Unisys Says Quest for Profit and Security Will Drive Supply Chain Evolution in 2005

Combination of technologies, business processes and regulations will create networks of "virtual warehouses"

Combination of technologies, business processes and regulations will create networks of "virtual warehouses"

Blue Bell, PA — December 2, 2004 — As the government and private industry ramp up efforts to strike a balance between security and profit, experts at Unisys Corp. predicted that the infrastructure and standards needed to drive velocity in global logistics networks will begin to fall into place throughout 2005.

According to Unisys, containers will begin to evolve into virtual warehouses that span oceans and continents. This evolution will emerge as track-and-trace technologies — such as radio frequency identification (RFID) — and merge with refined business processes and industry-wide standards and regulations designed to address supply chain efficiencies, global security and product counterfeiting.

The amount of data processed to safeguard global supply chains will grow in 2005, Unisys experts said, because of greater granularity in tracking goods — from manufacturer to container to store shelf. Managing and analyzing the increased data will require more powerful collection and faster decision-making, both of which pose new challenges for companies as they seek to secure their goods, improve their competitive positions and simultaneously grow their profit margins.

"Leading companies know that processes and technologies that enhance security yield efficiencies that directly impact the bottom line by reducing inventory, logistics costs and out-of-stock situations," said Peter Regen, vice president of Global Visible Commerce at Unisys.

Unisys has more than a decade of auto-identification experience, including managing one of the world's largest RFID implementations for the U.S. Department of Defense and piloting technologies and processes for the global supply chains of Motorola Inc., and two divisions of Sara Lee Corp. The latter engagement is part of the Department of Homeland Security's Operation Safe Commerce (OSC). Unisys worked on four of OSC's 18 pilots.

Regen believes several other factors/trends will come into play over the coming year:

1. Counter-terrorism and other security initiatives and port modernization efforts will accelerate, as will the implementation of auto-identification solutions.

Regulators and policymakers will seek industry expertise and partnerships to develop regulations and legislation that protect and enable the economic use of auto-ID and other track-and-trace technologies.

2. Speed-to-value of supply chain/logistics process improvements will be top priority.

Visibility into the status and movement of goods throughout the supply chain will be a prerequisite, and a new focus on optimizing product lead times will emerge. Visibility is particularly vital in supply chains for highly perishable goods, medicines and market-timed commodities such as apparel. Increased visibility into goods-in-motion will support novel approaches to manufacturing and distribution.

3. Next-generation federal and state/local supply chain improvements will emerge.

Preparedness — that is, material acquisition and stockpile management initiatives to support "first responders" — and homeland defense will grow in number and breadth. These initiatives will cut across federal, state, county and municipal organizations, involving nearly every commodity. Cost versus readiness will become the key driver for material planning and logistics process excellence.

4. Secure, passive RFID will be ready for primetime.

EPCglobal's "gen2" tag will be approved by both EPCglobal and the International Standards Organization (ISO) by the end of 2005. This tag, which carries an electronic product code (EPC), will be readable worldwide and will be more secure than existing passive tags based on its use of encryption and other protocols.

5. "Big buyer" compliance will expand; leading suppliers will achieve real business benefits.

Current big buyer mandates will be expanded to more distribution centers and stores, while additional organizations, including government entities, will establish mandates. Leading suppliers to multi-billion dollar companies like Wal-Mart will derive real business benefits across their supply chains.

EPCglobal's information systems network will go live in 2005, enabling data sharing across enterprises. Business and trade networks will invest in greater visibility into the position, movement and status of goods, including the ability to track, demonstrate product pedigrees, prove chain of custody, and optimize stocking and positioning for best possible order fulfillment. This visibility will depend upon integrated data flowing through a seamless, secure infrastructure chain as the leaders move beyond the current "slap and ship" approach. RFID tag reading accuracy, reliability and repeatability will continue to improve along with unit cost reductions.