It could have saved thousands of dollars by taking the "slap on RFID and ship" route, but vitamin-maker Schiff thinks its full-blown RFID project will have a bigger payoff in the end.
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
If Rod Farrimond ever tires of his career in information technology, he should have no problem landing a job in sales—not after the coup he pulled off last spring. Farrimond works for Salt Lake City-based Schiff Nutrition International, a maker of vitamins and nutritional supplements, but his sales feat had nothing to do with multi-year contracts for Tiger's Milk bars or Glucosamine Gelcaps. What Farrimond pulled off was a feat of a whole other order of magnitude: He convinced management to sink nearly half a million dollars into a project that offered virtually no prospect of a conventional ROI.
The story began with a mandate from Wal-Mart. In March 2006, Schiff got word that if it wanted to continue doing business with the mega-retailer, it had until January 2007 to start putting RFID tags on the cases and pallets it ships to Wal-Mart's DCs. That created a dilemma for Schiff, which had yet to get started with RFID. It wasn't a question of whether or not to comply with the mandate (it would). It was a question of how deeply to get involved with RFID to accommodate a single customer whose business represented less than 1 percent of the company's total volume.
For many suppliers in Schiff 's position, the answer would have been obvious: slap and ship. They'd buy some tags, slap them on the shipments that required them, and hope for the best. But Farrimond, who is the company's manager of business analysis, rejected that idea from the start. Though slap and ship might be cheaper in the short term, he felt Schiff would be better off finding a scaleable solution that would allow it to meet similar requests from other customers down the road. (At press time, Schiff had been asked to start shipping RFID-tagged product to a Sam's Club DC in Desoto, Texas.)
As reasonable as that argument might sound, it would still be tough to sell to management. That main hurdle? Return on investment (ROI). Farrimond's back-of-an envelope calculations showed that only 180 of the 25,000 cases the company ships each week would require tags, which meant Schiff wouldn't see any operational savings right away. He'd have to persuade management that the payback would come elsewhere in the supply chain. As Farrimond puts it, "We're not going to see it come back in any hard form of ROI, but we believe it'll be there. RFID is a supply chain initiative, and ROI studies usually have a hard time dealing with the fact that the ROI may not come within your own four walls."
In meeting after meeting, Farrimond laid out his case. Schiff might not see savings in its operating costs for a while, but it would almost certainly see sales growth through a reduction in out-of-stocks and increased inventory turns at Wal-Mart. "When that occurs,"he notes,"then our top-line growth accelerates. It'll probably never be attributed directly to RFID, but it's good for the company. We had to talk long and hard to our executive team about why that's important."
The right stuff
In the end, Farrimond's arguments carried the day. Management gave the project the green light and approved a budget of $465,000 for the RFID initiative. But as the project got under way, Farrimond began to wonder whether pitching RFID to management might not have been the easy part. In a matter of months, he and his team would have to design a system from the ground up, choosing the tags, readers, and middleware that best met their requirements. There was the added pressure to get it right the first time because Schiff, a mid-sized company (it recorded $178 million in sales in 2006), didn't have the luxury of limitless funds.
Rather than try to design the system on his own, Farrimond decided to consult with the experts. Over the next few months, he made several trips to IBM's RFID testing lab in Raleigh, N.C., to get recommendations from the center's specialists and test different types of equipment. He wanted to find a solution that would work for both cases and pallets, including mixed pallets, and that wouldn't require wholesale changes to the DC's operations. For example, the system had to allow DC workers to stack cases on pallets the usual way without worrying about the orientation of the tags.
On top of that, the solution had to be fully scaleable. "Schiff wanted a solution that not only offered enhanced productivity, but was also interoperable with other supply chain partners, highly scaleable, and replicable for future customers and their unique specifications," says Scott Burroughs, middleware software solutions executive for IBM Software Group.
In just 12 weeks, specialists from IBM and systems integrator OATSystems helped Farrimond come up with a system that's able to read tags on mixed pallets containing over 100 cases with 100 percent accuracy. "We know that all the cases on that pallet actually belong there, and we are able to associate a certain pallet with a particular sales order, and we know everything about the sales order and all the EPC numbers that went with the sales order," says Farrimond. Eventually, Schiff will be able to use the data collected to create an electronic "pedigree" that can be used to document the products' movement throughout the supply chain, verifying their authenticity and deterring counterfeiters.
The company rolled out the RFID system in late October at its DC in Salt Lake City. After a two-week trial period, it shipped its first RFIDtagged pallet to Wal-Mart in mid-November. In January, it began shipping tagged cases (corrugated cases of plastic bottles containing tablets and capsules) to three RFID-enabled Wal-Mart DCs. Farrimond reports that Wal- Mart achieves read rates of about 96 percent at its DC, which is slightly better than the average read rates recorded by the retailer. Schiff currently tags six stock-keeping units (SKUs), but Farrimond expects to increase the number to 15 shortly.
As for the cost, the project came in 30 percent under budget. The company had allocated $465,000 for the RFID initiative; Farrimond and his team spent only $323,000.
The next act
Right now, Schiff is using its RFID system purely for compliance with Wal-Mart's mandate. But it soon will begin taking advantage of the technology in other ways. For example, the company plans to start attaching RFID tags to promotional displays bound for the sales floor at Sam's Club stores sometime this month. "We're talking about putting a 20-cent tag on a $1,000 display of products," says Farrimond, "and being able to make sure that pallet is out on the floor when it should be. That type of thing has an immediate payback."
In the meantime, Farrimond has begun to identify possible ways to integrate the technology into the company's internal operations as tag use becomes more widespread. For example, he foresees a day when Schiff will be able to use automatic RFID reads, rather than laborintensive bar-code scans, to collect data for advance ship notices (ASNs).
Eventually, Schiff will be able to use the data gleaned from RFID reads to trace inventory down to the store level. "That's where the real gold is, and we're helping them to mine that gold by capturing the data and analyzing it downstream," says Paul Cataldo, vice president of marketing at middleware provider OATSystems.
That tracing capability will enable Schiff to confirm that its deliveries have been received at customers' DCs, which will help resolve disputes in cases where, say, a retailer claims to have received only 58 of the 60 cases it ordered. "We can look at our information pOréal and start to look for those case reads if there is a discrepancy," says Farrimond."If we see all 60 case reads, we can tell them that either their hand count was wrong or something else happened. We'll have the ability to tell them what distribution center received them and which store they were shipped to."
An equal opportunity technology
Though small and mid-sized companies often assume that RFID is out of their reach, Schiff 's experience shows that it's not just for the giants, says Farrimond. "One reason we wanted to share this story," he says, "is to point out that if you are smart and do it well and get a good partner to implement with, then even small and medium-sized businesses can do this without damaging your profitability."
What they need to understand, he adds, is that the ROI is unlikely to come from the traditional sources (like operational savings) but rather, from increased revenues elsewhere in the supply chain. "You have to recognize that it's the supply chain that becomes more successful, and not necessarily [operations within] your four walls. The ROI will come when the supply chain is more efficient and you can sell more things or sell them faster. If people realize that this little company can do it for 1 percent of [its] volume, then maybe others will realize they can figure out how to do it as well."
"we've got it on tape"
Not so long ago, a company that took the RFID plunge— investing in the technology in hopes of streamlining its logistics operations—could expect to wait three to five years for a payback. But that's starting to change. Someday soon, the average payback period for RFID projects could drop into the range normally associated with warehouse management systems and other software.
In fact, reports are beginning to trickle in about companies whose innovative applications are paying for themselves in 12 months or less. Take electronics giant Sony, which has combined item-level RFID tagging and digital video at its distribution center in the Netherlands. Sony expects to see a return on its RFID investment in under a year, due to the products' high value (the facility handles digital cameras and camcorders) and the volume of orders shipped from the site. (Currently, the electronics giant is moving 60 pallets of item-level tagged goods through the DC every hour, with plans to increase the volume.) The payoff, it says, will come in the form of increased shipping efficiency, reduced shrinkage, and a streamlined claims process.
For the project, which went live at its primary European DC in Tilburg earlier this year, Sony is using RFID tags from UPM Raflatac and Reva Systems' Tag Acquisition Processor (TAP) system, which filters RFID data from networked RFID readers, manages those readers, and sends the data to back-end systems.
Sony tags products to be shipped with RFID labels and then records the items' IDs at each stage of the fulfillment process, as they are picked, stacked, and shrink-wrapped on pallets. An automated video system records the process, burns RFID data onto the video image, and indexes the MPEG4 video stream according to the RFID information. The system also logs pallet movement through dock doors and onto trailers, combining video and RFID to provide visual and electronic proof of delivery.
Among other benefits, the new system is expected to help Sony resolve difficulties confirming deliveries to major retailers during peak shipping periods. In the event of a dispute, Sony will be able to provide not just electronic shipment confirmation, but also video proof that the items have been loaded onto trucks and shipped.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.