Supporting Automation and Efficiency in Logistics Warehouses – Full-scale sales of HAKO-FLO, a proprietary Operations Management System

Sales will start in Japan in Fiscal Year 2022

　Tokyo Electron Device Limited will begin full-scale deployment of HAKO-FLO, a logistics management solution developed by its U.S. subsidiary TOKYO ELECTRON DEVICE AMERICA, INC. to support automation and efficiency in distribution warehouses. In July last year (2021), the company conducted a demonstration experiment in Japan to offer HAKO-FLO as a Logistics Management Service that enables labor savings and cost reductions at customer warehouses. It has been confirmed that HAKO-FLO significantly improves operational efficiency at logistics sites.
　For this issue, we asked Yasuhiro Hamano, COO of TOKYO ELECTRON DEVICE AMERICA, INC., who is leading the development of HAKO-FLO, and Ooki Saito, who is in charge of HAKO-FLO (Photo 1), to appear on the panel to discuss the HAKO-FLO project. We interviewed them about the background of FLO development, its contents, current results, and future plans and schedules. (LOGI-EVO Editorial)

Aiming for DX solutions for logistics warehouses
Solve problems without modifying existing WMS

—First of all, I would like to start with an overview of TOKYO ELECTRON DEVICE AMERICA, INC.

Hamano: The Company is headquartered in Fremont, California and was founded in 2013. We have a satellite office in Detroit and a distribution warehouse for our semiconductor distribution business in McAllen, Texas. The company has four business areas: (1) semiconductor and other electronic component distribution business, (2) private brand business, which includes board design and mass production contract services, (3) research agency services related to computer networks, and (4) solution services for distribution warehouses. This time, we have chosen to focus on the fourth.

—How did you commercialize HAKO-FLO?

Saito: For some time, we have wanted to develop DX-related solutions as a business. When we were conducting marketing related to IoT and DX for our semiconductor business customers, our business partner, a logistics company, showed us many issues they were facing at that time. Specifically, there was a lot of manual work that had to be recorded on paper by humans, and this was a factor preventing efficiency improvements. One logistics provider told us about the harsh reality on the ground, where employees had to walk throughout the warehouse all night to keep track of inventory, due in part to the logistical upheaval caused by the COVID-19 disaster. As we heard these stories, we sensed the growing need for DX in logistics warehouses and decided to launch a solution business for this purpose.

—Thank you very much. Now I would like to ask you about the contents of HAKO-FLO. First of all, please tell us about the background of its development.

Hamano: With the recent expansion of the EC market and increasing logistics volume, there is a need to reduce manual work in logistics warehouses and shift to more effective operations without incurring the cost of modifying existing WMS. In many cases, many tasks related to receiving and dispatching cargo in logistics warehouses are managed manually by operations. As a result, there are many issues that need to be resolved, such as accurate inventory quantities, effective utilization of available space in the warehouse, elimination of delivery delays caused by understaffing, and control of labor costs, in addition to the costs incurred due to misdelivery of packages. As we learned more about these issues in the logistics field, we decided to develop a solution that would help solve them.

5 services that can be implemented independently
Subscribe to start small

—So HAKO-FLO was born out of a desire to develop a solution that would help solve problems at the logistics site.

Hamano: Yes, HAKO-FLO provides dedicated software in the cloud or on-premise to streamline the manual, labor-intensive tasks that occur in your existing WMS, such as receiving and inspection management, inventory management, shipping management, inventory control, invoice creation, and form and label issuance. HAKO-FLO includes “HAKO-FLO RFID”, which enables the RFID readers to quickly grasp information on the contents of the box (outer box), “HAKO-FLO LiDAR”, which automatically measures the size of the box, and “HAKO-FLO Eye”, which automatically detects the space and location of the box. “HAKO-FLO Tracking” tracks the condition and location of the box from receipt to shipment, and “HAKO-FLO CLOUD” stores, shares, and visualizes all kinds of data related to the box (Figure 1). By linking these services with existing systems, a shift to more effective operations can be made without incurring the cost of modifying existing systems.

—Can you explain step by step how the services work together along the workflow in a logistics warehouse?

Saito: Absolutely. In the receiving management scene, the use of “LiDAR” and “RFID” can streamline manual measurements and inspections, achieving cost reductions and shortening work hours at the same time. In inventory management, Artificial Intelligence can work cooperatively with “Eye” to notify workers in a timely manner of the availability of stock shelves, allowing for more efficient use of space. In shipment and inventory management, automatic matching with the picking list in conjunction with “RFID” can prevent misdirected shipments and significantly shorten inventory time. In addition, by linking with “CLOUD” and “Tracking”, the system contributes to operational efficiency by visualizing the status and location of cargo from receiving to shipping.

—I now understand how HAKO-FLO works together in each situation. Do all five services required together to use HAKO-FLO?

Saito: HAKO-FLO can be used for just a portion of the service and can be combined to best suit your warehouse operations. For example, customers who spend a lot of time on inspection, asset management, and inventory work and are unable to accurately manage inventory, or waste time searching for missing cargo, can solve their problems by adopting “RFID”. For customers who have to spend a lot of time and effort to measure the size of cargo with a tape measure, or have to spend time to find the best size box for packing, “LiDAR” can solve their problems. “Eye” can also be used for real-time detection of vacant space in warehouses to solve these problems.

—I see, so by employing a combination of the five services, you are able to appropriately lead your clients to solutions to their individual issues. HAKO-FLO is very attractive, but can you give us a brief idea of why customers are increasingly interested in HAKO-FLO?

Hamano: HAKO-FLO is chosen by customers for three reasons: 1) HAKO-FLO is a comprehensive solution from receiving to shipping, 2) semi-customized development can be performed based on consulting, and 3) the introduction of a subscription service enables us to provide customers with an optimal warehouse management solution while reducing initial costs.

—Please tell us what is included in the subscription fee.

Saito: HAKO-FLO RFID is offered as a complete package including RFID reader device, license to use the device software, and support. We also sell RFID printers and RFID tags upon customer request.

—Because it is a subscription service, flexible contracts are available.

Saito: Yes, for customers in Japan who are not comfortable with subscription services, we can sell devices upon request. However, since subscription services can be used with a low initial investment, they are particularly suitable for customers who wish to start small, and we have actually received high praise from such customers.

—Because logistics demand fluctuates depending on the time of year and the economy, a subscription service can ensure that there is always no excess or shortage of devices.

Saito: Yes. With subscription services, we can appropriately respond to changes in busy and off-peak periods.

The trend from ownership to use is expanding
Strong demand on shelf management in the U.S.

—I feel that the trend from ownership to use of devices that supports logistics sites will further expand. By the way, is the manufacturer of the RFID readers are specific?

—You mentioned that you receive many orders for inventory management solutions in the U.S. Do you expect to receive many orders for inventory management solutions in Japan as well?

Saito: We see a growing need for more efficient inventory management regardless of country. Currently, many companies’ inventory management is done by scanning barcodes attached to products one by one, which is mainly a manpower tactic that requires many workers to be deployed. This is a great advantage.

—Because inventory work is not directly profit-generating work, it is natural to want to get it done more efficiently than other operational tasks.

Saito: Yes. In addition, there are many cases where there are discrepancies between inventory control data and actual inventory in inventory operations. Since inventory tracking by scanning every single bar-code is not a daily task, there is a possibility that some management error may cause a discrepancy between the actual inventory and the bar-code inventory. The more frequent inventory work is done, the less chance there is for a discrepancy to occur. We believe that many of our customers will benefit from the introduction of RFID just for the solution to this problem.

—The benefits do not stop with the warehousing company, of course. They extend throughout the supply chain with manufacturers, wholesalers, and retailers, as well as across all product areas.

Saito: Yes, the benefits of RFID implementation cover a wide range of industries and business categories. In Japan, it is well known that a major manufacturing and retail company in the apparel field has introduced RFID and achieved results in improving operational efficiency. The company uses RFID for everything from production management in the factory to inventory, logistics, and accounting in the stores, so it can be said that the company is getting the most out of RFID. We would like to spread this service throughout the entire supply chain, without being biased toward any particular industry or type of business.

—How about a solution combining RFID and CLOUD?

Saito: The combination of HAKO-FLO RFID and HAKO-FLO CLOUD will not only improve the efficiency of inspection and inventory work, but also enhance traceability. Data on RFID tags will be read at each work process and recorded on the cloud. If a problem occurs with a product, the data can be used to trace it back to the source, enabling analysis of the cause of the problem.

—The benefits of enhanced traceability are likely to be of interest not only to semiconductors and electronic components, which are your company’s main business fields, but also to food, beverage, and pharmaceutical industries, where quality control and safety and security management are important.

Hamano: Yes, that’s right. The effects of introducing this solution are expected in a wide range of industries and business categories. We would like to continue to research not only the manufacturing industry, with which we have many relationships, but also customers in other industries, and through consulting and demonstration experiments, we would like to continue to propose the selection of tags and customer system operation according to the cargo to be handled.

—I think the price of RFID tags has come down considerably, but I think the introduction of RFID tags still depends on the price of the target product from a cost standpoint.

Saito: You are right about the cost of the tags and the price of the target products, but ultimately it comes down to how much manpower and time is spent on tasks such as inspection and inventory. If you are performing human labor with a barcode system, it is clear that RFID implementation will improve work efficiency and profitability. With the labor shortage in the logistics field becoming more and more serious, it is unreasonable to think that the conventional manpower tactics can be maintained in the future. We are convinced that HAKO-FLO RFID is well worth considering as a simple solution to the very serious problem of labor shortages.

Streamlining from receiving to storage to shipping
Benefits extending throughout the supply chain

—Can you tell us about the specific work flow and expected quantitative effects of the introduction of HAKO-FLO RFID?

Saito: Now, let me explain the solution for the manufacturing industry in the order of operations. The use of RFID starts when the product is completed and packed at the factory. Data writing and printing on the RFID tag is performed by a dedicated RFID printer. If existing 2D codes or barcodes are used, these codes are read by a scanner, and the dedicated software converts the data into RFID data and generates the printed content at the same time.
The printer then issues an RFID tag (label) with the contents printed on it, and the tag is attached to the product packaging (Photo 3). In the inspection of shipments to distribution warehouses, RFID enables batch reading of multiple tags, which is much more efficient than the previous method of scanning barcodes one by one. In fact, in our verification, scanning of 171 RFID tagged products in a container was completed in approximately 10 seconds. Since it took 13 minutes to complete scanning the barcodes, we believe that the system is 78 times faster and 99% less labor-intensive than barcode scanning under certain conditions. During scanning, the number of RFIDs read, or the number of products inspected, is displayed on the reader’s monitor in real time, which also improves the accuracy of shipping quantities (Photo 4). The read data can be exported to the core system as CSV files, etc.

—It’s a great effect. No wonder we are seeing a switch from barcodes to RFID.

Saito: In logistics warehouses, RFID implementation can be expected to be effective in all processes: incoming goods inspection, storage/inventory, and outgoing goods inspection. The RFID tag attached at the factory is simply scanned by a dedicated reader at each process, which improves inspection efficiency and accuracy, increases storage efficiency, reduces differences between data and actual inventory by increasing inventory frequency, and prevents picking errors by verifying data prior to shipment. In addition, if HAKO-FLO RFID is installed in the wholesale or retail business to which goods are shipped, it will not only improve the efficiency of receiving and inspecting goods, but also ensure delivery evidence and strengthen traceability. Furthermore, when HAKO-FLO CLOUD is combined with HAKO-FLO RFID, real-time traceability can be ensured, leading to the realization of DX for the entire supply chain.

—If downstream suppliers introduce RFID readers equipped with dedicated software, we can expect to enhance our competitiveness and add value by improving efficiency throughout the supply chain.

Saito: Yes, the solution combining HAKO-FLO RFID and HAKO-FLO CLOUD is also effective for asset management. In recent years, more and more Ori-Cons and returnable containers are being used by logistics suppliers, but many companies are troubled by the low return rate. Some of them say that they are satisfied with the return rate of about 70%.
By implementing a solution that combines HAKO-FLO RFID and HAKO-FLO CLOUD, the real-time location and number of returnable boxes can be checked and managed on a map on the screen, making it possible to ask suppliers to return the boxes in a timely and appropriate manner (Figure 2).

—I see, I understand the diversity of solutions that take advantage of RFID’s characteristics. Now, please tell us about the process of implementing HAKO-FLO RFID solution at warehouse sites.

Saito: HAKO-FLO RFID can be in operation in as little as three months from the time of inquiry. Due to the recent shortage of semiconductors, the lead time for hardware has become a drag, but we have hardware in stock in major regions, and we support customers who inquire so that they can introduce the product as quickly as possible. The implementation procedures include: (1) Hearing (decision on whether RFID solution fits in the current workflow, price, and schedule presentation), (2) on-site testing (tag reading, system testing, etc.), (3) contract (signing of contract), (4) pre-introduction preparations (support for installation setup, on-site setup (tag installation), lectures on usage, etc.) ( Figure 3).

Conducted a demonstration experiment last July
Know-how to increase RFID read rates

—We understand that in July last year (2021), you conducted a demonstration test of RFID introduction at a customer site of yours in the manufacturing industry.

Saito: In order to respond to the rapidly increasing demand, we introduced “RFID” on a trial basis in response to a request to improve the efficiency of outgoing inspection work at the factory and incoming inspection work at the manufacturer’s suppliers. When introducing the system, we faced a number of issues related to tag reading. These included cases where tags could not be read due to the overlapping of tags, which is unique to small parts, and approaches to metal parts that are difficult to read. With the cooperation of our customers, we were able to select tags and devise the system to achieve 100% tag reading performance.
Through such activities, we are accumulating know-how on a daily basis.

—What is the current structure for providing this service in Japan?

Saito: HAKO-FLO is a business development project led by our company in the U.S. We unveiled HAKO-FLO for the first time in Japan at the International Logistics Exhibition Logis-Tech Tokyo last year, where it received a very high volume of inquiries. Since then, we have been preparing to start sales in Japan in fiscal year 2022.

—HAKO-FLO What are your future goals and plans for the business?

Hamano: Within five years, we would like to increase global sales in this business to 3 million US dollars. For the time being, we will first respond firmly to projects in the U.S., while in Japan we have received numerous inquiries from customers at the Logis-Tech Tokyo, and we intend to follow up and provide support for them. In terms of services, we plan to apply the HAKO-FLO LiDAR AR (Augmented Reality) measurement application to the development of a solution that enables the creation of damage reports for cargo packaging on a single screen. We also plan to develop a new service called HAKO-FLO TAG, which will enable paperless use of the physical inventory slips used for process management in warehouses. The conventional operation using physical inventory slips requires time and labor for manual input, paper storage, and has a large environmental impact. We are also planning to conduct a demonstration experiment at a customer site in June 2022 as an environmentally friendly solution for the SDGs.

—It seems that orders are likely to increase in Japan in a short period of time. We hope that your company’s HAKO-FLO business will continue to progress smoothly and improve the efficiency of the entire supply chain. Thank you very much for your time today.

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