Jun 18, 2014One of industry's most contentious issues is a customer claim that goods shipped by a supplier were not received or were received only in part, or that the wrong parts or items were sent. The supplier is not at the customer's receiving dock, so it cannot verify the claim.
The process of reconciling what was received against what was shipped incurs additional work, cost and time for both supplier and customer, and it can generate ill feelings between the supply-chain partners. Large customers may impose fines if they believe an order was not delivered correctly, and suppliers are likely to pay rather than risk losing the customer. Yet a 2004 study conducted at Hewlett-Packard, when I was the company's worldwide program director of RFID, showed that in 82 percent of cases, the correct goods were delivered and most errors occurred on the receiving dock.
RFID can play a vital role in receiving reconciliation by enabling electronic proof of delivery (EPOD). Here's how it works: The supplier RFID-tags shipments and reads them automatically as they pass through a fixed portal at the warehouse exit. The data is uploaded to an Electronic Product Code Information Services (EPCIS) repository, so it can be shared with the customer. The tags are read as the goods move through a fixed portal at the customer's receiving dock, and the data is then shared with the supplier. Once all items in an order have been "seen" by the customer and confirmed to be accurate, the customer can pay the invoice. (If the goods are subsequently mislaid, the responsibility falls squarely on the receiver, not the shipper.)
Note that EPOD does not eliminate all receiving errors—genuine errors will still occur. But it does eliminate the need to chase down false errors and provide good data for resolving genuine errors.
The concept and value of EPOD was demonstrated 10 years ago, yet I don't know of any supply-chain partners that are using it.
There are several issues, including the fact that few folks are aware of or understand the process. EPOD also requires cooperation—and trust—between two companies. While supply-chain partners often share data to execute demand planning, it is far less common to share data on actual operations. The concern is that this information could be used to measure contractual performance or raise questions regarding a partner's suitability. Still, the benefits outweigh the risks.
If order reconciliation is a concern at your company, I recommend sitting down with your partners and discussing the mutual benefits of employing EPOD. It is relatively easy and inexpensive to deploy. Keep in mind that EPOD data can also support auto-replenishment, which I'll explore in my next column.
Ian Robertson is the 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.