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Consider the Big Picture

For RFID to have real value, you'll need to address certain critical issues, both before and after its implementation.
By Marlo Brooke
Jul 04, 2005The vision of EPCglobal is to automate the supply chain in such a way as to significantly reduce the unnecessary and immense costs exponentially crippling today’s supply chain. Ironically, many manufacturers have lived with the problem for so long that they hardly notice its existence. And yet, according to some, inefficiencies in the supply chain cost even small manufacturers as much as millions of dollars per year.

The remedy? A totally networked economy in which there exists a perfect synchronicity between supply and demand, such that the moment an item is used, purchased or consumed, an automated trigger produces the correct and appropriate action to the supplier, all the way back to raw goods procurement. Right product, right place, right time. We call this the synchronized value chain.

How does EPCglobal envision this happening? By essentially computerizing—with an RFID device—all widgets, uniquely and individually, so that an organization can have total visibility of the movement of all goods in real-time synchronicity. This unprecedented microlevel visibility suddenly opens awareness to the dark spots in the supply chain, the "unheard" areas where companies once made generalized assumptions about what was happening without empirical data. Assumptions in supply chain are not good: They create underages and overages of raw goods and inventory, the need for greater storage space, unnecessary transportation costs, customer service issues and lost sales.

And yet, total visibility with RFID throughout the supply chain is only one piece of the puzzle, and RFID is only one piece of the overall vision of EPCglobal. James Williams, partner and senior consultant at Avatar Partners, says, "For RFID to have any value, it cannot be considered as a stand-alone silo. There are critical implementation concerns to address, both before and after RFID."

A.T. Kearney illustrates a seven-step implementation path whose ultimate goal is that trading partners become tightly collaborative in the critical integration points between supply and demand. At the final stages, activities such as collaborative sales and forecasting (CPFR) and collaborative management of transport activities (CTM) will create a seamless dynamic in which every move a company makes is linked synergistically with the demand in the marketplace. Collaboration comes at the end of this overall vision, and RFID is a mere steppingstone to achieve it. If collaboration comes after RFID, what comes before?

What to Do Before RFID
To implement RFID with any hope of business benefit, the first step must be to implement the Global Data Synchronization Network. GDSN is a complementary initiative to RFID, endorsed by the same organizations that are promoting RFID within the supply chain. GDSN is supported by industries such as consumer packaged goods, hard lines, entertainment, apparel and automotive. It is also gaining momentum in many additional sectors. GDSN can be considered the foundation upon which the synchronized value chain will be built.

"RFID is about the movement of data," says Williams, "whereas GDSN is about static data, and ensuring that all trading partners are using common data standards. You would think that trading partners would have this figured out already, but they haven't. That's where GDSN comes in."

GDSN enables a very structured preparation for RFID. If implemented properly, it will allow a company to clean up its internal data and processes around how item data is managed. Its goal is for the supplier to have a single, one-time point of entry for its item data. This process will help solve a pervasive problem: Trading partners tend to have the wrong data about items 30 percent of the time. GDSN is a standard, global, single point of entry. Whereas RFID is concerned with a specific, unique item and its movement through the supply chain, GDSN is about communicating static, basic item and company data.

The most exciting part of GDSN is the immediate ROI. Deon Nel, a consultant for Avatar Partners, concedes, "At one of our customers, we found a way of achieving a seven-month payback from improvements in a single customer service department, not to mention the opportunity within the rest of the organization." Nel goes on to explain that at another manufacturer with revenue of less than $200,000,000, Avatar Partners found a way to "implement GDSN so that the company would achieve a million-dollar-per-year payback" once GDSN is fully realized. This, alone, can pay for RFID many times over.

GDSN provides the infrastructure for collaboration and lays the foundation for RFID. From a process and cost perspective, it is the most practical way to prepare a company for RFID.

Scrutinize Business Processes
Once GDSN is implemented and the objective of collaboration is understood, one can approach RFID with a clear vision. The next step, then, is to look within. RFID represents significant opportunity for process improvement—and, therefore, cost savings. If a company simply implements RFID without using it to improve processes, there will indeed be no benefit from RFID.

Process analysis, therefore, can enable significant improvements immediately with RFID. It is the key to finding the return on investment. This doesn't just refer to the compliance requirement of RFID, whereby cases and pallets are tagged with RFID; it also refers to the opportunity for RFID within the production and manufacturing process, even back through to raw materials, and using the data captured to more proactively react to market demand.

RFID has been in use for quite a long time in production, in closed-loop manufacturing processes, for automatically tracking and recording WIP (work-in-process) for the purpose of automated quality control and efficiency monitoring. And yet, the influence of EPCglobal on RFID compliance initiatives will tilt the scales toward trading partner collaboration.

Matt Ream, senior manager of RFID Systems for Zebra Technologies, explains, "In the future, we will see an eventual merging of RFID for internal production and EPCglobal requirements, where you consider the applications that require operation on the EPC network, but also areas that would benefit from the read-write capability of an automated read-write tag."

Marlo Brooke (949-622-5557, mbrooke@avatarpartners.com) is president of Avatar Partners, a consulting services organization specializing in strategic planning and systems integration for supply chain.
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