As the recession continues into the spring of 2009, many manufacturers are responding to decreased levels of activities with trading partners not only by cutting costs, but also by curtailing their supply-chain operations and waiting for consumers -- and retailers -- to start buying again.
But the manufacturers that will be the most successful when business picks back up are not idle. They're using the current lull in external activities to exploit their supply chains to bring costs down, or to wring profits and working capital while positioning themselves for growth in the eventual recovery -- all by simplifying processes and increasing efficiency.
They are incorporating a standards-based approach to product identification and data capture in their "four walls" applications locally, like asset management, work-in-process flow, and yard management. More important, they are planning ahead for working with their trading partners -- thinking globally -- by implementing data sharing with partners everywhere across their operations and supply chains, so they have actionable visibility achievable through standards.
They're thinking globally, acting locally, and seeing everywhere.
Simply put, the supply chain standards in question here help companies answer simple questions, like "Where's my stuff?," "When did my stuff move?," "When did Company X receive my stuff?," and other variations. To answer these questions effectively, companies need three things:
- A standardized way to give each and every physical thing (a product, some other good or asset) and location a unique identity;
- A tool kit of automatic data-capture methods (e.g., one-dimensional bar codes, 2D bar codes and RFID) that can quickly capture and communicate the same unique identity; and
- A library of standard data-sharing and exchanging techniques that add clear context to the unique identity, product attributes and can communicate status, location, and business process steps all along either the internal path a "thing" is taking or at any point along the supply chain.
Not all companies may follow the standards path -- in fact, there are entire industries that have gone their own way. It's helpful to compare the different approaches two theoretical companies might have for providing visibility in their own company.
Company A takes a "quick to implement" approach and starts putting its own catalog or SKU numbers in a proprietary bar code and tracking those numbers on a spreadsheet. Company B goes the GS1 System standards route, recasting its current SKUs as Global Trade Item Numbers and its inventory locations as Global Location Numbers, and follows the standards for bar codes. Company B also adds information about its trade items to the Global Data Synchronization Network, so it can exchange accurate and timely product and price data with trading partners, and begins the process of using EPCglobal-compliant passive RFID to track and trace its assets.
Both Company A and Company B can answer the "Where's my stuff?" question for their current operations. In today's challenging economic times, one could argue that Company A took the prudent approach.
The real test, however, comes when the inevitable recovery begins, and a new customer approaches both companies about establishing a trading relationship. While Company A has to scramble to build translation tables from its own SKU numbers and revamp its tracking system to meet its new customer's expectations, Company B just says "Okay, when do you want the first shipment?" The resources Company B put to work just paid off, and puts it far ahead of its competition.
On the customer side, the biggest benefit is in getting this information from all suppliers in a uniform, standardized manner that can help them give their end-customers the right product at the right time with the right information.
Data synchronization helps any pair of trading partners put collaboration on a fast track, and can help them save time and cost in introducing new products, significantly improving the efficiency of the order-to-cash cycle.
RFID operations based on the EPC standard can make dramatic improvements. One company, after deploying an EPC-based RFID system in its warehouse in 2008, was able to reduce its team from 24 forklifts and drivers to 16, a 33% capital savings in forklift rentals alone -- even while increasing its warehouse productivity over the previous year. A similarly equipped customer company could take these shipments and enjoy equivalent financial and productivity gains, with the same visibility.
For more than 30 years, businesses small and large, in a host of industries, have used the GS1 System of standards to effectively answer the "Where's my stuff?" questions, both locally and across their global trading partner networks.
Being able to use the same standards both internally and externally -- locally and globally -- has positioned those businesses for maximum flexibility and to respond quickly to marketplace changes, whether those changes involve acquiring a new plant that has to be integrated into their internal systems, or working with new trading partners on a different continent.
And today, the "stuff" questions have taken on new significance, with government, media and shareholders questioning the source of everything from children's toys to pharmaceuticals. Companies in every sector are looking at ways to improve the speed and effectiveness of recall processes, as well as information that can be used to optimize truckloads to save on fleet miles, thereby reducing their carbon footprint.
The business leaders steering their companies through the recession of 2009 would be well-advised to look at their supply chains and assess whether their use of global, open supply-chain standards is sufficient to maximize their return on investment and position themselves for profitability. The futures of their businesses may depend on it.
Joe Zenobio is the Chief Product and Solutions Officer of GS1 US, a not-for-profit organization dedicated to the adoption and implementation of standards-based, global supply-chain solutions, including unique-numbering and identification systems, bar codes, Electronic Product Code-based RFID, data synchronization, and electronic information exchange. GS1 US operates the subsidiaries and brands 1SYNC™; BarCodes and eCom™; EPCglobal US™; GS1 Healthcare US; and RosettaNet. www.gs1us.org
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