2023 is shaping up to be another year filled with disruptions that impact manufacturing. No crystal ball is needed to predict a continuation of challenges stemming from labor, inflation and global supply chain volatility. This cocktail of external, macro-level liabilities is forcing manufacturers to reexamine every process to make the most of what they can control within their four walls and with the suppliers over which they have significant influence. There are myriad ways to approach this, but no guarantees for success.
Michael Ochi
Looking at other companies that have managed growth cannot provide a step-by-step action plan, but it can provide insight. So, where should manufacturers be looking? One industry that manufacturers often overlook as a model, despite relevant similarities, is retail. Retail companies live and die on thin margins, and the ones that get it right all have something in common: world-class inventory management.
We’ve established that retailers are heavily invested in inventory accuracy. Next, we have two reasons to focus on how such accuracy is achieved at a company that defines the retail industry: Walmart. First, Walmart’s stock has trended upward since the beginning of the pandemic, including a slide in mid-2022 that from which it has since recovered. There are many elements as to why Walmart grew during the pandemic while so many retail stores went under, yet inventory accuracy is essential to retail profitability at any size.
Second, Shelly McDougal, Walmart’s senior director of merchandising, announced on LinkedIn in 2022, “We recently launched RFID in Walmart #apparel, this has improved inventory accuracy but more importantly has helped us better serve our #customers! Looking forward to partnering with our suppliers to expand #rfid to additional categories this year.” McDougal essentially said that RFID improved profit in one department so convincingly that Walmart is scaling it. Let’s break that down into pieces.
Walmart improved inventory accuracy amidst a labor shortage, thanks to RFID. Outside of CPG, electronics and tier-one automotive suppliers (for returnable containers), most manufacturers have not seriously looked at RFID since the buzz in 2005, when Walmart and the U.S. Department of Defense rolled out groundbreaking mandates. Back then, the results from suppliers were mixed and the implementation challenges were ubiquitous. But that was an era when news would have come from Yahoo and been read on a Blackberry.
RFID Technology
Like search engines and smartphones, the last two decades have matured the RFID industry. If Walmart is recommitting to RFID, then it’s time for manufacturers to look again. What you’ll find is that the maturation of RFID has become multi-faceted. This is good, yet potentially overwhelming. Here are a few areas on which I suggest manufacture’s concentrate:
Let’s get this out of the way. Walmart would not be doubling down if the hardware, software and related costs were unpredictable. RFID enthusiasts may not have appreciated criticisms of the technology in the mid-to-late 2000s, but the industry responded by making improvements across the board.
Pilot Programs
McDougal started her LinkedIn post by crediting a successful launch in apparel. I don’t have any insider knowledge from Walmart’s merchandising strategy room, but I know enough about RFID to say that apparel was a great department to pilot. The material is conducive to the least expensive UHF inlays, and the form factors of clothing brand/size/price tags (you know, those dangling cardboard things) are perfect for consistent reads.
When considering your pilot, aim for success as a primary goal and popular representation as a secondary goal. You’ll learn some lessons along the way, whether or not your implementation is successful, so build positive momentum early. I highly recommend strengthening your pilot justification (for RFID and any continuous improvement project) with process intelligence software that mines systems 24-7 to provide data-driven insights about what’s happening.
Level of Detail
Item-level tagging is key to achieving the level of accuracy that will lead to a return on investment (ROI). It doesn’t mean that we can forget container- and package-level identification, nor does it imply that lot and serial-level track-and-trace are unimportant. How you reach decisions about the level of detail appropriate for your organization comes down to your environment. Factors include external drivers like customer and regulatory expectations, and internal drivers like your enterprise software landscape. You know your industry, but let’s dig deeper into software.
The devil is in the details. Your holistic system design must consider how your inventory-management software is currently configured, and what it’s capable of handling. Discovering what your enterprise resource planning (ERP) solution and/or warehouse-management system (WMS) is capable of might take time, but you need to approach this with an ROI mindset. Translation: don’t fall for the temptation to silo RFID data into an Excel spreadsheet, Access app or SQL database.
Enterprise Software
In addition to fueling full and on-time picklists (which typically come from WMS and/or ERP), accurate inventory data empowers buyers, planners, schedulers, customer service teams and even finance personnel to do their jobs with more speed and confidence. They’re (hopefully) collaborating through a single version of the truth in ERP, so it’s worth doing the heavy lifting upfront to create a robust integration. Reach out to your ERP vendor to find out how they can support you; if they can’t, it might be time for a new one.
The value of inventory accuracy is not green KPIs in management reports; it is, as Walmart stated, better customer service. In terms of setting up your internal customers (executives) for success, it’s the VP of sales using your improved OTIF to secure a larger contract; the VP of operations/manufacturing starting a new product launch, because OEE is stable now that picklists are delivered; the VP of purchasing starting a supplier resiliency program, since rush orders aren’t consuming the department’s time and budget; the CIO using tailwinds to invest more in digital transformation; and the CEO building a stronger foundation on which to develop growth strategies.
All of this is aspirational, but you didn’t get through the last three years just to fizzle out with the status quo. Walmart is putting many more eggs in the RFID basket. Whether you’re in their supply chain or not, it’s time you look into RFID again, too.
Michael Ochi is QAD‘s senior manager for sustainability and digital manufacturing. He is passionate about building a better world through sustainable manufacturing. Michael educated engineering students about RFID by leading the PolyGAIT Lab as a graduate student at Cal Poly SLO, and he presented his pioneering study on the benefits of intersecting RFID with additive manufacturing at RFID Journal LIVE! in 2014.