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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.
Companies need to work together to establish procedures for reading EPC tags on goods as they arrive and for sharing that data over secure networks with other players in the supply chain. “Conceptually, it’s straightforward,” says Jamie Hintlian, a partner in Accenture’s Health & Life Sciences practice. Hintlian is a consultant to the Jumpstart Group—a collection of 11 pharmaceutical manufacturers, distributors and retailers working together to determine the business case for using EPC across the supply chain. “But execution becomes challenging in a number of ways. When you’re creating a pedigree, which events do you want to track? How do you ensure the product is authentic? Even the size of the tag is an issue when you are talking about small vials of drugs.”
Once procedures are established, they must be agreed upon by a critical mass of players within the supply chain; otherwise different groups of manufacturers, distributors and retailers will adopt different procedures and different IT systems, which creates inefficiency. One way to avoid that problem is to share information through trade organizations. The Healthcare Distribution Management Association, which represents drug distributors, and the National Association of Chain Drug Stores, which represents pharmacies, are members of the Jumpstart Group. Both organizations are disseminating information within the pharmaceutical industry to ensure that one set of procedures for creating an electronic pedigree is adopted industry-wide.
The benefits of collaboration are significant to all companies in the supply chain. But collaborating is never easy. Companies have divergent agendas, financial interests and competitive issues. Even if manufacturers, distributors and retailers join forces, each may want to focus on a different supply chain problem, because the business case for using RFID technology is different for each of them.
Some companies are working around that issue by collaborating one-on-one with supply chain partners, while also working on industry standards through trade groups and standards-setting bodies. Kimberly-Clark is an example of a company that’s executing this strategy successfully. The Irving, Texas–based maker of paper, household and personal care products is among the first eight suppliers to send tagged pallets and cases to a Wal-Mart distribution center in Texas.
Mike O’Shea, Kimberly-Clark’s director of corporate Auto-ID/RFID strategies and technology, is cochair of EPCglobal’s Business Action Group, which is defining user requirements for the second-generation UHF EPC protocol. “We’re working through EPCglobal to establish standards for exchanging data for shipping and receiving and track-and-trace,” says O’Shea. “But when it comes to proving the business case for EPC, we’re working with our partners one-on-one.”
In addition to working with its retail partners, Kimberly-Clark recently began discussions with some of its packaging suppliers. The goal is to put EPC tags inside corrugated boxes before they are shipped to Kimberly-Clark’s manufacturing facility. That would allow Kimberly-Clark to write an EPC number to the tag when a box is filled with product. Kimberly-Clark, in turn, would share information about when the boxes are used to determine how its packaging suppliers could benefit from using EPC technology. “If we don’t have sharing of data between supply chain partners,” says O’Shea, “we won’t get the benefits.”
Kimberly-Clark created an IT architecture for sharing data with its suppliers on one end and its retail partners on the other (retail partners, such as Wal-Mart, also provide information back to Kimberly-Clark through point-to-point connections). For now, Kimberly-Clark will maintain the databases of information about its products and their movements on its own computer systems and provide access to its supply chain partners. O’Shea envisions that once the EPC Network is fully functional, it should be easy to switch to sharing data over the network.
Over the next 12 to 18 months, companies in every industry—regardless of whether they are facing RFID mandates—should take the initiative to collaborate. Small-scale pilots can help them figure out what data they need to share with supply chain partners and what business processes they need to change to take advantage of the new data EPC technology will provide. At the same time, companies should join trade associations and EPCglobal to ensure that data formats and common business processes are adopted across their industry. The challenges are great, but the payoff for successful cross-supply-chain collaboration could be huge.
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