Interview with Larry Kellam
ASCET: You've been working on an initiative called "Auto ID." What will
it do? 
Kellam: Auto ID is, of course, automatic identification. Originally, the UPC was projected to last about 25 years and it certainly has fulfilled more than it promised.Radio frequency ID has been around for some time, in lots of proprietary, non-standard ways. That was seen as one of the solutions, but a group of people, including the UCC, P&G, Gillette, and others, helped sponsor and start the Auto ID center about three years ago, and there have been a whole lot of other companies that have joined as sponsors both from a technology and business-user standpoint.
ASCET: What's the difference between EPC and the bar code?
Kellam: A bar code requires a scanner to read it and use the information. It's static information — whatever is put into the bar code when it's printed is what the scanner can read and pass on to other systems. What we're testing in Auto ID systems, EPC (electronic product code), includes a small microchip that will remember information about a product and that will be able to look up more data over the Internet. It includes a radio-frequency antenna to relay that information wirelessly when it is queried by a reader.
My guess is that it will start as an addition to bar coding — but only through a transition period, and then ultimately will replace them. What's envisioned right now is an EPC tag on pallets, cases, and individual consumer unit items, like a bottle of shampoo. So we've got to have these tags at very low cost. The EPC chip as designed will look up information about the product over an intranet. For higher-end products or tagging at the case or pallet level, the EPC chip could have more memory so that more information is actually on the product or case.
ASCET: What are you doing at Procter & Gamble for consumers?
Kellam: We're trying to become consumer-centric in everything we do as a company. Currently, we're focused on how to better use real-time or near real-time demand information like point-of-sale data. By working with point-of-sale data and developing a monitor, we're able to work with our retail partners to reduce out-of-stocks. Retailers who have worked with us on this have seen out-of-stocks reduced by up to one third. We are trying to use point-of-sale data and collaborative planning forecasting information to reduce the cycle time it takes us to get product to the retailer and to make sure that we've got the right mix of products flowing and being produced.
We're trying to move our manufacturing systems to produce-to-demand, or at least to produce to an inventory buffer, instead of producing to someone's internal forecast. Those are our three big initiatives.
ASCET: What are the biggest challenges to achieving consumer values?
Kellam: I think the internal work that we're doing, such as produce-to-demand, is something that, because most of it is internal, is a lot easier to execute than something that crosses other partners in the supply chain. We're in a number of collaborative forecasting pilot programs (about a dozen) with a number of retailers around the globe as we're beginning to understand how to use the information that comes from that process. Part of the challenge is to determine if the information is good enough to run production plans, etc., in order to prevent out-of-stocks. But we're still in pilots and startups learning how to communicate this information. The difficulties are all things that you'd put under a collaboration banner. You have to learn to trust each other and to collaborate, and then you have to input the data in your system so that it's meaningful.
ASCET: Do you think real collaboration is workable, or will supply
chains stay insular like many people say about Wal-Mart's?
Kellam: It requires something of a culture change, where you have to learn the
value of other parts of the supply chain. One of the things we've done internally
is to say "We are not managing a supply chain. We are building a consumer-driven
supply network." We've used the terminology deliberately to say that we don't
own it, it's not sequential, it's not hand-offs. It's like an intranet where
everyone has a role to play, and it doesn't matter where you get your information
— it's how you use the information to better the effort, to better satisfy
consumer needs. The culture change is the difficult part, because you can't
possibly collaborate with everybody in a partnership or relationship way. You
have to make some choices about the real focus areas, and that's tough for companies
to do. Wal-Mart is very open and shares data with their critical supply chain
partners. We find them to be excellent partners and have a very open relationship
with them — working together to take time, cost, and cash out of the system
and add value to the consumer.
