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Analyst: Sense and Respond Goes Beyond RFID

In this guest column, Manufacturing Insights' Bob Ferrari argues that while RFID will be the most significant disruptive technology for enabling the sense and respond supply chain, it is but one piece of the overall solution, and a piece whose current costs still present an ROI challenge.
May 24, 2006This article was originally published by RFID Update.

May 24, 2006—Supply chain innovators will be distinguished by their ability to adapt and respond to unexpected events. When you boil down the overall differentiation of supply chain management among groups of companies, it can often be described as the art and science of managing or predicting the unexpected. The ability to sense unexpected physical events and provide near real-time information to adapt supply chain processes to respond in the most efficient or timely manner is also a fundamental investment capability for the adaptive supply chain.

RFID promises to be the most significant disruptive technology in this area. However, the current hype, customer mandates, and narrow win-win business cases of incorporating this technology could cause these current initiatives to implode. RFID's longer-term success as an enabler of sense and respond lies in mapping the cost/benefit factors of RFID to the new supply chain business models required for supporting demand-driven lean or postponement-based sense and respond capability. Over the next three to five years, the industry standards for auto-identification and product information transfer will mature, and the cost of individual tags will come closer to the ROI thresholds required for justifying RFID as a transformational enabler.

Manufacturing Insights encourages manufacturers to continue to view sense and respond execution as one of the three key enablers of an agile and more intelligent supply chain. The automation of business processes in conjunction with the integration of devices, sensors, and equipment within a manufacturing or logistics facility and the coordination of workflow of related business processes are essential to achieve execution-floor to top-floor visibility, which is a key component for a more intelligent supply chain.

Until technology and standards maturity is reached, companies should assess their current supply chain execution processes with an eye toward providing more of a sense and respond orientation. The emphasis should be on deployment of flow-through logistics, alerting, and the real-time decision-support capabilities for any geographic region that the supply chain is required to support. Network-wide inventory, logistics/transportation visibility, supplier-/customer-managed replenishment, and demand shaping are all good candidate processes that can be piloted, evaluated, and deployed for scalability and flexibility. Manufacturing Insights advises manufacturers and retailers to:
  • Examine the entire enterprise for opportunities to leverage a data acquisition or sensory networks platform strategy.
  • Prioritize their sense and respond process-enabling initiatives toward initially expanding visibility within planning and execution, and move from there toward further leveraged uses of event management and sensory networks, including RFID if applicable.
  • Exercise caution and diligence in identifying an overall platform strategy as well as selecting specific technology vendors for enabling sense and respond execution.
  • Be mindful of the fact that the technology vendor landscape will continue to consolidate for the next year or two.
  • Focus on cost analysis and ROI in a broader, longer-term context aligned with enabling key business strategy needs.
Please send your feedback to me at bferrari@manufacturing-insights.com.
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