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How Industry Giants Are Using Technology To Control Supply Chain Costs

Michael Wilson | Jul 24, 2014

In today’s world of heightened competition, it’s necessary to build and manage a sustainable supply chain that minimizes both expected and hidden costs.There are challenges that ...

supply chain costs

In today’s world of heightened competition, it’s necessary to build and manage a sustainable supply chain that minimizes both expected and hidden costs.There are challenges that arise on a regular basis, and an innovative approach is key to making sure they don’t disrupt your operations. The bottom line is that your company can increase efficiencies by properly controlling supply chain costs with advanced technology solutions. Have a look at how some of the industry giants are keeping associated expenses low while still providing high customer service and remaining competitive.

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Radio Frequency Identification (RFID) for Inventory Management

In 2003, Walmart issued a statement that it would be requiring all suppliers to use RFID technology when sending goods to the corporation’s distribution centers. The program would be phased in over time to allow all suppliers to get on board. Many of these companies were unprepared to implement RFID due to the higher costs and low return on investment, resulting in delays and other issues. The slow start caused Walmart to alter its approach to controlling supply chain costs, and the initiative somewhat fizzled out.

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The idea of developing a smart, technologically advanced supply chain did not go away; however, the benefits are too promising to abandon the approach entirely. Put simply, RFID enables retailers to identify items, boxes or pallets wirelessly, an improvement over the barcodes system that many businesses use. RFID technology has found the right fit in its ability to excel at “omnichannel” sales which help brick-and-mortar retailers compete with online sellers. Omnichannel capabilities allow a store to close a sale with a consumer wherever they may be, online, at the store, hanging out on social media, and other options.

Some large retailers have found success with RFID, including the Macy’s pilot program launched in 2009. The software allows clerks to assess inventory of an entire clothing rack simply by walking around it with a handheld scanner. The solution then displays the styles or sizes that need replenishment. Attempting this type of inventory management with a bar code system would be impossible. Macy’s can now count inventory twice per month with RFID, an improvement over the bi-annual process with bar codes.

Transportation Management Systems (TMS) for Fleet Tracking

TMS have been around for a long time, and they’ll continue to maintain popularity among shippers who see strong ROI with respect to supply chain costs. When surveyed, many of the largest shippers worldwide believed that giving up their TMS solutions and returning to manual planning would increase total freight costs by anywhere from 5 to 10 percent.

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The technology is successful at controlling supply chain costs because it efficiently manages process enforcement and optimization, using advanced analytics to run the show. Steve Banker, Director of Supply Chain Solutions at research firm ARC Advisory Group, sums up the advantages of TMS: “[It's] one of those applications that has good payback...When a company installs a TMS, the savings expectation is about 8 percent for most industry verticals.” In other words, a company spending $100 million on freight annually can save upwards of $8 million in freight costs after implementing a TMS solution for $1-2 million.

When shippers see their competition experiencing this high level of ROI, they’re eager to explore options for their own enterprise, and there are many to choose from. There are the common purchase and implement solutions, but more shippers are getting great results from cloud based systems that are available around the clock via web portal. This model involves the installation of software on virtual servers, which can respond to demand increases or decreases in real time.

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