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.
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.