Using RFID to gain competitive advantage at the heart of the true value creation activity
By formulating mandates and forcing manufacturers to slap radio frequency identification (RFID) tags and ship their products, retailers are sending the unambiguous message that they intend to take customer satisfaction to the next higher level. Initially, by tapping into the fundamental application of RFID accurate and beyond line-of-sight tracking and tracing of their stock retailers plan to enhance the shopping experience of their customers by giving them what they need when they need it, and, more importantly, driving their costs down while doing it.
At the same time, progressive manufacturers are also thinking beyond, what is in it for us? Incidentally, today's manufacturers are also chasing the dual but equally important objectives of higher service levels and lower supply chain costs. By meaningfully automating their critical value-add processes and driving the analogy of strong supplier/customer relationships deeper within the shop floor, manufacturers can develop greater agility across their supply chains and execute customer orders seamlessly and cost effectively.
This paper addresses how RFID can be leveraged to gain competitive advantage at the heart of the true value creation activity.
RFID is a wireless data collection technology that uses devices like small chips or tags with antenna, which can store data and respond to signals from readers. Typically the tag is attached to an item, pallet, container or equipment, and the data embedded can include identification/location/time, specification, service or warranty information. By recording relevant information at critical control points across the shop floor and placing readers at right locations, real-time process data can be captured. This enables fact-based decisions and provides the much needed capability to flex operations just at the right time to meet the ever changing load on the plant caused either by market conditions or by any one of the dynamic situations within the plant, like a machine going down, labor allocation imbalances, wrong tooling, raw material stock outs, and so on.
An AMR research report (April 22, 2004) indicates that companies must consider transforming their current supply chains into a demand-driven supply network in order to execute demand with agility and consider manufacturing as an important node in this transformation. The report also states that demand responsiveness requires synchronous collaboration of in-house and contract manufacturing nodes, and success in providing manufacturing visibility drives responsiveness to meet demand and will yield enhanced profitability. Early adopters driving these types of demand-based transformations are looking beyond the current MES applications for tools and technologies such as enterprise manufacturing intelligence and RFID to incorporate their heterogeneous manufacturing landscape into the supply network operations, which also includes trading partners like logistics providers, wholesalers, distributors and retailers.
As these next-generation strategies start to permeate upstream across value chains, adopting and extending the right technology to support end-to-end supply processes is a requirement to eliminate any weak links and ensure the delivery of measurable benefits. RFID technology by definition provides real-time business intelligence that can be leveraged at the very least to build responsiveness and cut out waste and unproductive practices. In the world of manufacturing, any plant manager would be thrilled to hear about ways to build cohesion between different units within the shop floor. RFID enables the analogy of strong supplier-customer relationships to be applied within and between the units of an enterprise. For example, by knowing real-time event occurrences in the sub-assembly unit, its supplier the parts room can develop responsiveness. Or, by knowing real-time event occurrences in the final assembly unit, its supplier the sub-assembly unit can flex at the right time to meet the changing demand. And across the enterprise, the same is applicable to distribution center final assembly, and the point-of-sale distribution center relationships. The benefits of leveraging RFID technology within complex manufacturing environments can be accrued to achieve the following operational as well as financial advantages. Some of these are explained later in the paper.