Leak in EPC Balloon? | Supply Chain Simulation | PierPass Offpeak |
Foreign Appliance Manufacturers Gain Share Global Trade Management | Trivia | Feedback

  June 24, 2005 - SupplyChainDigest Newsletter - Logistics Edition
SupplyChainDigest - Your first stop for supply chain information

Become a Sponsor Click here for information on how to become a Sponsor
Send to a Friend Send this newsletter to a friend. Click here!
Subscribe Not already subscribed? It's free! Click here.

Archived Newsletters | Your Feedback | Industry Events | Recruitment Corner | Expert Insight
Attend a Free Aberdeen Group Webinar  

SCDigest eLearning Series - WMS in the Oracle Environment Archive Now Available

First Thoughts by Dan Gilmore, Editor
Slow Leak in the EPC Balloon?

Is there anyone else who perceives a significant slow down in the EPC juggernaut?

Some signs:

I've heard many reports of RFID/EPC consultants and systems integrators being very "under utilized," as they like to say.
Ditto, I'm just not hearing a lot of good sales news from the EPC application vendors. Between vendors and consultants, I can't find anyone with a bullish take right now on the EPC market.
I've been to a few software vendor user conferences lately, and while RFID has generally still received a reasonable level of promotion, there is no question the focus has been at a much lower level this year than the same period in 2004. Vendors will emphasize what they think will drive the greatest sales, of course.
I've heard several private reports that Wal-Mart is telling some people that for right now, they are going to sort of settle down for awhile, and try to better understand what to really do with the data and where the value prop really is for everyone.
RFID-related press has noticeably been shifting coverage away from EPC/consumer goods-to-retail RFID stories to other, non-EPC RFID applications and successes. EPC stories themselves are basically the same earlier promoters over and over again.
The DoD is moving slowly, and so is everyone else other than Wal-Mart, which again appears itself to be slowing down.

So what's going on? Well, to some extent this should not be unexpected. Wal-Mart is now in-between its first wave of the top 100 suppliers, which are still just shipping a small number of SKUs to a few DCs in Texas, and wave 2 of another 200 suppliers. The history of compliance initiatives generally and the pattern of even Wal-Mart's first 100 (which were large and more pro-EPC than later groups are likely to be) indicate suppliers will almost always wait until the last possible time to comply, so we should not be surprised there is not much activity in the first half of 2005 for a Q1 2006 "deadline" of sorts.

Also, I do believe the intellectual property battles going on, largely driven by Intermec's extensive patent claims, are putting a bit of a drag on the market overall, both in customer adoption of EPC and in vendor technology development. Uncertainty brings indecision and inaction, and we have a good dollop of that right now.

Let me state yet again that I am very bullish on the use of non-EPC RFID in a broad array applications right now, and EPC over time in the many others. But in our report on The 10 Things Necessary, for RFID/EPC to Thrive (www.scdigest.com/assets/reps/SCDigest_RFID_EPC_to_Thrive.cfm), SCDigest Technology Editor Mark Fralick and I suggested in point number 7 that "Roll-outs should pushed at a measured, ROI-driven pace." As we wrote then: "EPC will ultimately achieve quicker adoption if expensive tagging requirements are not forced upon manufacturers at their expense far ahead of ROI, but rather at a measured pace that seeks to achieve true win-win scenarios."

Under the covers, I think this exactly what I think is happening. While it may cause some short-term discomfort in the EPC industrial complex, it will ultimately provide a much more solid foundation for deriving real value for the supply chain.

Do you agree or disagree that the EPC movement seems to be slowing? Is this a good or bad thing?

Let us know your thoughts.

Dan Gilmore

The Case for a Global Supply Chain Approach for the Enterprise

By Ned Blinick
Vice President
Blinco Systems Inc.
Ned Blinick Scenario 1: A large global 2000 company (it really doesn’t matter which industry) views itself primarily as a manufacturer. It has owned manufacturing facilities on several continents that produce most of the company’s products. It views its competitive advantage as being able to streamline its manufacturing facilities. However, because of competitive pressures for lower prices and the need for flexibility it has started to outsource some of its products to 3rd party contractors. It distributes its products in over 30 markets around the globe. ...

Click here for the full column.


June 24, 2005
Supply Chain Simulation Can Improve Decision-Making
New generation of tools helps companies make better decisions by comparing many scenarios and doing "what if" analyses.

June 24, 2005
PierPass Says Registrants for Offpeak Container Movement Now Top 1000
With July 23, 2005 deadline for registration, most importers are lining up for the program at the ports of Long Beach and Los Angeles.

June 24, 2005
Asian Manufacturers Take Aim at Appliance Market
Watch out Sears, Maytag and Whirlpool, direct Asian competition to own the kitchen and the laundry room is coming on strong.


Industry News - Click here for this week's performance details
Click here for performance details for this past week.


Q. What does a Las Vegas-style casino chip with an embedded RFID tag cost?

A. Click here for the answer

Become a Certified RFID Supply Chain Manager   Procure Con 2005

Feedback is coming in at a rate greater than we can publish it – thanks for your response.

We received a number of responses to our First Thoughts piece two weeks ago on “Optimizing labor resources,” which suggested that companies will be looking at even more sophisticated approaches and technologies to manage their “labor supply chains.” This includes our feedback of the week from Rafael Calderon of Deloitte Consulting, with some great follow up thoughts to our piece. We also have one writer who suggests maybe companies ought to be thinking about adding labor in some cases to solve supply chain problems, not just focusing on getting rid of it. You’ll find more letters on this topic, as well as a couple on our news piece about United Airlines finally throwing in the towel on it’s automated baggage handling system at the Denver airport.

Keep the dialog going! Give us your thoughts on this week’s Supply Chain topics.

FEEDBACK OF THE WEEK On "Optimizing Labor Resources:"

I think there is great potential for improvement in distribution center labor management. I spent some years managing a large DC in which we had about 130 permanent employees and a temporary workforce that could add up to 600+ during "busy season". When you put it all together, labor for the year could be as much as 70% of the DC costs. We implemented a state of the art WMS and packing stations and the constraint became the effectiveness of the training and preparation of the temporary warehouse personnel to support the shipping season. In essence, the weak link was not the technology but how effectively we managed the labor component.

Talking to colleagues at other companies, everybody was faced with the same problem. When is the right time to ramp up the temporary employee numbers? How do you properly plan & execute "train the trainer" programs so that you are able to get ahead of the learning curve and have temporary employees hit the ground running? What skills are critical and should be prioritized? Where are errors most costly? What is the optimal permanent/temporary ratio and how does it vary through the year?

It’s usually hard to sell the concept to senior management of the additional cost of taking employees early so that you can start training them. At the same time, its challenging to take permanent employees from their jobs to get them ready to help train and in some cases supervise temporary employees. Not everybody wants to help supervise & train and in most cases, this can be the determining factor on whether you will be successful "absorbing" large numbers of temporary employees.

I believe there is a need to better understand best practices around what is the optimal way to address "busy season" requirements. There is tremendous value in using modeling, simulation & optimization techniques to address these questions. Its not just about minimizing cost but about optimizing the timing and proportion of the permanent/temporary employee ratio in order to minimize the cost of errors, maximize DC output and optimize your labor investment. To support this, critical data needs to be identified, tracked and analyzed combined with some effective benchmarking. At the very least, this topic should be the number 1 priority for good operations managers whom should develop very early in the year a very detailed plan including contingencies and potential scenarios to minimize the impact of the "busy season" ramp up.

Keep up the good work in the magazine; it’s a great read.

Rafael F. Calderon
Deloitte Consulting LLP

More On "Optimizing Labor Resources:"

Enterprises are always looking at labor as cost and invariably trying to reduce costs with automation and technology solutions. But there are ways in which technology can be used to solve business challenges with an increased labor pool. Human intelligence is still a cheap resource compared to artificial intelligence (measured in Logical Inferences Per Second/per dollar).

Here is my challenge to your readers? How can this resource be effectively harnessed using technology? 

What would you do if you had 100 pairs of additional smart eyes to work on your supply chain?  Can you virtualize your warehouses, if you add one person to every 200 containers in motion? Would you run a perpetual game theoretic simulation of your supply chain if you had 20 people to play co-opetitive roles? How would you augment one employee in the US with 10 workers in China or India?

I am eager to hear the contrarians amongst your readership.

Anil Nair
GT Nexus

Labor management has assumed increasing importance in the past 10 years for both transportation and DC operations.  The question is “will the trend continue?”

Driver shortage continues as a high priority for carriers.  Routing and service optimization software provides high return on investment for both driver and vehicle utilization.  Real time monitoring capability permits flexibilities to meet unexpected service requirements.  Engine and braking feedback for driving practices lowers fuel costs.  Given these benefits, the competition among software providers, especially for metro pickup and delivery,  is increasing.  Innovation continues with enhancements to handle more complexity and larger fleets with less machine computational time—with an increased emphasis on real world situations.  The improvements in the next 12-24 months will be most significant.

In past years, misinformed HR functions blocked engineered labor standards efforts as an invasion of privacy.  Even with such resistance, the general acceptance of labor standards has improved based on potential return on investment.   One can calculate the return on investment in terms of labor savings versus investment (including internal engineering resources) and the majority of efficiently run operations (without standards) will have high return from a standards implementation.

Labor productivity is a “must” for strategic network modeling, given the multiple capacities (e.g. receiving, shipping) that constitute constraints.  For example, the planned capacity of a repack module in 2008 is influenced by several factors, including management driven improvements, possible labor standards, and technology (e.g. pick to light, voice order selection, slotting software, etc.).  In a possible network of 10 DC’s, labor improvement of 10% over several years is equivalent to adding a facility.  In considering the alternatives where labor impacts the primary capacity (constraint), avoiding a new automated DC (for larger firms) can be worth $75 -100 million. 

Labor consideration is a “driver” for locating new DC’s in today’s environment.  The strategic network modeling process is typically followed by detailed labor assessments for candidate sites, especially for locations in the Northeast.

The importance of labor optimization is significant today, based on labor (and vehicle + fuel for transportation) expense as percent of total supply chain costs.  The move for optimization will continue based on improving software and processes and the relatively high return on investment.

The numbers drive the focus.

John White
White Supply Chain and Operations

On "United Finally Ending Its Automated Baggage Handling System at DIA:"

The problem as I see it is lack of planning, poor project management,

and an extreme lack of communication between the system supplier and the users. However, I was not there and I don't know what really went on so my thoughts are based on hearsay over the last ten years.

Tom Allen
Dir. Logistics Engineering

For years I've been saying that I'd love to know the real story about the DIA baggage handling system failures. I've heard about the political issues, but I have also heard hints about some bad technical decisions too, like selecting 16-bit OS2 for the control computers. Maybe the problems were all political, but I doubt it.

Keep up the good work. I love to read Mark Fralick and your columns. I'm particularly happy with Mark's series on SOA and WMS.

Dirk Rodgers
Cardinal Health


This week's open opportunity is:

VP of Distribution and Logistics
In the Indianapolis, IN area

Click here for the full job description.
Click here if you are an interested candidate.

(NOTE: Any inquiries will be handled with complete confidentiality.)


Q. What does a Las Vegas-style casino chip with an embedded RFID tag cost?

A. Currently about $1.25, about double a regular chip, but down substantially from just a few years ago.

Copyright © SupplyChainDigest™ 2003-2005. All Rights Reserved.
To unsubscribe click here.