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Now You See It Now You Don't

Now You See It Now You Don't

Techno-enthusiasts insist that radio frequency identification is the Next Great Killer App and will transform the future of the global supply chain. But I've seen the future of supply chain management, and it's called China.

In a world in which partners are privy to each other's data, the challenge will be how to collaborate without sacrificing competitive advantage

Techno-enthusiasts insist that radio frequency identification is the Next Great Killer App and will transform the future of the global supply chain. But I've seen the future of supply chain management, and it's called China. If I were advising a CIO charged with a global supply chain mandate, I'd suggest they'd get a better return on their time looking at supply chain behaviour in China than at prospective RFID implementations by Wal-Mart.

A story in the China Daily English-language paper describes local law enforcement officials confiscating tens of thousands of cartons of counterfeit cigarettes that had genuine Universal Product Code labels. Step outside a luxury hotel in the heart of Beijing's embassy district in January and you'll find street vendors approaching you with shrink-wrapped DVDs of The Return of the King and The Last Samurai. They're pirated, of course.

Not to worry: This isn't a column about counterfeiting or intellectual property theft in China. That would be too easy. More important, it would miss the point. Sure, there are "bad actors" in China who use their vital link in the supply chain to steal, cheat and copy from their clients, but that masks the deeper dynamics of tomorrow's interactions. Talk to the CIOs of Chinese companies supplying US and European multinationals with IT systems and components, and you'll hear that they're happy to comply with whatever technical standards their customer desires.

ERP? A-OK. Interconnected CAD? Of course. They're very eager to learn. Yes, they want to be the low-cost supplier. But, if you don't mind, they fully expect to evolve into strategic partners. The IT systems they're building to provide just-in-time componentry worldwide are supposed to become platforms for value-added subassemblies by decade's end. Today, it's chips; tomorrow, it's motherboards; next year, it's an effort that makes Apple's iPod or Sony's Clie look like yesterday's PC. In other words, Chinese companies have ambitions that go beyond the first few links of your supply chain.

In this respect, RFID represents the least interesting innovation in the supply chain future. After all, none of Wal-Mart's suppliers, for example, will ever go into direct competition with the world's largest store. To the contrary, Wal-Mart seems far likelier to go into direct competition with some of its largest suppliers via its own house or private label brands. Managing the competition between global supply chains may prove much less of a leadership challenge to CIOs than managing the competition within global supply chains.

To what extent might RFID be a virtual window into the cost structures and innovation processes of a company's supplier? More provocatively, to what extent might suppliers mask, distort or minimize RFID tag elements to minimize the risk of giving their customers information that might come back to bite them in future negotiations?

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