RFID Wont Work Without Metrics

It’s not just what gets to Wal-Mart. It’s what happens on the way.

ABC Supply (not real name) was happy with its RFID (radio frequency identification) based inventory management system. It told them they were achieving 99 percent order fulfillment rates.

ABC’s customers disagreed. The problem? ABC measured fulfillment as the order traveled through its warehouse. Its customers measured fulfillment when the order arrived at their door.

A lot can happen to an order between warehouse and store. If you’re looking at RFID to fix your fulfillment problems, you’d better look at all your problems. And don’t forget, your customer’s problems are your problems too.

Is Wal-Mart your customer? Then you’re probably preparing your RFID answer to their RFID challenge -- RFID by 2005! If your answer involves tagging your shipments and collecting data from your own closed loop system, don’t bother racing to that finish line. Unless you can learn what happens to orders after they leave your dock, you’ll never know whether the technologyyou bought is living up to its promise for you or for Wal-Mart.

As you’ll read in our RFID Users Report on page XX, the leading suppliers to Wal-Mart start technology implementation with pilot studies. The purpose is to gather metrics. Successful pilot studies report more than just speeds and feeds, however. Those kinds of metrics are about your link in the supply chain. Supply chains are tortured by such metrics, says Eric Johnson, a professor at Dartmouth College’s Technology School. Johnson spoke at the Fall meeting of the Logistics Execution Systems Association (LESA), part of the Material Handling Industry of America (MHIA).

“There’s no perfect metric,” Johnson explained. “A metric is an amalgam of present and planned accomplishments. But measures decay because they lose variance and therefore the power to discriminate good from bad performance. Good metrics capture variability so you can see the worst and best players.”

How can you use RFID to measure variability?

Look for how many orders shipped early and late. Many factors contribute to late orders, and in an accumulative way. If you capture those data at several points in your supply chain, you’ll have better information on which to base your assessment of success or failure. If you can find variability, you can eliminate it, Johnson adds.

“People don’t realize how RFID will change their processes,” he concluded. “Speeds and feeds are easy. The advantage is in how it will change processes and identify opportunities.”

Woolworth stores in the United Kingdom did just that. They have 809 stores there. They did an RFID pilot to find the measureable variability in their supply chain. RFID tags were read going on trucks and coming off. They found that some products never made it to some stores, while other stores received too much. There was also pilferage along the way. Inventory systems showed products in stock when they weren’t actually there. The point is, they captured variability between various points in the supply chain. That proved the business value of RFID. But it only works if you change the supply chain process as a result and if organizational incentives between supply chain links -- are linked.

As you’ll read in our RFID report, Wal-Mart’s top suppliers are being methodical about their technology investment. It starts with organizational alignment and education. Then there’s lab testing of your products with the tags. There may even be package redesign in your future. Be prepared to do site surveys of your plants and DCs and evaluate all the data collection points along the supply chain. That will help you identify opportunities to take cost out of your system -- and add value to your products.

Tom Andel, chief editor

[email protected]

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