New York January 28, 2003 Supply chain execution specialist Manhattan Associates has joined with mobile computing solution provider Symbol Technologies and Alien Technology, a provider of radio frequency identification (RFID) tags and hardware, to produce a strategy for delivering a state-of-the-art RFID solution for supply chain execution.
In addition, Manhattan Associates has become the first supply chain execution provider to join the Auto-ID Center, a not-for-profit research organization developing designing the critical elements and creating global standards for so-called electronic product codes.
Working with Alien and Symbol, Manhattan is developing a solution that will integrate RFID technology with its PkMS warehouse management and supply chain execution solution, with the goal of giving companies real-time visibility into the flow of goods through their supply chain, greater operational efficiency and improved customer service.
RFID technology consists of tags or transponders, which transmit electronic product codes (EPCs) and communicate wirelessly to other devices over radio frequency waves. Attached to physical objects, including actual products as well as the cartons, pallets and containers in which the products are shipped, the tags uniquely identify the items. Readers communicate with the tag via radio frequencies. In a distribution center (DC), once within range of a reader, the data is captured, accepted and then executed against by a supply chain execution solution such as PkMS.
Experts believe that for retailers and certain other vertical industries, RFID tags could offer enormous opportunities to improve supply chain operations, including reducing stock-outs due to supplier vendor-managed inventory or replenishment, automating proof of delivery, improving security of products, reducing warehouse labor costs, expediting cross-docking, improving physical counts and reconciliation, and improving work-in-progress inventory and aging/quality control.
"The value creation opportunities with RFID are significant and the technology will change the face of business," said Eric Peters, Manhattan Associates' senior vice president for strategy, marketing and alliances. "The greatest potential will be in the end-to-end supply chain, benefiting retailers, vendors and ultimately consumers. RFID will increase the accuracy and timeliness of real-time product information to tailor assortments, improve productivity and optimize replenishment decisions."
Manhattan said that with a RFID/PkMS integration it would be possible to have totally automated logistics tracking processes, enabling products to pass through the DC without manual checking and scanning. For example, when an incoming shipment is physically moved into the four walls of the DC, the facility's antennae capture information from the embedded RFID tags. These antennae then pass the data onto PkMS, which accepts the information and automatically receives the inventory, thereby eliminating the manual receiving processes of counting and scanning individual items, cartons and/or pallets. This type of system can offer real-time inventory control, tracking and alerting capabilities.
Manhattan Associates demonstrated a prototype of this solution at the National Retail Federation's recent annual conference. For this "proof of concept," the provider ran eight RFID-tagged cases on a cart through a "gateway" to represent a pallet of goods being received. A RF reader automatically scanned the boxes simultaneously and instantaneously as they passed through the gateway and sent the information to PkMS, where the goods were recorded as received.
David Landau, director of product management at Manhattan Associates, acknowledged that, while the promise of RFID is great, challenges remain, including cost. "Even at $0.05 a tag, which is the magic number that everyone is throwing about, it's still not cheap," he said. Companies will want to see a solid business case to justify investing in millions of tags to track products through complex supply chains, and solution providers like Manhattan and its new partners are just beginning to build the return-on-investment models for these types of solutions.
In addition, Landau noted that RFID will represent a paradigm shift for supply chain management in the same way that the introduction of scanners into warehouses represented a shift 15 or 20 years ago. "This ultimately is going to change workflows in the warehouse," he said. "There are going to be a lot of process changes." For example, RFID holds the promise of removing a good deal of the current scanning from the overall workflow within the warehouse and at other links in the supply chain.
Finally, the RFID industry has yet to fully adopt standards of the sort that made barcodes a reality in decades past. "A barcode representing a product ID really wasn't effective until everybody went to the UPC standard," Landau explained. "Today, an EPC, or electronic product code, really hasn't been standardized." Not that the industry isn't working on standards. In fact, Landau said that the Auto-ID Center is due to come out with the first round of standards later this fall.
Already, some pilots are underway as early adopters such as Procter & Gamble, Gillette, Unilever, J. Sainsbury and Tesco move forward with experiments to demonstrate the ROI on RFID. Alien, for example, announced earlier this month that Gillette is buying half-a-billion of Alien's radio-frequency identification (RFID) tags for use in its supply chain and in retail stores over the next several years in the first large-scale test of the new product ID technology.
With such major players in the consumer goods field pushing forward, Landau believes that eventually perhaps two years down the road larger companies in this sector could begin mandating RFID usage by their suppliers, with wide-scale adoption coming a year or two later. With the technology becoming less expensive over time, Landau concluded, companies appear poised to finally realize the promise of RFID. "We're starting to see the hype turn into reality," he said.
For more information on wireless tracking solutions for the supply chain, see "Needle in a Supply Chain Haystack," the Net Best Thing column in the January 2002 issue of iSource Business.