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Collaboration Is the Key to Success

For companies to achieve the big benefits RFID technology offers, they will need to work with supply chain partners. The time to start? Now.
By Bob Violino
Reducing inventory across the supply chain is another potentially huge benefit that can’t be achieved without close cooperation between retailers and suppliers. Pete Abell, cofounder of ePC Group, a Boston-based consulting firm, says that companies need to experiment with how often demand signals need to be communicated between a retailer and supplier to reduce safety stocks.

“The key to reducing inventory is for the retailer to provide demand signals in a more timely way,” he says. “How often do you need the signals? It won’t be the same for every category or product type, because some products aren’t subject to the kinds of spurts in demand that require large safety stocks.”

Pilots can help both retailers and manufacturers understand how EPC data can be used to reduce safety stocks. Third-party logistics providers might also need to be involved with pilots, because some manufacturers and retailers envision using their logistics provider’s trucks as mobile warehouses. “Instead of holding stock in their own warehouses, they’re looking at product in transit as a buffer,” says Jonathan Loretto, global technology lead for RFID at Capgemini, the global IT services firm. “We’re moving toward much more dynamic supply and replenishment systems.”

Shipping and Receiving
For both suppliers and retailers, the proverbial low-hanging fruit is the use of RFID to automate shipping and receiving. If the supplier scans a pallet to ensure that every case on it matches the retailer’s purchase order and sends the EPCs to the retailer in an advance shipment notice (ASN), the retailer can scan the goods when they arrive at a distribution center or the back of a store. If the EPCs match those in the ASN, the retailer knows it got what it ordered and the supplier can issue an invoice for the goods.

Such a system can reduce the time and labor it takes for a manufacturer to investigate invoice deductions for goods the retailer says it didn’t receive. The retailer can also save time and money by not expending labor to count boxes or scan bar codes when goods arrive. But the retailer and supplier must agree on procedures for sharing data and on what constitutes proof of delivery. “Achieving the efficiencies has a lot to do with working together,” says Abell.

A potential problem for manufacturers is that different retailers could establish different procedures and systems for sharing data, providing proof of delivery and so on. It would be far more efficient for industries to establish procedures that all companies will use. Gillette’s Mytkowicz and Procter & Gamble’s John Duker are cochairing an EPCglobal working group that is exploring procedures for using EPC technology to automate shipping and receiving. “We’re trying to articulate the foundations that will enable the technical and software people to define the standard components necessary to effect that,” says Mytkowicz.

Many industries, such as pharmaceuticals, auto and airplane parts, and apparel, have a problem with counterfeit goods. The solution being pursued by a group of early adopters in the drug industry is to create an “electronic pedigree”—a secure record documenting that a drug was manufactured and distributed under safe and secure conditions.

The aim is to put a unique serial number on a product when it’s made, and use that number to track the product’s every movement through the supply chain. That way, if drugs are stolen and sold through another channel, a manufacturer could trace back and find the last person who handled the shipment before it disappeared. The system would also prevent a pharmacy from unknowingly selling drugs that are counterfeit, because the pharmacy could match each shipment against serial numbers provided by the wholesaler or manufacturer.

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