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Chip Maker Tries ‘Snack and Trace’
By using RFID to track shipments within its supply chain, KiMs, a Danish potato-chip maker, not only spiced up its sales but also cut the fat from its inventory and workforce.
May 31, 2004—KiMs is one of the largest snack-food companies in Denmark. A midsize company with 270 employees and annual revenue of about $67 million, KiMs delivers snacks and potato chips to many retailers in Denmark, where unit sales of its snacks bought by consumers accounts for 51.3 percent of the nation’s snack-food market. Its product line includes 9 of the 10 best-selling chips in Denmark, and its brand is considered one of the five strongest in the country.
But with competition increasing from other snack-food makers, KiMs believed it needed to increase efficiency of its business processes—internally and externally toward its supply chain partners—in order to retain its position in the market. KiMs sharpened its competitive edge by RFID-enabling its shipping process. As a result, the company not only increased sales of its snacks, it also reduced the risk of shrinkage, trimmed inventory levels at its distribution center and cut labor costs.
KiMs’s quest for improvement began in early 2003, when the company’s management realized it needed better control of its downstream supply chain. The company was supplying 100,000 pallets of its snacks per year to its business customers, namely, the retailers. Frude Lausersen, a third-party logistics partner, transported 70,000 of these pallets; KiMs used its own logistics operation to deliver the remaining 30,000 pallets. The problem was, KiMs had no dependable system in place that would tell it exactly what time specific pallets left its manufacturing house and at what time they arrived at their respective destinations—third-party warehouses and retailers. The inability to accurately track products increased the risk for shrinkage, because KiMs had no way to determine if products were lost in transit. Consequently, the data on the retailer inventory levels was inaccurate, which left KiMs unable to effectively plan its procurement and production processes and fulfill retailer orders in a timely fashion.
A big reason why KiMs’s product information was so unreliable was that the company was using a manual process. To keep tabs on deliveries, KiMs depended on written lists that indicated the number of pallets that left its manufacturing site to go to the third-party warehouses or retailer locations. The company also relied on manually written lists of its procurements, products and sales orders to estimate its own inventory levels. The data was entered manually into KiMs’s ERP-system, which was developed in-house by its own programmers. Due to human error when entering data, the resulting product location and inventory information was of poor quality.
In an attempt to rectify the problem, KiMs implemented a bar code system. In the area where boxes of snack foods were loaded on wooden pallets, KiMs applied a bar-coded label to each completed pallet. Forklift drivers used a handheld scanner from Symbol to record each label’s bar code before moving the pallets to the staging area. At the staging area, truck drivers scanned the pallets before transporting them to retailers or a third-party logistics warehouse. The bar codes carried information about the products on the pallets. Once the labels were scanned, the data was sent automatically to KiMs’s enterprise resource planning (ERP) application.
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