The 3 rd Annual Middle East Aviation IT Manager Forum
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1 The 3 rd Annual Middle East Aviation IT Manager Forum - - Dubai 22 nd November 2005 m2p Consulting Frankfurt (Germany) Dubai (United Arab Emirates)
2 1 RFID Technology & Market Review 2 Baggage Processing with RFID 3 Cost & Benefit Analysis for an Airline 4 Recommendations -2-
3 Three different chip-based RFID technologies are established in the market - Overview chip-based RFID technologies - Low Frequency Medium Frequency (HF) High Frequency (UHF) Frequency khz MHz 868 MHz / 2.45 GHz Range Less 1 meter Less 1.7 meter Less 6 m / less 100 meter Power Supply Passive Passive / Semi-Active Passive / Active Shape Multiple Film Multiple Bulk Read Limited 16/s up to 100/s Up to 500/s Memory Up to 2 Kbit Up to 2 Kbit Up to 256 Kbit Access Read Only or Read / Write Read / Write Read / Write Tag costs US$ US$ US$ -3-
4 Today RFID vendors are providing sets of different tags & scanners according to the customer specific requirements - Sample HF Scanning Solution MOBY (Siemens) - RFID Tag Type A MOBY MDS D160 Specification: - 16 mm x 13 mm - 44 Byte -120ºC Costs RFID Tag Type B MOBY Smartlabel Specification: - 85 mm x 15 mm - 44 Byte -25ºC ºC Scanning Range -4-
5 Data handling by RFID chips follows several well-defined philosophies - RFID Data Handling Philosophies - Electronic Product Code (EPC) Data on Tag (DOT) Chip Sharing Approach (CSA) The tag carries a unique identifier (product code) only. This approach is equivalent to a barcode All EPC related data must be stored in a specific database which will be accessed during a scan to validate the tag Strength: Very simple approach Disadvantage: Central database is required with sufficient performance to support the scanning and processing All relevant scanning object data is stored on the tag itself For further processing DOT approach provides sufficient data without the requirement for a centralized database Strength: No centralized database required; processing decision could be made decentralized during scanning Disadvantage: More complex with regards to Tag creation Enhancement of the DOT approach. Tag data is partitioned and could be used by two parties shared / separately with the possibility to define access rights Strength: Beside initial object information (DOT) processing information could be saved on the tag Disadvantage: Very complex with regards to Tag data manipulation and combination of centralized / decentralized information -5-
6 Based the chip-based approach new non-chip based RF technologies emerging the market - Non chip-based RFID s - Taggents Tiny antennas from Aluminum (~10 20 nm) distributed arbitrary on a carrier such as paper, plastics etc. producing a characteristic pattern ( fingerprint ) when moved into an electro-magnetic field (low power of 0.01 Watt is sufficient). Uniqueness of pattern: Probability is 1:3*10 11 to be identical with a second pattern. Faking is nearly impossible Nano-Pigments Application of synthetic pigments with characteristic resonating frequency to bearer; non-visible with naked eye, hard to fake. Authenticity can be checked with reading devices operation on the basis of laser, LED, IR or UV-sources Chemical Signatures Chemical mixtures from 70 different, characteristic (non poisonous) substance will result in a 12 digit code to identify the bearer. Identification is done by means of absorption spectrometers -6-
7 A review of RFID in other industries confirms the ongoing deployment of the technology Retail: RFID tags are widely used in food branch (German Metro and Wal-Mart are pushing the technology). First step is to equip all boxes and cartoons with RFID tags Personal Care: Gillette announced it will fix RFID tags to all razors. Unconfirmed reports say that the order of 500 mil tags reduced the price to 0.10 US$ Automotive: German automobile industry performed several pilot tests for the identification of parts with RFID s. Targets: Automatic checks of completeness of cars, authentication of original spare parts, etc. Food: European decreed 178/2002 enforces tracking of ingredients back to the producer from Jan
8 RFID technology is becoming more and more common in the Aviation Industry Maintenance & Engineering: The new Airbus A380 will have passive RFID chips on removable parts. Approximately 10,000 tags are within one single aircraft. With its new 787 Dreamliner Boeing plans to offer the same kind of service to its customers Cargo: Lufthansa Cargo has implemented RFID based warehouse management in JFK & MUC together with Kuehne + Nagel to cover its transatlantic supply chain. -8-
9 Compared to the established barcode technology, cost issue is still the main disadvantage of RFID - Comparison Barcode vs. RFID - Barcode Advantages Established Industry Standard Low operating costs High availability across the process value chain High Functionality Disadvantages Write once / not reprogrammable Limited usability in difficult environment (light, humidity etc.) Bulk / simultaneous scan not possible RFID Read / Write even without direct contact Bulk / simultaneous scan possible DOT philosophy provides platform for newly designed and improved processes Possibility of improved process quality Requires high investment in new technology Still not an established Industry Standard Operating costs (tags) are still high but expected to come down Limited benefits without process redesign -9-
10 1 RFID Technology & Market Review 2 Baggage Process with RFID 3 Cost & Benefit Analysis for an Airline 4 Recommendations -10-
11 Beside the passenger journey managed by the airline, multiple providers are involved in baggage handling - Baggage Processes from an Airline perspective - A B C The customer journey (controlled by the airline) Check In Customer boarded Customer seated Check In Customer boarded Customer seated Check In Customer boarded Customer seated CKI BAG The baggage flow (controlled by the local provider) Local Provider Local Provider Local Provider Check Scan Load Unload Scan Load Unload Scan Load Move Match Move Match Move Match Lost & Found -11-
12 The quality of an airlines bag handling service is measured by the execution of the Transport Bag process - Baggage Core Processes - Process Transport Bag Screen Move Scan Load Match Unload Move Screen Scan Match Load Unload Move Delivery EK Accept bag AL 1 st Leg 1 st GHA 2 nd GHA AL 2 nd Leg 2 nd GHA 3 rd GHA EK Deliver bag Process Recover mishandled Bag OHD Search Send Move Match AHD Move Search Request Match Receive Delivery Compensate Every fault within the transport baggage process places more load on the recovery process and drives up the costs for the Airline -12-
13 Baggage processes are supported by multiple systems on the airline and airport side - Baggage Systems Landscape - Origin Transfer Destination Baggage Tracking System / Repository* Departure Control System (DCS) Transport Bag DCS* BRS DCS* BRS Baggage Sorting* Baggage Sorting* Hub Control BHS* Recover Mishandled Bag WorldTracer Airport / GHA Systems Airline Systems System is optional BRS Baggage Reconciliation System -13-
14 The information exchange between systems, processes, and providers is defined by several IATA standards - Relevant IATA Standards for Baggage related Information Exchange- Object IATA Standard Scope / Content Baggage Tag RFID Standard for Baggage Tags Baggage Services Messages Automated Baggage Handling IATA License Plate Concept / License Plate Number (RESO 740&769) Not released yet IATA Recommended Practice RP1745 IATA Recommended Practice RP1800 The LPN is a unique 10 digit number generated by accepting check-in system which enables the identification of a single bag. The LPN is visually printed on each baggage tag The RFID standard will use MHz frequency; Air interface protocol is ISO c which is an open industry standard; Minimum data stored is LPN; Standard allows read / write multiple data items Baggage Messages are well-defined text message to allow structure data exchange between all involved systems e.g. DCS, BRS etc. Message types are for example BSM (Source Message) etc. The new RP1800 gives recommendations to airlines, airports and system providers of how Baggage Service Messages should be applied in the context of baggage processes RFID implementation could either follow EPC or DOT concept -14-
15 Besides the baggage processes themselves baggage irregularities are driven by multiple aspects Aircraft Wide Body Narrow Body Transfer Baggage Baggage Sorting Product Interline Transfer Baggage Irregularities Baggage Screening Processes Connecting Time Baggage Reconciliation Priority Baggage Loading Equipment Baggage Loading / Unl. Sorting Facilities Infrastructure -15-
16 The baggage handling processes could be improved by RFID on both sides between the Airport and Airline - Baggage Processes with RFID - Baggage Sorting Baggage Screening Baggage Reconciliation Baggage Loading / Unl. The Baggage Sorting System within an airport could be build on RFID technology Chances of Improvement Because of better reliability and higher scanning performance the overall throughput of a baggage sorting system could be increased Challenges High investment required to rebuild baggage sorting system Screening performance could be increased by using RFID in the same way as sorting. Depending on the used philosophy screening data could be stored on the tag itself (DOT) Chances of Improvement Higher throughput because of better scanning performance as well as improved security Challenges Process has to be adapted to utilize new technology efficiently Reconciliation performance could be increased and physical scanning process could be organized more flexible (airside vs. baggage build-up area) Chances of Improvement Better performance and higher flexibility of the reconciliation process Challenges Process has to be changed to achieve benefits Baggage Loading / Unloading could be tracked with RFID much closer and could increase visibility to the airline. Chances of Improvement: Availability of a baggage trail (real-time) which will allow to steer the baggage process and to measure GHA baggage performance Challenges Requires process changes and a central baggage repository to store all baggage trail data -16-
17 According to current developments several Airports are trying to improve their baggage performance with RFID - Baggage related RFID Implementations at Airports / Airlines - Airport LAS (2005) 1st airport to use RFID on a large scale; Cost: $125 million over 5 years; Purpose: Baggage Sorting and Screening; Phase 1 completed with a performance of 60,000 bags a day Airport HKG (2005) Purpose: Baggage Sorting and Tracking; Start of implementation in 2004 Airport JAX (2004) Trial jointly with Delta from 10/03 05/04; Purpose baggage sorting and screening; Uses 20,000 reusable tags Airline BA (1999) Runs a test on the routes MAN-LHR and MUC-LHR; Overall 150,000 bags were tagged and scanned; Further rollout was stopped mainly because of cost issues. A few Airports (SFO, BOS etc.) have tested RFID technology but did not accept the technology because of reliability issues -17-
18 1 RFID Technology & Market Review 2 Baggage Processing with RFID 3 Cost & Benefit Analysis for an Airline 4 Recommendations -18-
19 Having to provide baggage RF tags for each passenger is the biggest cost issue associated with RFID - RFID Implementation & Operating Costs - Implementation Costs Operating Costs Hardware New Bag Tag printer for Check-in desks RF Scanners for Baggage Reconciliation RF Scanners for Lost & Found Software Enhancement for existing DCS and BRS systems Centralized baggage tracking data repository (Optional) Services Implementation (Roll-Out) Hard- & Software Maintenance (Fixed) Maintenance of Software components according to defined SLA Maintenance & Replacement of Hardware components (Scanner) Consumables (Variable) Printer tags according to specification for all passengers For example an Airline with 15 mil pax, 1.4 bags per pax and a price of 0.1 US$ per tag has to cater for 2.1 mil US$ for RF tags -19-
20 Beside reduced recovery costs, there is a high savings potential in optimizing the transport baggage process - Tangible Benefit Analysis - Potential Benefit Tangible Baseline Description Mishandled Baggage Compensation Yes Cost per lost Bag / Passenger In case of delayed or lost baggage an airline has to pay direct compensation to the passenger. The amount depends on customer status / booking class. Process Costs Recover Mishandled Bag Yes Total cost per mishandled bag Processing cost of a delayed bag including internal and external staff (direct & indirect costs) Process Costs Transport Bag Yes Total cost per transported bag With a restructured baggage handling process the overall costs per transported bag should be decreasing Process Quality Transport Bag Yes Total cost per transported bag Ground Handler Baggage Handling Performance could be measured by established KPI s and could be linked to financial bonus / penalty. Additional benefits could be associated with RFID (e.g. Customer Satisfaction) -20-
21 An analysis of European Carriers showed that the number of Irregularities is related to Airline size - Correlation between Baggage Irregularities & Airline size - N o of Bags missing per 1000 Pax 22,0 20,0 KL 18,0 BA 16,0 BD OS LH 14,0 12,0 10,0 8,0 6,0 LG TP OK LO OU JP AY SN CY ROFI JK MA KM LX SK IB AF Average 13.9 Baggage Irregularities per 1000 Pax 4,0 IG TK 2,0 0, ASKs (mill) The top 4 carriers in Europe rank last with regards to Baggage Performance -21- * Source: AEA Annual Consumer Report 2004
22 The profitability of RFID could be based on the assumption of reducing mishandled baggage cost - RFID Implementation Sample ROI (Positive ROI) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Totol Costs Total Savings Net Cash-Flow Cumulative Cash-Flow Assumptions 15 mil passenger with a 5% annual growth rate 1.4 pieces of bag per passenger (Industry Average MEA) Baggage Performance: 12 mishandled bags per 1000 pax Costs: $1.5 mil total investment; 20% annual maintenance plus $0.1 per bag tag Savings: Costs per mishandled bag $75; Improvement through RFID 15% of total cases Reliable assumptions could be extracted from airline specific data -22-
23 In case an airline has already a good baggage performance this approach could lead to a negative ROI - RFID Implementation Sample ROI (Negative ROI) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Totol Costs Total Savings Net Cash-Flow Cumulative Cash-Flow Assumptions 15 mil passenger with a 5% annual growth rate 1.4 pieces of bag per passenger (Industry Average MEA) Baggage Performance: 6 mishandled bags per 1000 pax Costs: $1.5 mil total investment; 20% annual maintenance plus $0.1 per bag tag Savings: Costs per mishandled bag $75; Improvement through RFID 15% of total cases According to the ROI calculation additional benefits have to be secured with the introduction of RFID to justify the required investment -23-
24 1 RFID Technology & Market Review 2 Baggage Processing with RFID 3 Cost & Benefit Analysis for an Airline 4 Recommendations -24-
25 The operating costs associated with RFID technology are still one of the major issues!!! Technology Issues RFID tags will not work properly on container for liquids and within metal containers or behind metal grids Operating Costs Currently RFID tag costs are the biggest hurdle but even tag costs will come down further they will not become cheaper than paper tags Measurable Benefits Significant benefits with RFID could only achieved through process changes and consistent availability across all process steps -25-
26 It is recommended to assess the feasibility of a baggage related RFID implementation carefully Assess opportunity / impact of process improvements Major tangible benefits could be achieved by process improvements in the area of Transport Bag and Recover Mishandled Bag Outline technical solution The technical solution includes all Hard- and Software components required to implement enhanced processes with RFID Evaluate Business Benefits Tangible business benefits have to be evaluated carefully and with regards to the process improvements Prepare Business Case Cost and benefit estimates have to accumulated according to planned implementation timeline -26-
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