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Save Money on Rentals With RFID

Radio frequency identification device technology can save money for companies concerned with the integrity of their supply chains.

RFID tracking is a very common application that helps identify potential counterfeit parts through rules-based management. Essentially: Did the package enter, pass through, and exit the supply chain reader checkpoints at the right places, at the right times, and in the right sequence?

RFID is also ideal for warehouse management systems and local stockroom inventory control. The various applications for accounting purposes are widespread, and in this article I want to introduce a serious money-saving potential that your company may or may not be using at this time.

The cost of renting test and production equipment can be very substantial. Outright purchases of everything from environmental chambers to bench-top test gear can seriously impair a company's cashflow. For some startups with limited available funding, renting or leasing the needed equipment is the only viable option.

With the rental option, more of the available funds can be channeled into salaries or materials required to build the prototypes and proof-of-concept models. Purchasing new equipment often has the additional issue of extensive lead-times, resulting in critical delays for R&D efforts. With rental gear, lead-times can often be eliminated through will-calls at the rental company's back door.

If the development company is trying to optimize its success by meeting a market window opportunity, then the development schedule takes the highest priority.

By utilizing RFID tagging for incoming rental equipment, a company can not only track the equipment as it moves from location to location, but by periodically polling the RFID tags and matching the returned report against an asset management database, the company can save additional money by not inadvertently paying for rental equipment that has been retained by an engineering group but no longer needed for a project.

Also, the rental asset management database can include calibration date reminders so that when the RFID tag is polled, the operator can alert an engineer and arrange for a calibration update. Paying for rental equipment that is no longer being used can be very, very expensive.

My own case study
Here is a personal case history. Being the 24th employee of a now well known company, I found myself in the position of needing all manner of test equipment, both digital and analog. Since we were involved in advanced technologies, the test equipment, like fade margin and network analyzers, did not come cheap.

We were mostly engineers, so we all needed our own benches populated with the basics like power supplies, DMMs, frequency counters, generators, and bit error rate testers (BERs). Each engineer was assigned his or her own boards for development, and so it was not convenient to try to share the equipment in real-time.

Just the BERs were $285 a month times three. The network analyzer (NA), if purchased, would have cost $125,000. The spectrum analyzer was another huge chunk of change, if purchased. We had an R&D budget for $1 million. Obviously, we had to rent the NA. It cost $2,500 a month. In rental equipment alone, we were chewing through our budget at about $40,000 a month.

As in any development progression, different equipment was being used at different stages, but when some equipment was no longer needed, the engineers were so focused on design, and fearing any kind of delays due to limited or unavailable resources, we decided to keep the rental equipment, just in case.

Over about two years of ongoing rentals and project changes, some of the earlier rental equipment went into storage cabinets to quickly make room on benches for new, additional setups. These juxtaposition moves were not discussed or planned for, but were individual decisions by individual engineers over two years of development.

Reality check
One day I received a call from finance. Our rental equipment payments had burgeoned to about $110,000 per month. They asked a very reasonable question: “Do you guys really need all the equipment we are renting?” I was assigned to investigate and answer that very reasonable question.

I found about $60,000 per month worth of equipment in storage cabinets that had not been opened for over a year. I found another $25,000 per month at the factory on loan from engineering by verbal record only. Here the problem was that the factory was not using it anymore because we had built custom production test fixtures shortly after the new product introduction. That's $85,000 per month outlay for absolutely no return on investment.

To make sure this never happened again, all rental assets were RFID-tagged and polled monthly, and the assigned owners had to vouch that the equipment was still needed and was therefore a justifiable expense. Calibrations were kept-up-to-date, and our rental budget expanded and contracted in phase with the company's actual needs.

The supply chain does not exist without products and services. It all begins with R&D. The more affordable and timely the R&D, the faster products come to market. The equipment rental practice is often overlooked as being key to kick-starting the supply chain. If RFID can improve efficiencies and cost in the rental process, so much better for the supply chain.

18 comments on “Save Money on Rentals With RFID

  1. Tom Murphy
    June 4, 2013

    RFID is one of those techologies that remains wildly under-used, and I wish I could explain why.  Many merchants, of course, tag items in the supply chain, but the cost of the tags remain a tad on the high side — what ever happened to the 5-cent tag we were promised five years ago. 

    Douglas has put his finger on a very simple use that is also very practical and very affordable.  If I were a leasor, I would tag every item in my inventory. If I were a long-term lessee, I'd do the same.  This is a clever little strategy that almost any company could apply, and find new places to apply it, too.

  2. dalexander
    June 4, 2013

    @Tom…I'm gratified that you saw the value of this article. It is very indicitive of the response level in an ironic sort of way. It is precisely because people say “I have nothing to do with renting equipment” that the problem persists in companies. It takes an owner or someone with a card in the game to call for a rental equipment review. The additional irony is that our company saved so much money that we justified three more hire in place of the needless rental spending. We used to call that kind of savings, “low hanging fruit.” It became part of our periodic cost reduction practices. If a company is heavy into R&D and there are more than 7-10 engineers that have been working on various projects for at least two years, I can almost guarantee that there is rental equipemnt in the lab that should have been returned. Has anyone else had this same issue?

  3. t.alex
    June 4, 2013

    Very helpful article. Especially for those expensive equipment no doubt it is more cost-saving to rent than to buy. Even if we buy, the next 2-3 years we have to upgrade to a new model. And sometimes we only need them for a few months.

  4. dalexander
    June 4, 2013

    @t.alex…Just curious. How long does a development project take at your company? Does the company rent their test equipment? I think you hit the nail on the head. If you only rent for a few months, is someone in your company responsible for all test equipment or do you rely on the engineer to tell you he or she no longer needs the equipment?

  5. _hm
    June 4, 2013

    @DA: I also love too have RFID tag for small tools/equipment. Like caliper, hot plate, handheld DMM etc. This serves too purpose – you can find them when you need them – may be in someone's drawer. It also serves to locate them for claibration and can assign owner.

    I suggest organization who porvides calibration service should provide service to add RFID tag to all different small equipments.

    Can RFID also be useful at home? We get so many items at our home, we can not keep track. If low cost RFID solution is offered for home, this provides good tracking of all items.

     

  6. dalexander
    June 5, 2013

    @_hm…I agree. If a rental or calibration lab attached RFID renewable, programmable tags to their rental equipment, then they could offer the tracking feature software as a competitive edge over their competition. In the 80s, I wrote a pseudo code program and presented it to Leaseametric execs. They had me speak at their annual sales conference. I gave them a demo of how rental software might work as a means for getting their salesman into a company's front door. It included a reminder feature and a date and time stamp. They liked the presentation, but said they were already working on their own version and did not need mine. I never saw their version and as far as I know, their is still no software with RFID offered by rental or calibration companies out there.

  7. _hm
    June 5, 2013

    @DA: I agree with you and your foresight in evolving new concepts. I may suggest that one of the vendor should take this initiative, and all other will follow. It may be the smallest of major vendor should take this lead. RFID is very powerful device and should be utilized to enhance efficacy.

     

     

  8. dalexander
    June 5, 2013

    @-hm…I think we have to face reality. The reason the rental told me my idea was so good but that they were working on their own version is obvious. They did not want to purchase my program because they actually benefit from having companies continuing to pay for products no matter if they are using them or not. In other words, they never had any intention of developing that software tool because they believed it would have undercut their business. The only way this software application will fly if the end user/renter company buys it themselves.

  9. Cryptoman
    June 6, 2013

    @Douglas

    Your case study is an interesting example of RFID use. Could you tell a bit more about the process of how the polling worked?

    How were the readers placed? Did somebody go around with an HF reader to read all the tags? How were the owners of the equipment notified? If you could walk me through this process, I will get a better understanding of the efficiency of the system you are talking about.

    Regards…

  10. dalexander
    June 6, 2013

    @Cryptoman…This was early on in RFID so a walk around reader was all that was available. If I was going to implement a new lab today, I would use ZigBee wireless associated with the transmitter and reader. The ZigBee tag with the radio is about the size of a quarter and good for longer distances with about a 2 year battery life. The radio in a mesh network is easy to identify as each tag will have its own IP. I would then port the data to the internet and with a supplied API, write and update a DB automatically. The DB would flag for calibration and rental due dates with flags and alerts for overdue dates. The design of the hardware system can be ported to any asset tracking, rental or not. Laptops, Desktops, CAD systems etc. Once the asset is logged into the DB with the owner's name and phone number associated thereto, any queries can be expedited and actions confirmed with a notes field with follow-up flags that could port in-turn to an auto-email notification or reminder. Design this network abd it will pay for itself as I am sure you will find other useful items/assets to track. One thing I would like to see implemented is the tracking on equipment that is borrowed” from R&D by manufacturing. THis is particularly true if the factory is offsite like a contract manufacturer or outside test lab.

  11. dalexander
    June 6, 2013

    @Cryptoman…Here is a link to a company that sells the ZigBee readers and tags for asset management. The also sell the SDK for writing your own programs. http://www.abrfid.com/Solutions/RTLS/Value-ZigBee

  12. Cryptoman
    June 7, 2013

    Hi Douglas.

    Thank you for your thorough response.

    I presume each asset you want to track will have a ZigBee transceiver (?).

    For typical assets of low cost, attaching a ZigBee transceiver to each would be a luxurious solution. However, for many high value items such as a $15K+ testing equipment, this could be a viable solution. If ZigBee transceivers are to be used in this network, you would not need RFID at all. Each ZigBee device will have a unique MAC address you can use to uniquely identify each asset.

    With a ZigBee/Internet gateway that allows you to query each ZigBee node within your domain of operation. That way you can track each asset effectively. Each Zigbee node can create events and alarms to inform the database about the time of calibration, maintenance and rental dues.

    Another interesting application could be to report the physical position of the asset that is tracked if the ZigBee node is equipped with an accelerometer. Most such platforms come with built in accelerometers these days. This feature would allow the node to detect that the equipment rests on its side or in any other angle at which it cannot be used. If this odd positioning does not change for a long time then one can infer that the equipment may be returned as it is no longer needed. That way the user of the equipment does not need to be asked whether the asset is needed or not.

    Regards…

     

  13. Cryptoman
    June 7, 2013

    @Douglas

    Thank you for this useful link. Looking at the price of the ZigBee tags, they are totally affordable and can be used fro tracking assets of low value as well. The SDK is a one off cost so the $650 price tag is not a showstopper especially if this tracking network will have many assets to track.

    Regards…

  14. dalexander
    June 7, 2013

    @Cryptoman…those were my thoughts too. When the tags are reprogrammable, then the cost virtually is amortized away over time. I haven't read where RFID is being marketed for this specific application, but someone could wordsmith a brochure and sell systems as an aftermarket opportunity. Every major R&D company has some percentage of their equipment on a rotational basis via rentals.

  15. Mr. Roques
    June 7, 2013

    Very interesting case study. Who would have imagined that with such a tight budget, 10% of it would be unaccounted for? 

    Its a good solution for just about anything that needs to be kept track of? What is a normal cost for a RFID system? (basically the reader and a set of tags) 

  16. dalexander
    June 7, 2013

    @Mr. Roques…we had 2 million left of the 3 we started the company with. We were budgeted 1 million for 1 year of R&D and the remaining 2 was reserved for Marketing and Whiz Bang Dog and Pony shows to get our product visible to the big boys. We had just 39 people in the company when we were site surveyed and approved by AT&T who bought our first T1 23GHz microwave hops. 1 year later, Ronald Regan had one installed at his ranch, and 6 months after that we sold a bunch to the White House where all the communications equipment followed the President of the US on Air Force 2. It was a good strategy to hold back 2/3 of our venture money for Marketing. Our subsequent funding came from our IPO just a few short years later.

  17. elctrnx_lyf
    June 10, 2013

    Tracking the movment of equipments inside any RnD organization is a must these days to make sure all the equipments are used if they are rented, all are caliberated in time to make sure the all the maasurements are accurate. The advanced technologies such as zigbee could definitely help to solve this.

  18. dalexander
    June 30, 2013

    @Cryptoman…accelerometer…hmmmm very insightful. Equipment stacked on its side would most likely be in storage. I never thought of that. Thank you.

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