The Hidden Costs of Manual Tool Tracking

Wynn Ponder
Tags: inventory management, power tools, hand tools

I recently had a fascinating discussion with a friend who performs materials inspections for one of the world’s largest suppliers of aircraft parts and assemblies. His company had just switched from manual materials tracking to radio-frequency identification (RFID)-based tracking, and he calculated that the changeover had already saved them hundreds of thousands of dollars — maybe more.

Before they adopted RFID, materials frequently left his inspection facility and failed to make it to their intended destinations. Sometimes they were tracked down, and other times orders valued at as much as $300,000 vanished forever. RFID has entirely solved this problem.

This is an excellent example of the savings RFID can bring to a large operation. Although his story relates to materials inventory, tool tracking offers similar opportunities to reduce losses.

Material losses are easier to measure. When one-third of a million dollars’ worth of composite fabric vanishes into thin air, there’s nothing complicated or ambiguous about the cost. When a tool is missing or poorly calibrated, less visible losses appear on other parts of the balance sheet (beyond the direct cost of the tool, which can be significant).

When you add up these costs, the adoption of RFID tool tracking can make as much financial sense as RFID materials tracking. Let’s look at a few examples of indirect losses and some unprecedented opportunities related to the automation of tool tracking.

Lost Tools Increase Operating Costs

Most manufacturers invest in sophisticated software systems for everything from resource planning to project management, yet their tool-tracking systems are entirely manual. When tools go missing, the benefits of the other software programs lose effectiveness in terms of on-time performance and labor efficiency.

Reduced Product Quality

A poorly calibrated tool cannot produce consistent product quality, which can increase quality-control costs, or worse yet, damage a company’s reputation. These are difficult costs to track, but they are every bit as damaging to the bottom line as tool-replacement costs.

Tool Tracking to Augment Project Management Systems

RFID tool tracking can add new value to manufacturing processes when used in conjunction with project management and enterprise resource planning (ERP) systems. The use of a specific tool often represents a process step, and work orders often specify that tool. This means that work in process and tool inventory can be tracked simultaneously, providing a real-time view of order tracking and capital allocations. This introduces new profit in the form of production efficiency, especially in this age of just-in-time delivery.

It also allows tool inventory, preventative maintenance and calibration to be managed across multiple facilities, which reduces spare inventory and improves asset utilization across the board.

Interestingly, my friend’s company has not yet adopted RFID tool tracking or RFID inventory control beyond the incoming materials stage. But they are getting there, and so is the rest of the manufacturing world.

About the Author

Wynn Ponder is a freelance writer and managing editor of the Choctaw Tool Tracking Blog.


About the Author