WHILE both Australia’s major retailers appear to be some way from introducing a Wal-Mart style RFID mandate, local manufacturers are being advised not to disregard RFID and other emerging technologies but look at how they can be used to improve visibility in their supply chains.
Jonathan Loretto, global technology lead for RFID with Capgemini, based in North America, admits RFID is a cost for industry. “But it gives you a new dynamic, highly-accurate information point.
“How you change your systems, your organisation, and your supply chains to use that information is where you create the value. If you just want to put readers in, it doesn’t matter how strategically you put them in, unless you change your business, you won’t get the value,” Loretto told Manufacturers’ Monthly on his recent visit to Australia.
Loretto is scathing of the ‘slap and ship’ mentality where manufacturers simply follow a retailer’s mandate and ‘slap’ on the RFID tags without linking the data available back into their own IT system. “Slap and ship is only a cost. It’s a ‘last mile’ solution,” he said.
“What you are doing with ‘slap and ship’ is slowing down the supply chain and injecting more error by human intervention. It’s going to cost a company a lot of money going forward. So what should manufacturers do?
“Obviously complying with mandates is a must, to maintain their business volumes with certain customers, and a tactical response is a way of doing that.
“However, what we do with our clients is have a strategic program in the background that looks to extend that throughout their supply chain to a ‘first mile’ solution.
“The question is how can I introduce RFID technology into a business at the most appropriate and cost-effective point and get all the downstream benefits within that organisation. We are working with some very large organisations in the US and Europe where the ‘last mile’ solution will cost them $10m a year, while a ‘first mile’ solution, implemented correctly, can have an ROI as short as three months, on a spend of $45m. The longer ones have an 18 month payback,” he said.
Loretto says benefits come in a number of areas; visibility, productivity and velocity of product. “If you can see something and move it more effectively through your supply chain, it’s better. Other benefits include improved inventory management, improved inventory turns, plus the ability to do ‘first-in-first-out’, and to be able to manage your suppliers more effectively by sequencing product into their supply chains and manufacturing more efficiently.
“If my customers are able to sequence products into their stores and I can get better supply signals from them, then if my organisation is more agile and more adaptable, I can actually starting doing the appropriate level of planning in my organisation. Instead of a three or four week manufacturing schedule, I could schedule it down to maybe a day, or a half a day if that’s appropriate.
“It allows me to make my organisation more responsive and agile,” Loretto said.
According to Loretto, where you apply the RFID tags in your manufacturing process needs careful thought. “If you look at the label application style for tags, being inserted during the manufacturing process, it requires retooling of labelling systems; often very specialised and expensive machinery. Not the best option.
“While that is the most popular way at the moment, we have perfected a process with one of our clients where we can now reliably insert tags into the corrugate.
“It’s logical, as you move down the supply chain, a packaging company has more chip buying power than any manufacturer. It lowers the cost of implementing the technology into manufacturing lines. It comes already boxed, all I have to do is put a reader there to program it,” Loretto said.
But which industry standards should these readers and tags comply with? Loretto doubts whether the lack of standards has been holding back the implementation of RFID systems, but agrees most will move to Gen 2 when it’s available this month.
“The great thing about Gen 2 is it’s the first step towards ISO Standards within EPCglobal. It’s closely related to ISO 18000 Part 2.
“This is a good thing, moving towards a merging of standards, and will allow the market to grow and develop.
“However, if you look at the readers that have been released in recent months, they are all multi-protocol readers anyway and support a number of ISO Standards as well as EPC Standards.”
Loretto says the unique identifying number EPC brings is the “lynch pin of this new push forward”.
“Whether this number is on an EPC tag, an ISO tag or a proprietary tag shouldn’t really matter. As long as I can resolve that number, and I can recognise, for example, that I have a can of Diet Coke as opposed to standard Coke, that’s the key.
“Being able to do that within an organisation is a new revelation, being able to do that across multiple organisations is previously unheard of. If you look at bar codes or SKU identification, larger organisations tend to have two or three descriptions/SKU names for it. Being able to have a simple, single numonic to describe a product throughout the entire supply chain is a godsend.”
According to Loretto, RFID is just one of a myriad of technologies coming down the line. “What we are talking about is a whole raft of new technologies that allow us to effectively use that information in our supply chains and re-engineer the operational cost base of our companies.
“Companies that go there first will be able to re-engineer their cost base to change their profitability and become true market makers.
“As an example, Wal-Mart is looking to save over $US8bn a year when the company fully implements RFID, just a little less then its present annual profit. It will give Wal-Mart the opportunity to turn the screws on its competitors.
“While those who move first will get a few cuts and bruises on the way, they will learn a lot and will be in a far more effective position in the marketplace to compete,” Loretto said.