Receiving Loud And ClearDistribution centers and warehouses can reap the benefits of RFID technologyby Ram Reddy Continued from Page 1 Cycle Counts in the WarehouseThe typical operations person will wince when the word cycle count is mentioned. You may remember the days before integrated financial and accounting systems when closing accounting books was a big ordeal. Normal operations came to a standstill within the accounting and finance departments while everyone worked feverishly to "close" the books for the quarter or year. Since the advent of integrated financial and accounting systems, closing the books is something that can be done on a daily basis without much effort. RFID technology has the potential to affect cycle counts in DC operations in a similar manner. Cycle counting is conducted periodically in a DC to verify that the products on the ground reconcile with the number in the inventory management system. Beyond the auditing function, the benefits of cycle counting are to ensure that products are located where they are supposed to be for the most efficient picking, packing, shipping, and billing process. In the ideal situation, cycle counts should be done every day. In the real world, this may get done once a month, quarter, or year. The reason for this is that it takes a great deal of effort to perform cycle counts — especially if you're dealing with a huge DC and thousands of product categories. Companies suffer from lack of product visibility when cycle counting doesn't occur on a regular basis. This lack of visibility leads to excess inventory build-up at the DCs that must be periodically cleaned up after a cycle count. In addition to excess inventory build-up, absence of cycle counts leads to errors, such as:
The financial impact of these errors can range anywhere from 0.2 to 1.9 percent of an enterprise's total inventory costs. Accurate and periodic cycle counts performed in the DCs can reduce these errors. Cycle count work is typically performed with the help of light industrial, temporary workforce in the DCs. Technology innovation opportunities that are geared to making the day labor workforce efficient rarely get visibility in the boardroom. That is why it is important for the intelligent enterprise to look at this opportunity from the overall financial impact, rather than making cycle counting efficient for distribution centers. Extracting Value From Distribution CentersRFID technology can increase the visibility within DCs to improve material handling operations and contribute to the bottom line. Intelligently deploying the right mixture of RFID tags can not only reduce excess inventory at DCs but also reconcile actual product inventory with information within the warehouse management systems. Cycle counts can be quickly performed daily with the help of RFID readers, without moving cases to locate barcodes. The correct product location information can be used to virtually eliminate incorrect order processing or "losing" products in the warehouse. Whether to use low-end or high-end RFID will depend on product characteristics — cost, composition, and so forth. There are competent RFID technology implementation partners that can help you figure out which solution is suited for your cycle count needs. While the debate over privacy may still rage over its use amongst consumers, RFID technology can contribute significantly in distribution center operations today. Ram Reddy [ramreddy@tacticagroup.com] is the author of Supply Chains to Virtual Integration (McGraw-Hill, 2001). He is also the president of Tactica Consulting Group (www.tacticagroup.com), a technology and business strategy consulting company.
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