Category Archives: Technology

The Sourcing Maniacs 2008 Vendor Tour Part V: Co-exprise

When we left the Sourcing Maniacs, they had just finished learning about BIQ (acquired by Opera Solutions, rebranded ElectrifAI) and the true meaning of spend analysis. We join them wandering the streets of Southborough, MA.

Yakko, Wakko, & Dot We’re the sourcing-maniacs
We’re zany to the max
We lost our pay-to-play contracts
Without a job we can’t relax
We’re sourcing-maniacs!
Wakko & Yakko Come join the ‘Riba Brothers
Dot And the ‘Riba Sister, Dot
Wakko, Yakko, & Dot Just for fun we ran around the corp’rate parking lot
They locked us in the boardroom whenever we got caught
But let us loose from the caboose
And now you know the plot!
Wakko So where are we going next, Yakko?
Yakko I don’t know, but I think we should move onto the C’s.
Dot Any cool C companies nearby?
Yakko None that I know of. I think they’re all in Pennsylvania, Illinois, or California.
Dot Well, we’re from California.
Wakko And I always thought Illinois was a railroad!
Yakko So Pennsylvania it is!
Wakko Pennsylvania is a railroad, too!
Dot So who’s in Pennsylvania?
Yakko If I recall correctly, CombineNet and Co-exprise.
Wakko CombineNet? I don’t think we’re smart enough to work for them. I still have problems with double-digit multiplication, I couldn’t do com-bin-a-tore-e-ul op-ti-my-za-shun!
Dot I guess it’s Co-exprise. What do they do?
Yakko Something called SLM.
Wakko Sea Level Measurement? In Pennsylvania? Cool! Do they have any yellow submarines?
Yakko I think it stands for Sourcing Lifecycle Management.
Wakko Oh. Well, maybe they have some baloney sandwiches. I’m hungry!
Dot You just ate two servings of Boston Baked Beans, drank enough tea for a party, and finished it off with an entire Boston Cream Pie!
Wakko I know … but I’m always hungry for baloney sandwiches.
Dot So which way to Pennsylvania?
Yakko Yakko licks his finger, sticks it in the air, and pauses.
This way!
Dot Let’s go!
  As per their nature, they start to sing.
Yakko, Wakko, & Dot We’re off to see Co-exprise
We’re gonna get our exercise
As it’s 600 miles away
But we’ll learn about SLM
And if it has a hidden gem
And how it can help you save
  The song goes on for a few hundred more versus which somehow manage to include references to roman aqueducts, visitors from Beetlegeuse Seven, South-going Zax, and something called PffT, which I always thought was the sound my cat made when she was cross. Including it herein would be almost as bad as subjecting you to Vogon poetry, so we’ll skip ahead to when the Sourcing Maniacs land in Wexford, PA.
Yakko, Wakko, & Dot We’re the sourcing-maniacs
…
Wakko Brooktree Road! I think we’re almost there!
Dot I see lots of office buildings!
Yakko This must be the place!
Dot Do you think they’ll talk to us?
Yakko Why wouldn’t they?
Dot They’ve been in stealth mode, hardly talking to anyone in the media besides the doctor and …
Wakko And?
Dot It looks like this place is access-controlled.
Yakko Well, rumor has it that a number of big companies that have DoD contracts are considering using Co-exprise’s solution. Companies that do military projects have to insure their suppliers have a basic level of data security in place, at least SAS 70!
Wakko Do you think anyone from the military could be in there now?
Yakko Relax, Wakko. I’m sure the military has forgotton all about that little incident where you mistakenly procured a real Tomahawk missile instead of the model rocket you were coveting.
Wakko But I almost blew up the valley!
Yakko But you can’t aim. It harmlessly exploded in the ocean. No harm done.
Wakko But the General said …
Yakko Look, someone’s coming out. Maybe we can talk to them out here. Would that be okay with you?
Wakko Ok …
Yakko Hi, I’m Yakko. Do you work for Co-exprise?
Man-in-Black Yes, I do. Yakko … Yakko … why do I know that name?
Dot I’m Dot.
Man-in-Black Dot. Hmmm. Wait a minute, you’re the Sourcing Maniacs!
Yakko & Dot That’s us!
Man-in-Black I heard you were let go from Ariba a while back. Sorry to hear.
Yakko & Dot Well, can you at least tell us about SLM and what you do?
Man-in-Black Man-in-Black pauses and thinks for a bit.
Well, we have been slowly spreading the SLM message, which we believe is the first major revolution to hit the direct sourcing space since one of our founders co-invented the reverse auction at GE, and we do want to get the Co-exprise message out when the time is right, so I’ll make you a deal. You promise to keep things under your hats for a couple of months, and I’ll tell you about the future of direct sourcing. Deal?
Yakko & Dot Deal.
Man-in-Black Wakko?
Wakko Wakko, who has somehow developed a fear of all men dressed in black, looks out from behind Yakko.
Yes, sir?
Man-in-Black Is it a deal?
Wakko Yes, sir!
Man-in-Black OK, follow me.
Dot Where are we going?
Man-in-Black The coffee shop on the corner. The most discreet place is a public place.
Man-in-Black So, do you know what Sourcing Lifecycle Management is all about?
Dot Managing the e-RFX and e-Auction process?
Man-in-Black Well, that’s what many people think, but it’s much more than that.

Many providers, particularly those that only service the indirect sourcing space, believe that sourcing starts with an e-RFX or auction for a commodity, results in a contract, and ends with order delivery. But things aren’t so simple in the direct space.

In the direct space, the lifecycle starts way back at new product design as you are sourcing not a pre-defined commodity part, but a custom-made part. You have to insure that the design is appropriate with respect to the capabilities of your potential supply base; you have to insure that the raw materials are available, in the requisite quantities, at the appropriate times, in the manufacturing regions; and you have to make sure that the projected cost does not exceed the maximum cost that would make the end product viable for sale in your target market. You also need to collaborate with your supply base in the design, as needed, to optimize the design for production.

Once you have the design, you need to go through a negotiation and collaboration intensive sourcing process to select one, maybe two, suppliers who will manufacture the part for you. This involves the sharing of confidential information, which needs to be done in a secure manner, as well as collaboration on forecasts and target delivery dates.

Once you have an award, you have to manage the procurement, which usually has to coincide with the procurement of other custom parts, which have to hit a single location at the same time for integration into the final end-product, which then has to be packaged and shipped to the end customer. This involves coordination between manufacturers, 3PLs, assemblers, and end retailers. Plus, you still have to insure prices are contract prices, charges are valid charges, and that the i’s are dotted and the t’s crossed, as you would in indirect procurement.

As you can see, whereas indirect sourcing can often be accomplished with just e-RFX, e-Auction, and Contract Management — with Spend Analysis and Decision Optimization for higher-value projects — direct sourcing requires extensive integrated project management capabilities, product lifecycle management, collaboration capabilities, Bill-of-Material management, and the ability to easily integrate with third party platforms.
Yakko, Wakko, & Dot We … we … never knew.
Dot We always thought it was just e-RFX, e-Auction, and good data management.
Yakko & Dot So how do you do all that?
Man-in-Black With a great code-base, of course! Although I have to be really careful with what I say now, especially until our next release hits beta later this year and hits full release late this year or early next year, I can tell you a few things that are already more-or-less public knowledge.

First of all, our platform is entirely new, built from the ground up to handle the direct sourcing process, which our senior management and developers are intimately familiar with. This allows us to do things that retrofitted indirect sourcing platforms can’t do.

Second, we have our own universal data model that underlies our application and it can integrate with data in over 1500 different formats.

Third, we have PLM built in at the core, and this allows us to enable direct sourcing professionals to track a project from beginning to end and always access the most recent data, regardless of which module they are in.

Fourth, we have fine-grained security that allows us to assign access permissions down at the data element level that indicates who can see the data, where (by IP), when, and how they can access it (read-only, view-only, etc.).

Fifth, we’ve integrated a compliance tracking module that allows companies to track regulatory requirements such as REACH, ITAR, etc. from product inception to product end-of-life, and insure that such requirements are met at every stage of the sourcing process.

Sixth, we’ve re-invented “spend analysis” for direct sourcing. Although I can’t say anything yet … we’re still finalizing the initial product offering and working on getting our first beta projects under way, I can say that our founders and developers have been involved with spend analysis since the days of FreeMarkets, and know why traditional “spend analysis”, developed in the indirect world, just doesn’t cut it in the direct world.
Dot Can we see it?
Man-in-Black Definitely not.
Yakko & Dot Can you tell us more about it?
Man-in-Black Not yet. But you’ll be able to read all about it soon enough.
Dot When?
Man-in-Black When the story hits the blogs. We’ll show the right people at the right time. Right now we’re totally focussed on getting the next release of the product out and pleasing our current customers, who include some of the bigger names in manufacturing, and getting beta projects underway at some of the biggest names in manufacturing.
Yakko & Dot Until then?
Man-in-Black You go on your merry way. Have a nice day.
The man in black gets up and walks away, leaving the Sourcing Maniacs speechless, again, as their view of the Sourcing World broadens with each vendor they talk to.

The Sourcing Maniacs 2008 Vendor Tour Part III: Apriori

At the end of Part I, the Sourcing Maniacs had just completed their Aravo visit, the first stop on their journey. After Aravo, they took a trip to Massachusetts to visit their old friends Pinky and the Brain, but were unsuccessful as their friends were under lockdown until the annual user conference. However, being in the Boston area, they decided to continue their vendor tour through the sourcing alphabet and decided to pay a visit to Apriori, home of the Wizard of Cost, before moving onto the B’s. We join them on their hearty jaunt up Baker Avenue in Concord, MA.

Yakko, Wakko, & Dot We’re off to see the Wizard, the Wonderful Wizard of Cost
We hope he is a Whiz of a Whiz if ever a Whiz there was
If ever, oh ever, a Wiz there was, we hope the Wizard of Cost is one because
because, because, because, because, because
of the wonderful things a cost wizard does
We’re off to see the wizard, the wonderful Wizard of Cost!
Yakko We’re here!
Dot Where?
Yakko At Apriori, of course!
Wakko Are you sure?
Yakko As sure as a Massachusetts black bear does his thing in the woods.
Wakko But where’s the big neon sign?
Dot And the big corporate headquarters?
Yakko Not all companies own their own buildings, Dot. And not all companies feel the need to throw up flashy 1950’s neon signs to advertise their business. After all, those signs cost money. And I think cost management is supposed to be about not spending money you don’t need to spend. But that’s what we’re here to find out, isn’t it.
Dot I sure hope the Wizard of Cost can see us!
Wakko And that we don’t get shut out again. I mean, we were wako’d by Ariba, but we were almost wak’d yesterday!
Yakko I don’t think we’ll be shut out here. the doctor tells me that Apriori are very friendly and open people.
Wakko But will they welcome us with open arms?
Yakko Well, I never really asked if they’d welcome us. But we’re solo now … and I don’t think they ever competed with Ariba anyway. I’m sure they’ll talk to us.
Dot After all, who can resist pretty lil me.
Dot strikes her cutest pose and starts fluttering her eyebrows shamelessly.
Yakko So who wants to knock on the door?
Wakko I do! I do!
Wakko takes out his mallet and waks on the door.
long pause … door opens
The Wizard of Cost Hello?
Wakko, Yakko, & Dot We’re the sourcing-maniacs
And we’re zany to the max
Dot I am cute …
Yakko  and I like to yak
Wakko while I pack away the snacks
Wakko, Yakko, & Dot We’re the sourcing-maniacs
Dot I’m Dot,
Wakko I’m Wakko,
Yakko  and I’m Yak…
The Wizard of Cost Yes, I know who you are. Can I help you?
Yakko We want to learn about enterprise cost management!
Wakko And beg for food!
Dot And find a job!
The Wizard of Cost Well, I can certainly help you with the first topic. I’ve made it my personal mission to spread the word of enterprise cost management and how it can help direct sourcing organizations, as well as manufacturers, save money in these troubling times.
Wakko, Yakko, & Dot That’s great!
The Wizard of Cost But you have to promise me something first.
Yakko What’s that.
The Wizard of Cost That you’ll sit down …
Wakko No problem!
Wakko plops down on the floor.
The Wizard of Cost listen …
Wakko We’re all ears! Wakko stretches his ears in his best Dumbo impersonation.
The Wizard of Cost and behave. You have a bit of a reputation, and we’re a no-nonsense operation here at Apriori.
Yakko We can behave!
The Wizard of Cost Promise?
Wakko, Yakko, & Dot We promise.
The Wizard of Cost Then take a seat and let’s begin.
The Wizard of Cost Let’s start with the basics. Every business is in business to make a profit. Profit is defined as the difference between revenue and cost, or, the difference between the money you take in from sales and the money you spend on supplies, overhead, and taxes. That says there are fundamentally two ways to increase profit – increase sales, which falls under the purview of Sales and Marketing, and reduce costs, which generally falls under the purview of supply & spend management. We focus on cost.

However, not all costs are equal. If we look at a balance sheet, we see there are three main types of costs: COGS (Cost of Goods Sold), SG&A (Selling, General, and Administrative Expenses), and D&A (Depreciation and Amortization), and that COGS usually represents 80% of the costs under enterprise control. So, unlike many e-Procurement firms that just try to reduce the cost of the transaction, which only serves to reduce SG&A expenses, we focus on reducing COGS, as every dollar reduction in COGS has five to six times the impact of a dollar reduction in SG&A.

To reduce COGS, we start with the understanding that COGS is a combination of raw material costs, labor costs, production overhead costs, and margin. All of these costs can be reduced with the right insight — and this is where we are different than a standard sourcing application that just tries to get you the lowest price per unit through a volume buy or leverage-based raw material buy. Then we help you identify the right product, produced by the right process, to meet your needs at the lowest possible cost.
Wakko How do you do that?
The Wizard of Cost We have software that implements a virtual production environment that not only allows us to model a part, but an entire production process. This allows us to calculate not only how much a modeled part should cost, but whether or not there are other processes that could be used to create that part. For example, if you have a door hinge, you have a bend, a cut, and some hole punches. And there’s more than one way you can order the steps.
Yakko But you still have to do the steps, so how does reordering save money?
The Wizard of Cost Well, reordering allows you to do three things. First of all, it allows you to plan your production so that you don’t have multiple production runs waiting on the same machine at the same time. This increases your production throughput, which lowers your cost of production per part as you produce more parts in a day. Secondly, if you punch before you cut, and you have a machine capable of doing multiple hole punches simultaneoulsy, you might be able to punch four or eight hinges on a sheet of metal simultaneously, which would increases your productivity eight-fold. Finally, it allows you to consider different machines given the partial state of completion the part is in at any one time. And this is where a lot of the power of the VPE comes into play. Maybe instead of a punch, you can use a laser drill that can drill 10 pieces simultaneously if they are stacked, but only if you have enough extra metal around the edges for the grips to hold the stack in place. If the laser drill costs you half as much to operate as the old punch, then you want to use it — which is something you can do if the hole creation step comes first, but not if the hole creation step comes last.
Dot That sounds really neat!
The Wizard of Cost It is, and it’s quite powerful.
Yakko But how does the buyer know what the costs are? And doesn’t this take the supplier, who’s supposedly an expert in part manufacturing, out of the picture?
The Wizard of Cost Good questions. Fortunatley, we have some good answers.

The platform plugs into market feeds and our database of standard pricing that we have built up for North America and China, and this gives us a first level estimate. Secondly, it allows the buyer to enter their costs, or their supplier’s quoted costs, for each variable and refine that cost model further. Finally, it allows them to use a supplier’s VPE to calculate precise cost or set up a VPE specific to their supplier if their supplier does not already have one.

In addition, we realize that the best results often come from collaboration and from taking advantage of expertise on both sides of the table, so we have been working hard on improving our supplier interface that allows buyers and suppliers to share designs and data back and forth, through a new CAD-independent viewer that’s coming out in our next release, so that both parties can work together. And, unlike some vendors, who shall go unnamed, that force suppliers to pay a registration fee to be listed in, or gain access to, their system, our basic viewer is totally free to the suppliers of any buyer who licenses our system. This keeps the supplier in the picture, in a non-cost prohibitive fashion, and helps the buyer find the best product at the best price, produced from the best production process, for their needs. In our view, that’s what enterprise cost management is all about.
Dot That’s a really cool take.
Yakko Not at all what we’re used to … coming from a sourcing world that has traditionally focussed on e-RFx, e-Auctions, contract management, and spend visibility to reduce cost.
The Wizard of Cost It is a bit different, and we think it plays very nicely with those traditional approaches. Whereas they primarily reduce SG&A, and in the case of contract management, insure that agreed upon costs are adhered to, we primarily reduce COGS. It’s a big sandbox, we can play nice, and when we do, we think everyone wins. What do you think?
Wakko I think I’d like to see more.
The Wizard of Cost All in good time. Our next release, v6*, is slated for next quarter.
Dot Then I guess it’s time to go!
The Wizard of Cost Thank you for stopping by. And by the way, when you recount this story to the doctor, which I’m sure you will do, try not to leave anything out. Enterprise Cost Management is about a whole, and if you leave out any parts, it doesn’t really make sense.
Wakko We’ll try.
The Wizard of Cost Promise?
Wakko, Yakko, & Dot We promise.
The Wizard of Cost Farewell and safe travels!
Yakko Well that was different!
Dot Not at all what I expected!
Wakko And they didn’t feed us baloney sandwiches. I like baloney sandwiches. I’m hungry!
Dot You’re always hungry!
Yakko Let’s go eat.
Wakko So where are we going next?
Yakko On to the B’s!
Dot Bearing Point?
Yakko They’re a consulting firm. We do products.
Wakko Bravo Solution and their VerticalNet suite?
Yakko We’d have to hike all the way to Pennslyvania, wouldn’t we? There are B companies locally. Let’s go visit BIQ! They’re just a few miles away in Southborough!
Wakko What do they do?
Yakko Spend Analysis.
Dot But we already did that at Ariba. That’s old news.
Yakko the doctor says BIQ is different, and that how we define “spend analysis” is not the right way to define spend analysis.
Wakko Why not?
Yakko I don’t know. Let’s go find out!
Wakko & Dot OK!
Yakko, Wakko, & Dot We’re off to BIQ
To see what they do for you
Wakko And maybe find a clue
Dot To dealing with data times two
Yakko, Wakko, & Dot We’re off to BIQ
…

Tomorrow we recount the Sourcing Maniacs’ tale of their visit with BIQ. Stay tuned!

*Editor’s note. Apriori released v6 in early October.

The Sourcing Maniacs 2008 Vendor Tour Part I: Aravo

[Wakko, Yakko, & Dot] We are the sourcing-maniacs
And we’re zany to the max
So just sit back and relax
You’ll laugh ’til you collapse
We’re sourcing-maniacs!
[Wakko & Yakko] Come join the ‘Riba Brothers
[Dot] And the ‘Riba Sister, Dot
[Wakko, Yakko, & Dot] Just for fun we ran around the corp’rate parking lot
They locked us in the boardroom whenever we got caught
But let us loose from the caboose
And now you know the plot!

When we last heard from the Sourcing Maniacs, shortly after the acquisition of Procuri by Ariba, Chicken Boo had just fired all three of them. Confused and hungry, the ‘Ribas began marching northward from the Ariba corporate headquarters in Sunnyvale, CA, on their grand adventure to find a new job. They vowed to visit every sourcing company from Aravo to Zycus, if necessary, in their quest to find a new company to whom they could provide their maniacal insight. I’m sorry to report that, unlike Pinky and the Brain (who have been quiet for quite some time now), the Sourcing Maniacs are still unemployed, but I’m happy to report that they are willing to share with the readers of this blog some of the insights they acquired in their 2008 Vendor Tour. So sit back, relax, and enjoy!

Yakko We went to see Aravo
The wizards of 2Sustain
Dot We went with lots of gustavo
As far as we could ascertain
Wakko We heard that they were masters of SIM
so we challenged them to a duel
But it turns out SIM’s short for “Supplier Information Management”
Not SIM City …
and again I played the fool!
Yakko So we asked for an explanation
Of why we needed SIM
Wakko And what it could do
That we couldn’t do with Vim
Dot And then sat down to listen
Wakko Which we do so rar-i-ly
Dot As Aravo’s chaps, all dressed in chaps
Spun a tale of data transparency
Yakko This is Yakko’s summary of the Aravo story, edited by the doctor

In the beginning there was the web. It was a wild, wild frontier where data could roam free. A virtual gold-mine, enterprise software companies staked their claim and started to build ranches to corral the data. Some of these companies, like Peoplesoft, Oracle, and SAP were successful in their efforts. Furthermore, not only could they corral the data, but they could send it through pipes from buyers to suppliers. Business-to-Business was born.

Things were good in the beginning, but then the data started to mix, and like Fibonacci’s rabbits, it started to multiply out of control! More and more systems were installed to try and manage the data, but all this did was help the data spread like wildfire until, like the tribbles, it had overtaken every nook and cranny of every enterprise. Although this was a boon for BI systems that needed massive amounts of data to justify their existence, it was a bane to overworked IT administrators who couldn’t swap the backup tapes fast enough. It was an even bigger headache for supply chain professionals who couldn’t get a complete picture of what was being supplied by whom, or when it was coming. This deeply impacted their ability to strategically shape the supply chain.

This wasn’t too bad in the beginning, when oil was cheap, prices were dropping, and the boom look liked it would never end, but then the globalization backlash reared its ugly head. Oil and commodity prices went through the roof, financial markets started crashing, and quality issues became rampant as contaminated toothpaste, salmonella spinach, and lead-paint toys hit stores nationwide. Was your supplier still around? Would it be around tomorrow? Was its quality control adequate? Was it still the right supplier for you? All of these questions became front and center, and couldn’t be answered without insight into all of the relevant data surrounding the supplier … data that, traditionally, was spread across multiple systems inside and outside the enterprise.

Enter SIM. A SIM platform collects all of your data from all of your systems in one place, and lets you view, query, and manage all of your data on a single supplier from a single screen. How much business did you do? What did you buy? Where was it shipped from? Where did it go to? What QA processes were employed? And is the supplier current with their certifications and licenses? All of these questions can quickly and easily be answered with a SIM platform. And more importantly, it can be used as the foundation for supplier improvement and sustainability initiatives, because all of the data needed to launch and track such initiatives is at your fingertips.
Yakko So all your data in one place
Wakko Helps keep the egg off your face
Dot And helps you make a solid plan
Of who to keep and who to can
Yakko It’s pretty cool, but I have to say
Dot Their wordiness gets in the way
Wakko From a thought that should be as simple and pure
As combining your PB&J spend when you procure!
Dot SIM’s just meta-data management
with a flexible UI
Yakko It shouldn’t be that difficult
Wakko or pie in the sky
Dot But you need the right framework
baked in at the core
Yakko Otherwise you’ll never realize
Wakko that it’s not just meta-data, it’s more.

And Aravo was just the first stop on the Sourcing Maniacs’ journey. Stay tuned for more!

Things You Should Know Before You Launch a Project That Depends on IT

A month or so ago, on a busy day, I came across this ZDNet article on the “Top 5 issues your IT staff wants to address but is afraid to tell you” that I think everyone should read — twice — before embarking on any system modernization that will require the involvement of IT. For some of you, it might be a real eye-opener!

  • There is no history of the code.
    If your current application has been in place for five or more years, it has probably evolved substantially as a result of regular vendor upgrades and in-house customizations to meet your business needs. As support needs increased, and response times took priority over change management, tracking the changes (and who was responsible for them) fell by the wayside and the process of unraveling the underlying code is now likely as challenging as building the application from scratch.
  • We don’t know exactly how many applications we have or how they all work together!
    Applications make their way into organizations through procurement overrides, departmental purchases, trials, upgrades and, of course, open source. This treasure trove of technology makes an aerial view of the infrastructure nearly impossible to create. Chances are many departments don’t even know how many applications they are using or how they all interact. I can’t remember a single instance as a technology architect or consultant where I’ve asked for “all of the applications this product interacts with” or “all of the applications your department uses” and received a complete list the first time. Sometimes it’s only in the final phases of an RFQ when I’m building a list of detailed integration requirements and I’ll ask “so, where does this data get pushed to” only to find out that there’s yet one more application that has to be added to the list!
  • We’re actively seeking a new job.
    As the article points out, the average IT turnover rate is 22%. If you’re counting on a single resource to pull a project off, you’re in trouble! Also, there is probably a lack of interest among the millennium generation to work on older technologies just as there is often a lack of interest among the old-timers, only a few years away from retirement, to learn another new-fangled language that’s probably not going to reach the critical mass necessary to still be around in five years.
  • If you can’t prove the ROI, we’re not on your side.
    Your IT staff knows that faster, stronger, cheaper are BS marketing terms. Before they commit their overworked behinds to yet another project, they want to see real benefits in terms of skills, cost savings, and time savings using before and after metrics generated by a third party on similar projects at other firms.
  • We’re not mind readers … you need to share you vision.
    Your IT people are not going to accept that this resulted from long-term planning that was designed to anticipate the next three, five, or seven years of the organization’s technology needs just because you told them it would. Remember, they are the experts in technology, not you. If you want them to share your vision, and get behind the project, you need to involve them in the strategy discussions. They can help you build the right infrastructure for your business, but only if you let them.

The Truth About RFID … as the doctor Sees It

I recently encountered yet another RFID article that took a look at how RFID will impact supply chain optimization and control and decided that I just can’t ignore the subject any longer. As you have probably guessed from that first sentence, I’m not a big RFID fan. It’s yet another technology that greatly over-promised and greatly under-delivered, and it did this for two reasons. ( 1 ) The promises were outlandish with respect to what the technology actually does and ( 2 ) the technology, by nature, is not as “plug and play” as the vocal proponents would have you believe.

RFID, which is short for Radio Frequency IDentification , is a method of “automatic identification” that relies on storing and remotely retrieving data using RFID tags or transponders. These tags generally contain an integrated circuit for radio-frequency signal processing and an antenna for signal receipt and transmission, however some tags are read-only and do not contain an integrated circuit for signal processing.

RFID proponents promote the use of RFID tags for supply chain use because they improve the quality of material location/movement data versus current data collection technology and this provides more accurate data delivered to existing ERP systems that drive supply chain optimization systems. As a result, forecasting, master production scheduling, and distribution resource planning can produce better, timelier and more granular outputs based on more accurate, near real-time inventory and/or material movement. In addition, RFID allows manufacturers to keep in contact with, or at least “hear” from, their material as it moves through the supply chain.

The idea is that since the tags can automatically be read by readers at each checkpoint in the supply chain, the data is immediately available for processing and immediate transmission to your systems. And even though real-time data is valuable, and the benefits of this real time data that RFID proponents promote are significant, the fact of the matter is this: you don’t need RFID to know where your goods are in a supply chain and when they hit a checkpoint. You can just as easily slap a plain-old fashion barcode on every box and get the same results. Of course, you’d need someone at each step of the supply chain to scan every box, but as long as the systems are properly configured, the data could still flow automatically up and down the chain. The advantages of RFID are efficiency and human-error reduction, and that’s it. It’s more efficient because, as long as the scanners are properly configured, and the goods properly passed through the scan points, the tags are automatically read for the whole pallet simultaneously. It’s less prone to human error, because, as long as the tag is properly attached to each box on the pallet, it will be read automatically at each point and you don’t have to worry about a human missing a barcode or two each time the pallet is supposed to be scanned in full.

Therefore, RFID is valuable if, and only if the savings that result from increased efficiencies and reduced human error outweigh the costs of its implementation, which not only include the up-front equipment and installation costs, but continued costs associated with maintenance and each and every RFID chip. But it’s not going to save you a fortune … its the systems that you buy to take advantage of that extra data and optimize your chain that are going to generate significant savings, and, as a I pointed out above, they don’t care if the data comes from an RFID chip, a scanned barcode, or, if you want to go back to basics, a human operator typing in a box or pallet number into a terminal that automatically propagates the data up and down the chain.

I guess what I’m saying is, before jumping on the RFID bandwagon, see it for what it is, talk to your industry peers about the increased efficiencies they saw, and do the TCO calculations before committing to it. For most operations, I doubt it’s the best thing you can do to save money.