Beyond RFID

When it comes to the supply chain, radio frequency identification (RFID) has been hogging the spotlight. But while RFID tags have received plenty of buzz for the efficiency and accuracy with which they can help companies identify and track goods throughout the supply chain, it has been slow to catch on.

The primary reason, says Karen Hawk, vice president of the supply chain practice of consultancy Navesink Logistics, is price. The tags that are attached to products and send or receive information average $0.50-$0.75 a piece, though some suppliers have been touting prices as low as $0.15 each. Even so, Hawk says that for RFID to be adapted by companies outside of the Fortune 500, the price per tag would have to drop to about $0.05.

The tags aren’t the only expense preventing companies from embracing RFID throughout the supply chain. Given the potential for interference from metal shelves and beams, a company may need to reorganize and restructure its distribution center before it could implement an RFID solution.

Nonetheless, RFID isn’t going to fade away. “It will get there [as a viable option], but it will be two to three years,” Hawk says.

Several other relatively new but not as widely hyped supply chain applications can also help merchants streamline their operations. Delray Beach, FL-based VendorNet, for instance, offers a Web-enabled application that automates communications from retailers and distributors to their suppliers, says president Sharon Gardner. Merchants can use the product suite to transmit orders to suppliers, track their progress, and receive shipping updates, among other functions. VendorNet offers applications for both drop-ship and stock purchase orders.

Many of VendorNet’s customers are moving from manual means of communicating with their vendors, although about 20% are switching from electronic data interchange (EDI). “The Internet allows data to just flow from the retailer to the supplier system,” Gardner says. Easy communication has become critical as marketers increasingly apply just-in-time inventory techniques and need to be in almost constant contact with their suppliers.

VendorNet is available on a license basis; the fee, which varies depending on how many suppliers the merchant needs to communicate with, ranges from $200 to $1,000 per supplier; the more vendors a company has in the system, the lower the cost per vendor.

Another key to an effective supply chain is a robust, reliable forecasting system. Industry analysts point to Naperville, IL-based GAINSystems’ supply chain optimization solution as a leader in the marketplace. Although its GAINS application isn’t new, the company has continually tweaked the algorithms based on empirical data.

GAINS uses proprietary statistical techniques to calculate the optimal level of inventory to hold at each location, given expected lead times and costs and taking into account the desired service levels. It runs this information through what are known as heuristic, or exploratory problem-solving, models and artificial intelligence. This analysis is done for each item in the supply chain and then for the interdependencies between items. “GAINS forecasts both supply and demand so that it can optimally measure the error of both,” says GAINSystems executive vice president William Stillman.

As part of its analysis, the system calculates the potential impact of errors and supply chain variability. Say a supplier is scheduled to deliver 10 components on Tuesday but doesn’t show up until Thursday, and then with only eight components. The system estimates the likelihood and effects of these types of glitches in advance and adjusts its recommended inventory levels accordingly. “You can’t prevent errors, but you can anticipate when and where errors will happen,” Stillman says.

The ideal GAINSystem customer is a business whose supply chain operates on a cumulative lead time that typically extends past several weeks, that works with at least several thousand SKUs, and that operates with multiple locations, such as fulfillment centers and stores. The application is particular helpful when a marketer has sporadic demand, such as a jeweler that sees a spike in sales around Valentine’s Day. The price for an application typically starts at several hundred thousand dollars.


Websites of suppliers cited in the articles throughout the supplement

Aspect Software
Contact center applications

C.H. Robinson
Shipping applications

Multichannel order
management systems

Shipping applications

Ecometry Corp.
Warehouse and order management applications

eGain Communications Corp.
Contact center applications

Supply chain systems

Kiva Systems
Picking systems

Manhattan Associates
Warehouse management systems

Order management systems

Sealed Air Corp.
Packaging systems and products

Packaging systems and products

Supply chain systems

Picking systems

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