Everyone Wants 20/20 Vision When Peering into The Supply Chain

Inventory visibility is a key component of today's competitive and lean supply chains, enabling companies to execute with the precision and speed that the market demands. Functions as diverse as order commitment, cross-docking, forward transportation planning and on-time delivery all depend on knowing where inventory is in the pipeline and on receiving alerts, in real time, concerning disruptions or bottlenecks that could require corrective action.

Consequently, supply-chain inventory visibility (SCIV) has become a hot item among technology vendors and logistics providers. Nearly all deliver some piece of the puzzle. But "no solution to date has the scalability or the functional breadth" to give a comprehensive view of the entire supply chain, according to market researchers at the GartnerGroup, Stamford, Conn.

Trading exchanges, as they mature, are expected to improve visibility into suppliers by providing a central information hub, and logistics exchanges will centralize and simplify warehouse and in-transit visibility. Through 2004, however, GartnerGroup predicts that enterprises will have to trade off functionality and tracking from one segment of the supply chain to another.

Viewlocity, whose technology facilitates connectivity and messaging between disparate applications, believes it can help expand visibility by providing the needed linkages. "Typically, systems have pulled [inventory] data from one system or maybe two, at best," says Gregory Cronin, president and CEO of Viewlocity, Atlanta. "But the reality of the world now is that you need to get that data out of dozens of systems, particularly if you are looking to do inventory tracking on a global scale.

"When you start putting together a global inventory tracking system you need the ability to connect into any and all entities to be able to capture the inventory data and then turn it back and show status updates - not only show where inventory is located, but also the condition of that inventory and the quality of that inventory, which is what people are going to start looking for," he says.

Before companies can connect with their trading partners, however, they must first get their own houses in order, Cronin notes. "Whenever we start a project, the first thing we have to do is say to our customers, 'OK, now we have to make your own internal systems smart and enable them to get the data that is necessary to pass on to your suppliers and your customers.' The second step is to actually connect these partners together and then to reach out and start gathering data from places where inventory is really hard to see, such as product at a co-packer's facility or at a contract manufacturer in China."

Increasingly, that information needs to be in real time, he adds. "The closer the information is to real time, the more valuable it is and what will start to fall out are systems that are not real time but are batch oriented."

Viewlocity is doing more than providing the connectivity. It also is developing a product that will pull this data together and make it available to other supply-chain and enterprise systems. "What we are building will fit between existing systems such as transportation management and order management and warehouse management," Cronin says. "It will provide real-time inventory data that these systems can use to make decisions."

The result will be data that is "a lot more robust than what anyone else is doing," Cronin claims. "That is where we believe we are different, in the robustness of the data we can collect, and that we capture it in real time using the internet."

Cronin acknowledges, however, that the systems it collects from may not all operate in real time. "Some of the information may be a few hours old, but these batch systems will be the first to be abandoned as this area evolves," he says. "My view is that you build for real time from the get-go and you build a lot of connectivity from the get-go, or you will end up with a very limited view of very old information."

Viewlocity's product will be built in phases with the first piece, now at the beta stage, covering order and shipment visibility.

Logistics Exchanges
Budding logistics exchanges, like GOwarehouse.com and nPassage, also are making connectivity and visibility an important part of their value proposition. GOwarehouse, based in Santa Monica, Calif., plans to act as a hub between merchants, manufacturers and other trading partners and the third-party warehouses that they use. Instead of each entity having to establish multiple connections with one another, they will connect only to GOwarehouse, which will provide a neutral internet-based platform and interface. Clients of multiple warehouses will be able to determine inventory status in each or in all with only one query, says spokesman Michael Zucker. In addition, tools will track inventory history and performance criteria like turn times on specific items, and can be programmed to issue alerts if inventory is getting too low to meet incoming demand.

"A big market for this will be dotcom merchants who will be using 3PL warehouses heavily," Zucker says. It also may be attractive to "click and mortar" companies that want to have a single view of on-hand inventory, whether in a distribution center supporting brick-and-mortar stores or a fulfillment center handling web orders.

nPassage, an exchange focused on transportation execution for heavy freight (150 pounds or more), promises dock-to-dock line-item inventory visibility as part of its services. This model leverages the tracking capabilities of logistics service providers, which will feed information into the nPassage hub. Complete integration is available so that the data transfer occurs automatically, says Tom Dowd, vice president of marketing. But for smaller carriers that may not be ready for that, updates can be easily entered on the web site. nPassage tracks shipments across modes and borders. It operates in a completely hosted environment requiring no investment in software or hardware. nPassage markets primarily to shippers, who like the single-connection aspect. Once shippers sign up, carriers follow, says Dowd. "A lot of carriers know they need to have an internet-based system, they just don't have the wherewithal to get it done," he says. "nPassage gives them that solution with very low barriers to entry and immediate payback."

Wireless Systems
nPassage also is looking to advances in wireless technology to support its visibility functions. The company recently partnered with WhereNet of Santa Clara, Calif., which is building supply-chain visibility solutions using radio frequency (RF) technology that it has developed and patented. WhereNet will complement nPassage's capabilities by providing "critical pre-shipment and yard location information in real time," says Dowd.

Real-time location systems, such as those being produced by WhereNet and Savi Technologies, may well represent the future of inventory visibility.

WhereNet's system, called Supply Chain Visibility, is based on a network of readers and specially designed RF tags that reduce the cost of this technology. Current use is primarily in warehouses and surrounding yard areas, where readers are installed near the ceiling or, outside, along the perimeter fence. Readers have a 250-foot range inside and a 750-foot range outside. An installed system is able to identify the location, within 10 feet, of any tagged asset - typically conveyances like tractors, trailers, switchers, forklifts, totes or pallets.

"As companies seek to reduce the amount of inventory in the supply chain and increase the utilization of assets, they need real-time information," says Tom Turner, WhereNet's senior vice president of marketing and business development. "As you reduce the amount of inventory that is available, then the value of a particular container of inventory increases, because the cost of not knowing where it is and not having it available when you need it escalates very rapidly."

WhereNet has RF tags that can be written with a large amount of information, but most users only want a tag that pings its location every few minutes, says Turner. That information is picked up by the readers, which organize it into location packets. These are translated and sent to a database with standard interfaces and tools to facilitate the integration of the location information with other applications, such as warehouse management systems. Leading WMS vendors Optum and Catalyst already have signed onto WhereNet's Alliance Program. WhereNet also has an alliance with Symbol Technologies to include barcode tracking as part of its product offering.

This system would completely eliminate problems associated with human error-items not being where they are supposed to be, notes Turner. And items could be put away in the first convenient location, or in a temporary storage area, with no fear of their getting lost.

Installing a system in a 1 million square-foot warehouse, with 2,000 assets tagged, would cost from $350,000 to $500,000, Turner says.

In the yard, he says, "there is an awful lot of churn and friction that happens around trying to put trailers in pre-determined slots and having them picked up from slots and delivered to a particular door. In our process there is a tag on the trailer and once a trailer enters the yard, we track it. All of the dispatch can be done on the basis of where something really is rather than where somebody with a clipboard or a system said it was supposed to be."

There are security advantages as well. If a company closes down operations at the end of a shift, the system can be set so that if any of the tagged vehicles move after the shut down, it will generate alerts.

Assets also can be attached to a particular zone. If a tagged asset, such as a calibrated tool, is supposed to stay within the tool shop of a large facility, for example, alerts will be triggered - and the asset will be tracked - should it leave that zone.

Turner says these systems are subject to Metcalf's Law, which holds that the value of a network increases with the number of nodes. "If you look at each facility as another node on the network, you can see how the addition of nodes fosters new business processes," he says. For example, assume a supplier has the system installed. Its assembly-plant customer could add a node by installing readers just in the receiving area. Then, when the supplier's shipments were delivered, instead of having to go through a receiving process with employees scanning each item, tagged containers or pallets coming off the trailer would be automatically read and the receipt transaction completed electronically.

Other applications of real-time tracking systems further benefit manufacturers. A WhereNet installation at Ford Motor Co. has dramatically improved Ford's material call system, or "kanban." Working with Ford, WhereNet added a timer to its system. Instead of a tag pinging its location periodically, it pings only when called by a production worker on the line, who pushes a button. The call is placed when that location needs a replenishment of parts and the call triggers a work order to have those parts pulled and delivered. WhereNet's wireless system, which replaced Ford's hardwire kanban system, provides time and cost savings through reduced maintenance and increased efficiency. Its success led Ford and WhereNet to enter into an agreement to commercialize the jointly developed enhancement.

"The biggest advantage to Ford, or to other manufacturers that choose to do this, is that things like balancing the line and reconfiguring the line become very easy and can be implemented just by shifting the buttons around or resetting them to call a different product when the button is pushed," says Turner.

Tying WhereNet's real-time locating system into an in-transit tracking system, such as that provided by Qualcomm, would have compelling advantages in terms of extending supply-chain visibility. "The ability for us in the future to integrate with a wide-area, GPS-based tracking system, and for those systems to have the ability to look inside the trailer to our tagged containers is something that we are actively pursuing," Turner says.

WhereNet estimates that its primary market is more than $10bn since there are over 32,000 manufacturing facilities and 10,000 distribution sites in the U.S.

Savi Technology, Sunnyvale, Calif., also is marketing a real-time location system, but its business model and history are quite different from WhereNet's. Savi has been providing an RF-based visibility system to the Department of Defense for 10 years, primarily using tags that carry a large amount of data. In the field, military technicians use hand-held scanners to read the tag on a trailer or container from up to 300 feet away and see a display of the container's entire contents. When the U.S. becomes involved in a conflict, such as in Bosnia, Savi employees are among the first on the ground. They install readers at ports and in the field to prepare for the massive logistics operations to follow.

After being bought by Texas Instruments in 1995 and then sold to Raytheon in 1997, Savi management last year took over the company with the express intent of launching a commercial product. The result, Commerce Visibility Network, was introduced last fall.

In conjunction with its partners, Savi developed a less expensive RF tag. "In the commercial marketplace there is a cost sensitivity that is different, and users don't need that very high-end tag that carries a complete manifest," says David Shannon, director of industry marketing.

Savi adopted a vertical marketing strategy for its product. "We look at a vertical like retail and then we go to one of the leaders in that industry," says Shannon. "Our proposition to them is that we will install all the infrastructure in all of their stores and warehouses at no cost to them. Then we go to their key suppliers, as many as they say is appropriate, and convince the suppliers to let us install there. What we want to do is get all the traffic moving through a single chain."

Once a network is set up, with readers in place and all conveyances tagged, Savi begins collecting data. Since the Savi system is capable of integrating information from other major automatic data collection devices, such as those based on barcodes, each item placed in a tagged conveyance is scanned and the content and container records are married. That container and its contents are then tracked through the supply chain with strategically placed readers monitoring its progress. This data is available via the web using whatever filters or alerts a company chooses to employ. The data also can be used to populate ERP or supply-chain systems using Savi's standard XML interface.

Savi charges for the data in a model that is much like that used by cable television companies, says Shannon. "The cable guys put five cable boxes in my house and they charge me a fee every month, regardless of whether or not I turn the televisions on," he says. Similarly, Savi puts an infrastructure into a site and users are required to pay for the data collected, plus a small connection fee, whether they use it or not.

As an example, Shannon imagines an orange grower with 10,000 plastic totes that it uses to ship product into a grocery chain's distribution center and on to retail stores. "To guarantee visibility of those oranges, we would charge that supplier perhaps a penny a day per container," he says. "They can look at the economics. In order to guarantee that their oranges move smoothly through the chain, that they show up fresh on the store shelf, that they are always in stock and their customer is kept happy, they are going to pay the equivalent of maybe $3.00 to $3.50 per year for probably several thousand dollars worth of product that over the course of a year will move in that container."

At the same time, the grocer can use the data to see where product is coming into the chain so it can better manage its replenishment and better plan labor at the DC, says Shannon. "Savi just wants a little piece of the action."

The system obviously works best in industries where there is a high concentration of reusable containers or the value of the product is very high, such as grocery, automotive or high-tech. "We have to have reusable containers or racks in order to ensure that we can amortize the cost of a tag over a number of turns," says Shannon.

Savi's business plan projects that close to 200 million conveyances will be tagged over the next two years.

Instead of constantly sending their location, Savi tags are automatically read when they pass critical points in the supply chain, as designated by the customer. A tote of oranges, for example, might be read when it goes into cold storage, when it comes out of cold storage, when it is loaded onto a pallet, and when that pallet crosses through the dock door, says Shannon. Readers also can be placed outside to track tagged rolling equipment.

If a container passes one reader and fails to arrive at the next, an alert message is sent. The system also can be configured to monitor environmental requirements like temperature; if a product gets too hot or cold, an alert would be triggered. Other business rules can be incorporated as well.

Growth for Savi also is a node-adding exercise, which is another reason for its vertical strategy. It initially is targeting industries that tend to share a supplier base. "The impact really starts to kick in when we get one network installed and then can go to other companies that use those same suppliers," says Shannon. "We can tell them, 'your competitor is installed, the supplier base in installed, and we can install your sites and get you in this network, too.'"

Shannon says Savi has only a few small networks installed currently, "but we are growing ... And we would assert that what we are doing for DOD is the world's largest real-time visibility network."

The company also plans to implement its technology globally. One of its investors is Temasek, the largest single shareholder of Neptune Orient Lines, PSA Corp. (the Port of Singapore) and Singapore Airlines. "We expect very quickly to be enabling real-time visibility for containerloads moving from Asia into the States and into Europe," he says.

Viewlocity's Cronin thinks real-time location systems will transform supply-chain visibility. "I really believe that in the future all the assets of the world will be tagged and there will be entities-exchanges or service bureaus of some kind-that will capture this all-encompassing data on inventory and assets. Inventory visibility technology applications will then use these services to obtain the data they need.

"And I don't think this is very far around the corner," he adds. "It's just a matter of investment, and I see a lot of people out there spending money to make it happen."

Both WhereNet and Savi have completed several rounds of venture financing. WhereNet's major backers are Crosspoint Venture Partners, Bay Partners, Foundation Capital, Crescendo Ventures, and RWI Group. Savi's investors include Temasek Holdings, Vector Capital, Mohr Davidow Ventures, Dorset Capital and Venture TDF.