Making the case for deploying radio tagging to optimise
supply chains. AMR Research provides advice on where the benefits
can be achieved
The US Department of Defense (DoD) is placing Radio Frequency
Identification (RFID) tags on all assets moving to the Persian Gulf
Theater, and for good reason. By having visibility of assets moving
through a data-synchronised supply chain network, it will be able
to meet its logistical goals optimally through exception management
and decision support. Contrast the DoD with manufacturers faced
with eroding profit margins because of deflationary pricing
pressures and the need to meet customer demands while shortening
cash-to-cash cycle time and reducing inventory. In the latter
scenario, an RFID strategy needs to consider a company’s
intolerance of risk as well as capital budgets that do not provide
for the same level of expenditure on an emerging technology. In
order to maximise the benefit of RFID, companies need to identify
and prioritise projects that will respond to the unique internal
and external necessities of their organisation.
A targeted approach equals maximum performance
Manufacturers need to determine the most immediate and critical
gaps in their supply chain that can be fixed through better
visibility. With RFID tags and readers still relatively costly, it
makes the most economic sense to launch projects that tag items at
the container or case level. With that in mind, scope the
project:
1. Is there an unreasonable amount of shrinkage of
your product in transit or at the distribution centre?
2. Is greater asset visibility required for
cross-border or security needs?
3. Do you need to improve your
Available-to-Promise (ATP) capabilities?
While you could answer yes to all of these questions and
potentially move forward to address all the relevant areas, it
would not be wise to do so. In this constrained economic
environment, you will be better able to manage costs while
achieving a realistic benefit by rolling out a program targeting
one area of visibility.
As
with the introduction of any technology, people matter. By
limiting the scope, it will be easier to ensure that people
understand the business challenges and can then take the
appropriate actions. By making realistic changes to your business
process, people will be armed with RFID-generated visibility that
lets them manage exceptions and constraints in executing sourcing,
production, or logistics strategies.
Supporting SCEM with RFID will help your company realise
its full potential
Enter the promising marriage of Supply Chain Event Management
(SCEM) and RFID. As SCEM has become an embedded feature in broader
Supply Chain Management (SCM) applications, it has also allowed for
the closer coordination between planning and execution. A key
technology impediment, however, is the ability to obtain quality
data in a real-time environment and then introduce rules for better
decision support. By tying middleware-based technology that
pinpoints the location, condition, content, departure, and arrival
of goods as they move through the supply chain, more accurate
decisions can be made. It is here that RFID technology will offer
real potential by making it easier to collect and enter data into
your information infrastructure. This will lead to real-time
management of events that trigger immediate exception alert
messaging and decision resolution.
A new regulatory environment will push RFID
adoption
For
many companies, the lack of capital spending has stalled most
investments in new technologies. In order to introduce an RFID
strategy, you will need to tie a project to a difficult business
issue that needs to be solved quickly. New regulatory requirements
will force the acceleration of spending. Examples include CFR Part
11 compliance for pharmaceutical companies, environmental
regulations regarding packaging and disposed assets, and new
homeland security initiatives. These government initiatives create
the business case while providing an infrastructure for superior
tracking of assets, leading to reliable inventory and customer
fulfillment capabilities.
Recommendations
Introduce an RFID strategy that targets a project of limited scope
but fits as part of your long-term information technology goals and
business needs. Determine how you can use your current application
providers.
In
realigning your supply chain using RFID, you will need to
synchronise the information network not only within your
organisation but also include bilateral sharing of information with
trading partners in order to achieve the common goal of better
serving the end customer.
Recognise that the race to RFID excellence is a marathon rather
than a sprint. First, understand your business processes and your
logistics and trading partners, as well as the gaps that exist. If
you understand the gaps, you can better choose the appropriate
application of RFID that will give you the greatest competitive
advantage to serve the end customer.
AMR
Research