RFID Strategy -- RFID's Role In The Synchronized Value Chain

June 16, 2005
Marlo Brooke is president of Avatar Partners (www.avatarpartners.com), a consulting services organization specializing in strategic planning and systems integration for supply chain. Radio Frequency Identification (RFID) may be dominating the spotlight ...

Marlo Brooke is president of Avatar Partners (www.avatarpartners.com), a consulting services organization specializing in strategic planning and systems integration for supply chain.

Radio Frequency Identification (RFID) may be dominating the spotlight these days, but the prized technology is merely a stepping stone in the overall vision of the future of business and supply chain dynamics. RFID is, in fact, a convenient tool designed to execute the vision of EPCglobal, a worldwide effort supported by major players like GS1 (formerly EAN International), GS1 US (formerly the Uniform Code Council), healthcare consortiums and the FDA. The goal of EPCglobal is to automate the supply chain in such a way that would significantly reduce the immense costs and risks that are exponentially crippling trading partner relationships today. Ironically, to many manufacturers, these problems are not obvious in day-to-day operations. Companies have lived with the problem for so long that they hardly notice its existence. And yet, according to some, these inefficiencies cost even small manufacturers millions of dollars per year.

The remedy? A totally networked economy in which there is perfect synchronicity between supply and demand, such that the moment an item is used, purchased or consumed, an automated trigger produces the right and appropriate action to the supplier all the way back to raw goods procurement. Right product, right place, right time. We call this the Synchronized Value Chain.

How does EPCglobal envision this happening?

By essentially computerizing -- with an RFID device -- all widgets, uniquely and individually, so that an organization can have total visibility of the movement of all goods in real-time synchronicity. This unprecedented micro-level visibility suddenly opens awareness to the dark spots in the supply chain, the "unheard" areas where companies once made generalized assumptions about what was happening without empirical data. Assumptions in supply chain are not good: they create underages and overages of raw goods and inventory, the need for greater storage space, unnecessary transportation costs, customer service issues, and lost sales.

Collaboration Is Ultimate Goal

Consulting firm AT Kearney suggests a seven-step implementation path whose ultimate purpose is that trading partners become tightly collaborative in the critical integration points between supply and demand. In its more advanced implementation, joint trading partner activities like collaborative sales and forecasting (CPFR) and collaborative management of transport activities (CTM), will create a seamless dynamic in which every move that a company makes is linked synergistically with the demand in the marketplace. Of course, business already operates this way to some degree. But at what cost?

Costs have increased exponentially because of increasingly complex relationships between trading partners, driven largely by globalization. Worldwide sourcing creates entirely new challenges with respect to distribution, starting with basic cultural and communication barriers, and culminating in very expensive, non-integrated data silos. Collaboration comes at the end of this overall vision, and RFID is a mere stepping stone to this vision.


Many a supplier today has complained that RFID, in its role as a supply chain compliance requirement, does not provide a clear return on investment. And yet, conversely, suppliers small and large are achieving business benefit through RFID today. What is the difference between the company that achieves ROI from RFID and the company that does not? There is not always an easy answer to this puzzle, but one characteristic stands out in blaring simplicity. Companies that achieve ROI approach RFID, and the overall vision of EPCglobal, through internal collaboration between business units, with finance at the head of the ship.

In the best case scenario, each phase of an RFID rollout should be funded from the benefits gained from the phase that came before it. Not always is the return so obvious, but there are clearly hard-dollar savings to be achieved.

At its core, RFID should be considered as one critical piece to a much larger dynamic. EPCglobal provides a compelling vision: "Imagine a world where every object can be sensed as it moves, can trigger a response that can be interpreted and acted on without human intervention."

This, indeed, shines light on RFID as a central element in the synchronized value chain.

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