GID 96 Code Structure
13.2 RFID SUPPORTS SUPPLY CHAIN PLANNING AND OPERATIONAL OPTIMIZATION
The.problems.encountered.in.the.design.and.operations.of.complex.logistics.networks.need.to.be.
solved.at.three.levels:.tactical,.intermediary,.and.strategic..At.a.strategic.level,.a.company.must.
answer.numerous.design.questions.such.as
. 1..How.many.facilities.need.to.be.built.or.leased . 2..Where.to.build.or.lease.them
. 3..The.customers.served.by.a.facility
. 4..What.segments.of.the.transportation.network.to.outsource.to.third-party.logistics.(TPL).
companies
. 5..What.segments.to.retain.in-house . 6..How.many.trucks.to.own,.etc.
Because.these.factors.are.continuously.changing,.the.company.also.must.determine.at.an.interme- diate-term.and.short-term.(tactical).level,.the.following:
. 1..How.many.and.what.transshipment.points.to.operate . 2..How.many.trucks.to.maintain
. 3..Driver.staffing.requirements,.route.selection,.inventory.positions.and.reorder.points,.etc.
Different.operations.may.seek.to.minimize.their.cost,.or.maximize.their.profit,.and.pass.on.inef- ficiencies.to.the.next.operation..For.example,.in.our.framework,.a.warehouse.manager.making.a.
tactical-level.decision.may.seek.to.minimize.receiving.labor.and.create.a.large.queue.of.inbound.
trailers.(an.intermediate-level.decision).to.wait.for.unloading..Also,.a.transportation.manager.(inter- mediate).may.set.trailer.load.plans.that.require.each.trailer.to.occupy.a.facility.dock.door,.inevitably.
creating.the.need.for.a.larger.facility.(strategic-level.decision)..The.bullwhip.effect.on.inventory.is.
demonstrated.by.excess.inventory.in.warehouses.(tactical).due.to.lack.of.confidence.in.forecasts.
given.by.corporate.sales.(strategic)..We.now.review.the.levels.in.more.detail.
13.2.1 tActIcAL LeveL
At.the.tactical.level,.using.real-time.data.provided.by.RFID.systems.will.mean.on-demand.avail- ability.of.the.most.current.information..Most.pundits.suggest.that.there.will.be.a.major.impact.on.
dynamic.inventory.replenishment.for.manufacturing.and.warehousing.operations..The.use.of.RFID.
as.a.closed-loop.passive.system.has.been.discussed.throughout.in.earlier.sections..The.ability.for.
information. to. be. used. in. an. open. system,. which. provides. information. throughout. the. different.
levels,.provides.unique.opportunities.
As.information.captured.is.integrated.into.an.open.system,.external.and.internal.disturbances.
can. be. evaluated.. Internal. disturbances. are. caused. by. breakdowns. in. company-managed. assets;.
external. disturbances. are. caused. by. factors. beyond. the. organization. control. such. as. hurricane,.
major.snowstorm,.tornado,.earthquake,.significant.disruptions.in.fuel.supply,.and.so.on.
Due.to.the.fact.that.current.information.is.available.on-demand,.it.is.possible.to.develop.intel- ligent.agent-based,.real-time.decision.support.systems.to.dynamically.realign.supply.chain.planning.
such.as.adjusting.the.transportation.network,.or.opening.temporary.facilities.
13.2.2 InteRmedIAte-LeveL pRoBLems
As.we.discuss.intermediate.level.planning,.we.are.commonly.referring.to.transportation.planning..
The.main.effect.is.for.RFID.real-time.capabilities.to.reorganize.transportation.operations..We.intro- duce.transportation.in.the.supply.chain.in.the.next.section.to.provide.background.
13.2.2.1 Transportation Strategy
As.a.supply.chain.driver,.transportation.has.a.large.impact.on.customer.responsiveness.and.opera- tional.efficiency..Faster.transportation.allows.a.supply.chain.to.be.more.responsive.but.reduces.
its.efficiency..The.type.of.transportation.a.company.uses.also.affects.the.inventory.and.facility.
locations.in.the.supply.chain..The.role.of.transportation.in.a.company’s.competitive.strategy.is.
determined.by.the.target.customers..Customers.who.demand.a.high.level.of.responsiveness,.and.
is. willing. to. pay. for. the. responsiveness,. allows. a. company. to. use. transportation. responsively..
Conversely,.if.the.customer.base.is.price.sensitive,.then.the.company.can.use.transportation.to.
lower.the.cost.of.the.product.at.the.expense.of.responsiveness..Because.a.company.may.use.trans- portation.to.increase.responsiveness.or.efficiency,.the.optimal.decision.for.the.company.means.
finding.the.right.balance.between.the.two.
Supply chain network design decisions
Strategic
Intermediary
Transportation optimization Transportation
policies
Inventory control policies
Research and
assessment Validation and
application Inventory management Tactical
Facility location optimization
FIGURE 13.1 RFID.logistics.application.framework.
RFID Supply Chain Planning Levels 169
13.2.2.2 Common Transportation Decisions
The.transportation.design.is.the.collection.of.transportation.modes,.locations,.and.routes.for.
shipping.. Decisions. are. made. on. whether. transportation. from. a. supply. source. will. be. direct. to.
the.customer.or.will.go.through.intermediate.consolidation.points..Design.decisions.also.include.
whether.multiple.supply.or.demand.points.will.be.included.in.a.single.run.or.not..Also,.companies.
must.also.decide.on.the.set.of.transportation.modes.that.will.be.used.
13.2.2.3 Transportation Mode
The.mode.of.transportation.describes.how.product.is.moved.from.one.location.in.the.supply.chain.
network.to.another..Companies.can.chose.between.air,.truck,.rail,.sea,.and.pipeline.as.modes.of.
transport.for.products..Each.mode.has.different.characteristics.with.respect.to.the.speed,.size.of.
shipments.(parcels,.cases,.pallet,.full.trucks,.railcar,.and.containers),.cost.of.shipping,.and.flexibility.
that.lead.companies.to.choose.one.particular.mode.over.the.others..Typical.measurement.for.trans- portation.operations.includes.the.following.metrics:
•. Average inbound transportation cost.measures.the.cost.of.bringing.product.into.a.facil- ity.as.a.percentage.of.sales.or.cost.of.goods.sold.(COGS)..Cost.can.be.measured.per.unit.
brought.in,.but.typically.included.in.COGS..It.is.useful.to.separate.this.cost.by.suppler.
•. Average incoming shipment size.measures.the.average.number.of.units.or.dollars.in.each.
incoming.shipment.at.a.facility.
•. Average inbound transportation cost per shipment.measures.the.average.transportation.
cost.of.each.incoming.delivery..Along.with.the.incoming.shipment.size,.the.metric.identi- fies.opportunities.for.greater.economies.of.scale.in.inbound.transportation.
•. Average outbound transportation cost.measures.the.cost.of.sending.product.out.of.a.facil- ity.to.the.customer..Cost.should.be.measured.per.unit.shipped,.oftentimes.measured.as.a.
percentage.of.sales..It.is.useful.to.separate.this.metric.by.customer.
•. Average outbound shipment size.measures.the.average.number.of.units.or.dollars.on.each.
outbound.shipment.at.a.facility.
•. Average outbound transportation cost per shipment.measures.the.average.transportation.
cost.of.each.outgoing.delivery.
•. Fraction transported by mode.measures.the.fraction.of.transportation.(in.units.or.dollars).
using.each.mode.of.transportation..This.metric.can.be.sued.to.estimate.if.certain.modes.
are.overused.or.underutilized.
13.2.2.4 Intermediate-Level Summary
The.fundamental.trade-off.for.transportation.is.between.the.cost.of.transporting.a.given.product.
(efficiency).and.the.speed.with.which.that.product.is.transported.(responsiveness)..Using.fast.modes.
of.transport.raises.responsiveness.and.transportation.cost.but.lowers.the.inventory.holding.cost.
13.2.3 stRAtegIc LeveL
RFID. effects. strategic. level. planning. in. the. form. of. location. of. facilities.. The. impact. of. RFID.
technologies.is.envisioned.to.have.large.reduction.of.inventory.and.labor.such.that.the.number.of.
facilities.can.be.reduced..Also,.models.for.dynamically.erecting.temporary.buildings.and.portable.
facilities.based.on.demand.shifts..The.previous.concepts.of.open-loop.nesting.of.automatic.data.
capture.(ADC).technologies.with.RFID.and.effective.communication.would.support.these.types.of.
operations..From.a.closed-loop.perspective,.this.idea.can.be.achieved.on.a.smaller.scale.with.the.
common.passive.RFID.EPC.protocols.that.are.being.standardized.and.accepted..The.open-loop.
concept.may.be.achieved.in.the.future.with.this.standardization.and.adoption.of.protocols..This.type.
of.mobile.supply.chain.is.the.future,.using.RFID.technologies.
We.provide.a.brief.overview.of.facilities.planning.and.consideration.next.