Using Technology to Transform the Value Chain

142 Pages·2008·3.04 MB·English

by  Fred Kuglin, Ray Hood

Using Technology
to Transform the
Value Chain
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© 2009 by Taylor & Francis Group, LLC
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Library of Congress Cataloging-in-Publication Data
Kuglin, Fred A.
Using technology to transform the value chain / Fred Kuglin, Ray Hood.
p. cm.
Includes bibliographical references and index.
ISBN 978-1-4200-4759-2 (alk. paper)
1. Business logistics. I. Hood, Ray V. II. Title.
HD38.5.K849 2008
658.5’14--dc22 2008044082
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© 2009 by Taylor & Francis Group, LLC
Contents
Acknowledgments ..........................................................................................ix
Introduction ...................................................................................................xi
Authors ........................................................................................................ xxv
1 Radio Frequency Identifcation: Cure for Cancer or
Supplier Curse? .......................................................................................1
Introduction ................................................................................................1
Components of an RFID Solution ...............................................................2
An RFID Tag Is a RFID Tag or Is It? ..........................................................4
Ten Tere Are the Frequencies to Consider… ............................................7
How the RFID System Works…or Tries to Work ........................................7
Now Comes the Hard Part ..........................................................................9
Misreads Anyone? ...............................................................................9
Bragging to the CFO…? ...................................................................10
Costs in the CFO’s Cost/Beneft Analysis .........................................10
Benefts in the CFO’s Cost/Beneft Analysis and Supplier
Resistance .........................................................................................11
RFID Applications with Some Success…Maybe ........................................11
RFID Applications Tat Make Good Common—and Business—Sense ...14
Back to Wal-Mart ......................................................................................17
Conclusion .................................................................................................18
Notes .........................................................................................................19
2 Wireless Sensors: Te Value-Based World beyond Radio
Frequency Identifcation ......................................................................21
Introduction ..............................................................................................22
Fixed-Asset Sensors, RFID, and Barcodes ..................................................23
Value Proposition Examples—Fixed-Asset Sensors in a
Plant Environment ...........................................................................23
Back to the Wal-Mart and Department of Defense Challenges .................24
Monitoring of the Moving Asset—Value Proposition Expands ..................25
Wireless Communications Networks .........................................................26
v
© 2009 by Taylor & Francis Group, LLC
vi ◾ Contents
SensiTech—Maximizing the Value of Transport Diagnostics ....................28
Value Maximization in an On-Demand World..........................................29
When Time Is Money—Te Satellite Option ............................................30
When Time Is Money—And Money Matters: Te Cellular Option ..........31
Sensor Success Stories—Almost! ................................................................33
Sometimes the Bad Guys Are Smart but Unlucky ........................... 34
Insurance Company Summary .........................................................35
Summary ...................................................................................................36
Notes .........................................................................................................36
3 Tracking Animals and Other Living Beings: From Farm to
Fork and from Home to School (Hopefully!) .......................................39
Introduction ............................................................................................. 40
Food Supply Chain: Pork .......................................................................... 40
From Birth to Processing Plant .........................................................41
From Processing Plant to Store Shelf ................................................45
Cost of Supply Disruptions .............................................................. 46
Tracking Devices: Not New with Animal and Marine Life Tracking ........47
From Sharks to Cows and Other Farm Animals ...............................48
Ancillary Benefts .............................................................................50
Tracking in the Pork Supply Chain ............................................................51
Tracking Pets .............................................................................................52
Other Applications ....................................................................................53
Summary ...................................................................................................54
Notes .........................................................................................................54
4 Te Media Supply Chain Key Word: Digital .......................................57
Introduction ..............................................................................................57
History—VHS and Betamax .....................................................................57
Introducing the DVD ................................................................................59
Supply Chain Implications ........................................................................60
Change Is Pervasive ...................................................................................60
In the Eye of the Storm—Te Consumer ...................................................62
Starbucks—More Tan Just Cofee ..................................................62
Best Buy ...........................................................................................63
Apple, iPod, iTunes, iPhone ..............................................................63
Pulling It All Together ...............................................................................65
Summary ...................................................................................................67
Notes .........................................................................................................68
5 From Sea to Shining Sea: Te Changing World of Ocean
Container Shipping ................................................................................69
Introduction ..............................................................................................69
Te “Container” in Ocean Container Shipping .........................................70
© 2009 by Taylor & Francis Group, LLC
Contents ◾ vii
Te “Ship” in Ocean Container Shipping ..................................................70
Port Congestion and Necessity of Cargo Control ......................................70
October 2002—Te Month the Cargo Stopped Moving ..................73
Port Congestion—A Growing Problem ............................................73
Growth in Containerized Cargo .......................................................74
Panama Canal ...........................................................................................75
Inland “Ports” ............................................................................................76
Security: Secure Freight Initiative and SAFE Port Act ...............................78
Te Future: Smart Supply Chain ...............................................................80
“Smart Container” of the Future ...............................................................81
Transportation Management Systems and Smart Containers .....................83
Summary ...................................................................................................85
Notes .........................................................................................................85
6 Te Warehouse: Obsolete or a Critical Link in the Modern
Supply Chain? ......................................................................................87
Introduction ..............................................................................................87
Warehouses: A Very Brief History ..............................................................88
Early Systems for Inventory Control ..........................................................89
False Impression of Warehouses as an Information Technology
Backwater ................................................................................................. 90
Barcodes and Wireless ..................................................................... 90
What Barcodes and RF Illustrate about Technology Adoption .........91
What about RFID? ....................................................................................92
Future of Warehouses ................................................................................93
Conclusion: Physical Execution Still Matters .............................................94
Notes .........................................................................................................94
7 Pharmagistics .......................................................................................95
Introduction ..............................................................................................95
Counterfeit Drugs—Te Problem Defned ................................................97
U.S. Food and Drug Administration and Product Authentication, 2004 ......98
New Technologies.............................................................................98
More Secure Business Practices .........................................................99
Improved Reporting Systems ..........................................................100
Te Problem Worsens .....................................................................100
Fast Forward—October 2006 .................................................................101
New Technologies...........................................................................101
More Secure Business Practices .......................................................101
Improved Reporting Systems ..........................................................102
Diverted (Stolen) Pharmaceutical Drugs ..................................................102
Do Not Forget about Reverse Logistics...........................................103
© 2009 by Taylor & Francis Group, LLC
viii ◾ Contents
Back to the Future and the FDA 2004 Report .........................................104
Authentix ........................................................................................104
Summary and Our Recommendations ....................................................106
Notes .......................................................................................................107
8 Te Near Future for Technology in Supply Chain Management .......109
Introduction ............................................................................................109
Cross-Functional Supply Chain Problems and Inter-Enterprise
Collaboration Problems ........................................................................... 110
Stage Is Set for Inter-Enterprise Process Fusion ............................... 111
Extended Enterprise: Right Idea, Wrong Architecture ....................112
Rise of Web Services .......................................................................112
Federated Enterprise Concept .........................................................113
Deploying the Federated Enterprise Architecture ........................... 114
Why Are Web Services Better Tan What Came Before? ............... 115
Private Initiatives in Creating Inter-Enterprise Systems:
Multiparty Networks ...................................................................... 115
Big Tree: Identifcation, Location, and Condition ................................. 116
Information Security—Te Key to Enabling Data Flow .......................... 117
Enterprise Framework for the Future ....................................................... 119
Notes ....................................................................................................... 119
Index ...........................................................................................................121
© 2009 by Taylor & Francis Group, LLC
Acknowledgments
Te inspiration for us to write this book came from multiple personal and pro-
fessional sources. Te growing impact of applying new technologies in the global
value chain never ceases to amaze us. Our level of amazement is only exceeded by
the pace of change in technology overall. Te next decade will be one of increasing
opportunity for professionals on the leading edge of applying technology—and one
of increasing peril for those who choose to be laggards.
Fred: A special thank you goes to my wife Karin and children Heidi and Karl
for their support, understanding, and occasional assistance throughout the writing
process. In addition, I want to thank Dr. Les Waters for his ongoing mentoring
and support. Also, I want to thank my co-author, Ray Hood, for his signifcant
contribut ions. It was a pleasure to work with Ray, who is a brilliant business execu-
tive, a wonderful family man, and a friend.
Ray: To my wife Stefani, who puts up with my long hours, I owe a great debt
of gratitude. To my three sons, Tripp, Reid, and Jack, your world will be so difer-
ent from mine. Te changes over the next 50 years will make the last 50 look like
a warm-up.
To Fred Kuglin, who was the driving force behind this efort, thank you for keep-
ing me on track. One of these days, I will think of a way to show him proper thanks.
Joint: We want to thank the following individuals for their specifc contri-
butions to individual chapters: Scot Stelter of Alien Technology, Karen Jensen of
Printronix, and Sherita Cofeit of N.T.T.A for Chapter 1; Sherry Farley of CADEC,
Klif Black of SensorLogic, and Peter Maysek of SensiTech for Chapter 2; Randy
Krueger of Cargill, Dr. Ramon Bonfl, Patrich Simpkins of SensorLogic, and
William Buckley of GPS Tracking System.net for Chapter 3; Teresa Arosemena
of the Panama Canal Authority, Heather Lepeska and Kendall Shifer of the
Inland International Port of Dallas/City of Dallas, the Union Pacifc Railroad,
and Paul and Kathy Orsak of ZMS Technologies for Chapter 5; Harold Anderson,
CLS, an Inmar Company of Carolina Logistics, Marc Daigle and Craig Stamm
of Authentix for Chapter 7; and Brendan Ziolo and Krishna Kurapati of Sipera
Systems for Chapter 8. Finally, all quotations not specifcally referenced in the
e ndnotes come from our personal interviews and experiences.
ix
© 2009 by Taylor & Francis Group, LLC
Introduction
Overview
An efcient and efective supply chain manages the fow of goods, the fow of infor-
mation, and the generation and reporting of related fnancial transactions. Te fow
of goods involves the managing of customer orders through a network of suppli-
ers and distribution centers to a customer delivery point. Te fow of information
involves the data collection supporting the fow of goods, the conversion of these
data to useful information, and the sharing of this information across the multiple
supply chain partners to enhance the supply chain’s performance in managing the
fow of goods. As goods pass from one supply chain partner to another, fnancial
transactions are created. Tese fnancial transactions convert the goods into cash,
creating a series of reports on cash fows and performance measurements.
Flow of Goods
Flow of Information
Financial Flows
xi
© 2009 by Taylor & Francis Group, LLC
Sale
Source
xii ◾ Introduction
Te complexity increases as organizational priorities unfold. Te CEO and his
or her direct reports have a tight correlation to the agenda of the board of directors.
Tis agenda changes throughout the year, and is usually focused on mergers, acqui-
sitions, and all other activities (e.g., increasing sales, decreasing costs, leveraging
fxed assets, accelerating working capital turns, and minimizing efective tax rates)
that drive shareholder value. Te proft and loss (P&L) owners (senior vice presi-
dents and vice presidents) are focused on the execution of their annual operating
plan. Tis annual operating plan, frequently completed in the fourth quarter of the
previous fscal year, dictates performance targets on increasing revenues, decreasing
costs, and available capital to invest. Te operating expense budget owners (directors,
managers) are focused on execution tasks and managing to their direct costs. As the
board agenda changes due to internal and external forces, it becomes increasingly
difcult to coordinate or connect the activities of the P&L owners and operating
expense budget owners to ensure alignment with the current board agenda. (Does
anyone ever feel that his or her organization is a little disjointed at times?)
Troughout the chapters in the book, we try to “connect the several dots” that
represent the complex world of supply chain management. We provide specifc
reviews of the execution activities of moving goods; specifc reviews of existing and
new technologies that enable the fow of information; specifc reviews of technology
architectures that pull together the hardware, software, and middleware necessary
for the efective fow of information; and specifc reviews of industry supply chains.
In most cases, we incorporate the fnancial performance metrics that govern the
fnancial transactions and their associated value propositions. Te efective use of
information not only reduces costs, but also helps increase sales through connectivity
to customers and markets, enables greater use of fxed assets, helps accelerate work-
ing capital turns, and enables acquisitions. Te information throughout the supply
chain is at the heart of all of these shareholder value measurements. Maximizing
shareholder value requires supply chain excellence in most companies.
FINANCIAL SUPPLY CHAIN
STRATEGIES STRATEGIES
Increase Sales
Drive
Increase Fill-Rates
Revenue
Reduce Stock-Outs
Maximize
Shareholder
Value
Decrease
Reduce Labor, Inventory,
Costs Working Capital
Costs
© 2009 by Taylor & Francis Group, LLC