Project Title: EATON RFID Inventory Tracking

and Accuracy
Company: EATON Airflex Plant
CWRU Course: Six Sigma and Quality Management
Instructor: Dr. Alireza Kabirian (axk821@case.edu)

Fall 2016

Student Team (without any order):

Harsh Ganeriwala
Ahmed Nassar
Nimisha Ezhumavil Prakasan
Yaoxuekun Hu

Report Date: November 28th, 2016

Company Address: 9919 Clinton Road, Brooklyn, OH, USA, 44144

Project Sponsor/Champion: Craig Rossi

Sponsor Phone: 216-634-8334
Sponsor Email: CraigRossi@eaton.com
Executive Summary
The Eaton Airflex facility in Brooklyn, Ohio offers a product portfolio that can be
considered ‘High Mix and Low Volume’. It presently carries a large quantity of diverse products
of different sizes and weights. As a result of this, combined with a significant amount of manual
process, the enterprise has to deal with high ‘Defective Parts Per Million’ or DPPM rate,
inventory errors and high picking times. The scope of this project is to address these issues, i.e.
to bring down DPPM, increase inventory accuracy and reduce picking times by virtue of
implementing a Radio Frequency Identification (RFID) inventory tracking and management
system. The primary type of error that we target (as per company nomenclature) is ‘shipping
error’. We use the DMAIC process as a structure and guide in our endeavor. In the define phase,
this report talks about the company and the problem faced by it in a more detailed manner. In the
measure phase we state our observations primarily concerning the inefficiencies in the inventory
handling process in the plant. Here, we also investigate the current Sigma Level of the process
which is less than 1-Sigma. Our Critical to Quality chart allows to move on further to the
Analyze phase. In the analyze phase we take a three step approach to arrive at the critical
variables or factors that if addressed will help us towards making suggestions. These steps
include studying the process flow diagram, developing an Ishikawa analysis and brainstorming.
We realize that the process is highly dependent on human beings and requires a better IT system
to minimize human element as much as possible. In the improve phase we talk about a proposal
to implement an RFID system to address our critical factors. Benefits of RFID system go beyond
shipping errors. This system has advantages over the conventional barcode scanning system of
inventory management. A cost benefit analysis shows us that in a return period of 2.6 years, the
company is estimated to save nearly $19000 annually. As a conclusion, based on research, this
report recommends to implement the proposed RFID system at the Airflex facility. To help the
company significantly reduce the amount of DPPM defects as well as mitigate the human error
aspects of inventory handling, the team provides a practical RFID system (and potential
suppliers) that could be integrated into the existing IT system. A future RFID system would act
as a verification method for correctly shipped product by scanning all outgoing shipment tags,
thereby reducing inventory accuracy errors to nearly 0%.
1. Define
1.1 Company
Eaton is a large manufacturing company with sales of $20.9 billion and over 95,000 customers in
more than 175 countries. The team worked with Airflex Production Line of Eaton in the
Brooklyn area. Eaton’s Airflex® (http://www.eaton.com/EN/Eaton/ProductsServices) clutches
embody the principles of classic design: superior performance, long life and high quality. For
over 40 years, they have been providing superior drivetrain products by continuously adapting
and innovating their products to meet industry requirements. With global operations—including
manufacturing, sales and distribution—spanning multiple continents worldwide, their dedicated
team can help to select or develop customized solutions for your individual needs.The company
sells products that help its customers effectively manage electrical, hydraulic and mechanical
power more efficiently, safely and sustainably. (1) www.airflex.com.

1.2 Process
The team analyzed the core issues using multiple methods including the Sigma Level Analysis,
Process Flowchart, Project Charter and SIPOC analysis, with respect to the process of picking
and shipping products (all of which are included in the appendix 9).

1.3 Problem
The Brooklyn plant’s business model is a high mix low volume offering model. As a result, the
plant is forced to carry a large amount of diverse products, some of which could stay in inventory
for up to three years. Moreover, the inventory handling, picking and shipping processes involve a
significant amount of manual work and human input, which results in inaccurate inventory
handling and shipping errors, such as, wrong inventory counts, lost products and long picker
search time for inventory.

2. Measure
2.1 Observations
As a first step, the team visited the site several times to experience the packaging and shipping
process, interview the employees on site, and have a general overview of the plant. After serious
considerations and communications, we initially found the following things which we believe
could be improved:
● Items of different sizes sometimes are grouped and placed together. It might lead the
plant to be messy and in chaos, especially when people carelessly misplace items in
wrong places.
 ● The shipping system mostly depends on manual input, that includes order numbers,
shipment codes and status, intended shipping date, and other important information. The
manual typing leads to many mistakes and cannot be as accurate and efficient as
automated work.
● Due to the large size of the site, the wrongly placed items cause workers to take
substantially more time to find the correct items for picking.

Based on initial observations, the team concluded that RFID system could be one of the solutions
to improve the accuracy, efficiency and performance of the plant.

2.2 Six Sigma Level investigation

After having a general view of the plant, the team also conducted a thorough Six Sigma level
calculation of shipping errors. We tested the data, spanning over 32 months from January 2014
to August 2016.
The average monthly quantity of shipped items is 11499, and the average number of monthly
rejected items is 6. A detailed calculation is stated below:

Table1: Brief six sigma level calculation overview

Using six sigma level calculation, the team found that the current process is at a level of less than
1 sigma. We identified that the number of shipping errors within the given period is 70 while the
average monthly shipping errors are 2.2. The total monthly errors less monthly shipping errors is
3.8 in average, which is still above the lower specification limit. And thus our team believed that
by only focusing on shipping errors, we will not be able to bring the DPPM down by 50%.
However, if we implement the RFID system, the shipping errors and other human errors could be
lowered to nearly 0 percent.
2.3 Critical to Quality
In order to conduct further analysis, we also generated the Critical to Quality chart stated below:

To explain more on the Critical to Quality chart, the main need for the company is to reduce the
shipping errors and the pick-up time. The quality drivers are to reduce the costs made by wrong
shipments, lost items, and waste of time that people look for misplaced items, make employees
more pleasant in quickly finding the manufacturing parts they need, as well as increase customer
satisfaction by reducing the wrong shipments. To achieve the goals, the plant needs to lower the
shipping errors to nearly 0 percentage, place the items in the right place on site, and improve the
overall efficiency of the production line.

Further analysis of the problems and possible solutions will be covered in following parts.

3. Analyze
3.1 Analyzing the process flow diagram
The process flow for inventory management and eventual shipping at the Company in this case is
complicated, and up to a large extent, variable in nature. This variability can give rise to errors in
the system. (View Appendix 9.3)
The Company has a documented procedure, however, this procedure is very often not followed.
Following this existing procedure itself may help reduce shipping DPPM.

Critical Factor – In this case we have concluded that operator complacency and attitude is main
driver that’s causing errors. We will address this issue in the improve phase.

3.2 Root Cause Analysis using an Ishikawa Analysis

Two iterations of the Ishikawa analysis were made. The second one sought to make
improvements on the first one by having a discussion with the sponsor. The final Ishikawa is
presented below:-

Figure: Ishikawa Analysis

This gives us multiple insights into what can possibly be the reason for shipping errors.
Material:
Critical Factor – Main drivers are:
● Inventory data not updated in the system
● Which in turn, can be caused because of a system error, or because of manual entry error
into the system or because of operator complacency.
Measurement:
Critical Factor – Main drivers are:
● System error
 ● Manual error
Environment:
Critical Factor – Main drivers are:
● Complicated process flow, involving many manual steps

Method:
Critical Factor – Main drivers are:
● Manual error
● Errors caused by transporter (Not in scope)
Machine:
Although the original process flow consisted of using a Radley Gun to input pre-shipper details,
this equipment is no longer used. This change has not been documented in the official process
flow.
Personnel:
Critical Factor – We have concluded that a major part of the problem originates in this arm of the
analysis. One can see from our analysis that this aspect reflects in all other aspects and is crucial.
Critical Factor – Process too dependent on humans.

3.3 Brainstorming
In this study we made an attempt to simplify the approach by targeting a 100% accuracy and
customer satisfaction.
Simply put, shipping errors occur because customers receive wrong shipments. This can be
completely avoided if no wrong shipment exits the enterprise.
Addressing this issue will increase inventory accuracy to a 100%, considerably reduce DPPM,
and also provide huge intangible benefits to the Company. We will address this issue in the
Improve section of this report.

Summing critical factors affecting performance.

● The process dependency on human beings (operators) is high.
● Operator complacency is high.
● The enterprise lacks a robust, more efficient IT system.

4. Improve
Radio Frequency Identification (RFID) technology has been implemented across industries to
improve operations, reduce shipping defects, and realize cost savings. We examined the RFID
technology to address Eaton’s inventory needs. We undertook a cost–benefit analysis to
determine whether implementing this technology would result in improved inventory
management and accuracy, and reduced shipping errors.
RFID was developed in the 1950s and is in no means a novel technology. Nevertheless, it has
gone through significant technological advances. An RFID system consists of a transponder, a
sensor (reader), and a database that collects and stores data from the reader. The transponder/tag,
consists of a chip and an antenna. The chip stores information about the item (serial numbers,
production dates, and location) to which it is attached. The antenna which is attached to the chip,
transmits stored information to the reader. The reader scans the tag for the item’s stored data and
then transmits that information to a database.

There are two types of tags; active and passive tags. Active tags contain a power source and
transmitter that can send a continuous signal. They are larger and have a longer reading range
than passive tags. Their long reading range makes them more advantageous than passive tags;
but the biggest disadvantage with active tags are that once the batteries discharge, they can lose
the capability to transmit a signal.

4.1 RFID vs Barcode Technology

Eaton’s Brooklyn inventory currently uses a Barcode system to track and manage the inventory.
RFID tags build upon barcode technology and magnetic strip cards. The biggest advantages of
RFID tags over barcodes are that:
1. It can hold more information
2. Can be reprogrammed multiple times with updated information.
3. Unlike barcodes, RFID tags do not need line of sight to be read, and can operate
quickly over significantly large distances.

How will RFID implementation meet the project objectives?

From our primary and secondary research, which involved talking to multiple RFID providers
and literature survey respectively, it has become evident to us, that a robust RFID system will
help maintain the right inventory, in the right place, at the right time. After a thorough
evaluation of Eaton’s current system through multiple site visits and stakeholder interviews, we
have come to a conclusion that by implementing an RFID system in the inventory, both at the
dock (where the shipments exit) and in different parts of the plant, RFID systems will facilitate
accurate tracking and tracing of products during their movement across the plant floor. The
system would also ensure a high level of asset security as they move through facility.

Reducing DPPM defects arising from shipping errors: Implementing an RFID system at the
exit of the facility will ensure that whenever a wrong shipment is being shipped out of the
facility, the system will immediately alert concerned personnel. This will bring down the total
shipping defects to zero. However, RFID implementation will not reduce DPPM defects via
shipping to 50% as there are other errors such as freight errors, damaged goods, product
performance that contribute significantly to the total DPPM defects.
Increase inventory accuracy: A robust RFID system will optimize inventory management and
improve inventory accuracy. RFID devices can integrate with the existing inventory control
system to update data concerning the movement and location of inventory assets.

50% reduction in pick-up time for assembly or shipping orders:

RFID technology will significantly reduce pick-up times. However, at this point, we will not be
able to quantify the reduction. Pick time studies post RFID implementation which will provide a
better understanding of the reduction of pick-up times numerically.
Intangible Benefits:
There are numerous intangible, long term benefits as a result of RFID system implementation
them being:
● Increased organizational transparency and responsibility
● Accurate and faster access to data for timely decisions
● Improvement in customer response time
● More controls thereby lowering the risk of inappropriate utilization of resources
● Ease in gathering pertinent data needed for strategic planning

While RFID can solve the problems of shipping errors and inventory inaccuracy, and provide
long term benefits, the whole process has a very high dependency on human operation. In other
words, operators have a very high potential to impact quality and metrics. Therefore, to reap the
desired benefits from implementing RFID technology, it is critical that EATON undertakes
periodic operator training.
To understand more about RFID system and vendors in United States of America, our team
approached three RFID solution providers. After obtaining information about the services
provided, cost structure, and other relevant information, we undertook a cost- benefit analysis.

4.2 Cost benefit analysis:

Cost benefit analysis has been undertaken using the data obtained from Radiant RFID systems
(RFID providers based out of Texas).
A detailed chart of cost-benefit analysis includes annual savings, one-time investment costs,
recurring cost, payback period and rate of investment is attached in appendix. Based on our
calculation, we found the following points: (Refer Appendix)

Highlights
● Annual savings realized are $18,915 (accounting for initial investment of $49,000).
● It is seen that cost of implementing the system in the first year (accounting for 1 st year
savings) will be approximately USD 30,000.
● If simply allocated to Fixed Costs of the system, the organization will recover these costs
in 2.6 years, and the rate of return related is approximately 0.39.
 ● We see a positive return on revenue from year 3 onwards.
● We think, increased productivity, lower pick-up times and 100% inventory accuracy will
lead to increased customer satisfaction and retention. This will hopefully bring more
business to the enterprise. This increase in revenue can range between 2 to 7 percent.
● Costs in the supply chain can be expected to come down by 3 to 5 percent.

4.3 Recommendations
● Keeping in mind the tangible and intangible future benefits of an RFID system, we
recommend Eaton to pursue the implementation and integration of such a system
● Implement the above mentioned system at the exit stage of the enterprise as quality
inspection measure. This system will stop wrong parts from moving out of the plant and
thus will virtually increase inventory accuracy to 100%.
● Implement 2 hand-held scanners (initially) for effective and quick inventory tracking
throughout the plant. This will help reduce picking times.
● Conduct operator training sessions to increase awareness of operator responsibility in
inventory accuracy. This builds on the fact that the it is not possible to completely
eliminate the human element from the process.
● Small parts like nuts and bolts can be stored in one particular area of the plant, and 1 or 2
dedicated personnel can be made responsible for picking activities, substantially
increasing accuracy and reducing picking times.

5. Control
A major aspect of process control, after the project ends, is continuously measuring all the
attributes (DPPM, Accuracy, Picking Times) on a consistent basis once the RFID system is
implemented. The challenge here is that this can only be done after the system is implemented.
We recommend the company to make Standard Operating Procedures (SOP) with this regard to
continue measuring activities in the future. (An example of one such activity is conducting Time
Studies to keep a track of picking times)
The company has it’s high-5 metric for gauging performance. This is a great control tool and we
recommend that it be made more visible around the plant, or additional visual aids can be used to
ensure the workforce is constantly aware and motivated to perform better.

6. Future Work
Based on what the team has found so far, we believe that implementing RFID system will benefit
the company not only in reducing/eliminating the costs associated with shipping errors but also
in many aspects such as increasing customer satisfaction and promoting the reputation of the
company. However, the company and the team may still need some further investigation and
researches to completely make the decision. The aspects that need to be considered are listed
below:
 ● The sponsor may need to contact the RFID companies directly for more detailed
information regarding the actual implementation details specific to the Airflex plant
● Although implementing RFID systems will probably reduce/eliminate the shipping
errors, human errors cannot be ignored
● The plant may need to have training sessions on RFID systems for their employees

7. Acknowledgement
The team would like to thank Craig Rossi for his great help in providing necessary information
and introducing the team to other managers on site. We also would like to thank our professor,
Alireza Kabirian and our teaching assistant Yuanyuan Tong, for their support and help in
completing the whole project.

8. References
Company website:

● Patnaik, S. Active RFID Solution for Asset Tracking and Inventory Management. (2004).
Fremont, CA, FicusSoft.
● Ustundag, A. (2013). The value of RFID: Benefits vs. costs. London: Springer.
● Benefits of implementing RFID in Supply Chain Management. (2013, November 14).
Retrieved November 01, 2016, from <http://www.rfidarena.com/2013/11/14/benefits-of-
implementing-rfid-in-supply-chain-management.aspx>
● Ivantysynova, L., Klafft, M., & Ziekow, H. (2009). RFID IN MANUFACTURING: THE
INVESTMENT DECISION. Association for Information Systems.
● “Six Sigma for Green Belts and Champions: Foundations, DMAIC, Tools, Cases, and
Certification”, Howard Gitlow, David M. Levine - ISBN-#9780131172623
● “Managing for Quality and Performance Excellence” by J. R. Evans and W. M. Lindsay.
9th Edition, Southwestern Cengage Learning. ISBN-13: 978-1-285-06946-3. ISBN-10: 1-
285-06946-3
● Six Sigma Class Content

9. Appendices
Please include labels or reference tags to your information in the Appendix so that it can be
easily cross-referenced with the main body of your project report.

9.1 Project Charter

LSS Project Charter
Product / Service Inventory Product / Service
Impacted Management of Impacted Sales
Eaton Airflex (projection)
Plant

Name Craig Rossi Telephone Number 216-634-8334

(Blackbelt/Greenbelt)

Champion Craig Rossi Plant/ Site / Location Brooklyn, Ohio

Project Start Date 9/28/2016 Project Target 10/12/2016

Completion Date

Element Description Team Charter

1. Process Define the Shipping errors caused mainly by

process in 1. SHIPPING ERROR - WRONG QUANTITY
which
2. SHIPPING ERROR - WRONG MODEL
opportunity
exists. 3. SHIPPING ERROR - PARTS MISSING
4. SHIPPING ERROR - WRONG SHIP-TO

2. Project History, Eaton Airflex plant offers a High Mix & Low Volume which
Description circumstances, forces them to carry a large quantity of diverse products. As
and challenges a result of the business model and a significant amount of
of the problem. manual process, we need to streamline the inventory
Explain what handling aspect of our business to reach green on the High 5
needs to be Metrics.
done. Through the project, the team will research and provide a
practical RFID system that could be integrated into our
existing IT system.

3. Project Scope Define the part To significantly reduce the amount of DPPM defects via
of the process shipping, increase inventory accuracy, increase inventory
that will be pick times, reduce missed line items due to lost/incorrect
investigated inventory, and mitigate the human error aspect of inventory
(boundaries). handling.
Estimated Outcome (after fully implement):
· Reduction in DPPM
· 75% Increase in inventory accuracy
· 50% reduction in pick time for assembly or shipping
 orders

4. Objective Define the Metric Baseline Your

baseline, your Goal Theoretical Units
goal for the Goal
project, and the
theoretical 30 0 Reduce by 50%
(ideal) target for
Average
improvement on
Shipping
the primary
metrics such as Errors per
Rolled Year
Throughput
Yield, Cost of
Poor Quality $50,615 $0 Reduce by 50%
and Capacity /
Productivity. Cost of
(See definitions) Shipping
errors per
year

5. Business Case: Define the

(results in dollars) improvement in
business Implementation of RFID system will render an annual
performance effective savings of $30,085. According to our calculations,
(e.g., sales and the company will generate positive earnings of $7,745 in
income) that is year 3 (post implementation)
anticipated and
when.

6. Team Members Define the team Nimisha Ezhumavil Prakasan, Harsh Manoj Ganeriwala,
members. Ahmed Nassar, Yaoxuekun Hu

7. Benefit to Define the final Internal customer benefits: The RFID system will improve
Internal/External customer, the inventory maintenance and increase inventory efficiency.
Customers: benefit they will This streamlining initiative will expedite mobility and
see and their categorization in the shipments. This provision can reduce
most critical the amount of delayed shipments by eliminating wrong
requirements. inventory count, lost product, and pickers search time for
inventory.
Reduced shipping errors contribute to reduced logistic costs
which are crucial factors that impact the company’s profit
 margins.
External Customer Benefits:
· On-Time Delivery - Improved order processing based on
required delivery date
· Minimize missed dates, lower returns
· Reduced cost for returns processing
· Improved Customer Satisfaction and Improved Service

8. Schedule Project Start 9/23/2016

Key
milestones /
dates

D – Define “D” Completion 9/28/2016

M – Measure “M” Completion 10/7/2016

A – Analyze “A” Completion 10/21/2016

I – Improve “I” Completion 11/4/2016

C – Control “C” Completion 11/18/2016

Project 11/25/2016
Completion

9. Support Required Define any

anticipated
needs or any
special
capabilities,
hardware, trials,
etc.
9.2 SIPOC

9.3 Process Flow Chart

9.4 Cost-benefit analysis

Costing
 Breakeven and Cost Benefit

9.5 Six Sigma Estimation