This Week in SCDigest:
RFID State of the Union
Supply Chain Graphic of the Week, plus more Supply Chain News Bites
SCDigest On Target e-Magazine
Expert Insight - Supply Chain InView: Open Book Partnerships between Logistics Service Providers/3PLs and Clients
Expert Insight - Managing SCM Performance: Inventory Metrics Part 1
Expert Insight - The Supply Chain Technologist: Does a WMS Equal ROI?
From RetailWire - Retailer Participation in ARTS Session is Less than Impressive
Your Supply Chain Questions Answered! This Week's Question - Should Receiving be Counted as a Product Touch?
Trivia, Supply Chain Stock Index
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September 11, 2008 - Supply Chain Digest Newsletter

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RFID State of the Union

Let’s take a step back and look at where we are right now with RFID…and where we may be headed.

We are clearly in the “post-Wal-Mart era” – and experiencing something of a hangover.

Before offering my thoughts in more detail, I thought I would share the comments of a few great experts that kindly gave SCDigest their perspectives over the past few weeks on the state of RFID.

Tim Payne, the analyst who follows RFID for Gartner, says that “6 to 18 months ago, it has been very quiet around RFID – the post Wal-Mart effect.”

But, Payne said, there seems to be some renewed RFID energy now.

“The last six months we have seen inquiries really pick up around RFID. Companies are revisiting RFID, but from a different perspective. It is no longer: “Here’s a new technology, now can I find a business problem to throw it at?”  Instead, it has changed to: “I have a well understood business issue, is an RFID-enabled solution the right answer for me?”

That of course is the right question. As I’ve said before, we will know RFID has really arrived when it is just an arrow in the automatic identification technology tool bag to solve any particular challenge or need.

Payne adds that he sees some companies in their second or even third iteration of looking at RFID technology for certain applications, as they get better acquainted with it, and the price-performance curve improves.

Gilmore Says:
"As I’ve said before, we will know RFID has really arrived when it is just arrow in the automatic identification technology tool bag to solve any particular challenge or need."

What do you say?
Send us your feedback here

Similar to the observations of others, Payne sees a lot of activity in so-called “closed-loop” applications.

“Companies like closed-loop opportunities – they can get their arms around them, they can understand the scope, they don’t have to be too concerned about standards, he said. “Most of the projects we see are now closed-loop and many fall into the asset tracking/management category. There are certainly a number of healthy projects out there – just the scope is much tighter, and they are more focused.”

Interestingly, he also says that the business case focus is moving a little away from just cost reduction into support for business process innovation – finding novel ways of doing things in the supply chain and elsewhere.

That's what Dean Frew, CEO of Xterprise is also seeing. He believes companies increasingly understand RFID as a potentially “transformative” technology – but that we needed more and better software to take advantage of that power.

“Getting the XML data out of the reader and sending it somewhere is almost trivial these days,” Frew says.

“You have to build applications that understand, for example, how the data center manager really does his or her job, what kind of information they need to do that job better,” said Frew, referring to asset management applications for corporate computer networks. “We’re just scratching the surface of that at this point in terms of supply chain applications” and how they can really leverage RFID data.

John Fontanella of AMR says that things are “pretty slow in supply chain applications” for RFID right now, but that behind the scenes there finally are some things happening in retail besides Wal-Mart.

“We will see all the action in retail over the next year. There are some very interesting pilots happening there,” he said. Well, that’s intriguing – especially because we know that what happens in retail also then happens in consumer goods.

But Fontanella is for now less concerned with the “transformative” potential of RFID – which in a research note earlier this year is how he said he would classify Wal-Mart’s initial program.

“AMR Research finds that the companies that take a more simplified and focused approach to the use of RFID technology incur much less risk in implementation, receive tangible value, and build capabilities that give them significant differentiation from their competitors,” he said. “Successful RFID projects are inevitably closed-loop in nature and will be for the foreseeable future. This actually works in the favor of creating industry-wide initiatives. As RFID establishes itself as a valuable technology resource internal to a company, it lowers the barriers to justifying its use on a much broader scale.”

Steve Banker of ARC Advisory Group is among those who see strong technology advances and benefits to companies overall from Wal-Mart’s efforts, even if it didn’t work out quite as planned.

“As we predicted, retail compliance-driven RFID is moving slowly because of poor ROI for suppliers,” he said.“The hype around RFID has had positive effects in other application areas, however. Many companies now understand that there can be good ROI around using RFID for asset tracking and maintenance, and in yard applications, for example.”

Frew notes how far the technology advanced because of companies and venture capitalists pouring money into R&D in the hope of a Wal-Mart-driven gold rush. Even though those investments haven’t necessarily paid off in financial terms, nonetheless, for the rest of us, “There was something like a billion dollars of investment into RFID companies since 2003, and much of that would not have happened without the Wal-Mart program. That investment has enabled us to have a 10X improvement in reader performance since that time, and a 90% reduction in tag costs,” he notes.

Interesting comments from all. Here’s my take.

  • The news is still primarily filled with “piloting” this and “testing” that. It seems to never end, especially in supply chain applications. Obviously, there is much more action in asset tracking and some closed-loop manufacturing scenarios.
  • Frew is right that we need better software understanding and support. This is what an RFID leader from ConAgra predicted several years ago to me as ultimately being the real barrier.
  • Wal-Mart and UK’s Tesco, two of the primary potential drivers of adoption, have both retrenched substantially. Only Germany’s Metro stores group seems to be strongly soldiering on, albeit in a somewhat zigzag fashion.
  • There is an increasingly growing business case for item-level tagging in retail apparel applications – that may ultimately pop somewhat rapidly. Source tagging in Asia is an issue though.
  • We simply need a much better understanding of the real ROI, both generally and especially in comparison to bar code systems. It is amazing how little real information is available in this area. To this end, as you may have seen, SCDigest is partnering with Wright State University and Dr. Vikram Sethi to do RFID ROI analysis in real world applications. (See RFID Versus Bar Codes On the Shop Floor – Who’s Ready for a “Smackdown?”) We are about ready to start this at a couple of companies, but would like more candidates, and are now looking at distribution and manufacturing applications.

Finally – and optimistically – as I said several years ago, the dramatic change that is occurring through myriad paths is that for the first time ever, a growing number of companies are mentally committed to the path of knowing where everything is, all the time, in near real-time. This is a game-changing and far reaching development – and RFID will be at its center. I don’t know whether that will take 5 years or 20, but it’s coming.

We just need to understand what to do with that level of visibility, and as companies, to work to ensure you aren’t one of the last ones to the party.

What’s your take on the current state of RFID in the supply chain? What do you agree with or not in the comments from our experts or Dan Gilmore? Are lack of the right software support and/or lack of clear ROI information two of the biggest barriers? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

Upcoming Videocasts

Strategic Supplier Management in the Supply Chain

September 16, 2008


Leading Edge Logistics, Part 2
From Strategy to Execution

September 17, 2008


The Role of Inventory Optimization in Sales
and Operations Planning

September 23, 2008


Adding Actionable Intelligence to Your Supply Chain

September 25, 2008


This Week's Supply Chain News Bites Only from SCDigest

Supply Chain Graphic of the Week - More Freight Moving to Rail from Truckload

Supply Chain by the Numbers: September 11, 2008

Supply Chain News: SCDigest Announces Availability of New On-Line Supply Chain Videocast Schedule

Logistics News: New Dates for Fall Workshops on Best Practices in Distribution Center Design, Operations and Management Announced


Apprehension gripped Wall Street last week as the looming fear of a global economic slowdown increased.  Our Supply Chain and Logistics stock index results were cause for a tad of apprehension in and by themselves.  In the software group, Oracle slid 8.5% and Logility fell 8.4%.  In the hardware group, Intermec nose-dived 9.8% and Zebra was off 3.5%.  In the transportation and logistics group, the rail industry was hit particularly hard with CSX down a whopping 10.8%, followed by Union Pacific (-10.1%), Norfolk Southern (-9.7%), and Burlington Northern (-7%).

See stock report.

Each Week:

-Global Supply Chain
-Distribution/Material Handling
-Trends and Issues

Weekly On-Target Newsletter
September 9, 2008 Edition

Supply Chain InView by Ann Drake

Open Book Partnerships between Logistics Service Providers/3PLs and Clients

Sharing Information is Hard for Some Companies, but Key to Continuous Improvement

Managing SCM Performance
by Kate Vitasek

Inventory Metrics Part 1

You Can Count on It - The Impact of Throughput on Inventory Meaures


The Supply Chain Technologist
by Mark Fralick

Does a WMS Equal ROI?

A Warehouse Management System should be Thought of a Platform for Improvement, not a Discrete Investment

BrainTrust Panel Discussion Question: Why Aren't Retailers Playing a Bigger Part in Establishing Industry Standards

Retailer Participation in ARTS Session is Less than Impressive


The creation of the first centralized  transportation "Load Control Center" in the U.S. is generally credited to what company?

A. Click to find the answer below

Have supply chain or logistics-related questions you need answered?
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Share your insight!

Featured Question and Answer:

Should Receiving be Counted as a Product Touch?

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Feedback continues to pour in each week – but we want more.

We are pleased to announce this week our new “Fuel for Thought” program. Beginning with Feedback received this week, if your response is selected as our Feedback of the Week, we’ll send you a $20 gas card. Must have complete name and company, and you can only win once every three months. Send in your Feedback regularly! Make it thoughtful if you would like to win.

Appropriately, we received several interesting letters on our piece on a potential quick answer to soaring fuel costs, which involves mandating ethanol-compatible engines to, in effect, put a ceiling on how high oil can go. That includes our Feedback of the Week from Will Leggett, a Senior Economist at Concord Minuteman Solutions Group, who agrees that the idea can work.

We also got some nice comments on the second part of our interview with The Limited Brands’ Nick LaHowchic. That includes some nice words for SCDigest and this piece from John Norkevich of L’Oreal USA, who says, “I will keep this article and reference it in my next discussion.” Brad Corrodi of Logispring also has some nice insight to follow up on LaHowchic’s views.

Feedback of the Week - On Victory over Oil:

Zurbin's plan is indeed as simple and achievable as it sounds.

I have recently proposed a similar solution to Congress, and they are still pondering it. The cost to convert a non-FFV vehicle to FFV is about $350, and can apparently be done in under an hour.

My proposal is to use a combination of a switch to methanol, expanded use of human powered vehicles around cities, and increased gas mileage.

The only thing I disagree with is Zurbin's statement: "We can readily convert our available fuels into an alcohol supply bountiful enough to displace a large portion of the oil we import." My disagreement is with the "large portion of oil we import." In fact, we can eliminate all imported oil using this conversion to alcohol based fuels by utilizing under 6% of our land and converting coal to methanol. And my proposed plan can be completed in under 24 months! (And cost less than what we are currently paying to subsidize ethanol and a week's cost of the Iraq war).

Note also that this is not a new idea. After the oil crisis in the 70's, the  Federally-funded U.S. Synthetic Fuels Program concluded that "We have minimal technological, environmental and infrastructure conversion cost risks in converting our cars from burning gasoline to methanol." (From "Yogi and Gasoline" by Peter J. Vanderzee. Article in Institute for the Analysis of Global Security – March 28, 2005).

So, with a little cooperation from Congres, we can certainly make the "oil-for-terror game" end quickly and completely eliminate the strategic importance of the middle east.

Will Leggett
Sr. Economist
Concord Minuteman Solutions Group

On LaHowchic Interview:

I find it harder and harder to find time to read discussion articles these days. This was a nicely written article that quickly got through the window dressing. It simply and effectively clarified an important topic.

Many times the topics of supply chain, transportation management, traffic management and physical logistics is brought up in discussions and usually people are more confused than when we started. I will keep this article and reference it in my next discussion.

Thanks again.

John Norkevich
Senior Manager Of Transportation
L’Oreal USA

Great interview. I agree completely with LaHowchic’s view that many companies’ underlying roadblock to achieving world-class supply chain performance is organizational. He is precisely right that a company that remains firmly rooted in a highly functionally-specialized, industrialized model will continue to have great difficulty using a small supply chain ‘appendage organization’ as a ‘wrench’ to somehow align all the decisions buried within functional teams into coherent flows and responses to market conditions.

I also believe he is absolutely right that the critical driver is time. It is companies and industries where ‘latency reduction’ is becoming the basis of competition that have the most urgent need to shift the direction of the ‘grain’ in their organization, and gain the most value from doing so successfully.

Therein lies, I believe, the greatest difficulty for organizations that are trying to figure out what to do. Many companies have less to gain from ‘latency reduction,' and thus it isn’t clear that the payoff justifies the radical re-adjustment of processes, targets and incentives needed to re-orient the fundamental grain of an organization. Secondly, the scope of responsibility and the underlying complexity (particularly in companies with broad product/service lines) of the supply chain ‘organizing framework’ that would result from a re-orientation is in many cases just too big for a single executive to manage effectively. Thus, as Larry Bossidy suggested at a recent Supply Chain 50 event, “these supply chains may need to be broken up into a few different groups that share some consistency in terms of supply base, conversion characteristics or customer type.” There is a degree of conceptual problem solving what should be an organization’s underlying “tailored business streams” that very few companies have truly grasped yet (see Strategy & Business cases on Boeing and Lego for more on TBS).

Lastly – and perhaps most importantly – the biggest barrier to organizations making this transition is a lack of clarity on how the future model should function at the day-to-day, decision-making level. I hope in ‘part II’ you get to the question about how the future lateral ‘supply chain organizing framework’ might ‘bolt-into’ the functional organizations that will still remain as areas of specialty skills as LaHowchic suggests (e.g., marketing, sales, finance, logistics, engineering, design, purchasing, manufacturing). This seems to be the really tough problem, as in any given business (or business unit), the relative importance of each functional area might be very different, which by definition changes the ‘center of gravity’ as well as the tactics and process of how the functions should interact within a ‘customer value-focused framework’ as he suggests. Information and technology will help, but it cannot substitute for a clear understanding of where the decision rights should reside (simplistically, who should have the final call on which supplier to use for a given part – engineering, manufacturing, purchasing, marketing or finance? If you consider Nike, Boeing, P&G, Dell or Toyota – all leaders – I suspect you will get a different answer).

Thanks again for a very topical and thought-provoking article.

Bradley J. Corrodi


Q. The creation of the first centralized  transportation "Load Control Center" in the U.S. is generally credited to what company?

A. 3M, in the 1980s


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