Tuesday, February 7, 2012

Technology enabled reordering systems in supply chain process

This week readings focuses on the need to maintain not necessarily ‘sufficient’ but ‘efficient’ quantity of inventory for a business to thrive in competitive market. From HP’s case study it is evident how soon and how bad businesses can faze out if proper actions aren’t taken at appropriate time. Connected to this reordering system, I have had a brief experience while implementing RFID solution for a major garment retailer in Asia. The idea is to slap RFID tags to items (at the granular level possible technically and financially viable) and enable RFID systems and ERP systems to feed input to reordering modules. Further these modules are integrated across enterprises (among suppliers, vendors, integrators and ordering company) so that an fully automated ordering is possible. The input from RFID systems are usually feed to modules which implement various reordering algorithms to optimize the quantity and timing taking into considerations bulk order discounts, seasonal orders, anticipated disruptions etc.

The RFID based reordering system can be implemented at various levels of supply chain. At the manufacturing level, when the raw materials are consumed for production the bins holding these materials are ‘smart’ (meaning RFID reader enabled) to replenish themselves by raising purchase orders to suppliers. Further down the supply chain process, at the warehousing level the bins could again be built to be ‘smart’ to send intra-department work orders when the goods ship out. Finally at the final stage, that is retailing the shelves are RFID enabled to feed the data back to warehousing module of ERP. So, as you can see it is a information feed channel which flows backwards feeding valuable real time data to its predecessor module in the system. The advantages are multi-fold such as reduced cost on inventory carriage, reduced mis-orderings, increased visibility and better decision making abilities for the supply chain managers.

The concept is not new. In fact I was surprised to bump across an article dating back to 2003 when Wal-Mart wanted to have trails[Find the article here]. And there is an ongoing trial deployments across various verticals to make this work [More related articles on latest deployments -
Scandinavian Dentists Use RFID to Reorder Supplies
and Out of Stock? I’m Out of Here!. But due to accuracy limitations of RFID, economic viability and immaturity of the hardware and integrated software this system is yet to attain its peak. But, I do feel that going forward we can only expect to see more deployments with this system in place.

PS: Interestingly I found this video from HP which tries to promote the idea of smart shelf.
It is short and informative and comprehensively covers what I have described in this post.
HP RFID Smart Shelf

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