Chip technology set to revolutionise SCM
Chip technology set to revolutionise SCM
New technology that tags and tracks inventory and equipment has the potential to save the manufacturing and retail industry billions of dollars a year, according to a study carried out by consulting and technology services group Accenture.
The technology, known as Auto-ID, is a combination of electronic product codes (EPC) and radio frequency identification (RFID). It has been developed jointly between industry and academia, with the intellectual property to be licensed free of charge to any company that wants to use it.
Research into the new technology by Accenture describes how it can dramatically improve production operations, asset utilisation, forecasting and inventory accuracy, by pinpointing the location and status of products as they move through the manufacturing and retail value chain. Such improvements can increase the quality and efficiency of the entire supply chain, leading to significant savings in areas such as inventory and labour costs.
"Our research found that by 2005, many manufacturers – especially those in the consumer electronics and grocery sectors – will be using RFID technology to track products at the pallet and case levels," says Jeff Smith, global managing partner at Accenture's retail and consumer goods practice.
Soon, every can of soft drink or bottle of shampoo will have its own electronic tag. The main advantage of this system over bar codes is that while, in most cases, bar codes need to be scanned manually and, with all the labour costs associated with that process, whereas with this new technology, a whole warehouse full of stock can be checked and counted at the touch of a button.
A spokesperson for the Auto-ID Centre, an independent, non-profit organisation, comprising over 100 companies and five of the world's top research universities, says: "Bar codes are a line-of-sight technology. That is, a scanner has to “see” the bar code to read it. That means people usually have to orient the bar code towards a scanner for it to be read. Also, if a bar code label is ripped, soiled or falls off, there is no way to scan the item. Radio frequency identification, by contrast, doesn’t require line of sight. RFID tags can be read as long as they are within range of a reader. And since radio waves pass through plastic, tags can be protected from damage.
"Because RFID tags can communicate with readers without line of sight in most cases, RFID also has the potential to reduce out of stocks. Studies show that, on average, products are not on the store shelves 7 percent of the time. Every time a customer leaves a store without buying what they came for because it wasn’t on the shelf, the retailer and the manufacturer lose out.
"RFID has the potential to dramatically reduce out of stocks by providing real-time visibility into what’s on the store shelves. It also has the potential to dramatically reduce theft by alerting store employees to unusual activity at the shelves. It may also reduce employee theft, counterfeiting, administrative errors, and mass recalls."
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