Responding to Wal-Mart's RFID Mandate - ARC Advisory Group

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ARC Strategies • December 2003 The Retail Supply Chain and RFID Transportation Retail DC Transportation Store Backroom Store Shelves Active RFID is used to track shipments from overseas, to prove that shipments are secure, and to speed customs clearance Passive RFID is used to automate receiving & shipping; Barcodes for Putaway & Picking GPS or Wireless is used for tracking inventory in motion, active RFID can be used for tracking trailers in large yards Passive RFID is used to receive at the store and to find inventory in the store back room, the use of “smart” shelves is a few years off for most retailers ROI Is More Compelling for Retailers Manufacturers with global supply chains, however, have a better chance of realizing benefits, but the implementation scope is more complex. Companies that import from Asia, for example, can track their goods from origin to destination using Supply Chain Event Management (SCEM) software coupled with active RFID tags on ocean containers, Global Positioning Systems (GPS) on ships and trucks, and passive RFID tags on pallets and cases. Having greater visibility into “real time” events can lead The impact of RFID on business to reductions in inventory, less product obsolescence, and processes and supply chain other benefits that ultimately justify the investment in configurations remains to be RFID and other wireless technologies. Savi Technology seen, and it will be years before and Descartes Systems Group are leading solution providers in this area, but vendors like Manugistics and SAP case studies and best practices emerge. are also active. Nonetheless, the goal today for most Wal-Mart suppliers is to determine the most cost-effective way to comply with the retailer’s mandate. Designing and conducting pilot tests is a critical part of this process. Planning and Conducting RFID Pilot Tests It’s important for companies to remember that using passive RFID technology and EPC for supply chain management purposes is still relatively new. The impact of this technology on business processes and supply chain configurations remains to be seen, and it will be years before case studies and best practices emerge. At this stage of the game, learning about the technology and conducting pilot tests should be the primary focus. The information gathered from 6 • Copyright © ARC Advisory Group • ARCweb.com
ARC Strategies • December 2003 these tests can be used to develop Return on Investment (ROI) models and it can help answer key questions such as: • When should the tags be applied, as part of the packaging process or at the distribution center before shipping? • Should the tagging process be done internally or handled by external partners such as co-packers or third party logistics providers (3PLs)? • What impact would changes in ramp-up schedule have on these decisions? As with all initiatives of this nature, assembling a cross-functional team is very important. Team members must include high-level managers that understand manufacturing and fulfillment process flows. Internal experts on RFID (if they exist) should also be included, along with representatives from IT, finance, material handling, and industrial engineering (for time/motion studies). Timing Your RFID Investments The conventional advice is that companies should start investing and piloting RFID as soon as possible. In some respects, this is good advice. There is likely to be a shortage of consultants with strong capabilities in EPC RFID. However, there are three good reasons to wait until at least the middle of 2004 to begin active tests. • Early implementers will be the guinea pigs. EPC RFID consulting expertise does not exist. The early adopters will effectively serve as the training ground for consultants. Therefore, companies that wait will have access to more experienced consultants and obtain insight into the successes and failures of the early adopters. • Despite the availability of agile readers, companies that invest early may have to replace RFID hardware down the road. The specification standards for Class 1/Version 2 tags have not been finalized. RFID providers like Matrics, Alien Technologies, AWOD, and Thing Magic have the early lead when it comes to EPC RFID. However, the longer a company waits before investing in hardware, the more finalized the standards become and the more choices they’ll have in suppliers, as established companies like Symbol, Intermec, Texas Instruments, and Siemens introduce their own solutions. Copyright © ARC Advisory Group • ARCweb.com • 7
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Responding to Wal-Mart's RFID Mandate - ARC Advisory Group

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