Playing tag with baggage - RFID technology in baggage handling at Stockholm Skavsta Airport LiTH Supervisor: Bengt Ekdahl NYO Supervisor: Joakim Lindholm Daniel Florén & Joakim Rydh Master Thesis LiTH-EKI-EX--05/037--SE Linköping Institute of Technology Department of Management and Economics, Logistics Avdelning, Institution Datum Division, Department Date Department of Management and Economics, 2005-03-18 Logistics Management Språk Rapporttyp ISBN Language Report category Svenska/Swedish Licentiatavhandling ISRN LiTH-EKI-EX--05/037--SE X Engelska/English X Examensarbete _______________ C-uppsats Serietitel och serienummer ISSN D-uppsats Title of series, numbering Övrig rapport 2005:37 ________________ URL för elektronisk version http://www.ep.liu.se/exjobb/eki/2005/civing-eki/037/ Titel Title Playing tag with baggage - RFID technology in baggage handling at Stockholm Skavsta Airport Författare Authors Florén, Daniel and Rydh, Joakim Sammanfattning Abstract The purpose of this master thesis has been to develop a baggage handling process at Stockholm Skavsta Airport that is cost-efficient, in order to prepare for the expected expansion of the airport. When developing the new process it was a directive to examine the possibilities of using radio frequency identification, RFID, technology and also that the required investment for the new process should have a payback time of no more than two to three years. The current process contains a completely manual sorting activity, which is both costly in terms of personnel and creates some mishandling of baggage due to the human factor. Our recommendation is a baggage handling process that use automatic sorting through RFID technology that eliminates the mishandling of baggage and reduce the personnel costs and at the same time have a payback period of less than three years. The main cost driver is the RFID tag costs and therefore our process is a so called closed-loop system, where the tags are reused several times and require very little work in between uses. The proposed physical layout consists of a drawing of the physical layout of the baggage sorting hall, a description of the RFID system, and the required information system software. Nyckelord Keywords Logistics, Stockholm Skavsta Airport, RFID, radio frequency identification, Airport Management, Baggage handling, Luggage handling, NYO, HHN, Frankfurt Hahn Airport, closed-loop Upphovsrätt Detta dokument hålls tillgängligt på Internet – eller dess framtida ersättare – under 25 år från publiceringsdatum under förutsättning att inga extraordinära omständigheter uppstår. Tillgång till dokumentet innebär tillstånd för var och en att läsa, ladda ner, skriva ut enstaka kopior för enskilt bruk och att använda det oförändrat för icke- kommersiell forskning och för undervisning. Överföring av upphovsrätten vid en senare tidpunkt kan inte upphäva detta tillstånd. All annan användning av dokumentet kräver upphovsmannens medgivande. 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For additional information about the Linköping University Electronic Press and its procedures for publication and for assurance of document integrity, please refer to its www home page: http://www.ep.liu.se/. © “The scientific theory I like best is that the rings of Saturn are composed entirely of lost airline luggage.” Mark Russell (1932-) PREFACE It has been truly interesting to write this master thesis that deals with something, to our knowledge, not written about before; radio frequency identification in baggage handling at a small low-cost airport. We contacted Stockholm Skavsta Airport in early June last year to ask them if they were interested in investigating radio frequency identification as an option for their baggage handling process. They were keen on the idea and we set off on the task and this report is the result of six months, sometimes intensive, work. While writing this master thesis there has been some people that has helped us to keep on track and find sufficient information, these people has been a big help to us. When it comes to information about airport management and operations, Operations Director Mr Joakim Lindholm and CEO Mrs Dot Gade Kulovuori together with their personnel at Stockholm Skavsta Airport have contributed very much. Since we had little initial technological knowledge about radio frequency identification we have had much help from technical consultants Mr Jonas Hjort and Mr Robert Hansson. Moreover, we would like to thank our academic support made up of our supervisor Technical Dr Bengt Ekdahl, Department of Management and Economics, Logistics Management at Linköping Institute of Technology. Our main opponents, soon to be Master of Science graduates in Industrial Engineering and Management, Ms Britta Andersson and Mr Fredrik Benson together with Mr Erik Ängfors and Mr Henrik Pettersson have contributed with valuable thoughts. Thank you for your help! There are also a lot of people who have contributed with information through interviews and email at various stages in the work. Therefore, we would also like to thank: Operations Director Mr Patrick Muller at Frankfurt Hahn Airport for the extensive guide during our visit, Process Manager Passenger and Baggage Mr Tomas Eriksen at Göteborg-Landvetter Airport for having us, IBC Euroforum for the RFID conference, CEO Mr Gunnar Ivansson and Marketing Manager Process Control Mr Alf Mikkelä at Electrona-Sievert AB for RFID knowledge, Mr Tommy Jönsson at Moving AB for baggage handling equipment expertise, Mr Mats Svensson at Dahlander Marking AB for the plastic strings, IATA for their conference material, and last but not least the Italian bakery and Zoegas for keeping us awake during late evenings. Linköping, Sweden, February in the year of 2005 _________________________ _________________________ Daniel Florén Joakim Rydh ABSTRACT The purpose of this master thesis has been to develop a baggage handling process at Stockholm Skavsta Airport that is cost-efficient, in order to prepare for the expected expansion of the airport. When developing the new process it was a directive to examine the possibilities of using radio frequency identification, RFID, technology and also that the required investment for the new process should have a payback time of no more than two to three years. The current process contains a completely manual sorting activity, which is both costly in terms of personnel and creates some mishandling of baggage due to the human factor. Our conclusion is a baggage handling process that use automatic sorting through RFID technology that eliminates the mishandling of baggage and reduce the personnel costs and at the same time have a payback period of less than three years. The main cost driver is the RFID tag costs and therefore our process is a so called closed-loop system, where the tags are reused several times and require very little work in between uses. The proposed physical layout consists of a drawing of the physical layout of the baggage sorting hall (Appendix 5), a description of the RFID system (chapter 10), and the required information system software (section 7.6.1). A few of the current problems that are addressed in the developed process are the handling of special baggage, the flow problems in the screening activity, and the risk of mishandling in the sorting activity. One of our conclusions is that a RFID open-loop system i.e. when the tags are used only one-time and then sent away, is currently far too expensive, mostly due to the high price per tag. This price will have to be lowered significantly for an open-loop system to be a cost-efficient alternative. To be able to reach the closed-loop process conclusion we have developed an analysis model, which involves studying a reference airport, in our case the Frankfurt Hahn Airport in Germany, that currently is similar to what the studied airport is expected to be when the developed process is to be implemented,. The first thing to do is to identify the important cost items in the process through interviews and calculations to develop a modified total cost model for the baggage handling process. The next thing is to identify the current problems at both airports. This way, both current problems and problems that arise by the growth in baggage volumes are discovered. Simultaneously the possibilities and issues with RFID technology in baggage handling have to be examined. Thereafter a new baggage handling process that address the current problems, the personnel cost and mishandling of baggage can be developed using several process improvement principles and ingenuity, since there are not many case studies. When a process with sufficient performance has been found it also has to be evaluated financially. The payback or net present value methods can accomplish this.