of effective asset tracking and coming up against the limitations of traditional asset tracking methods, organizations are turning to advanced technologies like Real-Time Location Systems (RTLS) to revolutionize their asset management practices. This article looks at the role of RTLS in cost optimization and operational efficiency, as well as how to understand the return on investment in this cutting-edge technology.
The Impact of Inefficient Asset Management
Inefficient asset management isn't just a logistical inconvenience; it's a drain on resources and a barrier to sustainable growth. The financial repercussions of subpar asset management manifest in several ways, including:
Redundant Purchases and Overstocking: Without accurate tracking mechanisms in place, organizations often end up overstocking their inventory because they don’t know what they do or don’t have available. This ties up capital in excess inventory they may already have but just don’t have eyes on because of poor asset visibility.
Maintenance and Downtime Costs: Assets that are not properly tracked or maintained are more prone to breakdowns or premature failure. Unplanned downtime is estimated to cost manufacturers $50 billion annually. This is because reactive maintenance is much more costly than planned maintenance and is highly disruptive to operations. It can also cause a ripple effect through the production chain, causing delays, missed deadlines, and potential revenue loss.
Opportunity Costs and Missed Revenue: Inefficient asset management can impede an organization's ability to capitalize on new opportunities or respond quickly to market shifts resulting in missed revenue streams and diminished market share.
Diminished Asset Lifespan and Resale Value: Neglecting proper asset management practices can accelerate asset depreciation and diminish their resale value. Consequently, organizations incur higher capital expenditures to replace depreciated assets or sell them at a loss, further eroding their financial position.
The Benefits of RTLS in Asset Management
RTLS’s are changing how organizations manage their assets, providing them with clear insights and better control. With RTLS, organizations can easily find, track, and manage assets in real time. This brings a range of benefits including:
Enhanced Visibility and Tracking: RTLS allows organizations to track assets in real-time, monitor their movements, and quickly locate misplaced or stolen items. With these kinds of asset tracking capabilities, organizations can streamline their inventory management and minimize the risk of asset loss or theft.
Improved Inventory Accuracy: RTLS enables organizations to maintain optimal inventory levels and improve their order fulfillment processes. By leveraging real-time inventory data, organizations can also become more agile, anticipating fluctuations in demand and making sure they have the right amount of stock at the right time.
Increased Operational Efficiency: By providing real-time insights into asset availability and their performance, RTLS allows organizations to identify operational bottlenecks and streamline their workflows, allocating resources more efficiently and improving overall productivity.
Cost Reduction: By reducing inventory holding costs and optimizing equipment utilization (as well as preventing its theft or loss), RTLS helps organizations improve their operational performance and save costs. RTLS also greatly improves maintenance practices by enabling predictive maintenance - this minimizes maintenance costs, extends the lifespan of the asset, and generally enhances the return on investment (ROI) of assets.
RTLS in Action: Use Cases and Success Stories
RTLS tags can transmit a wide range of data, particularly if the tags are sensor-enhanced. This includes not only basic information such as object identity, location, and time, but also its condition and maintenance status, and environmental information such as temperature and humidity. The applications of RTLS technology are therefore vast and growing rapidly as sensor technology improves. In addition to the benefits discussed above, there are unique use cases across different industries in which using RTLS can enhance asset management activities.
Use Cases for RTLS in Warehousing and Logistics
Potential asset management use cases for warehousing and logistics include:
Cold Chain Monitoring: RTLS can be used to monitor temperature-sensitive shipments in real-time, crucial for industries like pharmaceuticals, food, and biotechnology, where maintaining specific temperature conditions is essential for product integrity and safety.
Last-Mile Delivery Optimization: RTLS allows companies to optimize last-mile delivery operations by tracking delivery vehicles and using information about real-time traffic conditions to dynamically reroute them - taking them the shortest and quickest possible distance at that moment in time.
Storage Space Optimization: By accurately tracking the location and movement of inventory in real time, RTLS enables logistics managers to identify underutilized storage areas, optimize shelf space allocation, and implement dynamic storage strategies based on demand fluctuations. For example, after implementing an RTLS, Volkswagen’s warehouse area has been ‘expanded’ by 20 percent.
Use Cases for RTLS in Manufacturing
RTLS offers a wide range of use cases in manufacturing including:
Factory Planning Optimization: RTLS aids in factory layout planning by providing real-time tracking of resources, materials, and personnel within the facility. This data helps optimize the arrangement of workstations, machinery, and storage areas, leading to more efficient workflows and improved overall productivity.
Quality Control and Traceability: RTLS can be used to track the movement of products throughout the manufacturing process, enabling manufacturers to maintain quality control standards and ensure product traceability. This helps identify defects or issues early in the production process, minimizing rework and improving product quality.
Work-in-Progress (WIP) Tracking: RTLS enables manufacturers to monitor the movement of work-in-progress items throughout the production process. This visibility helps identify bottlenecks, optimize workflow, and improve overall production efficiency.
Bosch, a renowned manufacturer of assembly-line machines and automotive components is a clear example of how RTLS can transform manufacturing operations. They began a transformation towards connected manufacturing in 2012 to remain competitive in the global market. This transition involved integrating advanced technologies to automate production processes and improve operational efficiency, particularly RTLS. They started with their automotive plant near Immenstadt im Allgäu, Germany, where operators now use tablets to tap into data captured by over 100 sensors on each machine, enabling real-time monitoring of production activities. They experienced significant productivity gains, with key assembly lines seeing a 20% increase in productivity annually since RTLS was put into operation.
Measuring ROI in Asset Management with RTLS
The return on investment (ROI) that companies can gain from investing in RTLS includes both direct cost reductions and indirect benefits. Direct cost reductions include decreased asset loss and improved labor efficiency, while indirect benefits may include enhanced process visibility, better decision-making, and increased agility in responding to dynamic operational needs.
The ROI drivers for RTLS in manufacturing and other industries can vary based on specific use cases and organizational objectives. However, some common ROI drivers for RTLS include:
Improved Asset Utilization: By optimizing asset utilization and reducing instances of loss or misplacement, RTLS helps improve operational efficiency and productivity.
Enhanced Labor Efficiency: RTLS provides visibility into the location and activities of personnel within the facility. This data can be used to optimize workforce management, streamline workflows, and reduce labor costs by minimizing idle time and improving task allocation.
Inventory Optimization: By providing accurate inventory visibility, RTLS helps organizations optimize stock levels, reduce excess inventory, minimize stockouts, and improve inventory turnover rates.
Reduced Downtime: By detecting issues early and scheduling preventive maintenance activities, RTLS helps minimize equipment downtime, extend asset lifespan, and reduce maintenance costs.
Streamlined Processes: By identifying bottlenecks, optimizing workflows, and reducing cycle times, RTLS helps streamline operations and improve overall process efficiency.
Enhanced Safety and Compliance: By ensuring compliance with safety regulations and enabling timely response to emergencies, RTLS helps reduce the risk of accidents, injuries, and regulatory penalties.
Improved Customer Service: By improving order accuracy, reducing lead times, and enhancing delivery reliability, RTLS helps organizations deliver superior customer service and satisfaction.
A Case in Point: Quantifying Cost Savings in Manufacturing
Let's look at an example of some different food and beverage manufacturing use cases and the potential savings identified by Siemens, a multinational technology conglomerate.
Reducing search time for assets: RTLS is used to reduce search time for assets through real-time tracking and localization, optimizing material stock, and preventing inventory loss. A production facility in Germany reported a potential saving of 3900 hours a year as they calculated employees had to look for toolboxes 327 times a day for three minutes. Another production facility in Germany calculated that they could save 4400 hours of search and handling time by installing RTLS.
Elimination of material loss : RTLS is used in these facilities to track inventory, reduce material loss, and prevent additional costs associated with replacing lost parts. An inventory consisting of 50000 articles with an average inventory value of $100 and a loss rate of 3% per year results in costs of $150 000 per year. Mark-up costs for having to order short-term replacement inventory (for this 3% loss) with an additional “expedite” fee of $10 result in an additional cost of $15 000. This adds up to an annual savings of $165 000 a year.
Identify and prevent bottlenecks and quality problems: Facilities use RTLS to identify production bottlenecks and quality issues in real-time, allowing for immediate action and process improvements. A factory used a production line analysis to estimate operations to be 20-30% below capacity through bottlenecks. A production volume of $1 000 000 with a minimal 10% improvement rate generates an additional $100 000 of product.
Simplifying process documentation: RTLS is also used to simplify process documentation by capturing data in real-time, enabling facilities to go paperless and streamline their workflows. In one facility, a manual scanning process of 3,000 boxes takes two seconds for each box. RTLS eliminates the need to scan as the system tracks and maintains all documentation, resulting in an estimated $18 000 USD savings in scanning time. Additional analysis shows that 50% of one factory worker’s job was being consumed by documenting the floor plan of 700 machines by hand. With RTLS, this information is readily available, thus saving the facility 50% on this labor cost.
RTLS: The Case is Only Getting Stronger
Real-Time Location Systems have revolutionized asset management across various industries by providing unprecedented visibility, control, and optimization opportunities. As technology continues to evolve, the future of RTLS for asset management holds promising advancements. Anticipated trends include enhanced integration with Internet of Things (IoT) devices, greater utilization of artificial intelligence (AI) for predictive analytics, and the development of more efficient and accurate tracking sensors. Moreover, advancements in cloud computing and edge computing are expected to further optimize data processing and improve real-time monitoring capabilities.
As businesses navigate an increasingly competitive landscape, the adoption of RTLS is becoming a strategic imperative - it is fast becoming standard fare, setting the bar for effective asset management. And Deeyook is the perfect partner to get you started.
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