By Tom Andel, chief editor
That was the consensus of a group of logistics execution system vendors speaking at a seminar held in Harrisburg, Pennsylvania and sponsored by LESA, the Logistics Execution Systems Association, part of the Material Handling Industry of America (MHIA).
Make no mistake, Wal-Mart is dead set on implementing RFID technology. But they face as many, if not more, challenges as the vendors they’re asking to join them on the RFID bandwagon. First, how does it expect its top suppliers to be compliant by January of 2005 when it’s almost impossible for Wal-Mart to have all of its distribution centers and stores set up to receive RFID tags? That’s 180 DCs and thousands of stores, noted Paul Crist, vice president of global sales and marketing for Provia Software.
In an early November meeting with suppliers, Wal-Mart clarified its expectations. The retailer will run a pilot project in 2005 with three of its DCs, supplying 150 stores -- primarily throughout the Southwest, but also selected stores on the East Coast and in other parts of the country. Each of the three DCs represents a different piece of Wal-Mart’s empire. One is a Wal-Mart DC supplying Wal-Mart stores, one is a Sam’s Club DC supplying Sam’s Clubs, and the third is a new venture, Neighborhood Grocer.
“For you suppliers, that still leaves the problem of figuring out which products you’re shipping to those DCs and which cases and pallets going to those DCs will need to be compliant with Wal-Mart,” Crist added. He noted that standards are still an open question, even with the work that the Uniform Code Council has done on the Electronic Product Code (EPC).
“The EPC Global initiative is not part of Wal-Mart’s requirement,” Crist explained. “Wal-Mart’s expectation is point-to-point communication, so as you ship them a case or pallet with an RFID tag, you will still need to send that information electronically directly to Wal-Mart with the associated EPC numbers and contents of the cases and pallets. Communication will be in two forms: EDI advance ship notice (ASN), or EDI over the Internet. It will be that way until the day the EPC network is set up and established.”
Susan Ryder, customer development leader with RedPrairie Software, reminded attendees that Wal-Mart doesn’t think of itself as just a retailer. She quoted Wal-Mart CEO Lee Scott’s assertion that it is a distribution company. Distribution companies are becoming global thanks to new visibility tools, according to Ryder.
“With more vendor owned inventory these days you need visibility of your product across the supply chain,” she said. “With that visibility I can do some supply chain analysis. Event management alerts give you a tool to respond to situations in real time.”
Ron Stein, account manager for Psion Teklogix, noted that the computing power to accomplish that is now being found on the warehouse floor, on the dock – even in the freezer.
“Applications are beginning to migrate from dumb terminals to web-based devices that may have Internet Explorer running on them,” he explained. “This will be a vendor independent environment where laptops, Palm Pilots and RF vendors’ equipment can inter-operate.”
Ralph Henderson, representing Kingway CAPS Material Handling, added that those are the tools that will help improve order fulfillment.
“With pick-to-light technology, we’re trying to effectively manage the people in the DCs,” he said. “The accuracy needs to be as close to 100 percent as possible.”
Stan Chew, director of international operations for HighJump Software, said that makes communication with your systems vendors extremely important if you’re going to make this technology work for you as well as for Wal-Mart. That goes for retailers as well.
“The standards have only recently been published,” he said. “The challenge is that proprietary tags are still coming out. Retailers must tell their suppliers what they want as well as the kind of standards they’re going to manage to. On the supplier side, they’re dealing with a variety of retailers who are foisting upon them different standards for compliance. At some point the cost of that becomes too great to bear.”
Steve Parsley, principal engineer with SK Daifuku Corporation, dramatized the benefits of working closely with your material handling system vendor on logistics basics before adopting any kind of technology. He recounted the experience of OC Tanner, makers of class rings and jewelry. When this manufacturer broadened its business to encompass personalized awards, it found it also needed to modernize its manual order picking, order consolidation and shipping. Its biggest problem was that it couldn’t tell customers when orders would be delivered. The warehouse was disorganized. Order pickers were traveling the equivalent of 5,000 feet in only 180 feet of work space.
OC Tanner worked with its WMS vendor to change the way it did business. By changing its warehouse layout and reducing labor up front, it increased productivity by 120 percent. The distance employees traveled was cut by 90 percent, lead times were cut in half and with the new WMS, OC Tanner achieved 99 percent order accuracy. Bottom line, by reducing non-value-added elements, OC Tanner was able to triple its business with less labor. The moral: making its processes more efficient before adopting new technology helped OC Tanner leverage the features of that new technology.
That’s a lesson Wal-Mart suppliers should take to heart before investing in RFID.
John Sidell, principal of Esync, a consulting and systems integration firm, concluded that a common message coming from all speakers at the LESA program was that you need to understand your processes before laying technology on them. That will result in significant improvements without adding significant costs.
“We find that clients often lean a little too much on the vendor or equipment supplier but don’t have the proper plan for execution of their own responsibility,” he observed. “You need a roadmap that spells out the final plan and resource commitments, not only from the vendors you’re working with, but also internal resources so there aren’t missed expectations.”
The LESA seminar concluded with a Q/A session between audience members and vendor participants. Here are more “sound bites” from the vendors:
“Companies have downsized their labor force to survive the economy but now they want to come back up to speed and they’re trying to find ways to do that without adding all of that labor force. They’re trying to find ways to use information and automation technology to improve productivity in their warehouse.”-- Steve Parsley, SK Daifuku
“Everyone in this room is being pressed by customers to provide a greater level of value added services, even to the level of light manufacturing in the DC. The next step is planning and optimization of that manufacturing, taking some keys from the manufacturing software vendors and deploying a constraint based model for increased cost savings from on-demand manufacturing.”-- Paul Crist, Provia
“Everybody needs the capability to deliver value added services within a software product’s function set to be able to react to the demands in their world. You shouldn’t have to come back to the software vendor after each and every shift in your business environment so you can position the product to respond better.”--Stan Chew, HighJump Software
“Our clients are trying to understand how to use a browser based interface for their lift truck operators. They’re struggling with the implementation of RFID and which systems integrator can supply them with the right terminal or reading device that will have the right frequency given that the standards are changing rapidly.” -- Ron Stein, Psion Teklogix
“You can’t know where you’re going if you don’t know where you are. Having visibility across your supply chain is key, as well as labor management.”-- Susan Ryder, RedPrairie
“Often we get caught up with prospects that are looking at first-site implementation and doing an ROI on the first implementation. If you have 20 sites around the world you won’t get the full payback until you’ve rolled the solution out to all of your DCs. What’s the level of effort and the timeframe to do that? Is your vendor empowering you on how to implement the solution on your time schedule and not be dependent on the software vendor to meet that timetable?—-Paul Crist, Provia
“In the last month and a half I’ve been in Japan and Germany on projects where there have been different ways of designing systems. In Germany land is very expensive, but there are also a lot of infrastructure differences. With Germany’s information structure they can’t release an order right away because the credit hold hasn’t cleared and that creates a disruption of the order process. In Germany you have a lot of height so you need software and systems that will support automation. In Japan you have height and vertical productivity laws, meaning for every sq ft of ground you cover you have to provide a certain amount of work space, so you see some tall multi floor facilities there. You can tell where the non value added jobs are because you have high turnover. In Japan people take no pride if they’re not involved in the process, so they leave. They have to understand the process to know how they fit in. That’s a key element in what the information system will provide.”—-Ron Stein, Psion Teklogix
