TraceElements

May 01, 2003 9:30 PM  By

But there may be no need to pay such close attention

THE POSSIBILITIES are intriguing. Wonder where the merchandise from the factory in China is as it crosses the Pacific Ocean? Click a mouse, and get a status report. Need to know if a customer has received his order in time for the holiday rush? Log on to a Web site and find out if it has hit the receiving dock yet.

It’s all part of the increasingly sophisticated technology that makes it possible to monitor merchandise, at any point in the supply chain, more closely than ever before. But this ability to track and trace products and shipments — whether business-to-business or business-to-consumer — must be more than an exercise in technology for technology’s sake, no matter how spiffy and clever the technology is. It’s one thing to use radio frequency tags and satellite positioning to know where a shipping container is; it’s something else entirely to be able to follow the contents of that container to the customer’s warehouse and even to the store’s shelves.

Says Norman E. Saenz, manager of logistics for Carter-Burgess, a supply chain consultancy in Fort Worth, TX: “You can track something on any level at all, but just being able to track it isn’t a good enough reason to do it. Why do you want to track it? What will you accomplish by tracking it? Is the investment worth the result?”

Hence, any approach to tracking single shipments, whether large business-to-business or retail orders or even smaller packages, must take those answers into account. What part of the supply chain needs to be monitored — before inventory gets to a business, once it’s in the warehouse, after it’s shipped, or some combination of those situations? How crucial is tracing toward improving efficiency? Or is efficiency or return on investment even one of the company’s goals? Note, too, that this doesn’t necessarily mean buying the latest technology. A company can adapt low-tech methods to meet its needs. Sometimes just a phone call or an e-mail from an international freight forwarder provides more than enough information.

“The ability to track and trace inventory is often one of those things that’s hard to quantify in ROI,” says Derek Gittoes, vice president of product solutions for G-Log, an enterprise logistics software company in Shelton, CT. “You’re not necessarily going to be able to cut freight costs. But what you’re going to be able to do is prevent problems. I always like to say it’s like eating properly and exercising. It’s not the most glamorous way to stay healthy, but it’s the most effective.”

REALLY HIGH TECH The ability to track and trace inventory and merchandise has evolved to a stage that is little short of astounding, involving new technology that can make the paperless warehouse seem like a turntable in a world of CD players. Consider these developments:

  • Radio frequency identification

    Smart chips embedded in individual products, packaging, and displays, whether for blue jeans or razor blades, enable manufacturers and retailers to follow an item from the warehouse to the store shelf to the consumer’s home. The New York Times recently reported that Procter & Gamble, the British supermarket chain Tesco, and Gap have each tested variations on RFID systems that allow them to keep tabs on how quickly merchandise moves off the shelf, which then gives them a heads-up on restocking and reordering inventory.

  • Software add-ons

    When these work on top of an existing WMS, they accomplish two things: They make improved tracking easier to set up, and they reduce strain on the warehouse management system. One such package, ExceedSentinel from Dallas-based EXE Technologies, collects data from the warehouse system and allows manufacturers to check for what Randy Marble, EXE’s vice president for retail solutions, calls “anomalies” in the supply chain. For example, during a beef recall, he says, Sentinel would enable a firm to know exactly where tainted product was and whether it had reached supermarket shelves.

  • Internet-based applications

    Web programs continue to replace electronic data interchange systems and their costly and often bulky proprietary software. These systems make it possible for third parties — whether freight and shipping lines or other logistics outsourcers — to input data into a company’s supply chain management system without the expense and bother of actually installing the company’s software.

Impressive? Yes. But always necessary? That’s the question companies must answer, says Saenz. “In practice, there is a tendency toward overkill, to use technology because it sounds so good,” he says. “But do you really need it? If all you want it to do is make sure you have the right stuff at the right time, then that’s the technology you need to focus on.”

That observation is something that Sandy Geiselman, vice president for logistics, e-commerce, planning, and replenishment for Pfaltzgraff, the York, PA, figurine and china distributor and retailer, has taken to heart these days. The company is in the midst of reconfiguring much of its supply chain management system as it moves to a paperless warehouse. But there are some things, Geiselman says, that probably don’t need to change.

For instance, Pfaltzgraff’s business-to-business shipments are 98% FOB from the Pfaltzgraff dock, which means that the shipments are the customer’s responsibility, so there is no need to trace them. In addition, the firm’s current method for tracing shipments from manufacturers, many in China, is decidedly low-tech. Pfaltzgraff follows the merchandise through a series of phone calls and e-mails to and from agents, freight forwarders, and shipping lines. But, says Geiselman, it’s effective enough, and she isn’t sure spending money on technology is going to make that much of a difference.

“We know, as we go through this project, that we’d like to do more via EDI,” she says. “But I’m not convinced that we can ever fully be able to trace and track merchandise via EDI.”

WHAT DO YOU NEED TO DO? That emphasis on less costly, more traditional methods is not unusual, says Charles P. Inman Jr., director of fulfillment operations for South River Distribution Center in South River, NJ. The firm, a third-party logistics provider, handles fulfillment for the retail and mail-order operations of New York City’s Museum of Modern Art. Inman’s point: If the shipment is unusually time-sensitive — food products or drugs that can go bad, for example — then knowing which boat it’s on and when it’s due to arrive is probably enough. “If it misses one boat, then I know it’s going to be on the next one a week later,” he says.

There are exceptions to this, of course. During the 2002 West Coast dock slowdown, whenever South River needed to find out if a shipment was being held up, someone had to call or send an e-mail to the shipping line. It certainly would have been more efficient if the merchandise had been tagged electronically, and if South River had been able to read the tag to tell where the merchandise was. But, asks Inman, does that sort of once-in-a-while situation justify the expense for a more sophisticated system? Probably not.

Which is not to say that other situations don’t require it. Perishables are one example. Excess warehouse capacity is another, even for operations that know they can’t approach just-in-time standards. Saenz says it’s not uncommon to see companies that have excess warehousing, production, and shipping because they don’t pay enough attention to tracking shipments.

And so there are companies striving to find a true just-in-time solution, focusing on what G-Log describes as transportation management systems. Wouldn’t it be nice to know exactly when a retailer ran out of a product, so that the warehouse could either ship it or redirect a shipment already en route — as well as order more from the supplier?

Another intriguing possibility, says Dave Adams, senior vice president of corporate strategy for TrenStar, a Denver-based supply chain software developer, is looking at the return part of the front end of the supply chain. What happens when manufacturers and distributors, such as a brewery, need their containers returned? Beer isn’t going anywhere without a beer keg, but what happens when the beer keg is still at the frat house? And how does the brewery even know it’s there?

“Most companies, when they do their planning, focus on controlling the forward part of the supply chain,” Adams says. “They don’t address the return cycle. I’ve seen companies with multimillion-dollar systems who know exactly where the product is, but don’t know where the container is after their product has been used. They don’t think of adding visibility to those containers.”

Know, too, that adding that visibility is something technology has made possible, just as it has made other feats possible throughout the rest of the supply chain. That leaves the next decision up to the distributor, vendor, or manufacturer, based on their tracking and tracing requirements.

“What are the real reasons for adding technology?” says Saenz. “Does it add value? Because, if it doesn’t, you’re no better off than if you didn’t add it at all.”

Which is something that just might be the most important thing to trace.

Jeff Siegel’s articles have appeared in Forbes, American Way, Emerging Business, and a variety of other consumer and trade magazines. He lives in Dallas.

Off the Beaten Track

It’s justifiable to track a shipment from business to business, because it’s easy to see where the value comes from in that part of the supply chain. But is there also value for distributors, manufacturers, and vendors in tracing business-to-consumer shipments? What benefit is there for the business, for instance, when a customer can monitor every step of an order made from a retailer?

“Oh, absolutely it adds value,” says Charles P. Inman Jr., director of fulfillment operations for South River Distribution Center in South River, NJ. The firm, a third-party logistics provider, handles fulfillment for the retail and mail-order operations of New York City’s Museum of Modern Art. “In my opinion, if they can follow the order, it gives them a great comfort factor. You don’t have anyone calling back in five days on a 7- to 10-day order, feeling antsy because they don’t know where it is.”

One key to this process, says Inman, is notifying consumers how they can track the shipment. South River, like most online retailers, sends customers an e-mail with shipping information — expected delivery date, tracking number, and a link to the shipper’s Web site.

So not only do customers get peace of mind, but retailers and distributors get to add that peace of mind without spending a lot of money — the ultimate win-win situation — thanks to Web-based software from shippers such as UPS, Federal Express, USPS, and RR Donnelley Logistics. After they send the link to the shipper, retailers and distributors don’t have to do much else.

And, says Inman, it doesn’t even matter that not all customers use the service. For South River, it’s mostly the online customers who do so. Mail and telephone customers can supply an e-mail address, but most don’t, and of those who do, even fewer take advantage of the process. Even among online customers, the percentage who track shipments is not 100%, Inman says.
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