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Anatomy of a RFID Pilot

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Do We Need "GDS" Before "EPC"?

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Another good report ("Connect the Dots") from the Grocery Manufacturers Association (GMA) along with the Food Marketing Institute (FMI) and National Association of Chain Drug Stores (NACDS), focused on the need for improved data synchronization between retailers and consumer goods manufacturers to enable supply chain collaboration and maximize the potential of RFID.

The full report is available at the above link, based on surveys with 80 or so manufacturers and retailers. Here are the highlights:

	The report concludes that most companies agree for the need for a single, global data registry (i.e., UCCNet), though no specific data is provided to support that claim. Huge percentages, however, of both retailers (100% of respondents) and manufacturers (71%) are planning advanced data synchronization efforts.
	While many companies have signed on as UCCNet participants, less than 1% of global retail sales currently involve registered and synchronized products. Manufacturers cited the need for internal data cleansing efforts (46%) as the largest barrier to increased participation.
	Manufacturers overwhelmingly viewed improved inventory management and supply chain visibility as likely benefits of RFID/EPC, while a somewhat lower percentage of retailers agreed. Most retailers, not surprisingly, were more interested in out-of-stock avoidance.
	Interestingly, retailers were much more concerned with EPC standards being completed to spur adoption than were manufacturers.
	76% of manufacturers and 66% of retailers believe that data synchronization always or potentially should precede EPC adoption.

The report is interesting, though seems to have been designed from the start to support a point of view. The statement is made that "without GDS [Global Data Synchronization], EPC technology represents nothing more than an expensive bar code."

Key Takeaway: The link between RFID/EPC and data synchronization has not been given enough attention, and is confusing given the potential overlap between UCCNet and the potential Object Naming Service (ONS) servers in the sky. The whole industry does need to "connect the dots" on this one.

Getting Procurement Right Requires End-to-End Process Redesign

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According to a recent study by the Hackett Group, a very high percentage of companies are putting heavy focus on streamlining "procure to pay" processes, hoping to reduce cycle times, overhead costs and the costs of purchased goods themselves.

The authors believe that to really drive improvements, companies need to do more than tinker at the edges of basic process re-engineering within the purchasing department - real results occur when the entire process is reviewed and improved across multiple functions. Especially key is great integration of purchasing and accounts payable processes - Hackett notes one example of where the A/P department was actually moved into the purchasing group at one large company.

The article notes that there are many benefits resulting from a more comprehensive process redesign, including:

	Improved root-cause error resolution, especially reducing errors in payables resulting from PO discrepancies.
	Improved goal alignment/attainment: Cross-functional design can get goals and metrics on the same page.
	Improved opportunities for overall improvement: Results from expanded scope and potential synergies across functions. For example, "in the purchase-to-pay process, implementing a new paperless process with electronic purchase orders on the front end and electronic invoices or evaluated receipt settlement (ERS) on the payment side is considerably more effective than doing one without the other."

Nonetheless, their research finds only 14.5% of companies manage procure-to-pay as a single, integrated process.

Key Takeaway : Too many of us thought "e-procurement" technology was the key to improve purchasing processes. It can play a vital role in that improvement, but with a total process this complex, it's clear a more holistic view is needed to really wring out efficiencies. Success, however, does not require that all the functional groups involved report to one individual - but the CEO does need to appoint one process owner with the clout and skill to herd this group of cats across the corporation.

Has your company looked holistically at procure-to-pay processes? What were the results? Can major improvements across the entire process be achieved while traditional functional groups and reporting are maintained? Let us know your thoughts.

More feedback on doing business with China:

Yes, my company has definitely been affected by offshoring to China.  Our biggest customer, Home Depot, has dropped their contract with my company, Werner Co., and started doing business in China.  This, in turn, has reduced our business so much that we are shutting down our division at the end of this year.  Approximately 750 people are being affected by this shut down.  My company has also opened a new plant in Mexico, which will take the place of the one I'm employed with.   This has been a disappointment and will be a struggle for several associates as we try to find gainful employment in the future. 

Name withheld

Somewhat scary proposition as we feel the immediate pain from job loss off-shoring, much the same as with Japan after WWII, as you stated in the article.  However, in the long run, the U.S. is stronger, more industrious, more ingenious, more productive, more competitive, and produces higher quality products as a result of free-trade markets.  Don't you think we are simply repeating this process again, and with a larger potential economic impact due to China's size?  I also believe that China will be successful in obtaining the high technology "secrets," whether we share them willingly or not, and only a matter of time.  We must continue our quest in the U.S. to stay ahead of the technology and innovation curve; that is our true competitive advantage in this world economy.   

Jon Walsh

VMG Consulting

There is a new term being used to describe the change from a manufacturing-based to a service-based economy - "Creative Economy". This concept predicts a US society where the only manufacturing is research and development or emerging technology. The problem with this concept is getting the majority of the US workers to have the skills or desire to perform these new "Creative" jobs. It has been the availability of good paying jobs in the manufacturing sector that has allowed the average American to achieve a standard of living envied around the world.

Another fundamental flaw with this "Creative Economy" is the assumption that American workers would be involved with research and development for the next generation of products. Historically, the companies that manufacture the products lead the R&D effort and unless our "Creative" services are less costly than our competition's, it is unlikely we would see the work.

Manufacturing has always been the hallmark for the most highly developed countries. The industrialized nations have always purchased raw materials and cheap services from third world nations. Is that really the direction we want to head?

As an Economics major I too believe in free trade, however, unregulated free trade presumes a free market that is fair and balanced by unregulated economic pressures. That condition does not exist in our Global economy.

Companies have to start taking a longer view in their planning process to determine what has to be done to keep manufacturing in the US.

Herb Minor

First, an emotional reaction.  This story comes on the heels of widely documented abuses of American intellectual property such as software and movies.  Counterfeit copies of Microsoft products and current release movies being sold on Chinese street corners with no apparent enforcement of international copyright law by the Chinese officials.  The Chinese have no regard for us or our property and I am very disturbed by their latest moves to demand that property be turned over on the condition of doing business in their country.  What an arrogant group of people!

Second, I have seen a similar situation before.  About 15-20 years ago I was working in the aerospace industry for a manufacturer of aircraft equipment.  A large, American aircraft OEM was anxious to sell planes to the Japanese and forced all of their key suppliers to acquiesce to a deal that, I'm sure, many of the suppliers would rather not have agreed to.  The Japanese purchased the aircraft that used equipment built by my company.  As a condition of the purchase, the Japanese buyers demanded all intellectual property to support the design, manufacture and repair of said equipment.  They also demanded that their service technicians be provided full access to the manufacturing and rebuild process when their equipment passed through our shop.  They asked an endless stream of questions and were never satisfied with the details provided.  They always wanted more and waved the technical license agreement whenever we tried to explain that there was nothing more to share.

Eventually, they stopped buying parts and services for the equipment.  Their strategy all along was to become self sufficient in the manufacture and repair of the components.  No telling where that technology ended up and how it benefited the economic advantage of Japanese companies.  The total sales gained by our company over the short term had to be small relative to the long-term benefits that the Japanese gained.  To this day, I question why anyone would negotiate a deal like that.

Denis M. Wolowiecki

Accenture

I think it is ridiculous that those companies continue to do business over in China. It just shows what American companies will do to help the bottom line. I am afraid that eventually, we will loose all major manufacturing and services to countries like China and India. When that happens, the United States will no longer be a leader in the world and could possibly be looked down upon as a third-world country.

Mike Dewey

Heraeus Kulzer, Inc.

A good editorial regarding offshoring and intellectual property.  But let's face it, this is not new.  We have been seeing excellent copies of all kinds of machinery goods (and other goods) from China for decades.  I saw Chinese copies of Bridgeport verticle mills 20 years ago.  And I know a division of the company I used to work for that set up operations in China only to eventually find that the exact equipment they had previously "joint ventured" became the sole venture of their former partners.

What are you going to do?  Sue?  Then what?  Collect?

All companies should be wary of this huge market.  The temptation is great but the rewards are temporary, and then potentially damaging.  The problem is always the same.  If one company stands up and says no, another company says yes, and gets the contract.  The issue is the same for all outsourcing.  Anyone who says no is the one at a disadvantage today.  And tomorrow is shaped by those who say yes.

This is exactly why we as a nation have the power to regulate commerce.  Until we strictly review outsourcing in terms of technology and job exportation and its future impact, the market will force us towards the maximum.  The consequences are astounding and people are just now waking up to it.  But unfortunately, the "R" word, Regulation, is seen as such an abomination by business today that they could never admit its necessity.  It will be our downfall.