From A to RFID: Plumbing 101

Radio frequency identification (RFID), the next-generation supply chain technology, is all the rage. And for good reason. The technology is poised to save the distribution, manufacturing and consumer packaged goods industries billions of dollars.

Wireless "smart tags" are embedded onto pallets and packaging for food, drugs and products that are then read by scanners to track the flow of merchandise from manufacturers to retail sales. RFID's potential to reduce loss, keep shelves stocked and automate inventory control will revolutionize retailing and bring significant advantages to other industries as well.

The movement of inventory through the supply chain is akin to the flow of water from reservoirs through aqueducts to home faucets. In both cases, that takes good "plumbing." Without the right infrastructure, neither the goods nor the H2O can get very far.

But while RFID chips and scanners are getting a lot of attention, too often the plumbing or middleware needed for them to work their wonders is taken for granted. That's a costly and potentially fatal mistake.

RFID systems are as dependent on the integration of business applications and processes as they are on wireless technology itself. Each tag generates a set of unique product data that must be conveyed consistently as it travels along the supply chain. Every manufacturing, distribution and retail node must be able to share this data across various ERP, CRM, billing and e-commerce systems.

If a tagged pallet is delayed, canceled, outbound or received, these operations must update one another in real time to ensure the seamless flow of information. Anything less than total integration between applications and processes creates a data "dam," negating the efficiencies and benefits RFID is poised to deliver.

This degree of business process integration presents a very significant challenge to many companies facing IT mandates from their customers to adopt RFID technology. And it can't happen overnight. Many suppliers, particularly the thousands of small and medium-size businesses that compose the value chain of large customers, need to plan and prepare for RFID adoption by auditing their existing integration strategy and asking themselves some hard questions to see if they're honestly ready for the RFID revolution. They are:

  1. What is my integration strategy today and across the next three years?

    If you're a midsize company, chances are you're running a number of different enterprise applications and computing platforms, such as Windows, Linux or OS/400. In fact, according to IBM research, more than three quarters of midsize businesses have multivendor computing environments. Meshing these internal systems together is a critical first step before you look to extend that level of integration with customers and trading partners.

    How well are your internal systems linked together? Are your ERP and CRM apps sharing information, or are they siloed in different parts of the business? Once you have a holistic view of how integrated your company and business processes are today, you can create a 24-to-36-month workback schedule from RFID and compliance deadlines.

  2. What other external market pressures will drive new integration projects?

    As you prepare for RFID, you can ensure long-term payback by building a flexible and open integration strategy that will allow you to adopt new standards and customer mandates as they arise. Increasing government regulations -- such as HIPAA and the Sarbanes-Oxley Act -- are forcing companies to track and share more data than ever before. The same plumbing that will share RFID data across the business can also support future reporting and compliance projects.

    As I mentioned before, the vast majority of midsize companies live in a multivendor world. To gain the most from integration projects -- from tying together existing IT systems to deploying new ones -- your middleware backbone must be built on true open industry standards, not just simple XML interoperability. This will help ensure that future investments, such as RFID scanning devices, can run on multiple operating systems, not just Windows. Otherwise, hand-coded integration with legacy data and applications will prove a timely and expensive detour downstream.
  3. Are the business benefits of new integration projects compelling enough to justify the investment?

    Think beyond compliance with customer mandates. RFID deadlines can and will change over time. The key to a successful, long-term approach to RFID is to capture the underlying business benefits of process integration within your company -- better customer service, lower costs and increased productivity. Use these incremental gains to subsidize a phased approach to a successful RFID deployment.
  4. Who are the key internal and external stakeholders in your company's long-term integration strategy?

    This could be your company's line-of-business managers or IT department leads, as well as third-party suppliers, technology partners and downstream customers. Enlisting their help and feedback in building your RFID road map and integration strategy will make it easier to convince C-level execs that the plunge is well worth taking.

The floodgates are opening and the rush of data through your company's systems is going to only increase as the RFID revolution gains steam. With careful planning and execution, you can avoid being washed away.

Copyright © 2005 IDG Communications, Inc.

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