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RFID Recommendations to Logistics Providers

This third article of a three-part series from Forrester Research about RFID's adoption in the transport and logistics industry offers recommendations to transport and logistics providers as they approach RFID.
Nov 12, 2005This article was originally published by RFID Update.

November 12, 2005—This is the third of a three-part series of articles from Forrester Research about RFID's adoption in the transport and logistics industry. Part 1 in the series, The Present and Future of RFID in Logistics, recapped what logistics providers shared about their current progress and future plans for RFID at eyefortransport's RFID Opportunities for Transport and Logistics Providers event in October. The second article, The Hard RFID Questions for Logistics Providers, looked at some of the industry-specific hurdles ahead for broader adoption throughout the logistics industry. This article will offer recommendations to transport and logistics providers as they approach RFID.

Growing through acquisitions and offering highly customized solutions to their clients, most global logistics providers have to manage a fragmented IT network, across regions and customers. This limits logistics providers' ability to gain economies of scale across their global networks, quashing their ability to leverage their global presence to offer clients end-to-end supply chain services. For example, given its aggressive acquisition strategy, Deutsche Post promises an expansive global supply network that includes the individual networks of providers like Exel, Tibbet & Britten, and Airborne Express. But Deutsche Post must first build visibility across these disparate networks to truly leverage economies of scale and uncover additional supply chain efficiencies for its customers. However, with siloed IT networks it is impossible for the company to identify cross-network opportunities, like improving asset use or obtaining better rates for its combined transportation services.

Logistics providers must recognize the parallels between the challenge to create a standard and open IT backbone and the future challenges that they will face if they continue to offer customers highly customized RFID-based solutions. Lack of interoperability of the technology will prevent cross-client visibility in areas like warehouse capacity or transportation availability. And with a nascent RFID hardware market, and multiple vendors -- like Savi Technologies and Wherenet -- working to become the de facto standard by gaining majority market share, there is a strong possibility that, in five years, logistics providers will have to maintain different customized RFID infrastructure for each client, each with unique maintenance and IT support needs. To avoid this fate, logistics providers must:
  • Insist on active RFID standardization internally within their network. The danger of fragmentation in active RFID adoption is compounded because many of these deployments are viewed as a closed-loop environment that does not require using standard data and process definition. To prevent this fragmentation, a logistics provider like APL Logistics must ensure that RFID education and future deployments are planned across its regions and business units.
  • Balance clients' need for customization with their need for economies of scale. As firms embrace RFID technologies, they do not always get their logistics provider involved in the choice of technologies or implementation strategies. This means that a logistics provider like TNT Logistics can be faced with unique RFID environments and costly customization needs for different clients. To avoid this, logistics providers must educate clients on the benefits that they can reap from standardized and more affordable solutions.
  • Take a bigger leadership role in active RFID standardization efforts. Logistics providers should study how consumer goods manufacturers like Gillette and retailers like Wal-Mart partnered with Auto-ID Lab to influence commercialization and standardization of RFID and EPC. Viewed as the glue that connects supply chains, and that offers visibility of products and assets between various shipper and consignee nodes, logistics providers' adoption of active RFID will probably precede that of other vertical industries. Logistics providers like FedEx must lead the industry in defining the standards needed to build active RFID-based visibility in logistics.
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