The power of technology in gearing up supply chain efficiency&effectiveness

The Power of Technology in Gearing Up

Supply Chain Efficiency & Effectiveness

Indonesia Supply Chain & Logistics Conference 2009

Nov 26, 2009

Eugene Van De Weerd

Country Director, Indonesia

2

Agenda

• Business and Supply Chain Dynamics Today

• Supply Chain Technology Involvement in the Region

• Enabling Silent Commerce in the Supply Chain

• Silent Commerce in Retail Supply Chain

• Outlook

3

Business Environment Today

Business

Dynamics

LowerCost

Branding

DynamicMarket

HigherQuality

of Service

RisingProfitability

Demands

Sourcing & Retaining

HumanCapital

Policies &Regulations

4

Competitive Trends in Global Supply Chain

Price

Deflation

Raw

Material

CostGlobalization

Integrity &

Security

Visibility

Quality of

Service

Environmental

Regulations

Glo

bal F

orc

es

How is

Your

Company’s

Supply

Chain

Coping?

Supply

Chain

Today

5

Supply Chain Initiatives (Examples)

Direction

Lean 6 Sigma

Collaboration

Brief Info

• Create flow and eliminate waste (lean) + improve process capability

and remove variation (6 Sigma)

• Mostly manufacturing (lean) + all business processes (6 Sigma)

• Strong enabler towards improving efficiency and driving cost down for

operations

• To reach a common consensus to achieve overall goals in an

increasingly distributed environment

• All stakeholders in the supply chain

• Enabler towards achieving greater visibility, time to market products,

higher security and integrity, new product development and lower costs

• Using energy efficiently and reducing environmental waste to ensure

greener environment al protection and sustainability


• Enabler towards achieving environmental protection and sustainability,

and complying with stricter environmental regulationsGreen Supply

Chain

6

Supply Chain Initiatives (Examples)

Direction

Integrity &

Security

Brief Info

• To ensure the authenticity, quality and efficient delivery of products as

it passes through the entire supply chain


• Enabler towards data integrity with partners, and reducing risk of

diversion or counterfeiting of goods with better visibility

Low Cost

Sourcing

• Outsourcing vs Insourcing – managing relationships, external risk

management, redefining core competencies


• Reducing overhead costs but ensuring Quality of Service is always high

7

Agenda





• Outlook

8

Su

pp

ly C

hain

Perf

orm

an

ce

1970 2010

Material Resources Planning

Enterprise Resources Planning

Advance Planning and Scheduling

RFID

Bar coding System

GPS

Manual tracking

Fax

Vendor Management System

Fleet Management System

Warehouse Management System

10 year milestone

Evolution of Technologies in Supply Chain

http://www.123rf.com/photo_214957.html









9

Development of Supply Chain Technologies

Nascent Growth Mature Decline

Procurement /

Manufacturing

Transportation

Distribution

Warehouse

Technology Development

High AttractivenessLow Attractiveness

Warehouse / Inventory

Management system

Fleet Management System

GPS / Vehicle Tracking System

RFIDBar Coding System

Vendor Management System

Remote Management

Low Attractiveness

RFID

RFID

RFID

10

20.9

35.6

38.1

43.1

62.3

66.1

RFID / Smart Labelling System

ERP Software

GPS / Vehicle Tracking

Systems

Transportation Planning/ Fleet

Management Systems

Bar Coding System

Warehouse/ Inventory

Management Systems

Responses (in %)

Logistics Technologies Currently Being Used by

End-Users (Overall ASEAN 4)

• Warehouse Management and Bar Coding System is the widely used technology in facilitating logistics process

• More than half of the end-users are yet to adopt the Transportation Planning / Fleet Management System

• Close to 80% of end-users are not using RFID technology, mainly due to the high initial costs for setting up the system

• ERP software and GPS / Vehicle Tracking System are being used by about 35 - 40 % of the end-users

Note: ASEAN 4 consists of 4 countries which are Malaysia, Singapore, Indonesia and Thailand


11

Future Technology Investment Plans of End-

Users (Next 12 Months, Overall ASEAN 4)

11.0

12.3

14.8

18.2

20.1

27.8

Transportation Planning/ Fleet

Management Systems

ERP Software

Warehouse/ Inventory

Management Systems

GPS / Vehicle Tracking

Systems

RFID / Smart Labeling System

Bar Coding System

Responses (in %)

• Bar Coding System is the most sought after technology

• Adoption of RFID / Smart Labeling System expected to increase at faster pace in near future

• GPS / Vehicle Tracking Systems are beginning to gain acceptance among the end-users

** Percentages compute based on the responses from end users who currently were not adopting such technology


12

ERP, MRP & APS System

Fleet/Warehouse MS

Barcode, RFID & GPS

Advanced

Logistic

Technologies

Increase supply

chain efficiency

Lo

gis

tics C

osts

Reengineer

supply

chain Consultation

from LSPs

Engage

new LSPs

Initiatives to reduce logistic costsUsed of advance technologies

Average Logistics Cost

Currently incurred in

ASEAN 4 countries:

14.4%

14.4%

Advanced Technologies + Initiatives =

Lower Operational Costs

** LSP refers to Logistics Service Providers

13

Agenda





• Outlook

14

Just two and a half square

centimeters will decisively

alter the future

of supply chain

management

(EPCglobal)

15

RFID

• No line of sight

• Long read range

• Multiple reads

• Rewritable

• Large memory storage

• Automated

• Sensor capable

Barcode

• Line of sight

• Short read range

• Singe reads

• 1 time write

• Limited memory

• Human labor needed

• Non-sensor capable

RFID Technical Benefits

16

RFID Business Benefits

• Increased efficiency

• Reduced cost

• Increased productivity

• Increased resource utilization

• Increased flexibility and efffectiveness

• Avoiding or reducing delays and latency

• Timely project execution and delivery

• Improved government delivery system

• Improved safety

• Efficient reverse logistics

• Real-time, dynamic track and trace

• Complete and real-time visibility

• Complete and real-time accuracy

• Improved quality of life

• Greener environment

• Streamlined logistics network

•Reduced (elimination) of manual

handling, processes and activities

• Reduced inventory holding, storage

and handling cost

• Benefits• Capabilities

17

Value of Real Time Information

What is the value of WSJ dated 1 month ago?

What is the value of WSJ dated yesterday?

What is the value of WSJ dated today?

What is the value of WSJ dated tomorrow?

18

Agenda





• Outlook

19

Manufacturer TransportationStore

Operations Retail

Example: Retail Supply Chain – Core Segments

Supplier

• Involves several segments along the supply chain before product reaches the consumer

• Susceptible to various internal and external challenges that could jeopardize a proficient

operational paradigm

RFID has potential to Optimize and Streamline Entire Operations …

Warehouse & Distribution

+

20

Manufacturer TransportationStore

Operations

Design Partner

Component Supplier

Raw MaterialSupplier

Contract Manufacturer

RetailCustomer

Large Retail Customer

Store Operations

Transportation

Manufacturer

Manufacturer


Transportation

Store Operations

Small

Cross Supply Network Activities

Retail Supply Network – Reality

• Complex SCM due to multi-faceted relationships

• So, what is RFID’s role here?



+

+

+

Large Retail Customer

Right

Product

Right

Place

Right

Time

Right

Customer

Right

Condition+

21

Holistic Benefits of RFID in the Retail Supply Chain

• Achieving significant inventory reductions and more efficient distribution

• Leveraging improved demand visibility to become more responsive to changing customer

wants and needs

• Lowering inventory and distribution costs across the value chain through better supply

chain visibility and demand planning

• Decreasing theft and counterfeiting for high-value items

• Reduced labor requirements with more automated based processes

• Efficiently managed supply chain can reduce green house emissions

22

RFID Applications – Cross Functional Activities

Security & Collaboration

The unique ID of the EPC

in the RFID tag ensures

authenticity of products

moving along the supply

chain is not compromised.

Shrinkage can be detected

immediately based on pro-

active alerts leveraging on

business intelligence in the

RFID system. The EPCIS

network enables

stakeholders to securely

share private data of tagged

goods.

Supply/Demand Planning &

Replenishment Forecasting

Real time visibility enables

supply side to have accurate

information on what is actually

available for more precise

replenishment of products. The

demand side able to monitor

entire movement of goods such

as sales, damage, theft making

projection of demand more

accurate.

Batch/Item Tracking Unique

EPC number enables products

to be tracked as an individual

product. Counterfeit or diverted

products can be easily traced.

Products can be monitored to

ensure it is eventually delivered

to the right customer.

24

RFID Applications – Manufacturers and Suppliers

Procurement & Materials Storage

Manufacturers are able to better

manage the raw materials received

from the suppliers thus improving

operational efficiency with RFID. Case

or pallet level tagging of raw materials

from supplier can ensure required

materials are received on time, and at

the same time ensure storing and

retrieving it at the plant is done rapidly.

Production Tracking of goods as it flows

through the manufacturing floor can aid

in pin-pointing and resolving bottlenecks.

As goods in work-in-progress inventory

becomes finished goods, RFID

applications can automatically trigger

downstream transportation. Real time

connectivity can ensure planners and

schedulers can respond instantaneously

to demand conditions from the consumer

end thus reducing the need for safety

stocks.

25

RFID Applications – Warehouse and Distribution

Receiving & Check-In Inventory

is automatically updated for tagged

pallets and cases as it reaches the

distribution center. All tagged goods

received will be cross-checked with

the purchase order to ensure any

potential discrepancies is swiftly

identified. Labor intensive manual

based quantity checks can be

eventually eliminated.

Order Selection Once item level tagging

is implemented, distribution centers’

order-fill rates can be done more

precisely by authenticating orders and

items ensuring better in-stock positions.

Once facilities are fully interconnected,

misplaced items can be identified

immediately, thus further improving order-

fill rates.

Put-away & Replenishment Personnel

manning forklifts or other vehicles will be

directed to the correct pick-up location to

pick-up and drop loads without stopping

to scan with a barcode reader. Once

dropped at a specific location, the

inventory will updated to report the quantity

at the new location. Workers will not need

to look for specific goods unless it is

already available at a specific location. All

goods can be automatically updated without

the need of a worker manually scanning

and updating the necessary information into

the system. Similarly, products stored in the

wrong location will trigger an automatic alert

notification.

27

RFID Applications – Transportation

Yard Management Overall

operational efficiency of the

yard can be improved by

attaching RFID tags to trucks

and trailers. Accurate

information on the containers

location can be retrieved when

necessary. Overall utilization

rate of the yard space can be

increased for better management

to prevent late deliveries with

better visibility. Labor usage

can be reduced and data mining

in RFID software can make work

site safer by providing intricate

details as to the number of times

a potential collision happened

in the yard.

Contract Compliance RFID

can be used to ensure service

levels with outsourced

transportation providers

meets the desired requirements

of both the outsourcer and

retailer. Accurate status on

how a given shipment is being

processed can be retrieved

when necessary. Data retrieved

can be crossed referenced with

vendor invoices to ensure it meets

with the appropriate service level

agreements

Electronic Seal Specially

designed seals embedded

with RFID to be used to lock

containers. The e-seal will

cease to operate once it has

been tampered with. This

will effectively make any form

of tampering, theft or

sabotage on the goods inside

the container known early on.

Security checks at customs

checkpoints can also be

decreased with swifter

processing.

29

RFID Applications – Store Operations and Retail

Receiving Pallet and case level

tagging will be able to update the

inventory system accurately during

the receiving process. Data can

also be relayed to other parties in

the supply chain on exact status of

the batches received. Overall store

labor productivity can be improved

besides increasing inventory

accuracy.

Exception Handling Any products

requiring special or immediate

attention such as goods nearing

expiry date or recalled lots can be

tracked and necessary information

can be relayed to the correct

personnel so appropriate action can

be taken.

Point of Sale Products tagged

with RFID can enable a swifter

checkout as total bill is

automatically calculated at POS

as no line of sight is required.

The use of RFID at item level can

heighten the overall customer

satisfaction level.

Security Handling The RFID

system can be designed to alert

security personnel immediately

when a product is removed from

the store without appropriate

approval.

31

Agenda





• Outlook

32

RFID in the Supply Chain Today – Asia Pacific

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Growth

Driven by mandates

Proof of

conceptsPilot

act ivit ies Large scale

implementat ions

begin

Deployments cont inue

to increase consistent ly

Phase 1

Phase 2

Phase 3

Phase 4

Phase 5

Refers to the present state in July 2008

4-7%

8-15%

10-18%

20-25%

25-30%

33

Conclusion

Managing the supply chain will continue to become more challenging …

• Technology to play an even more significant role in the supply chain of the future

• Stakeholders will need to identify all forces before implementing the relevant strategies

• Thorough understanding of technology needed to fully capitalize and transform it into

meaningful business strategies

• Top-down management approach needed to transform supply chain IT into a ‘Business

Technology’

• All parties (technology providers + SCM stakeholders) need to be prepared for a long

term commitment at enterprise level initiatives to ensure final goal is achieved

34

Thank You

35

Dewi NurainiCorporate Communications

Indonesia

Phone : (021) 571.0838 / 571.3246

Email : [email protected]

For Additional Information

www.frost.com