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Re-Evaluating Supply Chain Relationships

When customers help suppliers deploy RFID, everyone benefits.
By Samuel Greengard
Aug 26, 2014

The word "mandate" looms large in the hearts and minds of many manufacturing, defense and apparel retail suppliers that have been asked to RFID-tag pallets, cases or items for their customers. Whether it's called a mandate or a request, most suppliers view RFID-tagging shipments as a cost of doing business. Consequently, they opt for the easiest and least expensive slap-and-ship approach.

In this regard, little has changed since 2003, when Walmart first asked its suppliers to RFID-tag cases and pallets. The retailer's request (Walmart didn't use the term "mandate") led to the notion that the technology was largely a tool that would benefit the customer. That notion was reinforced in 2004, when the U.S. Department of Defense (DOD) announced its RFID-tagging initiative. Stories surfaced of firms placing tags on pallets and cases without adhering to any quality-control standards. Whether the tags worked correctly was secondary to meeting Walmart's or the DOD's mandate.

Slap and ship remains the order of the day for far too many contractors, says Don Ertel, senior VP of operations at CDO Technologies, a systems-integration firm that manages major RFID initiatives for government and industry, including the DOD. "Executives at suppliers continue to think in limited terms, because they've grown accustomed to a sale as a simple and straightforward transaction rather than something that's part of a larger business ecosystem."

Apparel retailers are now experiencing similar reactions from their suppliers. Most retailers have been RFID-tagging apparel items from different manufacturers, either at their distribution centers or when the goods arrive at the stores. But the process is inefficient, and they would like to see their suppliers do the tagging. The suppliers see RFID as an additional cost and believe all the benefits go to the retailer.

"There's been a perception that the reason to use RFID is because a big gorilla customer has demanded it," says Ian Robertson, CEO of Supply Chain RFID Consulting. "Unfortunately, this thinking diverts attention away from the opportunities and possibilities that RFID provides." In fact, Robertson, who introduced the term "slap and ship," bristles at the mention of the concept, which he says has been misconstrued. "I always thought suppliers should do more than slap and ship," he says. "The goal should be to use RFID to drive internal gains as well as better performance across a supply chain."

To that end, a lot has changed since Walmart first asked suppliers to use RFID. Many legitimate supplier complaints—tag costs are too high, read rates are too low, there's no business case—have been addressed. The price of tags, readers and middleware has fallen, and the technology is more reliable and easier to deploy. In addition, early adopters and industry groups have developed solid business cases for suppliers.

Yet, while there's a growing acknowledgement that RFID fuels gains, there's a general lack of understanding about how to use it in a more dynamic way, Ertel says. "We see a lot of niche and specialty uses, but not many organizations and supply chains taking a more comprehensive view of how to move from incremental gains to more substantial benefits."

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