The visible supply chain

A career or two ago, I was a co-ordinator at a commercial print shop. Fresh from my IET classes, I was anticipating a just-in-time environment, a recent but maturing manufacturing concept at the time. I was dismayed to find a bulging stockroom. Wasn’t just-in-time supposed to minimize the inventory

we carried?

“”Sure,”” said Philip, my boss. “”We do just-in-time.”” He swept his arm about the stockroom. “”This,”” he said, “”is just-in-case.”” (There was another category of material that no one could remember ordering. That was called, “”just-don’t-care.””)

No one can afford that much slack anymore. New technologies and processes have contributed to the tightening of the supply chain. Companies have their inventory under control.

Or do they?

Tom Dziersk says he still sees symptoms of out-of-control inventory. Dziersk is the CEO of ClearOrbit Inc., an Austin, Tex.-based supply chain software developer.

Dziersk cites five symptons of inventory control problems: frequent adjustments to inventory and safety stock levels; persistent inventory inaccuracies that can’t be reconciled; frequent product returns and the associated handling costs; increased expediting fees; and poor return on assets.

The key word here is “”symptoms,”” Dziersk says. You can keep throwing expediters at them, but they’re really a reflection of something gone awry systematically upstream from where the problems appear.

Discrepancies that could be eliminated at the shipping dock worm their way into inventory. By the time they’re discovered, it’s such a time-consuming and expensive task to reconcile them, it’s sometimes cheaper to write them off.

What’s often missing, says Dziersk, is prevent control — something to shut down the process and keep problematic shipments out of the inventory loop.

It begins, not on your shipping dock, but on your supplier’s. Companies like Wal-Mart have mandated formats for shipping labels to automate the inventory process. But there are two problems, according to Dziersk: they get only about 60 to 70 per cent compliance, and the supplier has control over what gets shipped into the supply chain.

But if you control the labels — issuing them only when the product, quantity and price are confirmed — suspect shipments stay out of the supply chain, or at least there’s clear accountability when discrepancies show up.

This starts the process with better visibility — if you issued the shipping label, you know the shipment is in transit. Maintaining that visibility through the process is critical for real-time inventory control. That means more check points at which the inventory is scanned.

Even bar code scanning introduces some latency into the real-time process, because it takes a human operator to scan shipments at various points.

That’s where RFID (radio frequency identification) technology has a lot to contribute to the process, says Dziersk. Shipments are logged at the moment of the transaction, and can be automatically tracked.

The technology’s up to the task — it’s as easy to do as bar code labelling — but cost is still an issue. Bar codes cost less than half a cent to produce, while RFID tags cost from 70 cents to $1.50. It’ll be a couple of years before they’re cheap enough — under five cents each — to warrant widspread use.

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Jim Love, Chief Content Officer, IT World Canada

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Dave Webb
Dave Webb
Dave Webb is a technology journalist with more than 15 years' experience. He has edited numerous technology publications including Network World Canada, ComputerWorld Canada, Computing Canada and eBusiness Journal. He now runs content development shop Dweeb Media.
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