The holy grail of the manufacturing and retail sectors must surely be to know exactly what inventory is sitting at which point in the supply chain. Powerful emerging technology currently being introduced is set to provide both manufacturers and retailers with up-to-date, accurate and complete inventory information.
According to a Deloitte Research Emerging Technologies brief, radio frequency identification (RFID), a sophisticated alternative to bar codes, is set to transform these sectors. The RFID tracking tags are tiny microchips connected to wireless antennae which 'listen' for a radio query and respond by transmitting a unique ID code. "Unlike bar codes, which must align visually with a reader, an RFID tag automatically announces itself to nearby readers, reducing the need for labour to scan a pallet, case, or item's bar code as it moves through the supply chain. This promises substantial labour savings and tremendous new visibility into the supply chain," says Anthony Higginbottom of the Consulting division of Deloitte in Atlanta USA, who emphasised the importance of this technology during a recent visit to South Africa.
Wal-Mart, the world's biggest retailer, has issued a mandate to its top 126 suppliers to incorporate RFID technology into all pallets and cases entering a Wal-Mart store by January 2005.
"Retailers are clearly driving this process because of the cost savings associated with implementing the technology. Because of virtually flawless visibility into inventory and its locations, eventually companies such as Wal-Mart will be able to initiate more effective promotions, stock placement and pricing. Another exciting aspect is the ability to detect shoplifting when individual items are fitted with an RFID tag," says Mike du Toit, consulting partner at Deloitte.
By adapting their business processes, companies stand to benefit greatly from the realtime visibility of stock and inventory enabled by RFID technology:
1. Stock availability could be improved by early identification of low stock levels. Stock could then be replenished based on realtime inventory information and optimally placed at retailers to maximise sales.
2. Manufactures could also exercise better control over agreed promotions, with visibility on where their items are located and whether they are correctly priced.
3. Inventory levels could be optimised across the boundaries of companies with increased visibility of stock movement throughout the supply chain. Replenishment and delivery processes could be refined to benefit from 'just in time' availability of stock.
As more companies adopt RFID tags, costs will drop. Like bar codes, RFIDs have the potential to release substantial value into the consumer supply chain through improved efficiencies in the warehouse, store and manufacturer operations.
"The potential applications for RFIDs in the manufacturing and retailing sectors are virtually unlimited. The pharmaceutical industry is already placing tags in bottles of costly patented medicines to get around the problem of counterfeit drugs. Certain airlines are using them in luggage tags to track bags on their flights; Procter and Gamble has introduced RFID tags to ensure that its lipsticks are always in stock, substantially increasing sales. The list grows longer each day; we are witnessing a fundamental change in the retail landscape," concludes Du Toit.
For more information contact Mike du Toit, Deloitte, 011 806 6009, [email protected]
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