Part II: Organizational Prerequisites for Smart Materials, Automatic Identification, and Quality
Chapter 8: The Next Frontier in Technology and in Supply Chain Management: Automatic Identification
8.4 Why Automatic Identification Means Major Changes in Business Partnerships
The advent of an auto-ID system will promote further development of online commerce. I-commerce will get a great boost if and when current inefficiencies dating back to Old Economy solutions are overcome.
Therefore, there is plenty of scope in studying the further-out impact of auto-ID, as well as in providing a steady stream of improvements.
From customer relationship management to enterprise resource planning and distribution chores, e-tags will in all likelihood underpin the new logistics. The expectation is that smart products and smart
packages will bring massive efficiencies to the global supply chain, starting with the assistance they can provide to manufacturers in assembly lines as well as in tracking inventory and foiling counterfeiters.
Other applications include integration with ERP and CRM software to promote customized products, new production paradigms, use of e-tags in robotics, and warehouse management.
These are fairly realistic and worthwhile objectives, as opposed to some others that do not particularly make sense (for example, the smart fridge). This refrigerator can see what it contains and, if it does not see a certain item, it asks its owner whether he or she wants to order it; then, if yes, it orders it directly from the manufacturer online. Researchers working on smart materials are well advised not to use such examples in their presentations because they make a mockery of the entire system.
The integration of the facilities provided by e-tags into new releases of ERP and CRM software is, in my judgment, fairly urgent because the first smart materials and smart packages are scheduled to roll out by the end of 2001 or shortly thereafter. They will permit manufacturers to track individual products and packages as they move from the assembly line to delivery trucks, and from there to store shelves and checkout counters.
The way to bet is that these first applications will be prototypes, on whose success will depend further implementation. Success will necessarily rest on how well this new departure will integrate with current manufacturing and marketing methods weeding out discontinuities. Therefore, both ERP and CRM software must be revamped to make such integration feasible.
If I ran a manufacturing company, the first implementation of e-tags I would do would be in-house in connection with production processes and inventory management. In this I would co-involve not only the MIT project developing smart materials and its business partners, but also ERP vendors. If one is serious about auto-ID, then one must start integrating its concepts and facilities at the design and prototyping stage.
Projecting and associating the EPC to a given product should be part of computer-aided design (CAD) software.[4] A similar statement is valid in connection with ERP solutions, which will see the product, its components, and its assembly through the manufacturing process. Using e-tags in connection to ERP will quite likely require a major update of ERP software (see Chapter 7). Even so, it will be worth the investment because production is a controllable environment, and one can apply experimental design methods similar to those used by General Electric (see Chapter 12). The final test of any new notion is, Does it work? To prove it does work, the test must co-involve the worlds of inventory management and scheduling of manufacturing lines.
If the auto-ID concept successfully passes in-house testing, then it will parallel one of the greatest twentieth century developments — Henry Ford's assembly line. By installing a moving belt in his factory, Ford enabled employees to build cars one chunk at a time. This produced efficiencies of such scale that in 1915, Ford was able to eliminate 65 percent of the price of an individual Model T.
The fact that such huge price reductions upset the scales of competition and made automobiles accessible to a large population of consumers is well-known. Another significant aftermath is the process of mass production that affected a much broader range of industry than motor vehicles per se.
What about marketing operations and the integration of the e-tag with CRM software?
A sound management principle is that if the in-house test through manufacturing gives positive results, then e-tags should be subject to experimental design for tests in merchandising, from marketing to distribution and after-sales service. This is where e-tag integration with CRM software makes sense.
Starting with marketing, as several projects today do, is like putting the cart before the horse. Problems that will invariably arise will be pushed upstream.
Provided that both the manufacturing and marketing tests of smart materials are successful, their paradigm shift will be online customization at an affordable cost. Smart online customization to client requirements will turn the supply chain on its head. Sophisticated new logistics, global supply chain, and auto-ID work in synergy, as Exhibit 8.4 suggests. To appreciate what may come out of this synergy, one must remember what has already been said: that the global supply chain is the largest network in the world, bringing together the virtual world of logistics and the real world of manufacturing.
Exhibit 8.4: The Frame of Reference of Smart Materials that Contributes to the Pace of the New Economy With smart materials, agile seamless interfaces and the ability of inanimate agents to communicate among themselves will automate operations that are still manual, despite 50 years of using computers.
Account must also be taken of the opinion of many experts that the current limited flexibility of
manufacturing systems is not the main barrier to online customization of products. The most important blocking factor is the manual fulfillment of customized orders. In the factory and in the office, people must still sort, track, package, and ship customized requests. This is prohibitive in terms of costs, especially for packaged goods and products with very thin margins.
People who participated in my research stated that this fact alone is evidence that ERP and CRM failed to deliver what they promised. For many companies, this is indeed true; but the answer to the query as to whether the failure is on the software or implementation side is more complex because many ERP and CRM applications are below a reasonable standard of performance (see Section I).
To help in better e-tag integration with CRM and ERP, as well as in upgrading these programming products, here in a nutshell is the scenario that will most likely characterize a thoroughly restructured logistics process. A customized order will be received over the Internet; it will be assigned an electronic product code and scheduled for production; the EPC will be embedded in a smart tag attached to the item; and a low-cost chip will literally be printed on the package. From this point on, the
identification/communication process will take on, so to speak, its own life.
The smart tag will communicate its needs to smart machinery.
It will tell to whom it should be shipped as well as other delivery details.
Knowledge artifacts will optimize the routing, issuing appropriate instructions.
Prerequisites are evident in implementing this kind of on-demand solution. In addition to the assignment of an exclusive ID number with self-communicating capabilities to each object, there is a need for modeling, simulation, and optimization to help in handling physical and logical (virtual) items. Experts believe that multi-modal information tracking needs to be both statistical and analytical.
The new logistics system must be designed to answer the basic goal of allowing inanimate objects to communicate with each other and with people on their own initiative. Because this solution should be global, there is a requirement for standards. The drive to normalization leads to other issues, such as the necessity for international agreements and the evolution of generally appealing tools and ID methods — beyond the standards per se.
[4]D.N. Chorafas, Engineering Productivity Through CAD/CAM, Butterworths, London, 1987.