May 11, 2014It's Complicated is the name of a popular romantic comedy starring Meryl Streep. It also describes the way most products are manufactured today. Often, the manufacturer must buy raw materials from suppliers in distant regions of the world, convert them to finished goods, ship them to points of consumption using third-party logistics providers and, if necessary, collect returns for reprocessing or disposal. Manufacturing, in other words, involves a complex series of supply chain links.
Other industries also rely on complex supply chains. In the oil and gas sector, for example, assets used in the field for exploration and production are often owned by a service company that rents them to the firm managing the operation. The management firm may not be the company that owns the well. And yet another company may be responsible for transporting the assets.
When there's a break in one link of the supply chain—say, raw materials are held up in customs or finished goods don't reach a distribution center on schedule due to a snowstorm—it affects all the other links. RFID can provide visibility into each link, so supply-chain partners can make informed decisions that minimize potential problems and improve efficiencies. Manufacturers, for instance, can shift production to another line, and logistics providers can divert goods to a different warehouse.
This works when you have a holistic view of the supply chain. But that involves getting all supply-chain partners to join together. Unfortunately, that's complicated, too. Outsourcers, for example, operate in a fiercely competitive environment and are reluctant to invest in RFID, even if it adds just a few cents to their unit cost.
Then, there are the practical issues that must be addressed. The cost of RFID tagging occurs once in a supply chain, but significant benefits may accrue for all players down the line. How can that cost be shared equitably? Gathering all supply-chain event data into a single repository could provide all players with a holistic view of supply-chain performance. Who will set up and manage the repository, and how will it be funded?
At times, these issues seem insurmountable, but supply-chain partners that have tackled them and adopted RFID are achieving benefits. Companies in the oil and gas industry, for example, are beginning to tag and track assets so all supply-chain partners can determine where an asset is, when it got there, what rental fee to charge, when the asset should be taken out of service and so on.
The key to supply-chain management is understanding how each link can benefit from using RFID, and how RFID-enabling one part of a process can deliver real benefits in another. We'll examine all these issues in upcoming columns.
Ian Robertson is CEO and president of Supply Chain RFID Consulting, a Texas-based firm providing services to companies that want to understand how to use and implement RFID internally and with partners. Send your supply-chain questions to ian.robertson@s-c-r-c.com.
