Half a century after the bar code's first appearance, supply chain managers are still figuring out how to handle the vast quantities of information it provides. Even as they struggle, a dizzying new range of automatic data collection (ADC) technologies are becoming economically viable, each more rich in information than the last: radio-frequency ID (RFID) tags, real-time locating systems (RTLS), magnetic stripe cards and global positioning satellites, along with biometric readers that scan the human iris and fingerprint. As the level of sophistication rises and the prices drop, logistics managers say it's increasingly difficult to figure out how to harness the power of ADC and make it work for them.
What they tend to overlook is that a blizzard of information is often less useful than a judiciously chosen trickle of facts. Vendors and analysts say it's crucial to decide which data collection processes would benefit from automation and to decide what level of detail is required. In an ideal scenario, the user plucks exactly enough information from the chaos to help things run smoothly.
Consider the case of 24plus, a pan-European expedited delivery company, where the chaos was considerable. The company, based in Hauneck-Unterhaun, Germany, was formed in 1996 as a partnership among 51 different shipping services. Every day, the network delivers around 40,000 packages in 34 countries, handled through 51 depots, offering guaranteed delivery times of 24 and 48 hours. Despite the complexity of the operation, the company relied on paper to manage receiving, tracking and even cross docking until 1999—when 24plus began to install bar-code printers and scanners from Psion Teklogix. "Before installing the system we had to report by pen and paper, via fax reports, with inquiries via phone on top of that," says Peter Baumann, managing director at 24Plus. "This was very time intensive and of course required a lot more work."
The challenge was to consolidate 51 separate information technology systems into a single network that could communicate freely with all of them. Because of the universally agreed-upon standards for bar-coding formats, it was possible to bypass most of the difficulties of language barriers, as well as differing computer systems used by the partners. 24plus simply started producing standardized labels for packages, and introduced hand-held and fixed Psion Teklogix bar- code scanning devices in the majority of its depots.
The Psion bar-code scanners quickly collect and relay information about the individual shipments' position, status and condition. That information is collected wirelessly, so that a reading can be done anywhere in the distribution center. Then the depots communicate the information via fixed lines to the central 24plus hub at Hauneck-Unterhaun, providing a realtime overview of the entire network. Although workers are able to track the shipments centrally when, for example, a customer calls up wanting to know where his package is, the actual management and monitoring of the shipments is done by each individual depot, explains Baumann. That reduces the operation's complexity enormously—given that approximately 1,500 messages whiz back and forth per hour. But, crucially, there is central access to all data, so 24plus can dip in to keep check on quality control and customer satisfaction. It's a great example of bar codes being used to reduce the mess, not just make it go round faster.
Another advantage of the system is that it doesn't even have to span the whole of 24plus's operations: 24plus uses the Psion network in only 40 of the 51 depots that serve the delivery network.Other depots gather and report on different IT systems. But automatically monitoring a majority of shipments through the larger part of the delivery cycle— using a technology that presents no problem with computers talking the same language, even if their users don't—is a huge advantage.
"We have seen immediate and clear benefits from Psion Teklogix's customized solution," says Stephanie Erbert, controlling manager at 24plus. Errors in the packing department are almost entirely a thing of the past, she says, as packages are scanned both on their arrival in the depot and again as they are loaded, giving workers the opportunity to ca tch disparities. Logging the movement of shipment s manually is a thing of the past too, of course. "This has translated into significant savings," Erbert reports.
This kind of intelligent use of automatic data collection in the distribution center has helped bridge a long-standing gap between front-office and back-office operations, says Richard Bauly, vice president of strategy and business development at Psion Teklogix. He explains that companies have been investing for years in front- office computers designed to manage their logistics operations. But gathering crucial information to feed into those computers was stil typically stuck in the dark ages. "You would do the work on the clipboard in the warehouse and if it was readable and accurate—which it usually wasn't—you'd [manually] update the front-end system. There was no bridge," Bauly says. "Now you can bridge that gap between front and back office; it's as simple as that."
Nonetheless, Bauly concedes that adoption of ADC technology is still surprisingly slow. Even though bar codes appear on every retail item you buy, the use of automatic data collection to track and manage the movement of those very same items as they move from manufacturer to retailer, is far from universal.
Some companies are just plain scared of using ADC. Dan Mullen, interim chief executive officer at AIM Global, a Pittsburgh-based trade association representing the automatic data collection industry, says he finds himself increasingly persuading small and medium-sized companies to explore the advantages of the technology. Often, these companies supply large retailers or consumer packaged goods giants, and are already putting bar codes or even RFID tags on their products because the customer has insisted on it. But they aren't using the information embedded in those tags or labels for themselves, Mullen says. Since the judicious application of supply chain visibility can mean the difference between besting their competitors and going out of business,Mullen thinks this is pretty crazy.
Though some companies simply fail to see the opportunity presented by bar codes and other ADC technologies, others, perhaps most, have trouble unfolding their wallets. But, Mullen points out, for small and medium-sized companies it's a fairly minor investment, often measured in thousands, rather than hundreds of thousands of dollars. And he puts the return on investment at typically around eight to 10 months."Innovators and leaders are prepared to make those incremental investments and gain competitive advantage," Mullen says. One of the recent changes in ADC technology is that it has become cheaper and easier to use across the board, bringing bar coding—or an increasingly attractive combination of bar codes and RFID tags—within the grasp of small companies with relatively limited IT capabilities. Mullen says the companies that make and sell ADC technology have recently realized the opportunity in the smaller company sector, and have scaled down prices for smaller systems. Meanwhile, for larger companies, reduced costs mean they can bar code individual items for supply chain tracking, instead of staying at the pallet or carton level of detail.
Waves of the future
Grasping the opportunities presented by the bar code is easy enough; taking the RFID route presents more challenges. Certainly, any manufacturer supplying Wal-Mart will need to tag cargo at the pallet level with RFID tags by 2005 if it wants to keep the business. But, as Mullen points out, suppliers don't necessarily have to use those tags for internal tracking purposes. Although RFID offers the promise of more information gathered more easily (no need for hand-scanning of tags, they announce themselves to a fixed reader), there's the trouble of expense. And, perhaps more importantly, there are unresolved issues of standards. Unlike bar codes, different tags carry different information in a different order, and readers don't necessarily speak the same language. Standards are important so that manufacturers won't have to insert three different tags to satisfy the incompatible demands of, say, Wal-Mart, Target and Home Depot. Mullen says the International Standards Organization (ISO) is due to approve a set of RFID standards by the first quarter of 2004, but there are several competing efforts at present to standardize RFID. Other ADC technologies suffer from a lack of standards too.
That's one of the enduring problems when you look at automatic data collection over the last 20 years, says John M. Hill, principal at ESYNC, a supply chain consulting firm based in Toledo, Ohio. "The absence of standards inhibits the growth of new technology; their promulgation spurs it," says Hill.
All the same, companies such as 24plus are not put off. The company is considering introducing RFID technology for shipment tracking, Baumann reports, though he says it won't happen anytime soon. Psion Teklogix's Bauly adds that, while smaller companies hold off on investments while waiting for standards, big manufacturers and retailers like Ford and Wal-Mart have simply gone ahead with their own proprietary systems.
Bauly is confident that we're headed for the "naked" supply chain, and fast. He predicts 70 to 80 percent adoption of RFID tags in five to 10 years, plus increased mixing in of other technologies such as RTLS.
He also points to cut-price supply chain management applications being developed by Microsoft. He expects other major software houses to follow suit, bringing down the cost of a warehouse management system from $100,000 to $20,000 for example, with cheaper terminals too. "Microsoft," he predicts, "is going to make it more economical for smaller warehouses to jump in and play."