Outline

1. Outline • consequence of short order lead time • bar code • technical details, benefits, process to adopt • RFID • technical details, milestones, benefits, and issues

2. Our Perspectives • to improve processes in logistics & supply chains • not to focus on technical details of technologies • to identify sources of relevant information

3. Benefits of Short Order Lead Time

4. Benefits of Short Lead Time in Retailing • two discount stores, A and B • re-order lead time: 1 day (3 days) for A (B) • what can be said about the two stores? • what are the advantages of store A?

5. On-Site Inventory Systems • conceptual models on variation of inventory • assumptions • replenishment: daily for A and three days for B • displayed volume: half day inventory for each store • demand rate: uniform • reasons for the shorter lead time in A • smaller in volume, smaller in shop area, closer distribution centers, better logistics skills, etc.

6. Store B Store A Front End Inv. Front End Inv. Front End (store) On-Site Inventory Systems Back End (warehouse) • conceptual models on variation of inventory • assumption: outlets displaying half-day inventory • implications of such differences Back End Inv. Back End Inv.

7. Comparison Between A and B • for the same total area • front-end area of A = (3)(front-end area of B) • A: larger area, more variety, more attractive to customers, more revenue • back-end area of A = (0.6)(back-end area of B) • A: less inventory, less obsolescence, easier to manage, less manpower, less costly

8. Comparison Between A and B • for the same front-end area • total area of A = (0.3333)(total area of B) • A: less setup cost, less operations cost • A: back-end area of A = (0.2) back-end area of A • A: less inventory, less obsolescence, easier to manage, less manpower, less costly

9. Comparison Between A and B • delivery frequency: daily for A and once per three days for B • for the same demand rate • A: one-third of the volume of B in each trip • transportation cost • A: more even workload in warehouse

10. Comparison Between A and B • all in all good to have shorter lead time • why doesn’t B cut short its lead time? • physical limitations, e.g., already quickest means by airfreight • uncontrollable factors, e.g., customs • design of system, e.g., far away distribution center • infrastructure of system, e.g., information systems not strong enough • operations policy, e.g., ineffective logistics support

11. To Cut Short Lead Time and To Simplify Operations Process

12. To Cut Short Lead Time • objectives: short lead time, simple & smooth process • delay in distribution center • operations: receiving, putaway, pick up, sorting, unitizing, shipping, transport • capturing information: product ID, quality, quantity, manufacturer, production and expiry dates, etc. • handling paperwork

13. To Cut Short the Lead Time • objectives: short lead time, simple & smooth process • delay in retail outlet • physical handling of goods • capturing information • pricing • inventory management

14. Reducing Time and Effort in Capturing Information • essential to capture information for warehouses or retail outlets • for daily operations and management, and for data for automatic systems • time spent on capturing information • counting and checking (at every touch, into and out of DC, into outlets), imputing data to computer systems • automatic identification and communication (AIS) equipment • factors to select: accuracy, speed, cost, industrial standard, handiness, robustness

15. BarCode

16. Hardware & Software for a Bar Coding System • bar code production – bar code printer • to generate or to print bar codes on labels, documents, goods, Windows applications, or on the Internet, etc. • direct marking • ink jet, laser etching • label production • dot matrix printing, laser printer, direct thermal printer, thermal transfer printing

17. Hardware & Software fora Bar Coding System • bar code data collection – bar code reader • to collect, decode, and transmit data from bar code readers and scanners into computer applications • mounted, hand held, fixed beam, moving beam • database and inventory control • warehouse management system

18. Symbology Worst Case Best Case DataMatrix 1 error in 10.5M 1 error in 612.9M PDF417 1 error in 10.5M 1 error in 612.4M Code 128 1 error in 2.8M 1 error in 37M Code 39 1 error in 1.7M 1 error in 4.5M UPC 1 error in 394K 1 error in 800K Symbology and Accuracy of Bar Codes • many types • QRcode, 2-D bar code • accuracy • best-trained data entry operator: 1 per 300 keystrokes

19. Benefits of Bar Coding in a Retail Shop • flexible pricing of items • convenient and accurate data collection • improvement in inventory control • real-time information • paperless environment • accurate data input • no repeat data entry • easy communication • increase in productivity • …

20. Adoption of Bar Code Systems

21. Adoption of Bar Code Systems • result of needs and maturity of technologies • initiated by food chain stores & grocery manufacturers • possibility of automated checkout discussed • 1966 the National Association of Food Chains (NAFC) • reasons: high cost for supermarkets • one-stop shopping, 6,000 SKUs  25,000 SKUs • complicated system • high labor cost in early 1970s

22. Adoption of Bar Code Systems • automated identification systems available, e.g., railway • technology available • laser technology, holography, IC for real-time computing • technical companies into this potential market, first RCA and then IBM • some form of coding system adopted by grocery manufacturers • numerical and alphabetical code on cartoons to facilitate ordering and warehouse operations

23. Adoption of Bar Code Systems • 1972: trails by RCA with mixed results • 1973: conclusions from the test of IBM: at least 70% of items bar coded to gain real benefit • mid 70’s: formation of Uniform Code Council (UGC) • non-profit private organization • to set up standards and guidelines for adopting bar code • UPC code: 11 digits, first 5 for manufacturer, second 5 for product type, 1 for check digit • 1974: first commercial sales (10-pack of Wrigley's Juicy Fruit gum) by bar code scanning (RCA system)

24. Adoption of Bar Code Systems • 1977: less than 200 grocery stores with bar code scanning systems • claimed saving of US$ 40 million not materialized • problems • not much help from partial change, but expensive for a complete change • late 70s: cost about US$200-US$300 per register, but possibly with 40,000 registers for a large department store • need a critical mass in suppliers

25. Adoption of Bar Code Systems • benefits for retailers • quicker in checking out • shorter waiting line • less checkers • simpler training for part-time checkers of high turnaround • less errors • automatic data collection to accounting and inventory management systems • benefits for manufacturers: better sales information, less out of stock

26. Adoption of Bar Code Systems • 1976: 75% items in a supermarket adopted UPC code • 1981: all supplies to Department of Defense bar coded • 1983-87: adoption of bar code by the apparel industry • K-Mart (1983), Wal-Mart (1987) • different reasons from grocery: product identification and inventory management to handle the huge product variety • 1986: formation of Voluntary Interindustry Communication Standards (VICs) Committee by suppliers, manufacturers, and retailers in apparel • to courage the adoption of the standard • adoption of UPC-A for point-of sales systems • 1992: 69% of companies adopted UPC-A

27. Adoption of Bar Code Systems

28. RFID

29. http://www.playgroundchildren.com/rfid-system-planning-a-simple-overviewhttp://www.playgroundchildren.com/rfid-system-planning-a-simple-overview RFID • components • an interrogator (i.e., a reader, a two-way radio transmitter-receivers) • an RFID tag (i.e., label, a transponder) • others, e.g., computer

30. RFID Readers • sending RF signals to an RFID tag and getting its response • activating an RFID tag within a finite range • signals blocked by metal and diffused by water

31. An RFID Tag • at least two parts • an IC (information storing and processing for data and RF signals, and DC power collecting from reader’s signals, etc.) • an antenna for receiving and transmitting signals • three types • passive: power from reader’s signals • active: battery available, possibly to emit signals • battery assisted passive: battery available, turned active by reader’s signals • finite battery life time

32. RFID • RFID (when compared with Bar Code) • no contact for reading • quicker in reading • tags can be placed anywhere • error free reading • robust: moving; dirty, oily surfaces; any material • long life for passive RFID tags • hard to fake RFID tags • read-write tags are intelligent • store a great amount of data • tags can be read or written

33. Benefits of RFID • accurate inventory • less shortage • reduced customer trip times • less inventory in supply chains • simpler check out process • shorter waiting time • less shop-lifting

34. Milestones

35. Milestones • 10/99, MIT: set up Auto-ID Lab • joint effort with industry giants (e.g., P & G, Gillette) • to develop an RFID-based electronic product code (EPC) and eventually to have auto-ID replacing bar code in supply chains • chains of Auto-ID labs

36. Milestones • 6/03, Wal-Mart: • by 1/05, mandatory case-level RFID for top 100 suppliers • end of 2005: all suppliers • 10/03, US Defense: by 1/05, mandatory passive case-level RFID for all suppliers • enthusiastic era • IBM commercial of a future supermarket • future supermarket, future store

37. Milestones • 11/03, Wal-Mart: mandated only to 3 DC and 150 stores in Texas • 6/04, Wal-Mart: mandated only to 1 DC and 7 stores in Texas

38. Milestones • 9/05, Wal-Mart: completion of a test • 29-week study • 12 pilot stores with RFID vs 12 stores without • out-of-stock rates on for about 4,000 SKUs tags at the case and pallet level • results: for average sales rate of • 0.1 units/day: no effect • 0.1 to 2 units/day: out-of-stocks rate reduced by 32% • 6 to 15 units/day: out-of-stocks rate reduced by 62% • 15 or more units/day: no improvement

39. Milestones • status on Oct, 2006 • 300 suppliers with RFID on 500 (out of 3,900) stores • plan: before 31/1/2007 • 500 more stores adopting RFID • 300 more suppliers with RFID • status on 2007

40. Milestones • status on Sept, 2008, Wal-Mart: with RFID • 600 ordinary + 750 Sam’s Club suppliers (out of 60,000 suppliers; 75% of sales volume) • 1,000 out of 4,000 Wal-Mart retailing outlets • 5 out of 120 DC • Oct 2008: US$2/pallet charged by Wal-Mart to suppliers to a Sam’s Club DC in the Dallas area without RFID • 2010: Wal-Mart put RFID on underwear

41. Status of Industrial Applications of RFID as of 2008 • more proven results • with standard, e.g., ISO 18006-C and standard for Generation 2 • cheaper tag • US$ 1.25/tag at 2003 • 2nd generation tag: US$0.07-0.1/tag at 2008 • still expensive to implement • US$100,000-US$300,000 for small manufacturers • US$ 20 million for large manufacturers

42. Status of Industrial Applications of RFID as of 2008 • complaints by suppliers • hardware and software costs • labor costs • tag costs still high • RFID markets • asset management solutions: US$233 million in 2006 to US$874 in 2011 • together with tracking and security: US$1.4 billion in 2011

43. Pacific Coast Producers(2008)

44. Pacific Coast Producers • California-based manufacturer of canned fruits and tomatoes • revenue US $450 million (2008) • a supplier driven by Wal-Mart to implement RFID • right from beginning: abandoning manual system • automatic system integrating RFID into production process • RFID on cases and pallets

45. Pacific Coast Producers • implementation process • experimentation on integration • read rate • with water and metal in products, initial 33% • later to 90+% with 1st generation RFID • EPC Gen 2 tags: 99.7% • 100% with verification check

46. Pacific Coast Producers • software • to communicate with ERP about order information • to generates EPC data • to code the tags • to receive electronic data from Wal-Mart on status and sales of products

47. Pacific Coast Producers • applications of RFID • to study the possible improvement in product availability by RFID tag • 50% less chance of shortage • to check the effectiveness of product promotions • e.g., synchronization of promotion schedule and product availability

48. Issues of RFID as at 2008

49. Issues of RFID • interference of radio frequency • incompatible standards • cost • integration with existing systems • application dependent technology

50. Complaints on RFID • RFID: market created by technology • no industry standard yet (2011) • unknown future of vendors • tags not 100% accurate • immature technology leading to obsolete investments • privacy issues for consumers • cost effectiveness not proven yet