The Next Frontier in Technology and in Supply Chain Management: Automatic Identification Pertemuan 15-16

2. The Next Frontier in Technology and in Supply Chain Management: Automatic IdentificationPertemuan 15-16 Matakuliah : M0594 / Enterprise System Tahun : 2007

3. The Next Frontier in Technology and in Supply Chain Management: Automatic Identification • The Concept of Identification in a Physical World is in Full Evolution • Identification Is Key to Introducing Smart Technology into the Supply Chain • Goals to be Achieved Through Automatic Identification • Why Automatic Identification Means Major Changes in Business Partnerships • The Need for a Sound Policy Regarding Technical Standards • Bit-Level Standards and Infrastructural Developments

4. Introduction • Nobody will dispute the need for identification in human society. Everyone has a name and identification (ID) card. Many of us who travel internationally have a passport with name, vital vitae, and a photo. But this concept of accurate identification, article-by-article abd entity-by-entity, has not yet taken hold in the physical world in a universal manner • Microchips have started to be used as identifiers. • Some experts think there may come a day when chips are not just worn around the neck, but are actually implanted under human skin. • Industry will essentially be endowed with a sort of global positioning systems (GPS) that will allow companies to track their assets at all the times through the use of ID tags and satellites.

5. Introduction • Automatic Identification (Auto ID) becomes more important as one begins to appreciate that people live in a physical world with physical objects that need to be uniquely identified to face the challenge of connecting the physical world to the virtual (data) world • The next wave of change in the supply chain will see to it that the notion of handling inanimate objects will evolve as radically as it did with Henry Ford’s assembly line at the beginning of the twentieth century • The revolution currently under way in merchandising and distribution parallels that of the assembly line in terms of depth and the likelihood of its being widespread • At its roots us a unique identification code for each individual item that is embedded in products, printed in packages, and used to store transmit, and receive information to or from a reader.

6. The Concept of Identification in a Physical World is in Full Evolution • In its first 100 years, and until the advent of computers, the Industrial Revolution did not particularly benefit the handling of information. Even after the commercialization of computing machine in 1954, the old bookkeeping methodology was retained. • Any to any automatic linkages to all key nodes of the supply chain did not happen until the advent of the Internet that provided a total transformation • There is an aftermath from four decades of delay (1954-1994), which can be summed up by: • As long as old concept dominated, information about current status and future trend, therefore visibility, has not greatly improved – and this lasted during the first 50 years of computer usage • To the contrary, there has been a kind of reduced visibilility – if not outright lack of reliable information – about future demand as the complexity of business increased with deregulation, globalization, and innovation

7. The Concept of Identification in a Physical World is in Full Evolution • A key reason for this persistent deficiency in visibility has been the latency in feedback from consumers and small business toward the main suppliers of goods. The Internet changed this perspective. • To appreciate the impact of this vendor-to-client connection executed in real-time, and client-to-vendor online feedback, one must keep in mind the negatives from lack of informationm, and even more so from misinformation. • Reduced visibility at the sales end affects production planning and inventory control by creating uncertainties that lead to volatility in production schedules. • The hope is that smart materials will add to the Internet effect, increasing the ability to keep the information pipeline open, smooth the ups and downs of production planning, and allow for efficient management of inventories. • It needs no explaining that smoother production and distribution schedules have a multiple effect; they lead to greater customer satisfaction, improve a company’s competitiveness, help to swamp costs, and improve quality assurance

8. Identification Is Key to Introducing Smart Technology into the Supply Chain • The concept of using smart technology in the supply chain for identification purposes is new. Yet, practical applications are not that far down the line. • Some companies, such as Gillette, plan to start implementation of chip-based auto-ID by 2002, and they foresee a generalization of smart technology applications by 2005. • International Paper has a joint project with Motorola, and other companies are actively engaged in a process of exchanging ideas, sharing vision on the course smart technology will most likely take.

9. Identification Is Key to Introducing Smart Technology into the Supply Chain • But what is meant by smart technology? • The simplest way to answer this query is to say that it represents the development of low-cost and low-power solutions that permit the use of smart material in the best possible way. • What does smart material stand for? • Any sort of material that one uses is an object one can classify and identify. It may be a raw material, semi-manufactured goods, or ready products. It may be in process at the factory floor, stored in a warehouse, or in actual use in the home or office • If this material, wherever it happens to be, has the means of knowing itself, or at least the class to which it belongs and its serial number, then it can be thought of as being smart; all the more so if it can receive messages from this material and respond in real-time to queries about its routing. This is the sense of automatic identification, which is based on very low-cost chips.

10. Identification Is Key to Introducing Smart Technology into the Supply Chain

11. Identification Is Key to Introducing Smart Technology into the Supply Chain • As Exhibit 8.1 suggests, auto-identification is the merger of two technologies: classification and identification, and semiconductors. • Classically, inanimate material has been identified as a group: computers, chips, tables, chairs, razors, pencils, or other objects. Some of this material, typically teh more expensive, has a serial number – therefore, individual identification. Autos, all sort of motors, and personal computers are examples. This serial number, however, has the following limitations: • It is typically issued by its manufacturer; it is not global • It is imprinted on a piece of metal attached to the machine; it cannot communicate its ID • It helps very little in inventory optimization, where the class to which the item belongs (not the individual item) is tracked.

12. Identification Is Key to Introducing Smart Technology into the Supply Chain • Both globality and auto-ID are important. Yet, despite big pronouncements such as the Universal Product Code (UPC), there has been a distinct lack of valid identification methods and procedures. • In a global economy, this is a major drawback. Half-baked approaches such as UPC are not enough. Identification should have universal characteristics with synonyms and acronyms avoided as much as possible. This is not easy, but it is doable • Classification is a prerequisite to a global ID system. Once a piece of material, any material, has been properly classified, it can be uniquely identified; and with low-cost technology, it is possible to go to the next step automatic identification. • What one needs to add to this material is a very inexpensive chip with an antenna; therefore, the ability not only to store the ID number but also to communicate it to other entities: materials or people.

13. Identification Is Key to Introducing Smart Technology into the Supply Chain • A more advanced implementation stage of smart materials will go beyond communication and require some sort of computation. This will be available everywhere in abundance at very low cost during the coming years. The same is true for efficient, user-friendly personal access to databased resources to be used by smart materials and by people

14. Identification Is Key to Introducing Smart Technology into the Supply Chain • The tougher part of the smart materials revolution will be cultural because organizations are made of people, and people tend to keep old habits. Both an open architecture and an open mind are made necessary by the fact that the global supply chain is the largest network in the world. It is operating all the time, seamlessly to most people, and it is at the same time sophisticated, random, and complex.

15. Identification Is Key to Introducing Smart Technology into the Supply Chain • In conclusion, auto-identification by smart materials and the ability of all entities to communicate their information or ask for other datastreams will revolutionize current conceps. Nothing has yet been seen concerning the real magnitude of the oncoming change and its management. • Sending and receiving data by inanimate entities will cause changes in the physical world beyond those experienced during the past 60 years with computers and give a big boost to Internet commerce, because I-commerce will be at the core of streamlining the total supply chain.

16. Goals to be Achieved Through Automatic Identification • There are four major components in the solutin targeted by MIT’s automatic identification project: • The ID code • ID-system • Internet Directory, and • Language • The latter is the Product Mark-up Language (PML) • The implementation of auto-ID has put forward several objectives, each with characteristic contributions to greater supply chain efficiency, including: • Enrichment of product information • Ordering via the Internet • Fast replenishment in the shop • Automatic check-out and online debit • New ways to strengthen customer loyalty • Product customization to each customer’s needs

17. Goals to be Achieved Through Automatic Identification • With smart tags used by all items on display,replenishment will be done automatically. Floor intelligence will be informed by rack intelligence on items whose frontline inventory is thinning. • But able to use of auto-ID obliges one to rethink the entire design, packaging, and merchandising process – as well as to seamlessly integrate the new system’s components with those already in place. Otherwise, there will be crevasses in process management.

18. Goals to be Achieved Through Automatic Identification • Database mining will be likely to fulfilling both objectives, hence the interest the MIT Project birngs to the use of an Internet directory and its real-time usage. • Simply stated,after interpreting the auto-ID, the Internet Directory will provide the information necessary to channel the message to the appropriate server. This server will contain appropriate product and package information to permit holding less data on the e-tag than otherwise necessary, therefore reducing local, item-by-item cost.

19. Why Automatic Identification Means Major Changes in Business Partnerships • The advent of an auto-ID system will promote further development of online commerce.I-commerce will get a great boost if and when current inefficiencies dating back to Old Economy solutions are overcome. • Therefore, there is plenty of scope in studying the further-out impact of auto-ID, as well as in providing a steady stream of improvement • From CRM to ERP and distribution chores, e-tags will in all likelihood underpin the new logistics. The expectation is that smart products and smart packages will bring massive efficiencies to the global supply chain, starting with the assistance they can provide to manufacturers in assembly lines as well as in tracking inventory and foiling counterfeits. • Other applications include integration with ERP and CRM software to promote customized products, new production paradigms, use of e-tags in robotics and warehouse management

20. Why Automatic Identification Means Major Changes in Business Partnerships • With smart materials, agile seamless interfaces and the ability of inanimate agents to communicate among themselves will automate operations that are still manual, despite 50 years of using computers • To help in better e-tag integration with CRM and ERP, as well as in upgrading these programming products, here in a nutshell is the scenario that will most likely characterized a thoroughly restructured logistics process. • A customized order will be received over the Internet; it will be assigned an electronic product code and scheduled for production; the EPC will be embedded in a smart tag attached to the item: and a low-cost chip will literally be printed on the package. From this point on, the identification/communication process will be take on, so to speak, its own life

21. The Need for a Sound Policy Regarding Technical Standards • To introduce the concept underpinning the need for global standards in a rigorous manner, one can start with a definition of the word standard. • Etymologically, the term means any figure or object, such as a flag or banner used as emblem or symbol of a community or military unit. • A standard is also a reference, a norm, something established for use as a unit of measurement (e.g., the meter) technical characteristic (e.g. the Internet Protocol [IP]) or quality of material (e.g., the proportion of pure gold and base metal) • A standard is something recognized as correct by common consent, approved custom, industry agreement, rule, or regulation. As such, it helps as a guide in the domain where it is regarded as a goal or measure of accuracy. Because it is viewed as a general reference, a standard tends to be associated with a model. • Without standards on which to rest, no new product would survive the market’s test for a long time • Any product and any process needs a generally accepted frame of reference, targeted by settings standards

22. Bit-Level Standards and Infrastructural Developments • Today, database are global, they are available interactively, and they are accessible from a large variety of end-user devices. Routinely, one connects to database systems through means that range anywhere from nomadic portable to big multi-million dollar machines. These devices are linked together through a network that knows the circuit end-to-end, but is often blind regarding the identifications of other real-world entities mapped into the database • Bit-level standards and network standards relative to electronic product code systems should account for EPC’s targeting a global implementation. • Why is it necessary to established standards on two levels? The answer is because we are faced with two challenges: • The network of items, handled through Internet, intranets, and extranets. • The network of bits, which is a new concept and is generated from the network of items

23. Bit-Level Standards and Infrastructural Developments