Finally RFID started bearing fruits and how

Back in 2005, on a sunny sunday, I was going for my weekly grocery shopping in Budapest when I saw the giant new electronic bill board getting lot more attention from people around. I found some employees of a local company using that new billboard to advertise their RFID Capabilities and they were engaging people with the help of few sets of shoes that they were offering people to wear after registering their name with them and take a round of the shops around for few minutes. When anybody wearing those shoes used to pass the bilboard, it used to flash his or her name on the billboard like: Welcome to XXXX (Company Name), Mr. XXXX. It was quite fun for people, specially for children and youth to wear those shoes and walk around to see their names on the billboard again and again. Upon enquiring, I was told that this is the pwer of RFID technology and this company offers multiple products harnessing RFID power. Though, RFID started showing head in 2003 in most markets (Largely as a result of mandates from retail market leaders, notably Wal-Mart), it was my first 1st hand experience with RFID technology and to say the least, I was impressed.

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I wondered what is in store for this technology and how warehouses and retail markets can track the movement of goods in and out with this, reducing manual intervention and improving accuracy. RFID showed lot of promise and lot of companies started investing in providing services in this field to be ready for future explosion in demand. We saw Wal-Mart persuading (or compel) its primary suppliers to tag everything under the sun with RFID. Wal-Mart would then use RFID tag readers and ancillary hardware and software to manage supply chains, retail stocks and costs more effectively. Similar mandates were seen from the U.S. Department of Defense (DoD), which reportedly planned to use RFID to manage and deploy assets more efficiently. The future had something else in mind and till last year, the growth in this field was snail pace and it nearly became a subsiding trend where service providers were no more investing. The costs of RFID enablement were higher than anticipated, and the inability or unwillingness of companies (including Wal Mart suppliers) to bear those costs were the main reasons of trend not picking up as expected. The nail in the coffin was the strong presence of bar codes that ensured that the primary benefits of RFID are met with much less costs. Well, barcodes cannot do everything RFID can do but nor can RFID do all of the things barcodes can do so these needed to co-exist.

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Some months back, BGN, the Netherlands' largest book retailer who was one of the early adopters of RFID, claimed that they could improve their inventory visibility from 65% to 97.5% by using an RFID Solution. Also it has increased receiving accuracy to 100% while dramatically reducing employee inventory time. Most importantly, BGN had significantly increased sales as well. Similarly, more examples of improvement in Inventory levels and accuracy started coming from aroundthe world and when the technology advances in RFID complimented it (Like tag readers are now faster and more accurate and can operate over a greater range of distance, angle and environment), the new wave of optimism started sweeping the space again. Year 2009 (April onwards) saw a spike again in the RFID demand and even the smaller warehouses are now looking for cost effective solutions in this technology to reap benefits in terms of inventory optimization. After all, RFID isn't really about tags, readers, frequencies or wavelengths, although all these things matter. RFID delivers the greatest business value when its focus is on the generation and leverage of real-time, fully integrated data that enables better business decisions and nimbler business actions. If all organizations drive their RFID deployements on above reasons instead of just wanting to utilize a trendy tagging solution that automates the stock movement tracking, this technology will go much far and will begin to realize its true potential in near future.

Warehouse Management Systems - Drivers for Managing Supply Chain

Off late, warehouse management system deployments have gained good pace and all ERP and SCM products companies have started investing into their solutions to fine tune to map to industry specific solutions. It has been a proven fact now that this is one of those controllable areas which can really make an impact in improving supply chain of organizations.

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When it comes to taking the necessary steps to create a more flexible and agile warehouse that can adapt and change to the ebb and flow of the market conditions, the goal is to ultimately minimize the time product or inventory stays in your warehouse – ultimately creating a near real-time inbound / outbound activity that matches all inventory to orders intended to turn revenue as quickly as possible.

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The metrics that are required to be tracked to improve the warehouse system and process efficiency are:

• First time sales order line picking accuracy
• On time shipment
• Back order percentage
• Turn around time for converting an order into sale
• Labor cost in warehouse

The reason why I added labor cost in warehouse as one of the metric to measure is that while increase in number of pickers can improve the picking accuracy and turn around time but at the same time it will drive the labor costs in warehouse up, so this will not be an optimum solution. The best solution will be to study the whole process first and find out the areas where there is a room of improvement. Then we need to implement processes that create more warehouse efficiency in addition of bringing down the operating costs with no sacrifice of service levels.

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To create more flexibility and agility in the warehouse, organizations need to leverage technology that can bring automation and visibility. Visibility here, means that the picker knows the contents of every bin in the warehouse in real-time and is also able to track inventory attributes like lot number, size, serial number or date etc. in real time. This visibility needs to be blended with automation like:

• Automated receiving or put away with the help of Radio Frequency Identification device (RFID) or bar coding
• Automation in replenishment process
• Ability to send advance shipping notices
• Managing containers with the order lines they contain etc.

This combination will help in improving the overall efficiency of the warehouse system definitely with lower costs in the longer run. One thing that we need to note here is that while we have talked about the visibility, it has to be real time or near real time visibility. If the employee has access to data that is month old then still the issues will not be resolved and in fact it can increase the amount of re-work and hence will impact the picking accuracy negatively.

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Another factor that has weightage here is that what is the age or version of the warehouse system that the organization is using. While most of the industry leader organizations were early adopters of WMS system but they are the ones which are facing bigger pressures today as the WMS solutions have evolved over time and much better and efficient solutions are available today against what they are using. The organizations that kept pace with this change and kept on upgrading their solution, were in much better position today.

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While almost all major ERP providers are offering these solutions but there are a few best of breed solution providers also available in market and companies are divided in their approach towards who they want to talk for getting the solution deployed.

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While assessing the improvement areas in existing warehouse system or going to deploy a new solution, the organizations need to make sure that:

• They break the processes into smaller pieces and then focus at all potential areas instead of trying to address just the most glaring issues
• They spend quality time to measure the important warehouse processes like Labor management, Yard management and Dock management
• They need to keep looking at warehouse as the enabler for improving the end to end supply chain process rather than a standalone system
• The team identifies the future growth areas in this and adequate budget is guaranteed towards these areas. Remember that even in this times of recession, investments will not stop but every organization will become wiser to invest in right areas

Few other metrics that can provide the warehouse system readiness index to an organization are:

• Capability to process warehouse activities without paper – Yes, it is possible to avoid paper pick slip too
• Ability to confirm transactions and communicate with automatic data capture in real time
• Advanced picking and replenishment process practicing
• Distributed order management usage
• Cross docking practices
• Reverse logistics handling capabilities
• Event management handling ability

The remaining year of 2009, as many experts have put it, is a year of transition where the organizations need to take this as an opportunity to dust-off existing issues in the WMS side of the Supply Chain and ensure that they have the best of solutions available that have the potential of reducing their cost of carrying inventory and its potential obsolescence, the cost of warehouse labor and the potential inefficiencies of processes.

Fundamentals to review before 3PL vendor selection

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Third Party Logistics (3PL) is the function by which the owner of goods (The Client Company) outsources various elements of the supply chain to one 3PL company that can perform the management function of the clients inbound freight, customs, warehousing, order fulfilment, distribution, and outbound freight to the clients customers. Utilizing the services of a 3PL company is one activity, demand for which has not gone down much even in these testing times. Though more and more organizations are going towards the 3PL companies for specialized logistics solutions, it is imperative that we all pay attention to few fundamentals points before selecting a 3PL partner company. (Also see: 3PL Industry Trends: Emerging Markets, Sustainability, and Fuel Costs Weigh Heavily at AMRResearch).

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Knowing Demand is key
Material flow information through a supply chain is very important to understand the requirements of you supply chain. Gather all historical data and record the number of items, costing information, how many times the demand comes for that item etc. The data should be for finished goods as well as raw material as it is critical to synchronize planning, material requirements planning (MRP), material delivery, conversion to finished goods and outbound product movement. Modeling the past, with appropriate normalization to accommodate projected future changes, will help manufacturers understand the cost-impacting decisions that drive supply chain requirements and identify which components to outsource or retain.

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Start taking forecasting more seriously
If you can predict your requirements and subsequently pass that forecast to your suppliers, then you are much more likely to get what you need, when you need it. However, demand forecasts are notoriously inaccurate. So, do not just multiply (or divide) the historical data with a number to get a forecast for future. Forecast needs inputs from a variety of stakeholders, including procurement, manufacturing, distribution and commercial. Participation from these stakeholders is critical to establish an accurate forecast and articulate key constraints, and ultimately can drive the success of the transaction, as the provider's ability to meet a company's needs and targeted cost structure will be largely dependent on the accuracy of the forecast. An inaccurate forecast likely will result in either excess capacity (and cost) or constrained capacity (and lost sales), with the implications becoming more pronounced as forecast accuracy decreases. Furthermore, stakeholder understanding of the supply chain performance dependencies is necessary to ensure valid root-cause analysis and issue resolution in an outsourced environment. Remember, a better forecast means less error and that predicts a smaller standard deviation, which in turn means you need to provide less buffer inventory.

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Accountability of Demand
The decisions of business leaders and other stakeholder departments like transportation, warehousing, handling/labor, working capital and obsolescence, heavily impact the Supply chain costs Supply chain leaders may determine where inventory is stored, how much warehouse space to lease/own, or specific transportation carriers and modes, but directives such as customer fulfillment rates and order-to-delivery time drive stocking location decisions, inventory levels and transportation carrier selections. While 3PL providers must be held accountable for optimizing costs within their span of control, internal stakeholders also must take responsibility for the cost implications of their decisions, many of which may limit a 3PL's ability to truly optimize.

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A 3PL can improve many aspects of a company's supply chain, but likely will focus on the objectives articulated by its client and reasonably within its control. Set clear objectives to drive provider behavior, such as specific cost savings or reporting, escalation and explanation. Engage the 3PL in discussions prior to finalizing objectives, as its experience and input can provide better visibility into the trade offs of supply chain decisions.

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SMART Goals
The business impact needs to be measured against the key performance indicators like the number of inventory turns per annum, total cost per unit sold, number of stock outs in an year, ontime delivery etc. and this measurement needs to be a continuous process.