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IBM looks to RFID to fight counterfeit drugs
IBM has released a new RFID (Radio Frequency Identification) tag designed to combat counterfeit products flowing through a supply chain. Aimed primarily at pharmaceutical companies, the RFID tags are placed on the product at the unit, case and pallet level and is tracked through the entire supply chain. Apparently, a pharmaceutical product changes hands as many as 10 times from the manufacturer to the point of sale.
From the article's description, the RFID tag seems to be largely a passive tag. As the article indicates, the RFID tracking system is described as follows:
The IBM RFID system for pharmaceutical tracking and tracing uses blended RFID software and services to automatically capture and track the movement of drugs through the supply chain, according to IBM.
I do not claim any knowledge of how the IBM system works but it does seem that its capability depends on adoption across the pharmaceutical supply chain by the many partners that are situated up and down the chain. Also, it isn't clear whether the unit, case and pallet level tags are identical or different. Since the tag is most likely a passive one, there are software services and objects behind the scenes that collect, organize and report on the state of the products in the supply chain.
So is this Innovation or Application? The latter, I think.
Categorized as: News_, Supply Chain Management_, RFID_ Tags: RFID, Supply Chain Management, RFID Tags, Pharmaceutical Supply Chain
How to go about selecting a 3PL?
Tompkins Inc has a great web presentation that outlines some of the key steps that any firm undertaking the journey of selecting a 3PL must consider before taking that step.
Jim Tompkins outlines the following warning not too far into the presentation:
“Taking the plunge into outsourcing strategic non-core functions without a robust process will not only prevent an organization from achieving the benefits from outsourcing, but will also result in a major setback to the organization.”
The 3PL Outsourcing life cycle consists of 6 major segments under the following classifications:
Understanding the 3PL providers- Requirements/RFP
- Selection
Creating the partnership- Forging the Legal Relationship
- Implementation
Transition into Operations- Establishing the Relationship
- Managing the Outsourcing Relationship
Each of the segments are explained in a concise manner that I won't bother to repeat except to glean some important takeaways from the presentation. They are:
- The better the two parties are at forming the legal relationship, the less likely it is needed later
- Involve key players from company and provider from the start
- Develop a detailed document and then put it away!
I take this point to mean that even though everything about how the relationship might be detailed on paper but when it comes to running the whole shebang focus on execution rather than playing it by the book.
The legal relationship should outline the pricing model, payment terms, desired service levels and measurement criteria, a schedule for transition and last but not the least a dispute resolution process
There will be problems at Go-live.
The above is also known as Murphy's law.
Be aware that there will be people who complain and don't like the new way of doing things
The above is indefatigable human behavior and if you're not planning on how to work through something as predictable, then you've got a real problem on your hands.
Jointly develop continuous improvement solutions
Consider a shared incentive program
Also known as gain sharing - a number of 3PL contracts are structured this way.
Client must be willing to accept the 3PL as part of their own company
If its a client process that is being handled by a different firm, there will be a desire at least initially to keep control of the process as much as possible - also called human behavior.
Tellingly, the presentation includes a tip for client managers of 3PL relationships:
Managers of 3PL relationships need to be collaborative problem solvers who can address performance issues and results, and discuss corrective action and the need for improvement, rather than telling the 3PL how to run the business.
Categorized as: 3PL_, Supply Chain Management_ Tags: 3PL, Outsourcing, Outsourcing Relationship
Third Party Logistics Study 2005 & 2006
A study of third party logistics providers carried out by John Langley Jr., Ph.D., of the Georgia Institute of Technology, with Capgemini, DHL, and SAP, conducted an extensive study about using 3PL services in North America, Western Europe, Asia-Pacific, Latin America, South Africa, and the Middle East to examine critical trends and issues among key markets and key customers in the 3PL industry. You can peruse the executive summary of the study here.
The key takeaways from the above study are:
- 3PL users continue to view a collaborative partnership approach with their 3PL providers as key to improving the user-company 3PL performance. However, unlike in past surveys, pricing has become the most important attribute in selecting a 3PL provider. This is different from last year's study where value-added services was ranked first. In fact, this year the proficiency of a 3PL provider's core services was considered more important than the provider's ability to deliver value-added services.
- 88% of those surveyed view their relationship with their service provider as successful. Although users are generally satisfied with their 3PL providers
- Implementing IT ranked third behind cost pressures and improving supply chain management as a leading factor affecting 3PL user organizations
The gaps identified in the 3PL industry in 2005 were:
- Disappointment with the 3PL provider's abilities to develop advanced services.
- Need for relationship reinvention, mechanisms for continual improvement, and solution innovation.
- Increasing importance on repeatable and leveraged solutions.
- Emerging role of supply chain integration.
- Global evolution of 3PL usage.
The 2006 study is forthcoming shortly at it can be accessed at the following site:
3PL Study.
Categorized as: News_, 3PL_ Tags: 3PL Trends, 3PL Study, 3PL, Supply Chain Service Providers, Supply Chain Management, Capgemini Consulting, Georgia Institute of Technology, SAP, DHL
The coming wave of Supply Chain Convergence...
Logistics Quarterly has an article about The Coming Wave of Supply Chain Convergence in their latest issue. The lead in describes the following:
Over the past decade, we have seen warehousing companies become logistics companies, watched logistics managers become supply chain professionals
That sort of describes where I work right now as well as my current role. Nevertheless, the author Benjamin Gordon believes that the next big trend in the supply chain industry will be "supply chain convergence". What does he mean by that phrase? Benjamin defines convergence in the following way:
Convergence is all about the combination of relevant services to provide customers with a broader set of solutions. In the 1990s, convergence meant the fusion of warehousing, freight forwarding, and transportation management to produce lead logistics providers or 4PLs. Companies like Menlo, UPS and Kuehne & Nagel, developed integrated supply chain solutions and enabled customers to reduce the number of logistics suppliers they used. Today, companies are increasingly choosing to compete by combining services. For instance, PWC Logistics acquired GeoLogistics, Trans-Link, and Transoceanic in order to add freight forwarding, event logistics, and project logistics to their arsenal of contract warehousing-based capabilities. Similarly, UTi has acquired Standard Logistics, Unigistix, and market transport in a bid to add warehousing, reverse/value-added logistics, and transportation management to their freight forwarding base. The convergence of logistics services is already well underway.
Benjamin seems to differentiate convergence in the past (which could be said to be about consolidation of multiple competencies under one broad roof) and convergence in the future (which could be said to be about proliferating specific services under the broad roof already created in the past). However, he rightly points out that this convergence is being really driven by the customer of integrated supply chain services i.e. large MNCs that have gone global (through outsourcing and in search of global markets for their products) in a substantial way. If today that seems largely one directional i.e. MNCs in the developed world driving globalization, that will change in the near future but integrated supply chain service firms will benefit nevertheless.
However, Benjamin draws my attention to something more substantial:
In the current decade, we are beginning to see the emergence of the next big wave of convergence: the combination of outsourced logistics with other forms of outsourcing. For example, in a recent survey of logistics CEOs at the International warehousing and Logistics Association (IWLA), we found that, out of five topics, the subject that generated the highest level of interest was titled: "Where logistics outsourcing converges with other outsourcing."
I'm not biting. Yet. It is undoubtedly true that engaging a supply chain services partner might seem a lot like outsourcing your IT or accounting or manufacturing from the point of view of the customer and thus there might be an expectation from the customer that instead of using 5 solutions providers for as many outsourced functions, it might be better to use just 1 or 2 integrated solutions providers. Therefore, one might take the view that this might drive convergence of the solutions providers themselves.
Benjamin cites the following in support of his thesis:
First, just as GM's move (over 15 years ago) to dedicated contract carriage with Schneider, ushered in a new era of dedicated contract carriage growth, so GM's moves in IT outsourcing may represent a broader trend. Second, logistics outsourcing contracts are likely to follow the same path as the IT outsourcing route. Third, aggressive IT outsourcers are seeking logistics partners. Some are even pursuing mergers. Companies like EDS, Accenture, and other IT firms are looking at logistics acquisitions as a way to extend their outsourcing capabilities. Meanwhile, logistics companies like New Breed and Menlo are bolstering their IT capabilities in a bid to accomplish a similar goal, but from a different direction. Convergence is already underway!
I would offer the following: Outsourcing/offshoring takes advantage of real economic disparities distributed across the globe. It is cheaper for an MNC to produce an unnamed branded shoe for 50 cents an hour or day, whatever the case might be, in some third world country. It is also true that 50 cents an hour or day is a boon as far as employment goes in that part of the world as well. However, the production/shipment/marketing/sales of the shoe involves several competencies. If you outsource your competencies to a third party (rather than retaining those competencies when you offshore your production), then you're indirectly narrowing the range of competencies from which you can then derive competitive advantage. Moreover, you're unwittingly giving leverage to third parties when it comes to negotiating power for those same services. Some of that leverage is probably mitigated by the fact that third parties can be switched in and out but that is true only for commoditized products and services. This can be boiled down to the following that it makes sense to outsource non-value added processes but not value-added processes. From the point of view of a customer, outsourcing non-value added services to a third party creates a middle man of non-value added services that can only function profitably on scale and breadth of services offered. While the third party is hired with the idea that on an ongoing basis, better services will be had for cheaper prices, the third party will try (or die trying) to offer "value" as a justification for same or higher prices for services rendered. However, that brings up an interesting paradox - while it is specifically non-value added processes that a firm initially outsources/should ideally outsource (non-value added from the point of view of a customer), the third party can only exist by creating value in those outsourced services - otherwise, it really wouldn't be profitable except in the scenario that third parties would merge into 1-3 large entities in order to create efficiencies of scale.
This is why I think that such convergence would be limited because firms survive by creating competitive advantages in the portfolio of value creating activities that they engage in or offer. Offshoring makes sense in that line of thinking. Outsourcing any activity other than non-value added services doesn't make sense.
An interesting aside, I'm plagued by the idea that all this designation of value added or non-value added services is being driven by some accounting allocation of overhead. That would be horrible.
Categorized as: Reviews_, Supply Chain Management_ Tags: Supply Chain Management, Supply Chain Management Trends, Outsourcing, Integrated Logistics Service Providers, 3PL, Offshoring, 4PL
