A recent press release, posted on RFID Solutions Online, announces that global aircraft manufacturer Airbus has selected both IBM and OAT Systems for a multi-year, multi-million dollar forthcoming implementation of RFID technology to streamline Airbus’s supply chain and manufacturing operations, with an intent to significantly reduce costs.

There has been much discussion over these past few years on the long-term value of RFID technology.  It was rather unfortunate that certain technology vendors jumped on the hype bandwagon, and large influencers such as Wal-Mart issued RFID-related mandates so early in the evolution process of this technology, before mature standards as well as more cost-effective technology such as item tags, could be justified for broader, more wide-scale value proposition.

In September of 2005, I wrote an article in RFID Update, indicating my view that RFID investments had to be placed in a broader context of a strategy for leveraged use of sensory networks.  My argument was that business cases and project plans for sensory networks should reflect this broader perspective, and that technology options for the sensory network include RFID, bar codes, wireless terminal, EDI and other appropriate technologies, depending on business- and cost-efficiency requirements.  A sensory network can leverage any of these key process capabilities, and RFID in particular has the long-term potential to dramatically impact the latter three.

RFID usage cases have improved since 2005, not just in the obvious regulatory compliance areas, but also in the sensing of logistics and inventory movements, and broader sensing related to timelier decision-support needs.  I for one take notice to the fact that Airbus has placed in a big way, its trust in this technology to deliver needed benefits.

RFID continues to be a viable technology option, leveraged in the broader strategy of cost-justified, sensory networks. 

Perhaps Boeing and others will follow in these announcements related to sensory networks.

Bob Ferrari

Over on IndustryWeek.com, I read where the International Monetary Fund (IMF) has revised its outlook for overall worldwide business growth to now reflect a 3.7% growth rate in 2008, which is down a half point from its January forecast.  Keep in mind that the base of this number is huge, and a half-point is significant.  The commentary also indicates a 25% chance of this number dropping below 3%, which is equivalent to a global recession from an IMF perspective.

A regional view of the overall number indicates that the U.S. is forecasted to only grow .5% in 2008, and .6% in 2009.  Europe is slightly more optimistic, 1.4% growth in 2008 and 1.5% in 2009.  The bulk of demand, from an IMF perspective will come from “Emerging and Developing Nations”, forecasted to grow 6.7% in 2008, and another 6.6% in 2009.  China is again the star, with a forecasted growth of 9.3% in 2008, in spite of attempts from China’s political leaders to slow down the existing multi-year growth cycle.  U.S. politicians should envy such a problem.

For supply chain product planners and demand planning professionals, this latest IMF data should lay to rest what will be 2008-2009 planning strategies.  In terms of overall growth, there appears to be only one growth horse to ride, China and the developing world.  Investments in production and distribution capacity to serve these specific markets can well be justified, along with increased unit volumes.  There well may be exceptions, for instance if you’re Apple, and supporting building iPhone demand, or perhaps selling depression related medications in the U.S.  But the numbers due indicate for at least U.S. growth, it’s a holding pattern, or decline at best.  So be well prepared to respond to those continued pressures for overall supply chain cost reduction across U.S. supply chain processes and channels.

This is always a challenge since there is a hope you don’t do something stupid or dumb for the sake of cutting, but cost avoidance is a very prudent strategy, especially for U.S. focused supply chains. 

Bob Ferrari

Global Logistics & Supply Chain Strategies had an article in its March 2008 issue titled If Supplier Portals Were So Great, Then What Went Wrong? This article provided a time-phased history of supplier portals from the late 1990′s to the present, but also points out how the hodgepodge of approaches have finally begun to sort themselves out in terms of a value proposition.

Michael Lamoureux’s blog Sourcing Innovation scooped me on initial comments in its post  It’s not the Portal or the network…it’s the Facilitation, which provides some interesting sourcing and procurement perspectives, most of which I agree with.

As an industry analyst at both AMR Research and IDC, I also had the opportunity to observe among various industries, as well as speak to customers regarding what value, if any they garnered from the process, as well as the supporting technology within portals and trading exchanges.

The article indicates that in the earliest days, portals were cheap and easy to setup.  I disagree.  The earliest technology was still a work-in-progress, and most of the early portals were focused on indirect sourcing, procurement transactions, and buying processes. When you added the almost mandatory costs of a systems integrator complete with process and change management, the cost ballooned to the point that many firms could not justify the ROI to move forward into more complex procurement processes.  More importantly, the suppliers who were curried to participate found themselves in a situation of added costs to participate, as the article correctly points out. When trading exchanges were spawned, various niche technology providers were quick to pitch the value proposition of an exchange that made revenue, as well as bring suppliers together in a seamless network.  A lack of consistent industry standards did not help.

What was missing, in my view, was the broader supply chain value proposition, beyond just transactional or electronic content exchange, and narrow functional focus. Buyer-supplier portals have finally begun to yield benefits because they moved beyond the functional limits of the procurement process, into areas of product design collaboration, supply and demand calibration, order fulfillment and transportation tracking. Today’s electronic supplier networks can effectively overcome the limitations of geography and time sensitivity, and yes, can provide a broader value proposition.  This may be one area where the ERP providers have finally got it right- enable broader value-chain processes.

 In a post on April 1, The Spiraling Cost of Diesel Fuel- U.S. Independent Truckers React, I challenged the U.S. presidential candidates to communicate a coherent strategy and discourse for the energy impacts on global supply chains. I was viewing my evening dose of Jim Cramer on CNBC, who just happened to be interviewing Senator Hillary Clinton.  To my very pleasant surprise, Hillary not only mentioned her concerns and observations related to the rising cost of diesel fuel and the current independent trucker protests, but also mentioned the product sourcing and supply chain issues of Heparin, which has also been cited on this blog. 

Thank you Hillary, this a great start to the discourse.

Perhaps we can look forward to comments from Senators Barack Obama and John McCain as well.

In a posting on Yahoo Finance, a representative from Apple was quoted as indicating that Apple is indeed experiencing more than expected demand for the iPhone, and is confirming that the company is experiencing shipment delays caused by supply shortages, not a ramping down of the product due to next model introduction.What is interesting to note in this article, is that much of the current demand is being fueled by grey market purchases in the U.S. Apple outlets, for phones being taken or shipped to emerging markets in China, Russia, Africa, and other countries.  One commentator is quoted that Apple’s shortfall in predicting demand could be upwards of one million units, and estimates that 15,000- 20,000 iPhones per week are being re-routed out of the United States to other countries.

I’m sure there are a lot of companies in the blogsphere that would enjoy having Apple’s problem, especially in light of today’s business slowdown economy. But for Apple, this presents a rather difficult problem for insuring adequate customer fulfillment in the U.S., as well as satisfying international demand.

In many presentations I’ve made over the past few years, I often cite Apple as a great example of a manufacturer who demonstrates all the characteristics of an “agile” supply chain. Their ability to not only provide truly innovative products, outsource almost all design and production needs, and ramp to extraordinary high volumes in a short period of time, are an envy to any consumer electronics manufacturer.  We should all look forward to how Apple responds to its current challenge.