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Is RFID Vulnerable to Hacking and Other Security Attacks?

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While there has been a reasonable amount of concern from some quarters around RFID technology and consumer privacy, a consultant recently argued that there is a real danger to retailers, manufacturers and others from "hackers" (criminals) being able to change RFID data.

It may be possible, even easy, for thieves to fool merchants by changing the identity of goods, said Lukas Grunwald, a senior consultant with DN-Systems Enterprise Solutions GmbH, of Germany. "This is a huge risk for companies," Grunwald recently said. "It opens a whole new area for shoplifting as well as chaos attacks."

Grunwald has actually built a small program that can read and reprogram tags. It's designed for consumers, to enable them to kill tags after a purchase, but could be used to re-encode tags in a store.

I'll admit I am not up to speed with what protections against this type of hacking are in place or are planned. The article above states that encryption type technologies are not going to be the answer: " While encryption could be used to hide data from unauthorized snoopers, not many RFID chips can handle the more-involved task of crunching cryptographic keys. Moreover, the RFID tags that can handle those tasks are among the most expensive on the market and not something you would stick on a cream cheese box at the grocery store, Grunwald said."

This of course is a higher-tech version of store theft via changing bar codes labels on products, a risk which led to such developments as incredibly strong adhesives and "tear away" labels designed thwart this activity.

One can think of many other potential ramifications. Can RFID really be used for authentication purposes, if tags can be reprogrammed easily to mimic valid product coding? Nefarious trading partners could alter tags to pass along or return different products than the ones encoded on the tags. While this of course is also possible with bar codes, the highly automated processes envisioned to be enabled by RFID, may remove some of the human checks involved in bar code based processes, and removing labels often leave some visible evidence.

We'll check into this in more detail soon, but until then we would love to hear from some RFID experts on how this risk is going to be mitigated.

Are there real risks from technology that enables individuals to easily change RFID data? What will be the protections to eliminate this type of risk to retailers and manufacturers? Let us know your thoughts.

Low Cost Ways to Improve Distribution Productivity

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Nice new article on the MHIA web site by Norman Saenz on some ideas for improving warehouse and distribution productivity without significant investment in software or equipment.

His suggestions:

	Review layout and material flow: Look for opportunities to reduce travel time through reconfiguration of storage modes. Cites average travel time in order picking as being 38% of total time, which can be used as one gauge as to whether there might be opportunities for improvement. Look for opportunities for overall redesign ("Quick Pick" areas, U-shaped paths, etc.), as well as additions in such areas as cross aisles and tunnels. While some capital expense may be involved, often it is very modest and well worth the return.
	Improve procedures and methods: Do some basic process mapping looking for opportunities to improve redundant, complicated or inefficient processes. Examples: moving back-end QA or packing steps back into the picking process itself.
	Focus on training and exception handling: Evaluate whether improved training of employees could result in productivity gains, and what productivity-draining exceptions (e.g., order pickers waiting on replenishment inventory) could be reduced through better training and exception handling.
	Review slotting opportunities: Big gains in picking and replenishment can be achieved with improved slotting. While WMS and independent slotting tools can truly optimize slotting decisions, much can often be gained through observation (congestion, activity) and some simple analytic tools (spreadsheets, simple databases).
	Improve management and incentives: Monetary incentives can have a big impact, but obviously come with a cost. Recognition programs, team meetings, and other techniques can improve morale and productivity, but have to be executed carefully.
	Do some productivity analysis: Use some tools like the MOST (Maynard Operating Sequence Technique) to evaluate your level of productivity versus industry standards.

Key Takeaway : These types of improvement efforts generally fall into the "important but not urgent" category, meaning they are tough to find the time to do. It's why most distribution/warehouses don't really drive continuous improvement (or so it seems to me). I have personally seen a number of DCs with severe constraints on storage or throughput capacity, make significant improvements with layout and procedure changes, often with minimal investment in new equipment. It often takes the use of consultants not only for their expertise but simply to act as a catalyst to get to some of these improvement projects that will just never rise to the level of urgency otherwise.

P&G's Demand-Driven Supply Chain Delivers Results

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We've dealt with this topic before, but there's a nice article in this month's baseline magazine on Procter & Gamble's initiative over the past few years to become even more demand-driven, and the quantitative results from those efforts.

The article starts by quoting Jack Barr, head of "supply chain innovation" at P&G, as saying that some 60% of the CPG giant's sales now come from "events," meaning an array of promotions from either P&G or the retailer. With these spikes in volumes, it becomes even more critical to coordinate inventory flow from P&G factories to the store shelf. P&G believed it could do that, reducing stock-outs, while reducing overall inventories at the same time.

Starting 18 months ago, Barr took on the challenge of getting P&G to a "nearly 100% demand-driven" system of supplying products to supermarkets and other stores around the globe. In part, this means P&G's planners and forecasters should be "looking through the windshield and not the rearview mirror" at the point of demand. Among the initial targets: cut retail out-of-stocks from 10 to 5 percent.

P&G pursued this goal with several strategies. These included:

	Improved collaboration with retailers that gives P&G virtually 100% visibility to planned events and promotions.
	Synchronization of point of sale information (structure, timing) across thousands of retailers.
	More flexible manufacturing, to allow P&G to respond more quickly to surges in demand (still a work in progress).

Some results from the effort are in, and look like a winner. Sales in the slow growth CPG market were up 15% in the past year. (P&G just reported very strong quarterly results, with core growth (excluding the effects of acquisitions) of 10%.) 93% of its retailers experienced stock outs of 5% or less, which has increased sales somewhere between $50-100 million. Working capital, always a key supply chain metric, increased from $700 million in 2001 to $1.7 million in 2003.

P&G now wants to cut stock-outs in half again, to 2.5%.

The article quotes one financial analyst as saying: "P&G is making life very difficult for competitors like Unilever, Kimberly-Clark and Colgate-Palmolive. It has consistently outperformed all of these guys, mainly as a result of its systems and its management."

Of course, P&G has been pursuing "demand driven" supply chains for more than a decade, through efforts around Efficient Consumer Response, Continuous Replenishment, CPFR, etc. What seems to me to be the real lesson here is P&G's relentless focus on "continuous improvement," driven by an executive focus on the importance of supply chain, and the willingness to invest in the people and technologies to make it happen.

More on CLM/CSCMP:

I think the change of scope is positive, but it comes way too late. The link between logistics and other areas of supply chain such as procurement or planning has always been there.

Carlos Pereira, CPIM
Aventis China

This just confirms my decision to expand my participation in WERC.  Over the last few years, CLM has become over run with consultants trying to sell programs to one another.  This dissolution of the focus of the organization makes it much less useful to the logistics practitioner.

J. Kevin Michel

Michel Distribution Services

I think the new direction for the CLM is sort of a "cop-out". Instead of getting deeper and more advanced in Logistics Management theory and applications, they are taking the easy way out so they can start echoing what APICS, and the Supply Chain Council have been doing for years. As a former CLM member, I was very disappointed in the organization as a whole. I felt that I did not get anything for my steep annual dues. No periodicals, no research journals, and a disappointing annual conference.

The one I went to had no software exhibition, and a good percentage of the speakers that were advertised to speak didn't bother to show up.

CLM has continually missed the boat on the emerging Logistics Systems movement (primarily via TMS) in that a dictionary and standard system have not been produced. If one looks at the evolution of MRP into MRPII and ERP, the APICS dictionary, and the "Standard System" developed over time by Orlickey, Wight, Plossl, Gray and Landvater, have offered a blueprint and common "language" that software vendors built upon. There has been no effort from CLM to do this with Logistics Systems. Changing the name isn't going to help a flawed offering.

Brian Dreckshage

InSite Logistics, LLC

There are a lot of groups that touch the Supply Chain arena - APICS, ISM, and smaller groups such as ESCA and SCC. I have been searching for an organization that can provide education for my team in the areas of CRM, and how the Demand Chain meets Supply Chain. I have yet to find this type of group. If all of these groups merged, we may see that, provided they could get organized before they miss opportunities in the supply chain, demand chain sector.

It would be wonderful if they could model themselves based on supply chain theories. Each educational group would have expertise in certain areas in the supply and demand chains, and a common thread in a body of knowledge would tie them all together. Instead of getting certifications for each area, I would love to get one that contains a module from each of these groups' expertise. I would then feel I have the knowledge to provide my company and my career the best in breed solutions to opportunities.

Yamini Joshi, CPIM, C.P.M.
Advanced Fibre Communications

I think it only makes sense to revise the name. Logistics plays across the entire supply chain from R&D, and it's regulatory requirements, through the Procurement & Manufacturing disciplines, to the overall distribution planning and transportation of finished goods & returns. I think that by broadening the audience we will set the stage for more collaboration across these functional areas.

Tom Golden

Agilent

I think all professional organizations are seeing lower membership and attendance at conferences, conventions, etc.  For some reason, the younger generation of business owners, senior managers, etc. are less interested in social or educational opportunities that used to be the "norm."  I believe that part of the trend is due to everyone working harder and with fewer resources.  Also, many people increasingly rely on the internet for information and educational experiences.  I agree with you that we will see more mergers between some of the professional organizations that you mentioned.