Subject: [NEXTEL-1] RFID- The Other "Goof"

From: [email-masked]
Date: Tue, 17 Jun 2003 02:59:31 -0400

RFID Demand to Help Future of Supply Chain Industry

Supply chain vendors say they are optimistic for their long-term success. While
they are currently running into problems closing enterprise deals, the industry
expects demand to increase quickly in the future. New technologies such as RFID
and voice recognition are expected to be the drivers of this increase in demand
for supply chain services. Wal-Mart last week announced it would require its
suppliers to use the RFID technology. However, the industry must overcome the lack
of standards before mass adoption of RFID will occur.

==========================================================================================================

Supply Chain Vendors Gloomy
For The Short Term, Optimistic
For The Long

By Mitch Wagner

New York -- Supply chain vendors say they're gloomy 
for the short term but optimistic for the long term.
Speaking at a panel at the Bear Stearns
Technology Conference here this week, supply
chain vendors said they're still having trouble
closing deals with enterprises, but that they
expect demand to accelerate rapidly in the
future, driven by emerging technologies such
as RFID and voice recognition. Vendors said
they're also concerned with competition from
big software vendors including SAP and Oracle.

Chris Heim, CEO of HighJump Software, said
many enterprises are shopping for supply
chain systems, and even selecting his
company. "But getting people to contract and 
part with the money is difficult," Heim said.
"I would have to say that visibility is pretty
poor right now, worse than we have ever seen it."
And John Jazwiec, company results leader for
RedPrairie, said when the economy does pick
up, deployments of supply chain software by
large companies will lag behind by 18-24
months. Companies deploy warehouse
management software when they build new
warehouses, and companies are still
struggling with an oversupply of warehouses
they built in 1999-2001.

However, smaller customer are now deploying 
supply chain software, driven by demand form 
large customers like Wal-Mart, Jazwiec said.
Mitchell Weseley, CEO of G-Log, disagreed with 
other panelists. He said his company, which makes
transportation software, is seeing good demand.
"The only real downside is that we get in, we
get selected, people love us, then we have to
get 83 people to sign on -- the board of
directors, CEO, CFO, brothers and sisters and
cousins. That continues to be an elongated
process that's hard to predict and hard to
manage," Weseley said.

While the situation now is hard, vendors said
they are convinced business will pick up. EXE
Technologies chairman Ray Hood said when
he hears prediction that the growth years are
over in the technology industry, he is reminded
of pundits who said that international politics 
was at an end after the fall of the Berlin Wall.  
Pundits have declared the technology market closed
many times, starting in the 1960s when IBM dominated.
"This market has a tendency to spring up and
surprise people," Hood said. Software is
"encapsulated knowledge," he said, "and if you
think we now know everything we need to know
-- you're nuts."

RFID will be a source of increased demand, 
the vendors said. RFID is nothing new, Hood said.
EXE has been engaged in RFID deployments for 10 years,
starting with a paper company that used RFID
tags to track rolls of paper. At $100 per tag,
then, RFID made sense. As the price has
fallen, it becomes economical to tag smaller
quantities, such as pallets, and, as the pricing
falls to five cents per tag or less, cases. It's
uncertain whether it will ever be economical to tag
individual items, Hood said. But if RFID tagging
of individual items becomes possible, it will release 
a torrent of information, requiring all new IT to 
track and use it, the vendors said. "A lot of what 
we do is provide visibility. The more data we get, 
the more accurate it is, the better or product works,
" Weseley said. RFID will be the "death knell" for 
supply chain planning systems, which are necessary
because companies now don't have precise information 
on what is actually going on, Hood said. "If you 
have true RFID, with every can of peas scanned, 
instead of planning from the top down you impose 
order from the bottom up," Hood said. "That amount 
of data will overwhelm algorithmic and formulaic 
planning systems.

With RFID spitting out 96 bits for every can of 
peas scanned, that's a tremendous information explosion."
Lack of standards is a major obstacle to RFID adoption,
Hood said. Tags and readers by different vendors are 
often not interoperable.

Voice recognition could prove to be even more important 
than RFID, Hood said. EXE has installed five live sites 
in the grocery industry using voice recognition to track 
inventory.

Enterprises get the same accuracy as barcode scanners but 
without staff having to carry around a barcode device. 
Supply chain vendors say their customers are having trouble
telling them apart, which leads to price slashing and 
commoditization.

Supply chain software tends to have similar
features and capabilities, which leads to
potential customers making decisions based
on other factors: price, quality of service,
perceived stability of the vendor, and
compatibility of the vendor's corporate customer
 with the customer's, Jazwiec said.

"We are a heavily service-oriented company.
 It's not just a matter of implementing software 
like dropping in Microsoft Office. Customers are 
deciding on a relationship for 10 to 20 years.
Once we're in there, there's lots of changes to
the operation, and once we are engaged, it's
difficult to separate us," Jazwiec said.
"Customers do due diligence on companies,
they try to make a decision based on the culture
of the company and whether they have the wherewithal
to be around for 10 years."The supply chain industry
is also seeing consolidation. Where there were 10-20 
vendors two or three years ago, the field has now 
dwindled down to a few, Jazwiec said.
"When you've got that kind of commoditization,
especially at the lower end, it leads to price
erosion," Jazwiec said. "There is no question
on my mind that there is too much capacity
changing too few deals with too much function."

Future competition from large software vendors 
such as SAP and Oracle will hurt existing supply 
chain vendors, Weseley said.

HighJump Software tries to compete by offering
an easily customized architecture, good
corporate culture and good reference
customers, CEO Heim said.

EXE Technologies stresses low total cost of ownership, 
Hood said. EXE software will run on a single IBM Unix server,
where competitors require a dozen, he said.
Heim agreed that TCO is important, and will
prove to be a good selling point against large
enterprise vendors like SAP. "I've yet to meet an SAP
customer who says it's inexpensive to implement and it's 
inexpensive to maintain."

One advantage that G-Log will have in competing
with enterprise software vendors is that there's no 
margin of error in transportation software. "If the 
system says, 'Put these pallets on this truck' and 
the last couple don't fit, you have a serious problem,"
Weseley said.

Likewise, if a truck fails to make a delivery, 
or arrives at the wrong time, that's also a serious problem.
Supply chain vendors need to have a detailed
understanding of their customers' business
models, which contrast with enterprise
software vendors' one-size-fits-all mentality. "I
don't think they'd be comfortable with how dirty
and scummy this business really is," Jazwiec
said. "It's a matter of people trudging around
warehouses, customizing code, and
understanding the business." Supply chain
customers require the software to conform with
their businesses, while enterprise software
vendors require customers to change their
business processes to suit the ERP
application.

Also, ERP vendors tend to sell to corporate
executives, while supply chain decisions are
made in the warehouse. "If you ask a CEO
when was the last time they visited the
warehouse, you will be surprised to find they've
 never been there," Jazwiec said. "He doesn't want
 to go to the warehouse and screw it up."

http://www.internetweek.com/story/showArticle.jhtml?articleID=10300860

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