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Collaboration Is Key

For companies to achieve the big benefits RFID technology offers, they will need to work with supply chain partners. The time to start? Now.
By Bob Violino
Jul 23, 2004—By Mark Roberti

Now that the EPC is being adopted by leading retailers in the United States and Europe and by the U.S. Department of Defense, collaboration has become critical. Many of the big benefits EPC offers—cutting out-of-stocks, slashing inventory throughout the supply chain, reducing counterfeiting, and automating shipping and receiving—can be achieved only if companies work together, share data and develop standardized business processes. But there are obstacles to collaboration, including competing corporate agendas, competitive issues and cultural inhibitions about sharing information. The companies that overcome them will likely benefit most from EPC technology.

“You can optimize your operation within your own four walls and achieve some efficiencies, but collaboration is the key to getting some of the bigger benefits that EPC promises,” says Bob Mytkowicz, manager of customer, order, and logistics systems for Gillette in North America.

By far the biggest benefit for both retailers and manufacturers is reducing the number of times a product is not on the shelf when a customer comes in to buy it. Linda Dillman, Wal-Mart’s CIO, says knowing what’s in the back of the store is the single most important type of information her company will get from RFID, because it will help Wal-Mart reduce out-of-stocks.

But retailers and suppliers need to work together to reduce out-of-stocks. “New EPC information, even from reading pallet and case movement and location, can be combined with modifications in business processes to help ensure that product is visible, traceable and reaches the shelf,” says Chris Lemmond, product manager for EPCglobal US. “And that’s the goal for both manufacturer and retailer.”

To improve replenishment, manufacturers need more timely information about demand at a store and the level of inventory within the store. “The worst-case scenario is when we get inventory records that show that inventory is on hand at the store, but the point-of-sale data shows no sales,” says Gillette’s Mytkowicz. “Why isn’t it selling if it’s there? The inventory information is wrong. If we could scan inventory and know that even though the retailer’s records show it has 12 cases, they’re really not there, then we can replenish and deal with that problem.”

But what information does a retailer need to supply to the manufacturer? How often does the retailer need to supply it? What processes must the retailer and manufacturer revise in order to take advantage of the new information that the manufacturer gets?

The only way to get the answers to these questions is for manufacturers and retailers to work together to map out how systems might change and then to run a pilot to prove the concept. Sean Campbell, a partner with IBM Business Consulting Services, says supply chain partners can begin this work before actually deploying RFID tags and readers by sharing data collected from bar codes.

“If retailers share existing data, manufacturers can use it to begin to change their replenishment processes,” he says. “The partners can work together to see if the manufacturer can use the retailer’s store-level data to better align its production with demand.”
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