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.

Say a specific number of pallets arrive at the loading dock, Jakab explains. In the past, this information was captured only after the shipment was brought into the facility. By capturing this data remotely in real-time right at the loading dock the entire supply chain can be compressed, i.e., order delivery trips the payment and invoice process, thereby decreasing the time it takes to get cash quicker. Customer service is enhanced, Jakab adds, since the wireless device stamps the date and time of the delivery. All of this has a positive impact on the bottom line, he says. 

Indeed, wireless technology makes static inventory in the warehouse as mobile as the forklift operators who move it. By equipping forklift operators with wireless telephony, a fast, mobile management of inventory in and out can be accomplished, says Sbihli. VerbalTek Inc. has a twist on this scenario. The San Jose, Calif.-based company markets speech recognition software for wireless devices that, among other uses, frees forklift operators from having to input data using a keypad. This way they can operate the forklift continuously, using discrete words and phrases to communicate how many pieces of merchandise are left in stock, says Michael Jameson, VerbalTek marketing manager.

Link Leverage

Inventory management is just the first link in the supply chain to benefit from wireless applications. Other links are targeted, such as procurement of materials and supplies, where wireless replaces the current batch mode store and forward interface with something that is really real-time. Margevicius explains that companies, at present, wait for orders to accumulate in a batch mode setting where they are stored and kept, he says. Wireless basically makes the store and forward' go away, by making the transaction instantaneous.

Mobile, wireless procurement is underway in the construction industry to order lumber and other supplies the moment they are required. Construction foremen at the building site are using wireless devices to place orders, route them through the appropriate workflow approval channels and, from there, to the supplier for delivery, says David Thompson, director of marketing at PointSpeed Inc., a San Mateo, Calif.-based purchasing services provider.

In some cases, suppliers may stage trucks near the construction site, each with a range of different supplies. Drivers are cell phone-enabled to head right to the site the minute an order is placed, Thompson notes. In effect, the truck becomes a moving warehouse. Once supplies are received, the site foreman and the truck driver wirelessly dispatch proof of delivery to the appropriate parties, triggering invoice and payment processes. Since time is money lost in the construction business, this strategy has obvious financial implications, says Thompson.

By instantly fulfilling the foreman's needs, the supplier also obtains a competitive advantage, says Brian Reed, vice president of product management at MERANT Inc. People like to talk about how the world was changed by overnight freight delivery, Reed adds. Now imagine what delivering in an hour will do. That's the promise of wireless. It's the thing that gives instant gratification.

Timely notification of price changes for commodities and other supplies is another procurement plus. If you make or build raw inventory and the commodities fluctuate during the day, the instant notification of a price change has enormous financial consequences, says Margevicius.

A company that manufactures personal computers, for example, is affected by gyrating memory price fluctuations (the volume of memory you can purchase in a chip), he notes. This price is not static by any means. If a deal crops up during the day and you're nowhere near a machine to take advantage, you're out of luck. By using a wireless device to automatically alert you of a price change, you can jump on a deal and save some big dollars.

Sbihli agrees. If something you need is suddenly cheap in Sri Lanka, that's a huge benefit, especially if you're looking at a commodity marketplace, a Net marketplace like in chemicals, he says. If your whole job is based on your ability to manage the cost of a certain chemical so your margins stay high, obviously you'll want to know the most up-to-the-minute cost of that chemical.

Instant notification of commodity prices is underway at World Commerce Online, a B2B exchange for perishable goods. A price point in a particular market, say cabbages or tulips, may indicate that it is advantageous to harvest immediately, explains Denise Stevens, vice president of applications and solutions at Ztango Inc., the Herndon, Va.-based wireless application service provider that hooked up the exchange. We've given them the ability to obtain this information, as well as fulfill orders and track them, Stevens says.

Logistical Leverage

Wireless applications also can boost logistical performance. G.O.D. Inc., a Port Newark, N.J.-based integrated freight forwarder for Kodak, Sherwin-Williams and other major Northeastern companies, uses Descartes' solutions tools to wirelessly notify truck drivers of their daily routes. We deliver about 4,000 bills of lading a day, operating through a hub-and-spoke architecture like FedEx, says Heath Snow, G.O.D. director of technology.

Before using wireless, our 300 drivers would have to report to the spoke facility to receive their manifests (shipment pickup and delivery data). With 4,000 shipments a day broken into different geographical locations, that's a lot of routing to prepare for that morning's deliveries.

Once drivers are equipped with PDAs (a RIM 950), they can access their manifests the night before making their rounds. They just jump in their trucks now and start driving, says Snow. Then, as soon as their route is done for the day, they can plan the next day's routes. All this cuts down on time, which cuts down on money. The strategy also gives drivers the ability to wirelessly notify the hub of completed deliveries or damaged shipments. We're delivering JIT (just in time) for our clients and giving them real-time tracking and tracing, says Snow. That has truly boosted our customer satisfaction levels.

Imagine the Possibilities

What else can wireless do, if not today then someday? Michael Parker, a Ztango software architect, points out a manufacturing application benefit, smack dab in the middle of the supply chain. We're working on a wireless notification process whereby industrial machines literally alert engineers and technicians of the need for repair, replenishment or restarting, Parker says. Say a silo containing industrial gases is near depletion or a machine shuts down. Using wireless, the machine can issue a command to technicians of what needs to be done.

Think that's pie in the sky? Where wireless really meets the Jetsons is its relationship to location awareness technology, still in the research and development phase. Reed, from MERANT, envisions railcars, shipping containers and actual products that tell companies when they have arrived and/or are leaving a facility. Can freight actually talk? Sure, says Reed. Think of it as bar code technology without the scanning. By using a sensing device in a warehouse, each time a truck or box equipped with identifying technology enters the facility, it wirelessly communicates its presence to supply chain information systems.

There's more. Say a truck with a particular raw material enters a steel mini-mill. The notification of its arrival could automatically drive computers to reconfigure manufacturing processes, from making pistons to some other specialty product all dictated by the specific raw materials that have just arrived. Now that's what I call a seamless supply chain process, says Reed.

And some companies are getting close. Motorola Inc. has developed a radio frequency technology that combines silicon with printed ink to enable manufacturers, distributors and retailers to talk to their products throughout the supply chain, says Francois Dutray, vice president and general manager of Motorola's worldwide SmartCard Solutions division in Schaumburg, Ill.

By developing these so-called smart tags and embedding them into a product's packaging, companies can bypass inherently passive bar code packaging, which require manual scanning of inventories. Smart tags, by contrast, emit radio signals that allow companies to communicate with their packaged goods continuously and in real-time, after they leave the warehouse and move from factories to shelves to checkout counters.

In April, Motorola signed a memo of understanding with International Paper in which the Purchase, N.Y.-based company would become the first global producer of packaging products using the new technology for its retail, pharmaceutical and food services customers.

Reed sees wireless location sensors also in use at the end game of the supply chain customer service and sales. A department store fitted with location sensors can be notified immediately when an important customer walks into the shop, assuming the customer carries a wireless device, he explains. Say this person loves Hugo Boss suits. The moment he steps into the store, his cell phone or PDA would alert the relevant salesperson. Before he even reached the suit section, the salesperson could have a rack of size-42 Hugo Boss suits in a selection of colors there, ready and waiting. Meanwhile, even if the salesperson has never met the customer before, he or she is ready with, How are you today, Mr. Smith?'

This is just the beginning of the encounter and its impact on the supply chain. All kinds of interesting things can happen, in an automated sense, from the moment the customer is identified, Reed explains. Imagine the customer buys a suit. This fact is now propagated wirelessly through the entire supply chain. Hugo Boss now knows that the department store in Raleigh, N.C., just sold a suit to Mr. Smith, indicating the delivery truck should add another suit for that day's delivery. Thanks to wireless, the supplier opens a window into its customer's inventory. This is real real-time supply chain management. Expect it in about three years.

Yet another application is advertising, particularly information about an imminent or ongoing sale. Companies have three opportunities here the ability to target customers based on their specific demographic data and tastes; the ability to leverage advertisements to the geographic presence of a consumer (thanks to global positioning satellites); and the ability to tailor an ad to the moment. For example, a golf club manufacturer may offer a discount to wireless golfing aficionados on a sunny day, knowing the pull of good weather.

The geographic benefit is especially enticing. Says Margevicius, Someone with a cell phone driving through Phoenix around exit 5 at lunch time might receive an ad from, say, Domino's Pizza of a discount at the nearby restaurant, just exit and make a left.' A similar marketing strategy is underway in West Nyack, N.Y., where GeePS.com, a wireless Application Service Provider (ASP), recently launched a wireless advertising service with 50 retailers at the Palisades Center mall. Shoppers can receive moneysaving promotions on their cell phones by registering for the program at the store's kiosks or through its Web site. GeePS.com says the registration process sidesteps the privacy issues associated with unwarranted messaging, i.e., consumers are giving their permission to be bothered.

Integration and Optimization

Ultimately, wireless will become an integral part of a new, futuristic supply chain information infrastructure. This is the Supranet visualized by Gartner the anticipated interplay of wired and wireless telephony, data, satellite, cable, and broadcast television and radio communications. Wireless will be part of a larger interaction, integrated with phones and other wireless-connected devices, Margevicius explains.

For example, a truck driver may request route directions from a cell phone, but receive the instructions by fax. Or a business may order a component sold on a B2B exchange using a PC but check the status by cell phone. To get to this point of multiple device interactions, several obstacles must be surmounted.

Most are in the wireless realm, fundamental to the shortcomings of the technology as it stands today, from small screen size to limited bandwidth availability to connecting problems. Anyone who has ever owned a cell phone knows how frustrating it is when driving long distances and being unable to make a call, typically when you need it most like after a fender bender. The telco hurdle is daunting, says Sbihli. Companies like BellSouth, which is in the top 300 markets and has great coverage, only represent 3 percent of the land mass of the United States. Not many large companies operate in less than 3 percent of the United States.

Another challenge is dissimilar wireless technology, particularly in relation to accessing the Web. In the United States and Europe the predominant way to access the Web is through WAP-enabled devices, while Japan is hooked on i-mode standards developed by Tokyo-based NTT DoCoMo. Think of WAP and i-mode as Windows and Unix they do the same thing, just differently. And there are other standards floating around as well. Since wireless is an emerging technology, you don't have two or three device suppliers, you have seven, says Sbihli. You don't have one or two dominant middleware suppliers, you have multiple ones. So the question becomes, which ones do you pick?

The WAP dial-up Internet process has been criticized for the long time it takes to connect. In addition, a new connection must be made each time the user wants to access another online service an expensive proposition for even deep-pocketed companies. DoCoMo's i-mode technology is closer to the standard Internet process, i.e., it's always on and guarantees unlimited usage.

Ultimately, expectations are that both WAP and i-mode will evolve into a new standard that supports much higher bandwidth, the so-called G3 that promises greater operability, less complexity and more robust information. Once we have this worldwide standard, people like me won't need three devices to work in Japan and the rest of the world, Reed says.

Meanwhile, many European phone companies are building wireless Web portals, given predictions that more than 1 billion WAP-enabled phones will be floating around Europe within two years. Not that they won't have competition Internet stalwarts like America Online, MSN and Yahoo! are hustling to extend their first mover status into the wireless device arena.

The final hurdle is screen size. Obviously, what you see on the Internet or company Intranets is not what you'll see on a small cell phone, although new-generation wireless devices made in Japan offer increasingly larger screens and even color formats. Several companies, such as Novarra in Arlington Heights, Ill., provide tools that map and shrink standard Web sites into wireless-size formats. Companies can also tailor their own Web sites to fit the confines of the medium. The question is how much pain a user is willing to go through to obtain the benefits of wireless as it stands today, says Margevicius.

Of course, these drawbacks (other than screen size) are largely non-existent in a closed networking environment. It's when companies get outside, cover great geographical territory and utilize Net-based supply chain strategies that problems surface. These, too, will be solved as time progresses. The value of wireless is just too great to prevent its wider use, Margevicius contends.

What will the supply chain be like when that halcyon day arrives? Michael Deering, a principal and senior vice president at Dynamis Solutions, painted a compelling scenario. Say you're looking to buy a particular product, Deering says. You would design what you are looking for on your wireless device, which would communicate that information all the way back through the supply chain, link by link. As soon as the consumer puts through the order, the component manufacturer begins to manufacture the components, the distributors begin to move them ... and so on, producing a virtual inventory environment.

Deering explains that a company would not put inventory into the system until it had the order from the customer in hand true built to order,' he says. The challenge is to do this in as timely a fashion as possible to make the customer happy. That way, you not only take cost out of the supply chain, you gain a competitive edge by giving customers what they really want in a reasonable amount of time.

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