2006 Tech Trends--Online Exclusive!

Cheaper, more reliable, faster return on investment. Words every manager loves to hear when they start looking at investing in new technology.

“The entire supply chain is under attack.” That’s how Joe Campbell, who manages strategic relationships for Kuka Robotics (Clinton Township, Mich.), sums up the objectives of distribution and material handling managers as they head into 2006. “People want to take time out and they want to take money out. Nobody wants inventory for a day longer than they have to have it.”

On the retail end this means that floorspace is everything. Storage rooms in retail outlets will continue to shrink, increasing the pressure on suppliers to deliver smaller order quantities in a faster timeframe. Other efforts to streamline the supply chain will challenge manufacturers to deliver products to the exact specifications of each and every customer.

To meet such requirements, Campbell reports that Kuka is seeing an increased interest in applications that use robots to re-palletize product in different formats or stack patterns. He also reports that mixed-load palletizing--the “holy grail” of palletizing--is finally becoming viable on the strength of new grippers, simplified interfaces with manufacturers’ ERP systems and software that can calculate mixed case patterns. It also helps that the cost and reliability of robotic technology gets better every year.

“Today the robot is a very, very reliable piece of machinery with a long life,” says Campbell. “Smaller companies don’t have a team of manufacturing engineers. For them to deploy this level of automation, this stuff has to just plain work.”

Such applications demonstrate how the warehouse continues to become more central to serving customers as production becomes commoditized or moves offshore. It used to be that the factory was the focal point of many manufacturers, observes Kevin Prouty, senior director manufacturing for Symbol Technologies (Holtsville, N.Y.), which makes and sells mobile computing devices. Now the manufacturing plant is becoming a supplier to the warehouse.

“Warehouses were built to store stuff, as a buffer zone to help maintain the inventory and control it, so you knew where your finished goods or raw materials were. What I’m seeing on the finished goods side is a complete shift in the warehouse from storing stuff to being the touch point of retail customers,” says Prouty.

The Year of RFID

Although the technology has been around for decades, 2005 could be remembered as the year that radio frequency identification (RFID) finally came of age. The mandates have begun to have an impact on how the direct suppliers to large retailers package and ship goods. As the technology has matured the cost of readers, encoders, inlays and tags, has dropped significantly. Perhaps even more important, the standardization of protocols has opened up opportunities in other industries. Companies will really begin to take advantage of RFID’s capabilities over the next few years, says Prouty.

“You want to be able to track your materials and assets without impacting productivity. RFID gets to that point,” he says, because forklift drivers and order pickers won’t have to stop what they’re doing to read bar codes on cases and pallets. Every penny that the price of the RFID tags comes down opens up even more opportunities.

“A lot of people had expected that these major compliance mandate market drivers were going to pull back on the technology, that they weren’t real serious. That’s absolutely not the case,” says Matt Ream, senior manager of RFID systems at Zebra Technologies (Vernon Hills, Ill.). Zebra manufactures and markets printers and RFID-tag encoders for a wide range of applications.

For those who have adopted a wait-and-see approach to RFID, Ream offers some simple advice: “Start sooner rather than later. Don’t wait around until you get the letter in the mail that you have to do something in the next couple of months. Those folks who wait until the last minute really have to scramble and end up making decisions they wouldn’t otherwise make.”

When managers have to make hasty decisions they may install technology that meets current needs but that isn’t scaleable. By setting up pilot RFID programs companies can familiarize themselves with the technology and engineers can identify other potential areas where it can be used that can improve the overall return on investment.

As the volumes go up, the so-called slap-and-ship approach to compliance will become cost prohibitive, says Ream. This is already fueling more interest in automatic print-and-apply equipment. He says that the Generation 2 protocol is improving programming times, which will eventually mean that high-volume operations may need fewer printing/encoding machines.

“We’re seeing at least a 10-fold decrease in the amount of time it takes to program and verify a tag, which ultimately means increased throughput in those applications,” says Ream. It’s one more indication--like the recent drop in tag prices to the 14-cent range--that the technology is getting closer to the “sweet spot” where it will make economic sense in a wide variety operations. Ream questions the litany of reporting saying that there is no ROI in RFID.

“A lot of companies are very tight-lipped about where they’re seeing the value because they think it can give them a competitive advantage,” he says.

The Big Picture

Whether it’s RFID, a warehouse management system or basic slotting software, whatever type of information technology that manufacturers, distributors and wholesalers choose to invest in next year, it had better help them manage the growing complexity of today’s supply chains. Globalization means that both suppliers and customers are international, which means international laws and regulations that have to be complied with. Customers want more choices and more innovation, which means shorter product lifecycles, and shorter lead-times.

“It’s an exciting time but it’s challenging for people in how they manage their business,” says Larry Ferrere, chief marketing officer for Manhattan Associates.

One of those challenges is how companies can cost effectively integrate their various software solutions so that different applications can easily exchange data. Supply-chain software, says Ferrere, needs to be integrated, allowing managers to do both planning and execution in a cohesive fashion.

The whole point, he says, is to increase business value by increasing revenues, reducing costs and making better use of assets. From a supply-chain perspective, that means leveraging what the company does best, and bringing in or hiring outside expertise where necessary to make the company’s supply chain perform better than the next guy’s.

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