Over the past year, 58% of companies surveyed by the Aberdeen Group suffered financial losses as a result of supply chain disruptions. As global organizations face the current turbulent economy, savvy businesses are finding that serialization enables supply chain agility -- giving them a strong competitive advantage without making a large capital investment.
Typically manufacturers have been driven to deploy serialization technology to combat supply chain challenges such as counterfeiting and recall management. But, there has been a visible shift by manufacturers to create a more nimble supply chain empowering businesses to respond proactively to new opportunities and tackle the latest business challenges with ease.
Businesses realize that the increased complexity of the supply chain requires far greater visibility --and opens the door to advantages previously unforeseen in the manufacturing space. Manufacturers can capitalize on new market opportunities, adapt production in response to shifting consumer demand, and gain unprecedented levels of efficiency. The Aberdeen Group concurred in a recent report: "To truly receive the benefits of technology optimization, it is necessary to unite the entire supply chain."
Challenges
- Protecting brand identity. Major brands are a magnet for litigation and bad press if anything goes wrong with their products. Regardless of their culpability when something goes amiss in the supply chain, they are the ones with the most to lose. These manufacturers may outsource part of their operations but that does not negate their risk or responsibilities. Maintaining their financial standing and reputable brand involves greater vigilance in a global supply chain.
The cost benefits of outsourcing to third parties are substantial, yet as soon as manufacturers outsource activities they lose a great deal of control. Mass serialization allows manufacturers to take advantage of the financial benefits of outsourcing while maintaining the visibility that is so crucial into these partner networks.
- Improving recall efficiency. Often manufacturers lack the ability to track batches through the distribution and retail channels. This prevents them from conducting precise recalls and brings added cost for the manufacturer and retailer in lost inventory. With true serialization, manufacturers can manage recalls on a location by location basis, collecting a wealth of trend analysis data along the way.
By knowing the specific product and batch number of items affected by a recall -- whether they reside in a warehouse or at a customer's retail store -- manufacturers can quickly confirm that they've completed and contained a recall. Acting in a timely, efficient manner to stop contamination in a supply chain prevents proliferation of product that could have health implications for consumers, and financial implications for the manufacturer. And more importantly, by applying serialization further back in the manufacturing and procurement processes, manufacturers will have the knowledge to identify and prevent future sources of contamination. - Fighting counterfeits. Six million counterfeit cosmetics/personal care products and 1.2 million foodstuffs and beverage products were seized at the EU border last year. The problem is even more profound in the pharmaceutical market. Fake medicines account for almost 10% of world trade in pharmaceuticals. This problem shows no signs of abating, and may get worse as manufacturers expand partnerships and operations around the world. After all, the more a product changes hands, the easier it is to introduce counterfeits into the system. Businesses need the ability to trace movement of goods in production at each stage in the process, from inception through packing and shipping, regardless of whether these activities are conducted onsite or at partner or contractor sites.
To combat this challenge, many manufacturers are considering mass serialization to create a chain of custody of goods produced. Serialized labels are affixed directly to the item so that it can be monitored throughout the entire product lifecycle. This serialization process also comes in handy for expiration management. For limited shelf life products, batch numbers can be used to determine expiration dates and help enforce "first in, first out" practices. - Bypassing global supply chain disruptions. As companies have begun sourcing from and selling to more regions and adding new carriers, forwarders, logistics and distribution partners across the globe, the supply chain has become more complex. Any manufacturer will tell you, production and distribution can be easily derailed by a number of issues, from natural disasters to rising energy costs to security concerns.
Serialization has enabled manufacturers the agility to adapt when such issues arise. If, for example, a supplier in one location cannot deliver goods to the manufacturer due to a hurricane, additional goods can be delivered to another manufacturing locale to compensate for the interference. This is a powerful way to keep the supply chain on track, regardless of what issues crop up.
New opportunities
- Improving responsiveness. Conversely, manufacturers with serialization in place can take advantage of new business opportunities. A developer of flu vaccines, for example, now has the ability to quickly respond and distribute medications should a flu outbreak occur. With an agile global supply chain, the company can move inventories to counteract emerging threats.
- Capitalizing on consumer demand. Inventory visibility allows firms to better predict when and where to replenish products. This allows them to assess all types of merchandising issues, from displays to distribution patterns. For example, a major retailer now applies data gleaned from serialized RFID tags to more finely tune distribution and store activities. The company recently gained intelligence from its RFID systems that distribution levels for the Game Boy launch needed to be adjusted. This early alert enabled the retailer to increase sales and eliminate out-of-stock issues by refining product stock levels.
- Ensuring Service Level Agreements are met. As manufacturers outsource more and more of their operations, Service Level Agreements (SLA) are used to ensure third party performance. However, outsourcing results in lost visibility to supply chain, procurement information and processes that now reside at partners. This makes it more difficult to ensure SLA performance. Serialization and auto-id technologies can provide the visibility to ensure SLAs are being met.
Conclusion
Serialization technologies offer a powerful means to improve supply chain processes and integrate complex global supply chains. Progressive-minded businesses are realizing this unification of the supply chain can be used not only to react to major challenges but to capitalize on lucrative new opportunities.
Stewart McCutcheon is President and CEO of Acsis, Inc, which delivers end-to-end products, solutions and services that help manufacturers and distributors ensure safe, secure and efficient supply chains. www.acsisinc.com.
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