Special Interview: Lyle Ginsburg

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Accenture

Lyle Ginsburg is managing partner for technology innovation within Accenture’s Products operating group. Accenture was an early member of the Auto-ID Center (now EPCglobal), and Mr. Ginsburg spent several years working with the group. During this interview, he talks about the growing importance of RFID and electronic product codes.

ASCET: The Auto-ID Center – a major force for researching and promoting radio frequency identification – closed recently, with its mission and resources moved to EPCglobal. Can you explain why this was done?

Ginsburg: “Transfer of power” was part of the plan all along. As a research entity, the Auto-ID Center’s goal was to help research and jump-start RFID/EPC technology to set the stage for economic viability and widespread implementation. The center succeeded in that mission, and thus it was time to turn things over to an entity that is better equipped to manage next-step processes, such as developing standards and driving adoption. That’s where EPCglobal comes in. It is a member-driven organization of leading firms and industries whose goal is to create global electronic product code (EPC) standards to support the use of radio frequency identification.

ASCET: Do you think that a common language architecture and standardization will be a boon for supply chain management?

Ginsburg: Anytime you create standards, it makes life easier for suppliers, which in the end benefits customers. Look at it this way: In the business world, communication and collaboration are always good things. And they are propagated most efficiently by common languages, common numbering systems, common frequencies, common descriptions, and so forth. Nearly always, the results include more choice, better product selection, and lower price points for the consumer.

ASCET: The Department of Defense (DOD) and Wal-Mart are leaning on suppliers to implement RFID. Why?

Ginsburg: To answer that question fully, we should be clear about the connection between RFID and EPC. Radio frequency identification refers to the ability to automatically capture information about products and resources as they move through the supply chain. RFID systems generally include tags, readers, communication media, and associated information processing systems. Electronic product codes, on the other hand, are the heart of an RFID-enabled supply chain. In operation, EPCs embedded in memory chips are attached by tags to products, cases, containers, and so forth. Information contained in the chips is sent via antennae out over the Internet, where it is accessed by various supply chain management applications.

RFID’s value resides in the ability to track items without human intervention, thereby saving time and money, while improving processing speed. Any business entity is likely to register large labor savings at the DC-level and (in Wal-Mart’s case) at the store level. EPC then adds more value by virtue of its ability to uniquely identify each individual item. As a result, Wal-Mart and its suppliers can watch and track items as they move through the supply chain and out onto the store floor. It’s a whole new level of visibility and efficiency that actually extends well beyond Wal-Mart and DOD. For example, Metro has put out similar capability mandates, as have Tesco, Target, and several other retailers. In DOD’s case, it’s all about making sure that parts and material are where it needs them, when it needs them.

ASCET: Where does silent commerce fit in?

Ginsburg: Silent commerce is an Accenture term. It actually refers to a series of technologies working together to enable ubiquitous computing – which, in turn, enables ubiquitous commerce. Accenture technologists started building RFID demonstrations and prototypes seven years ago. For example, we created a smart medicine cabinet that can tell what prescription drugs are in it, thus helping consumers stay in compliance with their prescriptions. Right from the get-go, the principal mission was ubiquitous computing and providing new sources of business value. That’s what silent commerce really involves: combining identification, communication, display, and processing technologies to improve business performance.

ASCET: How big of a role does RFID actually play in supply chain management?

Ginsburg: It’s going to be huge. RFID has been around for a long time, but in its current form (implementing passive, low-cost tags and readers), it is pretty new. Moreover, high price points still make it tough for some companies to tag at the case level, let alone the item level. As a result, most of the activity is around tagging the cases or items with high value or for which “track and trace” is particularly important. The pharmaceutical industry exemplifies the latter, as Accenture’s James Hintlian and Stephen Proud discuss elsewhere in this book.

However, as RFID technology becomes more robust and cost-effective, it also will affect supply chain applications that deal with lower margins, lower item value, and a higher number of read points. This means that broader supply chain applicability and visibility eventually will reach the shelf and item level, producing more labor savings, productivity gains, reduced inventory levels, improved in-stock positions, and better asset utilization. I mentioned pharmaceuticals a moment ago. In this industry, counterfeit drugs are a big problem. EPC technology has great potential to winnow counterfeit drugs from checkpoints across the supply chain. In fact, the FDA is already investigating new methods to secure the pharmaceutical supply chain by examining technologies that utilize RFID/EPC.

ASCET: Does RFID have a role to play in homeland security?

Ginsburg: There’s enormous potential benefit if you can put a unique identifier on an ethical drug shipment – or any shipment – because it helps confirm that the contents are what the shipper claims. This is where EPC comes in. Rather than labor productivity, the advantage is around data accuracy, since security is enhanced if you can better confirm that what you have received is what it’s supposed to be: food, drugs, machine parts ... you name it.

ASCET: What are the barriers to adopting RFID systems?

Ginsburg: Proliferation of standards, the cost of tags and readers, and reliability are probably the most formidable. And there is the longer-term challenge of managing all this new data, which implies a large increase in the amount of information flowing through the supply chain.Not surprisingly, there are also issues pertaining to the reliability and robustness of the technology. For example, it is still quite a challenge to read all of the cases on pallets coming through a dock door. I think that’s why you don’t see many mandates demanding full compliance in a short time. This is a multiyear issue that requires the ongoing tightening of standards, continuous improvements to the technology, and the buyin of more and more companies. It’s a matter of critical mass: More companies get on board, more vendors see the market potential, more competition drives new innovation, and more activity pushes costs down.

ASCET: So why are the (retailer and DOD) mandates happening now?

Ginsburg: Some of it may be to address short-term concerns. But the main reason, I think, is that RFID is the real deal: a viable way to improve supply chain performance by reducing costs, improving productivity, containing inventories, and increasing data accuracy. There is also a sense that if the major players don’t push, then widespread implementation – the reaching of critical mass – will be too drawn out. How long have we been using bar codes ... 25 years? Yet some companies still haven’t adopted them. Even if the technology’s short-term return on investment doesn’t seem all that powerful, that’s not the real point. What matters is the end game, when RFID/EPC becomes a ubiquitous, widely accepted application. At that time, technology prices will have fallen, the technology will be more robust, and more things will be tagged for reading in more places. In effect, users’ supply chain performance – and their overall business performance – will be greater.