Can the electronics supply chain learn a lesson from the apparel industry? When it comes to RFID tagging, the evidence suggests it can.
As in electronics, US and European apparel imports have been rising over the past few decades. To cater to this ever-increasing demand in a cost-effective manner, manufacturers have shifted their production from the industrialized countries to the developing ones. The shift in production has brought new challenges at every link in the apparel supply chain, including manufacturing.
Manufacturers in the developing countries are losing business because of improper inventory management, poor shipping information to clients (based on pallet-level accuracy), and, most importantly, leakages in the manufacturing process.
Under these circumstances, RFID-based item-level tagging would solve a lot of problems for manufacturers. Since RFID is one of the most promising emerging tools, manufacturers can deploy RFID technology to track products throughout the supply chain and hence improve their overall business processes. Some of the numerous benefits of item-level tagging include the following:
Improved raw material forecasting:
With item level tracking, manufacturers are able to manage raw materials more efficiently based on first-in-first-out (FIFO) material data and product availability. This way they are able to get a comprehensive understanding of the raw materials and can make more accurate demand forecasts to distributors. As a result, they reduce the inventory holding and labor costs.
Enhanced shipping verification:
Item-level RFID tagging provides accurate information to the distributors about the products, compared to the cases and pallet-level information. It also provides an electronic proof of delivery; hence, item-level confirmations can be received from distributors, which reduces shortage disputes and save costs.
Real-time accountability of work-in-progress (WIP):
Through proper integration with enterprise systems, manufacturers can monitor work-in-progress in real-time and ensure that the right combination of raw materials is being used to produce the products. Accurate information of products at the shop floor enables correct disbursement of production incentives; as a result, overall labor costs can be reduced.
Authenticity control:
Counterfeit fashion is one of the primary causes of concern in the apparel business. With designers losing more than $10 billion annually to counterfeit products, RFID tracking proves to be a viable solution. Through RFID tracking, high-level authenticity checks can be set up for individual products, which protects brand reputations.
The technology industry can benefit from increased sales of RFID products. According to a research report, item-level tagging will represent about 40 percent to 45 percent of total RFID revenues in the coming years. The business will rise from about $250 million in 2008 to $8.3 billion in 2018 (i.e., from 5 percent to 30 percent of the total RFID market). Consequently, the usage of these tags in different industries will increase.
Keeping in mind the torrid growth in the RFID market and the advantages of item-level tagging, as reported by many retailers including Macy's, there can be many scenarios where item-level tagging can be effectively used. (Retailers have achieved inventory accuracy of up to 97 percent, which is significantly higher than the industry average of 65 percent.) Effective uses include consumer electronics (especially high-end and unique gadgets), archiving, military equipment, libraries, and automated assembly lines, where machines can automatically recognize and bind components together.
Do you think that the electronics supply chain industry should adapt to RFID-based item-level tagging? Are the benefits worth it? And will there be any barriers to implementation?
The supply chain in developing countries in which the article mentions many issues with inventory management will require some fundamental upgrades before RFID can be used.In many cases, the processes employed in these countries are extremely manual and paper based.Supply chain systems in general will need to be implemented with regular barcode scanning.RFID can be looked at once the fundamentals are in place to take advantage of other technologies in these countries.
Dave, I agree with you on the fact that the technological infrastructure is a pre requisite for implementing any auto identification technique. I am sure that the infrastructure in the developing nations is not at par with that of the US or Europe. But I can assure you things here are not as gloomy as they might look.
Even in the developing nations paper based environments are being discouraged and enterprises are opting for ERP systems. One key factor for this is because it becomes easier to communicate with the suppliers and the customers. EDI (Electronic Data Exchange) is getting popular in this region. Therefore, RFID or any other identification technique can be deployed.
@Nemos, RFID is not an improved bar code scheme. It is a completely different auto-identification technique that is being used in the industry to identify products.
@cryptoman: It is indeed a very informative post. Thanks for sharing this.
Although the RFID technology is not mature and has some other drawbacks. I still think can be used in developing an intelligent supply chain network. Where more information about the products can be transmitted rather than just a unique identification number?
@Cryptoman, looking at the pro and cons of the RFID i can imaging that they are not useful for everything for lagging. Airline industry still use barcode technology and they handle huge amount of customer luggage. So, i think that just for tracking and keeping an inventory database barcode is more than enough. To keep a check on counterfeit we need more intelligent solutions.
You are right different technologies should be used for different uses. Keeping the pros and cons of RFID in mind I am sure they cannot be used for all purposes. But I think they can be used for intelligent solutions.
That is essentially what it is. It is an imporovement upon the previous iteration of scanning technology. But now it extends those same functionalities and more to all types of devices and on the Internet.
Well, it adds a new layer of security. Yes, they can counterfeit tags, but if you think about it, they can do anything... but you have to make it harder for them.
Whats RFID's replacement technology? There should be one around the corner.
That is a difficult question to answer right now. I'm not sure if there has been much rumblings regarding newer iterations. This article is a bit old but see how the innovation now is comparable:
Is there need for tagging everything? Many product will become costly and conusmer may not like to pay for it. Tagging at final product level or at module level may be worth experimenting.
@hm: Tagging is one of the ways the electronics industry believes will stop counterfieting. If every item is tagged, then a simle scan will authenticate the product. Unfortunately, becuase so many single components are used in a product, tagging each becomes prohibitively expensive.
@Barbara: You are absolutely right. Tagging is one of the ways for authenticity control and with proper scanning counterfieting can be identified easily.
@hm: Your point about the cost is of primary concern to the manufacturing sector. They need to come up with a plan to balance the cost with benefits. Hence, tagging everything might not be possible given the price tag a product has.
@hm: Excellent point. No doubt that will or already is happening. I would think, though, that efforts are spent on circumventing the technology rather than counterfieiting it becuase it is not a really high-value product. Tags themselves should cost less than a nickel apiece, so I think it is a lot of work for little reward. The real money is made in the scanners, which no doubt could be counterfeited as well. But scammers would have to develop an entire system. I think they still prefer the path of lease resistance, which is taking an existing chip and re-marking or re-topping it in some way.
@Barbara: I agree with you. Counterfeiting tags is a lot of trouble for very little reward. Even if counterfeiters get hold of the tags and clone/modify them it will mostly likely be non productive.
Firstly, they will have to get hold of tags from a specific shipment. Since, information on tags is relevant to orders they will have to predict the information for the next order to get into the system. And I think the chances of doing that are pretty slim.
@Sohaib: Isn't it possible to produce a clone/copy of a genuine tag and stick onto a counterfeit product? The system may not be able to restrict a counterfeit product from going to the consumer then. Are there preventive measures companies can take with regards to this?
@TaimoorZ: Cloning a genuine tag may be possible I haven't seen it happen myself so I am not certain. But in theory it might not be possible with some tag types.
Moreover, the beauty of RFID tags is that they store more information than just a serial number. So even if someone clones a tag and changes some information on the tag the chances of all changed information holding up are extremely less.
Companies can use RFID tags to validate all information about products like product number, batch number etc. So that the chances of success may become less for counterfeiters.
-hm,
Exactly right. For about 10 EUR, a tag can be cloned. If the counterfeit tag enters the Supply Chain First, the real tag sets off the alarm, but often times not before the counterfeit tagged goods are through distribution and onto retail shelves or in OEM stockrooms.
Operational envoirnment affects all identification techniques. There are different types of RFID tags which are suitable for different purposes.
The limit on tags is in the thousands. I know of use cases where entire truckload are scanned at once.
RFID need not be in the line of sight to work. They can work within suitable distance ranges for example, toll tax collection works using RFID's and sensors are capable of identifying vehicles as the pass the checkpost.
And you are absolutely right that a RFID based solution needs to consider all pros and cons before it is actually implemented.
I would like to add here that there are different types of tags in the market, i.e. read only, read-write, write once and read many. Counterfeiting may also be difficult depending upon the nature of the tags being used.
Read only tags the information is stored in the manufacturing process and cannot be changed.
Read-write tags the information one can add information to the tag or write over the previous information. But still you cannot write over the serial number.
Write once and read many tags can have a serial number written onto them once which cannot be overwritten later.
Nice info regarding tag types. I too agree with Barbara that circumventing the technology here is easier than counterfieting it. It will be good for the anti-counterfiet campaign that the more experienced manufacturers or rather the pioneers of hardware technology get involved in RFID manufacturing so that trust in RFID grows simultaneously with the growth in anti-counterfeiting/circumvention activities taken around the globe.
I think RFIDs will do more good to electronics industry than apparel one. The cost of consumer electronics is far higher than apparel and hence the RFID, as percentage of cost is quite lower and the revenue saved, due to anti-counterfeit actions, per item is more than in the apparel's case. That makes it more viable for the OEMs to adopt the tool. However, it is also essential that the RFID usage culture to track authenticity spreads up and down the supply chain so that the benefits of RFID dont remain confined to the internal aspect of organization such as inventory management.
I agree. If the RFID tags are being used to prevent counterfeiting, the usefulness and effectiveness would be far greater with electronics than apparel. Many of the electronic components are being used for scientific and military technologies and counterfeit components is a serious threat in these areas.
You are correct. RFID tags can be used effectively for military and scientific purposes. It will make much difference there because counterfeit products in those industries can do great harm.
Collaboration with sourcing partners and B2B payments continues to be the biggest issue faced by supply chain managers today. Let's see how we can use cloud technology to solve this issue.
Lean supply chain technology has much more to it than supply chain management. It is also about understanding processes and finding ways to improve them continuously.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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