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Aberdeen on Supply Chain Visibility with RFID

Research firm Aberdeen Group this week released the latest installment in a series of reports on RFID adoption. Entitled , the report is available free. In this guest contribution, report author Russ Klein summarizes the key findings and recommendations for action.
Dec 14, 2006This article was originally published by RFID Update.

December 14, 2006—During the last six months, Aberdeen's Emerging Technologies Practice has surveyed more than 300 organizations using or planning to adopt RFID technology. Of those, 68% indicate that their primary objective in adopting the technology is to enable or optimize business processes related to the supply chain. Why are the majority of RFID projects related to the production and movement of goods? In a single word, the answer is: Visibility.

RFID is an enabling technology, not a solution. With education and standards, RFID can complement and extend the core business applications that make up the integrated supply chain. From raw materials, manufacturing and packaging, to transportation logistics, warehousing and distribution, out to the consumer and beyond to field service, repair, returns and recalls, positive ROI is available. Strategically applying RFID technology to business challenges and leveraging its data has the potential to optimize critical processes, enhance business intelligence, and improve collaboration across industries.

The Supply Chain Conundrum

Achieving total supply chain visibility is still an elusive goal for most enterprises, even those with mature RFID initiatives. The proposition is costly, time-consuming and requires unprecedented cooperation and collaboration among the organizations involved, many of whom have competing objectives and incompatible requirements for the technology. Some anticipate immediate rewards from the endeavor; others have trouble seeing any value for themselves at all. However, some enterprises have begun to develop standards-based approaches to this conundrum and are publicly acknowledging that applications of RFID to the supply chain can avoid loss, speed time-to-market, insure quality, facilitate service, reduce paperwork, improve workforce efficiency, and provide forward visibility to demand. This report illuminates the early successes and describes a roadmap to achieving total supply chain visibility.

Key Business Value Findings

A successful cross-enterprise RFID initiative uses the right flavor of the technology to address each of the business challenges, collects data at key choke points, makes use of that data to enable visibility and to inform business analytics applications, and makes collaboration among organizations seamless.

Looking at use cases in fields where RFID is already contributing a high degree of value into the supply chain, we can learn how to leverage existing network infrastructure, adapt to existing best practices in supply chain management, apply specific domain expertise to solve challenges unique to each industry, maximize ROI in the obvious places and discover ROI in unexpected ones.

Implications & Analysis

An RFID initiative may begin with a narrow focus and a phased approach; but it will not realize its full potential unless the adoption strategy includes multiple business units and multiple applications. As product travels through supply chain, attribute and sourcing information is augmented with handling, checkpoint and chain of custody data at each step along the way. In the best case, the flow of data precedes the arrival of the product, giving each handler a forward view into the product before it arrives. At the same time, data flows backward through the supply chain, delivering lifecycle visibility all the way back to the manufacturer. As a result, the entire supply chain benefits from the control and the business intelligence that RFID data provides.

Recommendations for Action

In addition to the best-in-class actions illustrated by the case studies presented in this report, organizations should evaluate their RFID initiative planning using the following guidelines:
  • Start early and collaborate with your supply chain partners. Implement a data-sharing policy that protects and empowers both you and your partners.
  • Understand your objectives and the objectives of the entire chain. Start small but think about how the solution will scale across business processes and enterprises.
  • Pick the right technology vendors. Selecting the proper "flavor" of RFID and technology vendors with domain expertise is essential to a successful program.
  • Don't "self-integrate" unless you are a data integration specialist. Edge devices, middleware and applications must work in concert. This is no small challenge.
  • Conduct a pilot or proof-of-concept trial. It is easy to miscalculate during the design process or underestimate the costs, especially with data integration across enterprises. A validation exercise greatly reduces the risk of developing an unworkable solution.
  • Test "what-ifs" up and down the supply chain. RFID is a way to reduce the cost of exceptions. If you design using the "80% rule" the other 20% can negate the ROI.
The full report, available free on Aberdeen's website for a limited time, discusses each of these points and many others in detail. Given the state of the RFID industry today, every supply chain organization has the opportunity to emerge as a best-in-class company and realize the promise of this emerging technology.
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