The Supply Chain Unplugged

[From iSource Business, May 2001] The Home Depot hates static inventory. The Atlanta-based mega-store, with $38.4 billion in 1999 revenues, likes inventory to fly into its store and off its shelves without ever lying around in a warehouse. The company calls the strategy mobile inventory, and the glue holding it all together is wireless technology.

Although seemingly invisible, wireless technology is palpably poised to be the next killer app in supply chain management. Many diverse companies are using wireless applications hand-held devices that stream information to and from remote corporate databases in their inventory management plans. Once serious stumbling blocks like limited bandwidth, different technology protocols and privacy issues are surmounted, much broader wireless supply chain solutions are expected to take hold.

Imagine trucks, staged around major cities, that are filled with company merchandise, waiting to be alerted about immediate deliveries. Or procurement specialists notified the minute no, the second commodity and component prices budge an inch. What about packaged products that automatically tell corporate databases they have left or entered the warehouse? Or retail stores that know when a top customer, who is a size seven and loves black Manolo Blahnik shoes, has just walked through the doors? Wireless takes such musings and makes them real.

How does it pull this off? Well, in supply chain management, the seams between disparate processes are just as important as the processes themselves. Affixing those seams, however, has been a problem. Wireless can be the connecting technology, dictating the movement of goods from the raw material stage through to the end user. Each process sourcing, procurement, order processing, inventory management, logistics, warehousing and customer service can be accomplished via wireless communications, offering real-time decision making and mobility where none presently exists. The supply chain is ripe for wireless because it is very disconnected and, yet, very mobile, says Scott Sbihli, senior manager at Dynamis Solutions Inc., a Farmington Hills, Mich.-based Internet professional services firm. It's just the kind of situations wireless applications excel in.

Why Wireless?

Current promise aside, the unplugged supply chain still resides largely in the future. Techno-research gurus at such companies as Gartner Group predict wireless will be an integral part of the so-called Supranet, an uber-network of all networks, in which mobile, wireless data communications are plugged into the Internet and other communications networks, such as voice and data, television and computer. These heretofore independent networks will interact to drive unparalleled efficiencies in the supply chain. Wireless is the missing link in the Supranet, says Mark Margevicius, a Gartner research analyst in Cleveland, because it creates a thread of continuity in all these interactions.

Wireless devices remove the constraint of a fixed location for a terminal, enabling services to be based on the user's current location wherever that may be, Margevicius explains. Companies and customers will get products faster and most certainly at a cheaper cost because of inventory systems that get updated in real-time.

The use of wireless technology to access the Internet (via the Wireless Web) and integrate with company extranets, Intranets and Enterprise Resource Planning (ERP) systems is just beginning. Impediments to growth are obvious, from the exasperatingly long time it often takes to connect to the Internet to the tiny screens on cell phones and PDAs (personal digital assistant devices), which limit messages to brief text. These shortcomings are bound to change, due to the immediacy, mobility and convenience of wireless devices literally forcing the technology to improve.

More than one million PDAs were sold in the United States in 1999, a 60 percent increase from the previous year, according to researchers at NPD Group, based in Port Washington, N.Y. An informal poll by this magazine of company willingness to use wireless devices for e-procurement needs indicates overwhelming interest, with 62.5 percent responding in the affirmative.

Some companies are already there. The Home Depot has used wireless technology in its inventory management system for three years. Store associates roam aisles armed with a penpad PC and scanner that alerts company servers when merchandise is low. The associates eyeball the shelves to determine what is needed and enter it into the computer, says Curtis Chambers, senior manager of information services. This information is then wirelessly routed for approval and dispatched as an EDI [Electronic Data Interchange] transmission to our suppliers.

The penpad PC, with software provided by Rockville, Md.-based MERANT Inc., informs associates how much merchandise should be on shelves, given current sales experience and market data. Despite these supply chain benefits, that's not the main reason why Home Depot went wireless. The idea was to find a way to keep our associates on the floor at all times to help customers, says David Pennington, Home Depot's IS manager. Previously, the associates would write down inventory requests on paper, walk back to store offices and transcribe the data into computers. Given the store's 50,000 SKU's, some associates must have been marathoners.

Inventive Inventory

Wireless technology is also finding a home inside the four walls of the warehouse. As supplies and products arrive at the door, the facts about them can be wirelessly communicated to company inventory management systems. The earlier companies can capture information about shipments and communicate it, the better they can plan, says Michael Jakab, vice president of business development at Descartes Systems Group, a Waterloo, Ontario-based supply chain management company.