Beyond Barcodes: RFID in the Supply Chain

1
Beyond Barcodes RFID in the Supply Chain

• An Operations Perspective

2
Agenda

• Supply chains
• Role of RFID
• Advantages
• Issues
• Conclusion

3
What is a Supply Chain?
Goods/services
Supply chains
Source Bose, I. P. Raktim. 2005. Auto-ID
Managing anything, anywhere, anytime in the
supply chain. Communications of the ACM, 48 (8),
100 106.
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Supply Chain Core Processes

• Plan
• Strategic design (process, location, staffing)
• Source
• Select suppliers (quantity, quality, cost,
  delivery)
• Make
• Process optimization (resources, throughput,
  schedule)
• Deliver
• Logistics optimization (transportation,
  distribution, customer service)
• Return
• Reverse logistics/closed-loop supply chains (3Rs
  - recycle, remanufacture, retire)

Supply chains
Source Supply Chain Council
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RFID Key Supply Chain Questions

• So, how can RFID help us
• Plan?
• Source?
• Make?
• Deliver?
• Return?
• And, what is the financial return?

Supply chains
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Role of RFID in Supply Chains

• Comply with customer mandates
• Provide information visibility
• Materials (source, amount, location, status)
• Provide information availability
• Common database (feeds ERP data warehouse)
• Expected Benefit Improve supply chain
• Integration
• Optimization

Role of RFID
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Comply with Customer Mandates

• DoD (MIL-STD-129P)
• In-transit visibility
• In-box content detail
• Enhanced inventory management
• Enhanced item-level visibility
• Wal-Mart/Target and other retailers initiatives
• Similar to quality management initiatives in the
  1980s
• Retailers (and DoD) are primary beneficiaries now

Role of RFID
for more information see http//www.acq.osd.mil/
log/rfid
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Status of Wal-Mart Initiative

• Has shifted focus to stores rather than
  distribution centers
• About 25 of U.S. stores (1,000) have
  implemented RFID, with plans to add another 400
  by year-end
• Initial tests demonstrated a 16 reduction in out
  of stock merchandise (InformationWeek,
  10/14/2005)
• Plan to automate checkouts, warranty activation
• On the supplier side only Campbell Soup,
  Smuckers and P G have acknowledged any
  benefit.
• According to AMR Research, ...after three years
  of testing, there is no definitive answer for
  the industry on the benefits of RFID.

Role of RFID
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Information Visibility

• Source
• Supplier information
• Input/raw material specifications
• Make
• Inventory location geographically/within the
  supply chain
• Pull production
• Maintenance RR materials
• Deliver
• Transportation logistics
• Customer service

Role of RFID
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Information Availability

• Make
• Inventory updating
• MRP scheduling
• Deliver
• Custody transfer
• Integration with financials
• Return
• Recycle/remanufacture

Role of RFID
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Supply Chain Optimization

• Information integration
• ERP systems
• Decision tools
• Universal access
• All partners have access to same data
• Closed-loop supply chains
• Cradle-to-grave tracking (esp. hazardous
  materials)

Role of RFID
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Opportunities

• Better inventory management
• Improved customer service
• Information integration through the supply chain
• Enhanced decision-making at all stages
• Benefits all supply chain partners

Opportunities
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Issues

• Hardware/software costs
• EPCglobal standards just released (April 2007)
• Training and integration
• Standards
• Security
• Culture

Issues
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Conclusions

• RFID shows great promise
• Some significant hurdles to overcome
• Must be solution-driven, not technology-driven.
• Widespread adoption will lead to lower cost and
  unforeseen benefits

Conclusions
15
Backup Slides
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The Bullwhip Effect
Retail Fluctuations
Orders to Distributor
Orders to Manufacturer
Orders to Supplier
Orders
Time

• A 10 increase in demand at the retail level can
  result in a 40 increase in manufacturing
  production rate (Forrester 1958).

Supply chains