“RFID will revolutionize the way supply chain management is organized,” claims Dick Sorenson, director of product management with radio frequency identification (RFID) device manufacturer LXE Inc. (http://www.lxe.com). “It has fairly significant impact for efficiency in supply chain through improved visibility. From the supplier side, if I can get better long-term vision to what's selling at the store — if I'm getting shelf stock depletion — I expedite forecasting and order placement.”
The grand vision for all retailers, Sorenson notes, is smart shelves — shelves with readers that detect when product needs to be replenished. “That information travels to the back room, on to the distribution center, perhaps even to the supplier. Or the smart shelf notifies the inventory management system of a potential out-of-stock and the system looks for extra inventory at another store, relocates it, and evaluates the need to adjust deliveries to stores,” suggests Sorenson.
“RFID provides for greater efficiencies, shortens lead times and trims inventories in the total supply chain, not just in one store,” asserts Sorenson. A number of major retailers — notably Wal-Mart Stores Inc., Target Corp. and Home Depot Inc. — have already alerted their top suppliers that they're expected to have RFID programs in place in 2005.
Today's upsurge in RFID use focuses on the pallet and case levels, not the item level. Privacy issues aside, the cost of each RFID tag will have to drop significantly — many observers believe to less than 10 cents — for item-level adoption to be seriously considered.
Common standards will also need to be agreed upon, which Sorenson sees as an imminent development. “We now have the promise of emergent standards. Standardization around RFID should open it for broader adoption.”
Six Sigma makes change more palatable
Dow Corning's adoption of Six Sigma methodology has enhanced the company's ability to bring about change.
“Six Sigma highlights the customer, the facts, our processes and root causes,” notes Lori Schock, global business process manager with Dow Corning.
Six Sigma is a measure of quality that strives for near-perfection, which is defined as no more than 3.4 defects per million opportunities.
“Getting the business units to accept changes has been accelerated because we're talking a common language and common methodology through Six Sigma,” Schock says. “It removes the doubting-Thomas attitude because it is a common process based on facts.”