While businesses have deployed large scale enterprise resource planning (ERP) systems to integrate much of the enterprise, the majority of shop floor devices and processes still are not connected in any meaningful way to the ERP system. Moreover, as manufacturers have added point solutions, undergone business acquisitions, and outsourced manufacturing and distribution to third parties; disparate silos of information have cropped up, exacerbating disconnects between the shop floor and the top floor.
This disconnect creates troublesome blind spots. If a manufacturer discovers a flaw that requires a product recall, many times there is no way to quickly and exactly understand which product from which batch needs to be recalled. There’s no way to pinpoint which locations or stores received tainted product. Thus, the company has little choice but to announce a massive recall of all items shipped during a particular timeframe — making the recall far wider in scope than is probably necessary. This hurts profit margins and brand reputation.
You only need to watch the local news to see examples of the issues this can cause — toys, spinach and so on — but what you may not know is that in a three month span in 2007, the Food and Drug Administration issued more than 70 Class 1 recalls. A Class 1 recall is a situation in which there is a reasonable probability that the use of or exposure to a violative product will cause serious adverse health consequences or death.
With the ever increasing global nature of the supply chain, having the ability to track product in an automated fashion through the entire supply chain is critical.
Likewise, many manufacturers face exorbitant costs because of product expirations. The Healthcare Distribution Management Association reports that the pharmaceutical industry incurs $2 billion a year in returns and product losses and incurs another $2 billion annually in the costs associated with processing returns, expirations and recalls. Many of these expiration issues could be avoided if the organization had a better grasp on the shelf life of products still on site in order to determine ship dates appropriately.
The two most common areas where this disconnect is more prevalent are as raw materials enter the production line and as final product is moved into distribution. After all, shop floor employees are focused on moving products, not entering data to report to management.
Typically, someone in manufacturing will manually update systems, but the frequency of the updates and the granularity of the data are often limited. This does not allow management to have a real time picture of the production process. With this limited view, it is difficult to understand the impact that disruptions or changes in the process have on the entire supply chain.
Many organizations have deployed radio frequency identification (RFID) systems to comply with demands from major customers such as Wal-Mart or the Department of Defense. However, these data collection systems tend to be implemented tactically, simply to meet a mandate. Why not leverage these systems to gain visibility into manufacturing and distribution processes?
For example, if a company is faced with implementing RFID tagging to fulfill a regulation, why not use the RFID system to report production, track the movement of finished goods, receive raw materials and automatically update that inventory directly into the ERP system? The further back organizations look in the supply chain for opportunities to track the movement of product the more value they are going to achieve from visibility to those products.
Instead of implementing RFID as yet another siloed function, manufacturing and supply chain executives would be well served to use this as a tool to track data and improve processes across the shop floor — from receiving to production, quality management, warehouse management, shipping and distribution, and third-party processing. This approach not only eliminates considerable manual labor, it gives management context into the product as it goes through the manufacturing and distribution cycles.
As inventory moves through the production run, the serial number in the RFID tag is associated with key information about important metrics, such as lot and expiration date, key ingredients, notification regarding hazardous materials, etc. And by identifying which lot is associated with which carton, manufacturers can track these materials as they move downstream.
During the distribution process, additional data is added such as destination customer, carrier, expected transit time and other key supply chain data. In addition, by adding intelligence to the product as it moves through the process those handling the product can be alerted to any special handling instructions (for example, storage temperature) to ensure that specifications are met as the product goes through the supply chain.
Ultimately, RFID tags can connect manufacturing and distribution processes throughout the entire product lifecycle. This includes automatic sharing of intelligence back from retail stores to the manufacturer.
For example, if a company ran a promotion, did the product make it to the right store at the right time and was it put out on the display area? Usually this type of information is very expensive and time consuming to track, but with the right RFID infrastructure in place, all of these granular details are tracked and reported automatically — giving manufacturers and retailers invaluable insight into inventory levels, product demand, promotion effectiveness and more.
A variety of key performance indicators (KPI) can be identified and tracked to monitor issues such as on-time delivery, product shelf life and cycle times. Identification of customer consumption patterns also is extremely helpful for determining appropriate stock levels.
Retail powerhouses like Wal-Mart are applying data gleaned from RFID tags to more finely tune distribution and store activities. This information is being used to enhance customer service by eliminating out-of-stock issues and increasing sales.
This technology can also be leveraged for additional supply chain processes, items like proof of delivery, returns processing, invoice and dispute resolution, custody tracking, and container and returnable tote tracking.
Businesses already are investing in RFID technologies due to industry and legislative pressures. But those that simply apply a “slap and ship” approach to RFID tags are missing out on tremendous opportunities to optimize material flow throughout the factory.
Organizations today have the ability to manage the entire supply chain dynamically, simply by automatically collecting and analyzing RFID data throughout the product lifecycle. This rich wealth of information adds context to drive process automation and improved decision support across warehouse operations, distribution management, promotion management and more.
Acsis, Inc. is a global enterprise software and services provider that automates manufacturing and supply chain processes enabling higher throughput at lower costs.