2004 APICS International Conference and Exhibition, San Diego

All about in depth knowledge about RFID, browsing through Supply Chains or updating your Leadership Skill

The 2004 APICS International Conference and Exhibition in San Diego has been an exiting learning experience. More then 2500 people from all over the world gathered to connect. People show up and share foibles (the difference in how they do things compared to others), problems and find ideas to solve them. The message during the conference was: Everybody has more or less the same problems (customer service not good enough, late deliveries, large inventories, high WIP levels, long throughput times). And if the problems are not solved, competition will take over. When analyzing above you will see that these are universal issues, which transcends people, cultures and boarders. Everywhere are the same workers, the same processes. Let us concentrate on the similarities, not on the differences. This articles reports about APICS name change, RFID, the keynote speakers and a sneak peak of the 2005 New Orleans conference.

APICS name change

In order to get the message better across, APICS announced a name change during the conference. As of 1^st January the new name will be APICS The Association for Operations Management. The association will use a new tag line: Advancing Productivity, Innovation and Competitive Success. “APICS has evolved to meet the needs of the community it serves, but the name no longer fully recognized the value proposition the association delivers.” Said APICS president Arnold F. Kennedy CFPIM, CIRM, Jonah. “The new name will honor the rich history in production and inventory control, better define the broad application of the APICS body of knowledge, and position us for the future. The new tag line communicates the value that APICS delivers to an individual’s career advancement, as well as an employer’s bottom line.”

RFID

The conference had different focus zones. The emerging field of interest that got most attention was RFID. RFID is becoming real business. A lot of information for the practical industry was found in the conference. One of the major issues is to choose the right standards. Two major purchasers in the US, Wal-Mart and the US Department of Defense have put out a mandate to create new standards. Even if the January 1, 2005, compliance deadline isn't hanging over your head, RFID is the future of automated data capture, and it will profoundly affect your world one way or another in the next 18 months. When implementing RFID it is important not just to copy the Barcode system, otherwise it will only add costs and no value. Early adaptors may run the risk of running wrong standards.

One of the speakers, Amar Singh VP Solution Management from SAP told the following about RFID:

Business challenges that RFID can address:

ü Out-of-Stock: Current out-of-stock rates cost retailers $7Bn - $12Bn annually

ü Inbound and outbound visibility: by asset, location and time. Better visibility drives lower inventory levels.

ü Supply Chain Velocity: knowledge of inventory turnover at each node in the supply chain.

ü Collaboration with trading partners: share real-time accurate information

ü Returns and Recall Management: incorrect product shipments and recall account for 4% of Retail Sales; retail costs are very high; manage FDA, DEA, other agency guidelines.

ü Shrinkage Reduction: Manufacturer theft reaching 1% of sales; retailer theft reaching 2% of revenues; Annual write offs of $33 Bn in the US and $29 Bn in Europe

ü Operational Efficiency. Labor costs reaching 89% of DC costs; over 30% of labor tied up in receiving (60% of receiving done manually)

The conclusions from Amar Singhs presentation were:

ü Adaptability is a KEY requirement for businesses. Need to get the real world aware.

ü RFID generates benefits, but not overnight.

ü Many industries are using RFID across many processes.

ü Think long term, act short term.

Mark Kamstrup-Braad (an exhibitor at the Microsoft Business Solutions (MBS) booth): Microsoft is geared towards mid sized companies. The Wall-Mart mandate impacts 45000-50000 suppliers, of which 40000 mid sized.

The software for midsized companies needs to be simple to manage and easy to use. MBS is embedding the RFID in the ERP solutions Exapta, Navision and Great Plains. Henrik Grann (MBS): The MBS services are web services based. The idea behind it is that you can implement your software on your own pace. Once you and your partner are ready, it will hook up automatically with your partners. Other new developments, soon to be seen from MBS: The Microsoft Business Network, Demand Planner and Autodesk (Engineering Data Management).

Rogier Bouvrie told me about his case: implementing RFID at Puratos.

Puratos (a global group dedicated exclusively to bakers, pastry-chefs and chocolatiers) was forced by law to implement lot tracing in 2003. In case of an emergency it is necessary to trace backwards the source of the raw materials and forwards where all the raw materials are being used. The maximum time allowed is two hours. While starting the project from a legal perspective, it was discovered that processes could be improved. P.e. the labels on the pallets were teared off when the pallets arrived in the next warehouse in the supply chain. And of course, a new label, with new information, was attached to the pallet. These were all loose building blocks, all running on the same central computer (> 40 Baan locations on one computer).

In the beginning of 2004 new rules were enforced from large companies like Carrefour and the Metro (mother of Makro). SSCC (Single Shipment Container Code) needed to be implemented (EAN 128, information on pallet level). The possibilities are

ü one lot one product on one pallet,

ü one products, more lots on one pallet

ü different products, more lots on one pallet

The reason behind is minimizing transportation costs by shipping full pallets only.

SSCC is an expansion from lot control to pallet control. When this is implanted in the right way, Puratos is ready to implement RFID, since there is a parallel between the SSCC and RFID: SSCC contains a lot of information on product level. The information is GTIN (General Trade INformation, existing of EAN13, packaging information), lot number (including production date and best before date), and pallet number.

In order to implement lot tracing successfully, Puratos is following these steps:

ü Re-align all companies in the use of Baan. It was discovered that the companies diverge in how they use there ERP system.

ü Implement lot control, first as SSCC within Baan, then on RFID tags.

Remark: RFID is not yet mature. Version 1.2 will only enable the possibility to read tags throughout the cooperation. It is preferred to wait for a world wide standard.

RFID and barcode will co-exist together. RFID are too expensive to tag on every product. RFID will be used for the more expensive products and the consolidated low value products.

During the implementation the old pallet identification and the SSCC will co-exist. Since the average shipment size to the customer is quite small, there are some loose ends: How to change the picking method? Does every customer always need a SSCC? What is the right moment to tag the RFID tag? In production, during palletizing?

The project, as run so far, will create more information for the people who are implementing RFID.

Keynote speakers:

The first keynote speaker Dan Thurmon powered Day One of the APICS conference to a great start by taking the stage and never dropping a single ball as axes and clubs flew through the air, and he pedaled through the audience on a six-foot unicycle. He succeeded in waking us up, entertaining us well, and making us think seriously about focus, balance, and practice in our lives.

Dan began his address in a fairly traditional fashion, which was a good start, but what happened next really got our attention and charged the room with energy. After asking us to imagine how we would respond if he had run, tumbled, executed back flips, and somersaulted onto the stage, Dan proceeded to take off his jacket and do just that. He grabbed our attention by taking action and creating an environment for learning.

Taking Action
Beginning to juggle, Dan continued to address us directly, pointing out that APICS professionals "juggle" every single day-a metaphor that we all understand. We have innumerable opportunities for action and to take the stage. Action generates energy, as Dan's presentation pointed out. He emphasized the importance of little things and of practice, telling the story of Harry Lind to illustrate his point. Lind was a furniture maker who became a master Vaudvillian juggler following a crippling accident. He began juggling as part of a very slow, extensive, daily therapy and became the founder of the International Jugglers Association.

Focus, daily practice, and balance often aren't enough, however. Juggling on stage or in the workplace depends on the art of synthesis. A partner, a network, someone to catch for us is often a necessity to excel at the intricate patterns our professions demand. And then a participant took the stage with Dan to learn to juggle. Dan built on the participant’s strengths and provided feedback with every trial, set a goal with a timeline, and she was juggling with him in under three minutes. But the key was taking action, getting started-throwing that first ball into the air.

Taking Leadership and Risks
Dan concluded with another spellbinding story about Merck Smith, who appeared following one of Dan's performances and presented him with five antique wooden juggling clubs. In his youth, Smith had purchased the clubs from Harry Lind and now wanted to give them to a juggler, saying "I always thought I would find a juggler who could use them." Dan was thrilled and displayed the clubs for several years before realizing that he was not using the gift as Smith intended. He learned to juggle with all five, a formidable and impressive display that illustrated his message well. Use your gifts and share them is Dan's recurring theme.

Lessons learned from Dan Thurmon:

ü It is not what you know, it is what you do with what you know that makes the difference.

ü Juggling contains also a message for life: Do one thing at the time Engage – Look – Disengage. And … do it real fast.

ü Message for management: If the ball is in your hand, throw it.

Charles E. “Gus” Whalen, Jr. (CEO of an 120-year-old, medium sized infant apparel company) presented Renewal, a story about “Manufacturing still the key to prosperity”

Many people feel that prosperity is created on only three ways – through agriculture, extraction (mining, drilling, fishing, etc.), or manufacturing. Beyond three activities, all other economic activities transfer wealth, but don’t create it.

For some time, the United States has been losing its ability to create economic wealth through manufacturing. In the last 20 years 18 of 22 major manufacturing segments as defined by the Department of Commerce have developed trade deficits.

There’s an inseparable connection between wealth creation in manufacturing and our standard of living. Manufacturing jobs pay substantially more then service jobs (in 2004 the difference was 34%). In the last 20 years, the median household income has been flat, while the cost of living has risen significantly. Today only 13.1 percent of total U.S. employment is in manufacturing, down from 23.3 percent in 1979. What this really means is that the U.S. has more people involved in wealth consumption then in wealth creation. Gus Whalen believes one of the reasons many companies are sending so many jobs jobs off-shore has to do with the very narrow view of “cost”. Component cost is confused with total system cost. What can be done for the U.S. manufacturing to make it more competitive? First, we need to rethink the way manufacturing views itself and how it defines cost. We should look at the cost in terms of meeting consumer expectations of quality, price, and responsiveness. Secondly, we need to remind Americans how critical manufacturing is to this country. As an example Gus Whalen describes Alexis Playsafe. At first glance, the chain appears to be comprised of separate components, or links. After they analyzed this supply chain along with Eli Goldratt, they became convinced that this chain must be viewed not as separate links but as a total entity.

For Gus Whalen, to walk his talk, he founded the Warren Featherbone Foundation, to increase awareness of the importance of manufacturing in the United States. Creating awareness and interest in manufacturing is critical to the long-term economic health of the U.S. Manufacturing has provided a substantial amount of wealth to this country in the past and will do so in the future if we recognize its importance and if enough people from all walks of life understand the cost of losing it. It is crucial that our young people learn the importance of manufacturing and the career opportunities it affords. These young people are tomorrow’s leaders. Manufacturing Appreciation Week in Georgia and throughout the country is a first step in greater public awareness that will lead to the rebuilding of our manufacturing base in the United States. Manufacturing is, in fact, an “economic” environmental issue. We must preserve it and protect it. When we do, we build America.

Lessons learned from Gus Whalen:

ü Those that know why they are doing what they are doing can do more then they think.

ü Live in the moment of now

ü The position is not important, it’s the person.

ü Until the consumer buys the product, nobody in the supply chain has sold anything!

Joseph Pine

B. Joseph Pine II showed how companies across a myriad of industries could get out of the commoditization trap by staging unique, memorable experiences. Manufacturers in particular, whether selling to consumers or businesses, can use experiences to generate demand for their products. Pine demonstrated how mass customizing goods and services sets the stage for the emerging experience economy: …ing the thing, put action in your deliverables.

Joseph Pine explored the example of baking a cake. First his grandma bought all the raw materials for $0,40, and baked the cake at home. The next generation bought cake mix for $2,00, today most people go to the store and buy complete cakes for $12,00, the finished products. In the experience economy people go for instance to a place like the New Pont Farm, where the kids who celebrate their birthday party and experience the life on a farm. This cake experience cost about $ 146, not including the cake. So, what business do you want to be in?

What are experiences, and how are they different from services?
Experiences are memorable events revealed over a duration of time that engage individuals in an inherently personal way, while services are mundane and mass-produced on demand. Experiences are built on top of services in the same way that services are built on top of goods. A service becomes an experience when it is personalized because customizing a service makes it memorable. An experience becomes its own economic offering when a company charges a customer admission or a subscription fee for the time he spent with that company on its experience. The value that is created by an experience is the person's internal reaction. Experiences have always been around, it's just that now we're beginning to recognize them as a distinct economic offering.

There are four basic kinds of experiences—entertaining, educational, escapist and aesthetic—but the best ones actually encompass aspects of all four. Entertainment is just one way to engage a customer. An example of this is the Forum Shops in Las Vegas, where all of the stores are laid out on streets that look like an old Roman marketplace. Every hour there is a five- or 10-minute staged production—like a re-creation of the drowning of Atlantis or a parade of Roman centurion guards—to captivate the audience of shoppers. Despite the fact that five or 10 minutes of every hour are basically lost, with no shopping done, the Forum Shops earn by far the highest dollar amount per square foot, three or four times that of the typical mall.

There are also educational experiences, where the customer absorbs the events unfolding before him. Unlike entertainment, which passively engages an individual, education requires that he actively participate in the event in order to increase his knowledge or skills. An example of this is the Diamond Exchange, a thrice-yearly gathering of executives presented by Diamond Technology Partners, a consulting firm in Chicago. The primary focus of the Diamond Exchange is the educational experience: [Through discussions with their peers], people learn about what's going on with the Internet and how they should create a digital strategy.

Then there are escapist experiences, where the guest is completely immersed and actively involved in shaping the experience. This could be like a trip to a casino, a ski vacation or a virtual-reality experience.

Finally, there are aesthetic experiences like going to the Grand Canyon or the Metropolitan Museum of Art. Customers are immersed in an environment, but because they are passively involved they have little or no effect on it, leaving it essentially untouched.

What is an example of a company that is wrapping an experience around its product or service?
A great example is the Progressive Insurance Group of Ohio, which mass customizes both its policies and its claims adjustment process by producing standardized modules of those offerings that can be combined in different ways to suit the needs of its individual members. If a Progressive client has an accident, he can call the company right from where it happened, and Progressive will immediately dispatch a claims adjuster to the accident site. The first thing the claims adjuster does is make sure that the customer feels all right by giving him a cell phone to call a loved one, a cup of coffee or a place to sit. While the customer is collecting his nerves, Progressive adjusts the claim on the spot. The adjuster has on hand all the information about the customer's policy, car, the places where he can get it fixed and how much it will cost. In over 95 percent of the cases, Progressive gives the customer a check on the spot. He is then free to get on with his life instead of having the accident hanging over his head for weeks while another company might try to fit him into its mass production process. And by the way, Progressive found that it cost a lot less to operate this way. Progressive has taken what was an insurance service and created an assurance experience where they assure the customer by mass customizing the service.

The Ritz Carlton Hotel is a perfect example of a company in the service industry that offers experiences. The hotel tracks in a database things like whether guests prefer Pepsi or Coke, hypoallergenic pillows, or that they set their radio to a contemporary jazz station rather than a classical station. The next time a guest checks into a room at the Ritz, the housekeeper automatically knows to prepare the room with hypoallergenic pillows and sets the radio to a jazz station. With each stay, the Ritz learns more about its customers and is able to customize more of its services for a particular guest. Because of the personalization, the Ritz Carlton transforms a hospitality service into a memorable experience that is revealed over the duration of a guest's stay and subsequent returns.

Lessons learned from Joe Pine:

ü 1776: first publication on economics, >90% of the people working in agriculture, in 2004 less then 2% in the US.

ü Manufacturing employed 40% of the people in 1904, today 12%.

ü Services employ today 80% of the people.

ü Ing the thing (…ing = activity)

ü Mass customize your offerings

What’s next?

After a short week of inspiring news, sessions, exhibition and events the participants traveled home. We will meet again next year from 16 – 18 October 2005 in New Orleans. Under the title Make Mine Spicy we expect to see Mike Ditta, former head coach of the Chicago Bears and New Orleans Saints. He is a motivational speaker about key characteristics people need to achieve their personal and professional goals. And another exiting keynote speaker will be Ken Smith. Ken is former director of communications form the Harley Davidson Motor Company. He tells a fascinating story of building an entirely new corporate culture, rekindling relationships with customers and reaching out to new ones in completely untraditional ways.

Wout Verwoerd

San Diego, 10-13 October 2004