By Peter Collins
This article was written by A2B Tracking’s President and CEO, Peter Collins. It was published as a cover story in the February 2020 issue of the NPMA Property Professional magazine. To download the full article – Click here.
Why Government Contractors Need RFID for Tracking Inventory and Equipment
In today’s business world, data accuracy and time efficiency are more important than ever. Companies are being required to move faster and continually streamline their operations.
Organizations – large and small and in every sector – need to rely on smart technology to survive. Government contractors, in particular, need to rely on technology to help them achieve and sustain audit readiness.
This audit readiness initiative (the Financial Improvement and Audit Readiness Initiative or FIAR) is being mandated by Congress. The Pentagon has embraced this initiative and made it clear that audits are now the “new normal” for the Defense Industry. The combination of increasing audits along with the current business environment is forcing government contractors to reevaluate their asset management programs. Modern organizations don’t have the luxury of inaccurate or incomplete inventory data. They need robust business systems that will track assets autonomously to provide total visibility and 100% accountability in as little time as possible.
The FIAR initiative has sent a tidal wave through the Defense community in recent years. Stories of contractors being audited abound; but probably the most notable story comes from the F-35 Program.
Earlier this year, the Inspector General’s Office released a report that found the F-35 Joint Strike Fighter Program had not adequately managed the government furnished property (GFP) used to build their fighter jets.i Specifically, the only record of the government property was with the contractor and had not been properly reported to the DoD systems. The estimated value of this property is 3.45 million pieces worth $2.1 Billion.
Make no mistake, these audit initiatives are not just about financial statements and bookkeeping — their goal is also to verify the accountability of qualifying assets and inventory. The auditors are investigating government contractors and performing site visits to verify the existence and completeness of their inventories.
Currently, auditors for the DCMA are able to schedule an audit in as few as 10-business days. There is little chance to resolve issues with inaccurate data in that kind of a time frame and that is why a sustainable asset management system needs to be implemented early.
As you might imagine, the auditor’s expectations are that a government contractor knows what inventory they have on hand and that it has been reported accurately to the appropriate Accountable Property Systems of Record, or APSR. The Pentagon has made it very clear that improved visibility and accountability of government property is one of the highest priorities of the 2019 audit. Specifically, it’s the inventory accuracy and proper reporting of that inventory that is under scrutiny.
In my experience, it’s not uncommon to find government contractors with an inventory accuracy in the 60-70% range. Meaning, that when they perform an inventory audit and compare what’s on the floor to their database records, they are finding 70% accuracy. I am afraid that 70% accuracy will not be acceptable any longer.
RFID is the Game Changer
There is a common misconception that RFID technology is best applied to high ticket items in a retail store environment. And certainly RFID technology can provide excellent inventory control and added security in a shop — but there is much more to this exciting technology than just that.
Using RFID to track assets is a game-changer. The biggest reason why RFID is so powerful is its ability to improve an organization’s inventory accuracy to near 100%. Total asset visibility is an achievable goal with an appropriate system implementation.
The other benefit that is worth mentioning here is the time savings. Barcode tracking systems are typically able to achieve a 10% savings in labor over a manual clipboard process. RFID tracking systems, in comparison, are able to achieve 30% savings in labor.
By design, Barcode systems scan one item at a time requiring a direct line of sight between the reader and the barcode. RFID technology does not require that direct line of sight between the label and the scanner; instead it’s picking up the RF signal from the antenna. Because of this, RFID allows for identifying hundreds of items in a few seconds.