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RFID ROI — Not what it seems

I was having a recent discussion over lunch with an executive from a specialty grocer out west who admittedly didn’t know what the big hoopla was about RFID. The mother of all grocers and supermarketers is into it in a big way but he didn’t know what the point of it was except maybe for pallet level or truckload level tagging. I suggested – maybe its volume throughout the entire supply chain that one surmises without accurate and up to date information, supply chain managers might feel quite out of the loop and without much control. Dr. Peter Harrop has an article RFID ROI – Not what it seems that makes several points. Here’s a sampling:

Ask someone in the street about RFID and they may say it is tagging prisoners. However, those in the industry generally talk about putting labels on pallets and cases necessitated by the commendable commands of leading U.S. retailers, which see sales increase and costs decrease as a result of their suppliers doing such tagging.

However, he says, if you follow the money and not the talk:

However, if we look at the major spend and potential spend on RFID, we get a very different picture. The global spend on RFID labels for pallets and cases alone

Taking a peek at mySAP (Transportation area)

This post is a continued peek into the capabilities of mySAP’s solution space. Transportation is one of the specialty areas of the firm that I work for (GENCO) and so I am more than familiar with all aspects of the transportation area and it should be a whole lot of fun exploring the capabilities of mySAP in this area. So let’s dive right in. There are three main areas in the Transportation solution space namely:
1. Transportation Planning
2. Transportation Execution
3. Freight Costing

Under Transportation Planning, there are five areas:
1. Collaborative Shipment Forecasting – Allows the firm to exchange/adjust forecast infomration between customers and carriers. Since forecasting really is the forward loop of the system, we should be observe a feedback loop (implicity or explicit) that should give back information to the firm and the other stakeholders about reality.
2. Load Consolidation – Any good TMS should have this feature because it is absolutely essential to realizing cost savings from transportation operations. mySAP comes with two options – one option is to carry out the consolidation yourself and the other is to allow the carriers to carry out the consolidation for which presumably you’d have to part with a portion of the savings so realized.

3. Mode and Route Optimization – Any good TMS should have this feature as well. What I would like to know is the internal workings of the Mode and route optimization algorithms, whether it relies on true optimization or some heuristic to achieve the mode and route optimized results. The other obvious question, given the high fuel prices and lack of carrier capacity, is whether this feature extends to the intermodal space or not.
4. Carrier Selection – Another important aspect of any TMS tool is to be able to assign and (and with the following feature of tendering) tender loads to carriers based on some business rules.
5. Collaborative Shipment Tendering – Most TMS come with this feature built in simply because it makes sense to do it. Either that or you’d have to be on the phone getting spot rates for lanes which is the least efficient way to tender large volumes of loads.

Under Transportation Execution, there are five areas:
1. Shipping – This option seems to be a souped up version of the Load Consolidation feature in order to move it from the Transportation planning to Transportation execution.
2. Collaborative Shipment Tendering – Repeated from Transportation planning area. I’m kinda getting ticked off with the repetition thing (not only because I might repeat myself needlessly but also because it inflates the number of features that a product advertises). Sure, it might not be possible to neatly categorize such a subject but that is a flaw in the presentation of the capabilities in neat little silos when such silo based differentiation is not the solution. C’mon SAP, you can do better…
3. Express Ship Interface – Deals with those orders that needs to be shipped out using the Parcel mode. However, I wonder what’s driving the logic of whether to send a particular shipment by parcel or not – whether the different modes of Ground, Next Day, Second day etc can be selected/optimized based on delivery dates or priority etc.
4. Distance Determination Service – There are only two service providers for distances – PC Miler or Rand McNally, that are used in the industry and most firms that I have dealt with use PC Miler of some version or the other.
5. Transportation Visibility – Since visibility is a key desire for many firms especially given outsourcing and longer lead times for the products produced in cheap manufacturing locations, this is a feature provided for tracking the movement of an order either by road or by sea.

Under Freight Costing, there are 4 areas:
1. Freight Cost Calculation – An entire industry of freight pay and audit works around this particular topic and this functionality is going to make inroads into their revenue pie.
2. Freight Conditions – A database of freight rates and accessorials that are applied to orders to evaluate the freight costs
3. Freight Cost Settlement – Classic execution of freight pay conducted from within an ERP system so that there is end to end supply chain management.
4. Freight Costing Extensions – Adjustment of freight paid with customers or carriers based on some outlined business rules.

So is anything amiss? Not really. mySAP’s transportation piece seems to have everything that I’d expect from a good TMS solution. The natural extensions that might be thought off from the current state are probably contract management with the transportation providers, integration of 3PLs as 3PLs and not as some virtual carrier to whom the loads are tendered, performance of the carriers as well as 3PLs, BI (Business Intelligence) from carrier performance that enables the identification of routes, modes and networks that could be leveraged for better carrier contracts. There is one component that will be of great value to an ERP provider such as mySAP that can leverage existing users through the internet and that is peer collaboration of transportation networks. And that can be entered into using an interface that mySAP could provide albeit for a small fee.

About me

I am Chris Jacob Abraham and I live, work and blog from Newburgh, New York. I work for IBM as a Senior consultant in the Fab PowerOps group that works around the issue of detailed Fab (semiconductor fab) level scheduling on a continual basis. My erstwhile company ILOG was recently acquired by IBM and I've joined the Industry Solutions Group there.

@ SCM Clustrmap

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