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22 technology and engineering teacher December/January 2016

RESOURCES IN TECHNOLOGY AND ENGINEERING

“One of the most effective contributions to a company’s

competitive edge is the

ability to control inventory.

BY VINCENT W. CHILDRESS

INTRODUCTION Two of the most fundamental technological influ- ences that have shaped the global economy are information technology and transportation technol- ogy. Both of these technologies have merged to create the most efficient means of global trade ever seen. The ability of a company to supply inventory, manufacture, track, ship, and distribute products to a fulfillment center or retail location is enabled by both information and transportation technologies. In turn, this efficient system of sup- ply chain and logistics creates high levels of global competition.

Friedman (2005) described the circumstances well. In the early 1990s, when engineers designed software that would generate documents easily accessed across the Internet, they basically gave rise to the World Wide Web. Simultaneously, the first web browser was written to accommodate the new format. There was also a proliferation of ready-to-use software. As worldwide Internet bandwidth also increased and became more af- fordable, user-friendly computers hit the market, and millions of people were sharing information across the globe at a rate that had never before been seen.

In 1994, the North American Free Trade Agree- ment took effect, reducing tariffs on goods imported to the United States from Mexico and Canada (United States Department of Agriculture,

2011). Suddenly, unskilled workers in the United States worried about their manufacturing jobs moving to Mexico where wages were, and still are, much lower. In fact, many unskilled manufacturing jobs have since been moved to countries where wages are much lower. This happens because of increased competition among manufacturers. For example, if a manufacturer in Mexico can produce socks for much less than a manufacturer in the United States and import those socks into the United States with no taxes added to the price, then consumers are likely to buy the Mexican socks. The American manufacturer cannot cut wages so low that its workers cannot earn a liv- ing, so American socks sell at a noticeably higher price. The American manufacturer cannot compete and is forced to move labor-intensive portions of its operations to Mexico.

Now, similar trade agreements are in place among countries around the world. Manufacturers in highly developed countries like the United States and those in the European Union have moved their low-skilled operations to low-wage countries around the world. Even high-tech companies that have developed significant levels of automation and are less dependent on low-skilled labor, have found that distributing their operations around the world is strategically advantageous. First, these companies are able to sell conveniently to multiple markets, worldwide, and second, they are able to develop multiple or redundant sources of supplies

and supply chain,

logistics, global economics

December/January 2016 technology and engineering teacher 23

from various regions around the world. And, because of ad- vanced information and transportation technology, they are able to control all of the complex processes that are neces- sary to get their products to consumers.

SUPPLY CHAIN AND TECHNOLOGY A supply chain is the sequence of events and the entities that cause direct and indirect materials or services to move from their origins to the consumer. Logistics is the control of the movement (Lea, 2015). Here is an example that can illustrate a supply chain. There is a multinational company that sells computers to consumers. It sells its computers directly to customers via Internet sales, and it sells computers to vari- ous retailers that sell computers in their stores. The company has several vendors that supply parts for the computers located in Indonesia, China, and Taiwan. The smaller parts of the computers that are partially assembled are called sub- assemblies. These subassemblies are manufactured at dif- ferent locations by suppliers and are then shipped to another location for final, complete assembly of the whole computer.

One of the most effective contributions to a company’s competi- tive edge is the ability to control inventory. Control of inventory includes buying and storing only the most necessary levels of parts or materials on premises. “Just-in-time” inventory feeds “just-in-time” manufacturing. Say a manufacturer has several customers. One customer wants product A, another customer wants product B, and another, product C. The manufacturer will fill the first customer’s order, but then it will stop production and shift the line to fill another customer’s order. Buying and storing parts and materials costs a lot of money. Therefore, the manufacturer does not want to carry, say, the material for product B, until just before manufacturing product B. Manufac- turing products beyond what can be sold costs a lot of money. For just-in-time manufacturing (and inventory) to work correctly, the manufacturer’s material and parts suppliers must be very reliable. Compared to previous decades, just-in-time manufac- turing requires greatly reduced lead times for purchasing, tooling the line, and production scheduling. Companies like Toyota and Walmart have developed very close relationships with their sup- pliers to better ensure supplier reliability.

Identification tagging, scanning, and tracking. To track the movement of all of the materials, parts, and products, each must be identified and scanned as it moves from one operation to another and from one location to another. For most manufac- tured parts, an important operation in the manufacturing process includes placing an identification mark, label, or tag on or inside

Figure 1. UPC bar codes and RFID tags each have advantages and disadvantages.

global economics

the part. For efficiency, universal product code (bar code) images or labels, radio frequency identification (RFID) tags, or printed characters (for optical character recognition, OCR) are used and are scanned rapidly by machine. For example, a microprocessor will have a code or symbol printed on its surface with ink. A metal part could have a bar code laser engraved on its surface, or the identification could be annealed, a laser-based heating process that discolors the metal. A plastic part could be etched with a laser (ablation), or depending on the plastic’s additives, the laser could simply change the color of the surface of the plastic in order to mark it with a bar code. And, of course, a bar code is printed with ink on a label, or the part itself may be the substrate (Lea, 2015).

There are advantages and disadvantages of different identifica- tion technologies. Products with UPC bar codes and printed characters have to be scanned one at a time on a line. However, products like automobile parts or medications might need to be scanned after they have been sold, during a product recall. In that case, a permanent bar code may survive product use when an RFID tag would not. This also means that machines that generate bar codes must provide variable print, because each part must be identified as, for example, belonging to a specific automobile. Variable print means that after one part is marked with a bar code, then the next part must be printed with a slightly different bar code. An RFID tag might be adhered to or embed- ded inside of a part when:

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RESOURCES IN TECHNOLOGY AND ENGINEERING

• Many parts or products need to be scanned simultaneously. • Packed parts need to be scanned without unpacking. • Scanning needs to be completed from a distance due to

hazards or for convenience or a reduction in labor (Global Standards 1, 2015).

• The part needs to be tagged for theft or diversion deter- rence in addition to tracking (Lea, 2015).

RFID tags are more expensive than bar codes. Invisible ink and micro-printing are two other identification and scanning tech- nologies that help to prevent counterfeiting of high-end products like taxed tobacco, bank notes, and designer fashions (Lea, 2015).

When the world’s largest parcel shippers, FedEx, UPS, and DHL, have to sort, track, and deliver millions of various shaped packages per day, they use the less expensive bar code. These shippers send the packages through a series of sorting convey- ors, and because the packages are difficult to orient, multiple scanners are positioned on the conveyors to ensure that all bar codes get scanned. One innovation that is solving this problem is sequencing multiple scanners in a tunnel or ring configuration. These scan tunnels have improved greatly in reliability (Lea, 2015).

Scanners for bar codes and OCR use technology similar to that in a digital camera. A special transistor senses the pattern on the code or character, and the computer matches that pat- tern to a code. The code then has meaning, such as company, product type, and product number; or company, lot, batch, and item. However, RFID tags must be scanned by a magnetic field. When a pet has an identification “chip” inserted under its skin, and a veterinarian finds the pet and scans for the chip, the scan- ner is activated and waved near the animal so the magnetic field interacts with the chip. The scanner then displays an identifica- tion number. RFID tags on products work the same way. These tags can be designed for injection into an animal or to be sewn into the tag on a designer fashion (Lea, 2015). They can be used for tracking and for point-of-purchase checkout.

To actually track the movement and quantity of items, the scan- ners send code to a computer database. The programming code for all scanners within an industry uses the same basic algo- rithms or logical processing. A database stores, organizes, and connects information. For supply chain and logistics, a central location, such as a company’s headquarters, can tell how many products are located at specific locations around the world be- cause its computer’s database is being fed information over the Internet from those global locations.

Bar code and RFID standards. To ensure that a company tags (UPC bar code or RFID) its products according to international standards, it applies for a company prefix through Global Stan- dards 1 (GS1). Everything the company tags can then be traced back to the company, or the products of one company can be sorted from the products of others. Once the prefix is estab- lished, the company can implement a global trade item number (GTIN), which can be associated with individual products, flats, and pallets. Tags can also be coded with a global location number (GLN). Therefore, between the GTIN and the GLN, a company can tell which product originated from a specific location, and if, say, a pallet is scanned upon arrival at another warehouse, the database can show the location change. When a customer wishes to track an order, the shipper will use a serial shipping container code. This code is used to show the arrival and departure locations of the parcel as it moves from one distri- bution point to another, through final delivery (Global Standards 1, 2015).

GS1 is primarily used for items that eventually become general consumer products. However, there are some special standards for special industries. For example, ePedigree is a standard for the pharmaceutical industry to track medications through the supply chain down to the dosage. More exact tracking of medications gained traction during the Tylenol tampering scare in the early 1980s. Codentify is used to track tobacco products in the European Union. The Produce Traceability Initiative is working to develop practical tracking of fresh produce from field to grocery store or restaurant. This is important for supply chain tracking, but it is also useful when contamination causes a food recall. Even in an industrial bakery, when a bag of flour is poured into the mixer, its bar code is scanned. Efforts in the produce industry have primarily been aimed at the case unit, but bar coding has been tried on individual fruits. The primary limita- tions are distortion of the bar code on the variable surface of the fruit and the different sizes of the fruits varying the distances to the scanner from one fruit to the next. Such variations have made scanning less reliable (Lea, 2015).

Back to the supply chain example. In Taiwan, the computer’s cooling fan and motor subassembly is manufactured, and one operation in the production line is the application of a bar code label. In China, the computer’s motherboard, just the printed circuit board, is etched and laser bar coded. In Indonesia, the computer’s central processing units (CPUs) are manufactured and printed with a character code. Also, in Indonesia, there is a plant for assembling the entire computer.

December/January 2016 technology and engineering teacher 25

The computer company in the United States takes orders for several different models. As those orders come in, they are compiled in a database and communicated to the parts suppliers in Taiwan, China, and Indonesia via the Internet. This causes a batch run of parts for one model, a batch run of parts for another model, then another at each of those locations. As CPUs arrive at the assembly plant in Indonesia, they are scanned with OCR so the correct unit is queued on the correct line or queued in the correct order. As fan and motor subassemblies arrive from Taiwan, and the motherboards from China, they are scanned for the same reason. To fill the orders, the assembly plant will (1) run one batch after another if it is tooled for flexible manu- facturing, could (2) run all three models in a manufacturing cell simultaneously, or it may (3) run all three order types on three different production lines. While these orders are being manu- factured, more orders keep coming in. So while the final comput- ers are being assembled, the parts manufacturing resumes at the suppliers’ plants. The computers can be packed for shipping by model, on pallets suited for air freight, with all pallets arriv- ing at a distribution hub. As computers move off of the produc- tion line, the company’s headquarters can track the orders and provide guidance to its vendors for production scheduling and to its shippers for logistics.

LOGISTICS AND TECHNOLOGY If the computer order is large, then it could be shipped in containers onboard a ship. But if the order is small or the order is running late, it could be loaded onto a jet. Some companies have their own ships and jets for transporting products, but most contract with shipping companies. These companies are part- ners in the logistics needed to ship the product to market. The manufacturer and the shipping company work together to move the product as efficiently as possible, and database technology is at the heart of the management process. Each step in the transportation effort requires scanned information coming in so that shipping orders can go out. Even vehicles are tracked using GPS, and with the destinations entered into the system, comput- ers help pilots and drivers follow the most efficient routes.

Of 17 million shipping containers in daily use, only about five percent are fitted with GPS tracking. Shipping containers are logged or scanned and loaded in a particular order. When the ship arrives at the port, the containers are offloaded and sorted in different staging areas. The same sort of logic is used for shipping air freight. Shipping ports are obvious distribution hubs because there is a limited number of ports along the coast. Every coastal city does not have a port because it is easier and more cost-effective to add infrastructure to an existing port.

There are savings in volume where there is established infra- structure. Containers are then shipped to distribution centers by tractor-trailer or by intermodal rail. Even at the neighborhood delivery level, the logistics system determines the order in which freight is loaded and delivered on the delivery truck (Lea, 2015).

Transportation hubs and distribution hubs are like spider webs. The hub is in the center, and routes (called lanes) branch out from that center to warehouses, where in turn, lanes branch out to retailers or customers. Well-planned coastal hubs are ideal for shipping destinations. For example, Newark, NJ provides manufacturers with: • The Port of Newark for shipping containers. • The Newark International Airport for air freight. • A FedEx air hub at the airport for sorting and distributing air

freight. • An intermodal tractor-trailer and intermodal rail head for

distribution of containers. • A FedEx Ground depot. • The New Jersey Turnpike with interchanges for the Port of

Newark and the Newark International Airport.

Built up around this hub are other logistics-related companies with their depots used for sorting the drayage and packages for dispatching to various trucking lanes from the hub. In some cases, a hub will host several fulfillment centers on surrounding property. A fulfillment center is a final location where various orders can be assembled and dispatched to the most efficient

Figure 2. The port of Newark provides manufacturers with multiple modes of product distribution.

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RESOURCES IN TECHNOLOGY AND ENGINEERING

delivery lanes. Because of efficiency, the goal is for trucks to leave full on the outbound trip but also to return full on the in- bound trip: “truckload shipping.” In logistics, “less than truckload shipping” is undesirable.

SUPPLY CHAIN AND LOGISTICS EFFICIENCY AND GLOBAL AND REGIONAL ECONOMICS Once a transportation hub has been established, a lot of compa- nies will want to locate their operations near it. The capacity of the shipping port, airport, interstate highway, railhead, the avail- ability of land, the availability and education of the workforce, tax breaks, and the general quality of life all figure into a company’s decision to locate near the hub. In turn, companies that do busi- ness with the first company will move to the area. This chain of events causes local and regional economic prosperity. And it tends to diversify the economy so it is better able to withstand economic recessions.

Generally, efficient supply chain and logistics made possible with information and transportation technology have had a major influence on global trade since the 1990s. One way that the supply chain’s influence is measured is in terms of the global value chain. The value chain is a way to figure which country has added the most value to a product. For example, if Taiwan manufactured 20 percent of a computer, Indonesia, 20 percent, and the United States, where the computer assembly process is

completed, 60 percent, then the United States added the most value to the computer. This approach is important when it comes to estimating true trade balance. The point, however, is not that one country is outcompeting the other but that they are intercon- nected and interdependent. Companies have been able to outsource and move operations offshore be- cause of improvements in supply chain and logistics reliability (Ferrantino, 2013).

CLASSROOM STEM The value of bar codes in supply-chain efficiency can be easily demonstrated using some subassemblies that the technology and engineering teacher designs and using students’ smartphones. In this experi- ment, there will be an experimental condition using bar codes, and there will be a control condition that does not use bar codes. Design two very similar but slightly different products. For example, the wheel

and axle assemblies shown in Figure 3 have wheels that have the same outside diameter but have holes and axles that are dif- ferent diameters (only 0.0625” or 1/16” difference). Prepare 40 wheels of one size and 40 wheels of the other size. Prepare 20 axles of one size and 20 axles of the other size.

Use a bar code website to generate 20 bar code labels for one size wheel and 20 bar code labels for the other size wheel. Generate 10 bar code labels for one size axle and 10 bar code labels for the other size axle. Apply the bar code labels to half of the parts for both sizes of wheel and axle assembly, and do not label the other parts. Place the coded parts in a mixed pile and the non-coded parts in another mixed pile.

Divide the students into two groups. The bar-coded parts will be sorted and assembled by one group, the experimental group, and the non-coded parts will be sorted and assembled by the other group, the control group. While timing both groups, have each sort the parts and assemble them. The experimental group must to use its smartphones’ bar-code reader apps to sort its bar-coded parts. The control group has to sort using their own vision. Then compare the times of the two groups.

Figure 3. Have students use their smartphones to scan subassembly bar codes to sort parts that are difficult to differentiate with the naked eye.

December/January 2016 technology and engineering teacher 27

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REFERENCES Ferrantino, M. J. (2013). Plugging into supply chains: Designing

policy for a changing world, Part IV. Geneva, Switzerland: World Trade Organization. Retrieved from https://www. wto.org/english/res_e/booksp_e/aid4tradeglobalvalue13_ part4_e.pdf

Friedman, T. L. (2005). The world is flat: A brief history of the twenty-first century. New York: Picador.

Global Standards 1. (2015). Standards. Lawrenceville, NJ: Au- thor. Retrieved from www.gs1us.org/

Lea, D. (2015). Personal communication. Lea, J. (2015). Personal communication. United States Department of Agriculture. (2011). North American

free trade agreement. Washington, DC: Author. Retrieved from www.fas.usda.gov/itp/policy/nafta/nafta.asp

ACKNOWLEDGEMENT Special thanks to Darrell Lea, specialist in data capture and industrial automation. Mr. Lea works for a leading data capture and industrial automation services and equipment supplier and has been in the business for 15 years. Thanks also to Julia Lea, an information technology and logistics professional, who works for a leading logistics company.

Vincent W. Childress, Ph.D. is a professor in Technology Education at North Carolina A&T State University in Greensboro, NC. He can be reached at [email protected].

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ITEEA is working hard to prepare all of the data associ- ated with the upcoming DC Conference and will have a highly interactive mobile user experience in place.

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Preregistered conference attendees will receive a personalized email inviting them to download the app and update their user profiles prior to the conference start date. Attendees who register on-site will receive download instructions in their registration packets.

For a preview of the app’s functionality, watch the demo at

www.crowdcompass.com/resources/ cms-app-walkthrough.shtml

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