|RFID: Slower, Better | New Demand Management Project | Investment in China Slows |

| Alien Cancels IPO | Feedback | Trivia |

  Aug. 10, 2006 - SupplyChainDigest Newsletter
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Featured Report

Driving Operational and Bottom Line Benefits in Beverage Distribution

Beverage distributors across multiple segments (beer, wine, sprits, soft drinks) are facing multiple challenges and competitive pressures. The approach to operational strategy and suppy chain and distribution technology that were enough in the past are giving way to new models that help beverage distributors increase sales, reduce costs, and become more integrated in the total supply chain.

Read this excellent report to learn how these improvements are possible, and what it takes to get there.

How Beverage Distribution Companies Can Use Technology to Increase Efficiency and Profits


First Thoughts by Dan Gilmore, Editor

RFID Adoption: Slower, Better

Maybe it’s the summer doldrums, but parts of the RFID movement seems again to me to have slowed. Not that this is a bad thing – more on that in a moment.

On the Electronic Product Code (EPC) front, if vendor activity is any indication, there just isn’t much going on. As just one anecdote, three years ago at the Manhattan Associates (a leading supply chain software vendor) user conference, RFID was the major overall theme, with many presentation sessions covering numerous aspects of the technology and applications. In 2005, the focus was still there, but much muted from the year before. In 2006 – you could find a session or two if you really looked hard. I’ve seen this pattern at several other venues as well. Why? Because vendors promote where they think the near term money is. (Note: a couple do tell me they are busy).

A mystery to many in the vendor community is what all the Wal-Mart 300 are doing. Meaning, if you add up the customers for RFID compliance and beyond of the leading providers of such solutions (Exterprise, HighJump, Manhattan Associates, Oat Systems, RedPrairie, Verisign/R4, etc.) it doesn’t total up anywhere near to 300.

So what is everyone else doing? Some are certainly using 3PLs to get the tagging done. Many others may be just building their own simple solutions. Still others may just be delaying and hoping it just goes away.

Which leads me to conversations I’ve recently had with a couple of Wal-Mart’s next 200 suppliers. I’ll put it bluntly: their approach to compliance is to do the minimal effort required to comply, keeping investment in hardware and software to an absolute minimum. The systems, if they can even really be called that, are built for compliance only, with no care or concern with driving value themselves or moving it back up their own distribution and supply chain processes. Are they short sighted - or not?

Meanwhile, the news around Wal-Mart is all about their “Inventory Deload” and “ReMix” programs (See Will Retailer/Wal-Mart Inventory Cut Backs Mean Sales Risk for Consumer Goods Companies? ). These programs have similar end goals to the RFID effort (reduce inventory and out-of-stocks, speed the flow of goods to the floor), and seem to be accomplishing those goals rather quickly, from various news and financial reports. Of course, RFID is completely compatible with these programs – they’ve just moved to the front burner, it seems, it terms of delivering real value now, attention from Wall Street and the business press, etc.

The Inventory Deload program is really interesting in this respect. As we’ve reported on several times, a wide swath of consumer goods suppliers have issued earnings warning or discussed future risks to revenue based on lower orders from Wal-Mart as it slows its growth of inventory. In most cases, this will be a short term impact, but for some, as shelf space and SKU counts are revamped, it may be more permanent.

But in either case, do you think consumer goods companies will be thrilled to bear the cost of putting RFID tags on cases while their order numbers from Wal-Mart are declining at the same time? A double whammy on profitability.

Alien Technology indefinitely postponed its Initial Public Offering (IPO) this week (see story nearby in News and Views). There were a variety of factors, but one thing that emerged was that in an effort to drive volumes and market share, amidst a growing level of chip capacity in the industry, the company has been pricing tags at a point that could not lead to profitability in the short term. Alien is a fine company, and many companies across industries have been postponing IPOs given these stock market conditions, but Alien’s move and filing data do say something about the overall state of the RFID market right now.

On the other hand, a few companies are really touting the benefits of EPC. CPG giant Unilever, for example, is apparently very bullish on the results of some pilots it has been conducting on gathering, analyzing and sharing EPC-based data, such as in the area of executing in-store promotions. This is an area in which Gillette (now part of Procter & Gamble) has also found strong initial results.

All of which is to say that RFID is now clearly taking on a sort of normal market adoption curve. In fact, as we wrote about a long time ago, as we predicted it is very reminiscent (for those that were around in the first half of the 1990s) to the path of the original bar code labeling and advanced ship notice requirements (see RFID Compliance – Deju Vu All Over Again?) – which took a long time.

What’s also happening is that the Wal-Mart/EPC focus has somewhat given way to a more broad based interest in RFID technology generally, across many applications. I recently spoke with one RFID-focused integrator that had been almost totally focused on Wal-Mart vendors, but which now is busy mostly with projects in manufacturing, asset tracking, etc.  There’s no question, for example, that the interest in RFID-based solutions for in pharmaceuticals to combat counterfeiting and diversion is quite high.

As I noted a few weeks ago in my Random Musings column, this more normal – and prolonged – adoption curve is actually a good thing for many people and businesses associated with RFID. As soon as RFID becomes just another data collection technology like bar code, the need for experts internally, and RFID specific publications and events, just goes away. So frankly from an SCDigest perspective, I hope it progresses, but not too fast. I’d like this to be a 10-year ride.

It’s also good because it means that we’re getting more real about the costs and benefits of RFID – moving away from the unfortunate tendency of many to view RFID as an end in itself.

We’re now just about where we should be.

What are your thoughts on the RFID market/adoption landscape right now? Do you think Wal-Mart vendors should just do the minimum to comply, or more? Why? When do you think RFID will become just another standard data collection technology? Let us know your thoughts.

Let us know your thoughts.

Dan Gilmore


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See reader Feedback below!


Aug. 10, 2006

MIT Announces New Project to Help Companies Understand “Demand Management”

Is anyone taking a look at the entire picture?

Aug. 10, 2006

Alien Technology Cancels its IPO

Timing, new TI chip, and tag pricing environment probably all play a part


Aug. 9, 2006

Is Rise in Chinese Costs Causing Slide in Foreign Manufacturing Investment?

Numbers are down after years of rapid growth; Vietnam looking good?

Aug. 3, 2006

Building Products Giant Johns Manville Achieves Major Improvements in Transportation with Load Control Center

Centralization, new TMS, and cross-company collaboration drive savings and service benefits

Aug. 3, 2006

Annual GMA Unsaleables Benchmark Report Shows Some Progress for Manufacturers, But Distributor Costs are Flat

Case Studies identify Supply Chain practices that reduce unsaleables for manufacturers, distributors and retailers; Heinz and H-E-B cited for excellence


Aug. 3, 2006

Chinese Manufacturers Rapidly Enhance Quality and Sophistication, Encroaching even More on Western Production

Wall Street Journal story says gains in automotive parts sign of broader upstream trend



Q. Days of inventory + days of receivables outstanding - days of payables outstanding calculates what common supply chain metric?

A. Click to find the answer below


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

Catching up on a variety of letters and topics again this week, although we're still behind.  We will have a new ability to publish more letters in just a few weeks, as part of a complete, exciting web site re-design. Our feedback is another excellent letter on "To Wave or not to Wave," from Eric Smith of ProModel Corporation. We also have leters from Greg Andrews of Adtran on transportation infrastucture, Kevin Hampton of Grande on On-Demand TMS, Dan Melnyk of National Nail Corporation with some nice things to say about SCDigest, and Jane Kerr of ITT Gould Pumps, who coming out of our piece on customer satisfaction versus customer sacrifice was one of several to tell us they usually use hotel room irons - and she doesn't want to take one on a plane! You'll just have to read the column to know what we're talking about.

Keep the dialog going! Give us your thoughts on this week's Supply Chain topics. As always, we’ll keep your name anonymous if required.

Feedback of the Week – to Wave or Not to Wave:

Your piece “To Wave or not to Wave” is interesting, especially the part about WMS providing more flexibility for order release.

It is possible that many SC Digest readers can achieve performance gains without significant changes or upgrades to their existing WMS.

From our experience, the capability of many existing systems is under utilized for these reasons:


  • It is difficult to visualize all that an existing WMS could do for the floor. Releasing orders is obvious, but all the ways of doing so and their benefits is harder to see.
  • Complementary technology is not widely implemented or the link to a WMS has not been made. As you wrote, “More companies need to do a more rigorous job of really analyzing how orders will or are flowing to the floor, and what is the most efficient way to release orders or create wave criteria. We look at overall DC/material flow, but rarely at this specific aspect.” The means of rigorous analysis exists. The goal should be higher performance achieved with the existing capabilities of the WMS. Whether or not WMS does its own analysis is not so much the issue as if it is possible to feed it with better plans and policies.
  • Planning and execution are very distinct from one another. WMS excel at the day-to-day execution. By contrast, planning a wave for efficiency is a pre-execution activity; the sweet spot of predictive analysis applications, specifically discrete event simulation. Our experience shows that for a portion of the investment of the WMS, a DC operator can have an integrated system that offers best of bread integration with what-if analysis even to the level of detailed sequencing of individual orders or manually compiling orders for a wave. It also includes validating that the selection criteria will actually lead to higher performance.   
  • Underestimation of the complexity of the situation leads to the belief that a spreadsheet, a database or traditional statistical analysis alone are adequate to analyze a very complex, dynamic system when they never were designed to do so.

Organizations that apply WMS technology efficiently today can also test what will meet their needs on any ‘tomorrow’, wave or no wave. They shouldn’t have to wait until the WMS providers duplicate the predictive capabilities of discrete simulation. With an eye on tomorrow, let’s make the most of what we own today.


Eric Smith

ProModel Corporation

On Transportation Infrastucture:

You are dead on the money with your comments. The US in the past has led the way in development of logistics-transportation infrastructure, in fact one could argue quite easily that our doing so helped to leapfrog the US over other developing nations, and become the world’s strongest economy, as we left other countries in our dust.  


Folks used to send their best and brightest to the US to benchmark off of us, I certainly do not think this is the case today. What do they see, crumbling bridges, an interstate system built primarily in the 60’s and 70’s, airports, railroads, and highways at capacity, inefficient ports strangled by labor unions and landlocked by surrounding growth.


It is time for Congress, The Senate, The White House, and major shippers and transportation service providers to tackle the “Infrastructure Crisis” that we are now faced with in this country. The issues you list in your editorial are not mirages that one sees off in the distant heat waves, they are real and we are falling significantly behind in our efforts to maintain and grow our infrastructure. If we do not take on this issue now, we may wake up one day and find that we are now a third world country eating the dust of our global neighbors.


This issue is not getting the focus and attention that is desperately needs.  


Greg O. Andrews

Director Global Logistics-Transportation


On On-Demand TMS:

The on demand model is appropriate if cost and timing is a driving factor to get into the technology.  Because it is a subscription service it allows companies to evaluate it's effectiveness quickly and can be cancelled (based upon contract) if it does not meet expectations or if there is a need to buy a software for increased functionality. Most required functionality however is typically contained in most on-demand programs.  Protection of the data becomes more of a contractual issue with the provider.  


Kevin Hampton

Director Supply Chain Management


On SCDigest:

I think the digest is very well written, and Dan Gilmore is very much in tune with trends and issues in supply chain logistics.


Keep up the excellent effort!


Tom Miralia

Distribution Technology Inc.

On Customer Sacrifice - and Hotel Irons:

I use the ironing board and iron (along with the blow dryer) EVERY TIME I check into a hotel – whether traveling for business or leisure.  Seems like a relatively small investment with real customer satisfaction results.  Now you are venturing into the nuances between your requirements as a hotel guest and my requirements as a hotel guest.  That’s the trick – to balance investment against the customer requirements that provide the greatest payback.


I sure don’t want to go back to packing my travel iron – TSA might consider it a dangerous blunt object!


Jane Kerr

Logistics Manager

ITT Goulds Pumps


Q. Days of inventory + days of receivables outstanding - days of payables outstanding calculates what common supply chain metric?

A. Cash-to-cash cycle

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