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Driving High Performance

A Silent Commerce prototype developed by Accenture Technology Labs shows that RFID technology can radically improve supply chain management.
By Bob Violino
Apr 01, 2004—For a number of world-class enterprises, superior supply chain management is increasingly cited as the secret to success. One senior executive at Dell Computer refers to the supply chain as "the biggest leverage point we have." And in a recent study by a team from Accenture, Stanford University and INSEAD who conferred with hundreds of companies in Europe and North America, researchers found a direct correlation between supply chain excellence and a positive bottom line.

More and more companies are realizing that they must master the supply chain, not only to compete but to conquer and enhance business performance. But where to start? Consumers are demanding higher product quality at lower prices. Companies struggle to meet these demands while contending with rising labor costs, which account for up to 30 percent of overall supply chain costs, according to an Accenture benchmarking study.

Radio frequency identification (RFID) can help. Accenture Technology Labs, Accenture’s technology research and development organization, has applied its expertise in technology innovation and collaborated with Accenture’s supply chain practice to develop an RFID-enabled Silent Commerce prototype for the supply chain. Silent Commerce refers to business benefits derived from new types of applications that result from intelligent and interactive objects. It's enabled by tagging and tracking technologies such as RFID, combined with emerging sensors and continuous Internet connectivity.

Accenture’s Silent Commerce Supply Chain solution makes individual items "smart" and traces them from manufacturing through to retailing. The solution provides immediate achievable benefits and enhanced business performance through operational efficiencies while revolutionizing product flow from production to point of sale.

Transparent management with visible results

Accenture’s RFID-enabled end-to-end supply chain solution covers a product’s full life cycle, from manufacturing to distribution to retailer. Using a manufacturer of compact discs (CDs) as an example, all product components, discs and inserts are tagged with RFID tags bearing Electronic Product Codes (EPCs). The EPC is like a license plate for an item because it is a unique serial number that can distinguish two otherwise identical CDs.

To read the EPCs, antennas are placed in point-of-use storage zones to detect the tags, enabling items to be tracked throughout the entire manufacturing process in real time. Accenture’s prototype provides a highly sophisticated means of process control, enabling manufacturers to monitor the assembly of each individual CD to the point where the system transmits alerts if discs are coupled with the wrong inserts or if items are misplaced. The prototype can even be automatically programmed to stop the manufacturing process altogether if irregular products or processes are detected.

After the CDs have been assembled, the system conducts a final verification where erroneous items can be identified and removed before being packed in cases. Finished products are given an additional EPC that can be tracked through to the retailer. Pallets and cases, also with EPCs, are read by antennas as they leave the building, and the information is transmitted to the EPC network. This enables trading partners (manufacturers, warehouses, retailers) to share data by linking EPC serial numbers to product information stored in distributed databases.

Silent inventory management

Accenture’s solution demonstrates how to outperform the competition by matching supply and demand through optimum inventory control. Warehouses are typically plagued with a range of operational errors from stocking to shipping. Shrinkage and missed, late or partial fulfillments ripple through organizations, causing discrepancies in physical and virtual inventory worlds.

With the RFID-enabled end-to-end prototype, the CDs arrive at a warehouse where the dock doors are equipped with portal antennas capable of reading pallets, cases and individual units. The product data is checked against the order and is automatically integrated into the warehouse system, which generates a receipt. If orders are wrong, they are detected early in the process and can be dealt with immediately.
Forklift drivers are directed to the appropriate storage locations for put-away through handheld devices. The warehouse shelves have antennas, and EPC data from each item is automatically transmitted to the back-office system, giving an accurate picture at any time of the quantity of stock available. The prototype provides automatic updates and reduces manual inventory cycle counting.

For picking, the prototype directs drivers to the appropriate shelves and then leads them to specific areas in the shipping zone. Warehouse operators have a visual interface to see how and where to put items and can even create mixed cases or pallets. Units or orders are scanned by dock portal readers as they are being loaded into trucks. The prototype simultaneously triggers an automatic update to the warehouse management system and verifies shipment, customer truck, and load sequence. If the shipment is incorrect, there is a visual alert. Units can be shipped quicker and with more accuracy.

There is a final check confirmed with a handheld device as the units are loaded on the truck for dispatch. After the correct shipment has passed through the dock doors, completed shipment information is passed to the order management system, and an advance shipping notice (ASN) is sent to transport services and the retail operations.

A silent, ubiquitous floor manager

Retail has its own set of challenges: keeping shelves stocked, ensuring that the right merchandise is in the right place when customers want it and preventing shrinkage. Accenture’s prototype enables companies to track at item, case and pallet level. When shipments arrive at the dock door, retailers can scan the entire load using an incorporated reader that immediately integrates the CD’s RFID data with the EPC network applications capable of determining where and when the product should be placed on the sales floor. The store, CD display racks and transport carts are wired with antennas, so employees are able to identify the exact location of every item in the store in real time. If employees make a mistake while stocking or replenishing, they are prompted via a computer screen mounted on an in-store transport cart or handheld device to place the CD in the appropriate spot.

RFID tags continuously gather detailed product information, allowing the system to track the movement of a particular CD throughout its life span—from the manufacturer through to the cash register. We believe that high-performance companies align their supply chain partners with processes to maximize product life-cycle revenues. Our end-to-end solution enables vendor-managed inventory by automatically submitting a restock order when the number of CDs in a store falls below a specified quantity. Ultimately the solution enhances business performance through increased inventory efficiencies and improved fill rates.

A remarkable chain reaction—end to end

The Accenture, Stanford University and INSEAD study revealed that leading companies incorporate supply chains into their business strategies and devote significant attention to designing integrated operating models. Accenture collaborates with clients to help them become high-performance enterprises by identifying areas of greatest potential in supply chain, building pilot applications, implementing value-oriented solutions across whole organizations and sustaining positive momentum. Our Silent Commerce solution for the supply chain acts as a springboard for developing customized solutions faster.

The end-to-end prototype gives companies a macro and micro picture of processes, inventory and product flow at every stage in the supply chain —in almost real time. Because individual items have unique RFID identifiers, the manufacturer, distribution center or retailer can query and identify an order’s actual status whenever necessary.

In manufacturing, the system’s ability to spot errors can contribute to improved performance measurements, increased safety and savings on materials and labor. Because RFID can withstand sensitive handling and storage conditions, it’s ideal for tracking any product, from consumer goods to pharmaceuticals. And in the event of tainted supply, traceable EPCs could be invaluable for helping to manage product recalls.

Accenture’s research and analysis of the use of RFID within the retail supply chain determined that labor reduction related to processes in distribution will range from 5 to 40 percent, depending on a company’s level of process automation, technology and the number of items it must handle as they pass through the supply chain. Also, knowing where products are at any given point helps companies pinpoint supply chain loss and theft.

Furthermore, safety-stock reductions made possible by reducing delivery lead times and lead-time variability will generate considerable savings in transport. Depending on current lead times, this reduction may range from one to four days of supply.

Retailers can provide improved customer service by ensuring high-velocity items are kept in stock. Inventory is maintained automatically using RFID technology, so automatic orders to replenish inventory can be submitted by retailers depending on sales volume, using existing replenishment rules. Conversely, if items are not selling well, the solution also enables reverse logistics.

By gathering information about item movements on the store floor, Accenture’s end-to-end solution can also analyze consumer behavior more accurately. Store managers could use insight gained about buying patterns to maximize merchandise presentation and planning. Loss prevention can use the information to reduce theft, and marketers can leverage it to improve branding and promotions.

Companies that aspire to be high-performers should act now to achieve supply chain superiority and gain competitive edge by being an early adopter. A pioneering force in Silent Commerce, Accenture is breaking new ground with original RFID-based solutions, collaborating with leading organizations to establish affordable global standards and investigating the business impact of the next generation of technologies.

Accenture’s Silent Commerce practice combines RFID research and development capabilities and industry expertise to help companies grasp RFID’s potential, act on it and maximize the return on investment. Through its broader global technology capabilities—enterprise integration, SAP implementation and infrastructure services—Accenture leverages its entire organization to deliver comprehensive RFID solutions that enhance business performance and achieve bankable results. For more information, visit www.accenture.com/silent
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