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As service manager of the member-owned Bayport Marina, in Bayport, Minn., Gregg Nelson took a big step a couple of years ago by adopting a bar coding system. Until then, everything to do with recording and tracking parts at the 20-year-old, 231-slip marina was done manually.
“We’re not that big of a shop and we don’t have a lot of customer traffic per se, but it is a lot easier now for a technician to get a part onto a work order,” said Nelson.
Bar codes have been around for more than 30 years. Despite the history, Bayport Marina’s recent adoption isn’t an anomaly within the marine industry. It’s only been in the last few years, as dealers adopt dealer management systems compatible with bar code technology, that using bar codes for inventory management is beginning to become the industry standard. And there are still many in the industry who would just as soon stick with paper.
They may, however, want to reconsider.
Not only are they foregoing the efficiencies and cost-savings of a streamlined inventory management system, they are on the edge of a gap that is widening by the day. Radio frequency identification technology is transforming the supply chain, and while it will be years before it affects average marine dealers, affect them it will.
Awareness vs. risk
“Personally, I like to be familiar with anything that is coming out,” said George Bellwoar, chairman of the board for the National Marine Manufacturers Association and vice president of marketing for Perko, Inc., Miami. “I might very quickly decide that it isn’t for me, but once I have it in my scope, I can look back at it every year to see if something has changed.”
RFID is certainly in Bellwoar’s line of sight. At present, the challenges of the technology outweigh the advantages for Perko, but that will change.
Essentially, RFID is a tag and reader system that uses radio frequencies to wirelessly transmit the identity of an object or person. The tags can be active or passive. Active tags consist of a microchip with stored data and a transmitter with a power source such as a battery; they broadcast a signal to be picked up by the reader. Passive tags just reflect back the radio waves coming from antenna on the reader. With both, the reader passes the received data on to a computer system.
RFID has been around for years and is used for everything from identifying drivers going through toll booths to tracking parts bins and shipping pallets to decreasing car thefts via “smart keys.” It is a particularly hot topic in retail now because Wal-Mart issued a mandate a few years ago that its top 100 suppliers start using RFID by 2005.
Reports of the success of Wal-Mart’s suppliers in meeting that requirement have varied, but it is safe to say that there are still enough bugs in the process to bet that it will be at least five years before marine dealers are affected, perhaps more. Nevertheless, attendees at the 2004 Marine Aftermarket Accessories Trade Show were treated to a presentation about how RFID might affect them, and the topic was scheduled to be addressed again at this July’s show.
A primary challenge with the technology is the cost. Currently, passive tags, which are still the most commonly used tags, cost between 30 and 50 cents each. Active tags are significantly more.
“The intelligent memory chip can carry a huge amount of data, so the great news about RFID is that it will eventually allow us to be much more successful in managing our inventories at the lowest possible levels,” said Pat Murphy, senior vice president of logistics for West Marine, Watsonville, Calif. “But right now, as it relates to the boating industry, it is still very expensive.”
When it does start making inroads into the industry, there will be a migration of sorts, beginning with higher-priced products.
“I imagine in five years the whole process will be much more mature, and for certain higher value items-in our stock assortment, perhaps radars, GPS and other electronics — RFID will be the way it is,” said Murphy. “But for a part that goes on the bottom of a boat and costs a buck and a half, it probably won’t be used.”
In addition to the need for a better cost/benefit ratio in an industry built on small parts, Bellwoar sees another reason for slow acceptance of RFID by the marine industry.
“We are still an industry in which inventors come up with great ideas,” he said. “The chances of those individuals adapting to technology like RFID are much less likely than in a more mature environment where most of the inventions come from established companies.”
UPC the missing link
That observation can also account for the inconsistent use of universal product code bar codes by marine suppliers. UPC codes were launched in 1973 by the grocery industry as a way to track inventory and speed up the checkout process, and their application quickly spread.
But not everywhere, as Tom Martin soon found out three years ago when he became vice president of parts and accessories for MarineMax, Clearwater, Fla. One of Martin’s first goals was to standardize parts across the company’s 60-plus locations. As it was, each parts manager set up a separate system so part numbers, descriptions and costs varied from store to store.
“Our first thought was to ask all of our suppliers to give us the UPCs for their products, but we quickly realized that wasn’t going to happen,” Martin explained. “Very few of them used it, or used just a part of the UPC for their catalogs. So we had to come up with our own part numbering system.”
MarineMax’s system now combines UPC codes for products that have them and bar codes generated in house for those that don’t. Obviously, it is much more efficient to simply scan a UPC label than generate the codes and print and apply the labels.
West Marine has faced a similar situation. “Unfortunately, not all of our vendors use a UPC code, so we have to put one on ourselves because our system is 100 percent reliant on it,” said Murphy.
That said, he understands that using the UPC system is a matter of return on investment for some.
“There are a number of small mom-and-pop vendors in the boating industry that are extremely valuable to West Marine and to the entire industry,” he adds. “[Just as with RFID], until I can see an absolute value-added contribution for both us and our manufacturing partners, we are very resistant to saying that we want them to use a technology just because it is that latest and greatest thing out there.”
Set up costs for implementing a bar code system, even without tying it into UPC codes, can be significant.
“The cost really has nothing to do with the cost of the hardware and software,” said Tony Pimentel, COO of Watch Captain, Mattapoisett, Mass. “You can get the bar code scanner, printer and labels up and running for out-of-pocket costs of $600 to $700. The real cost is in the management discipline, saying that this is how we are going to run the shop and then going through and doing the actual work of setting up the system and labeling everything.”
Once set up, however, cost savings are immediate. It is easy for technicians to scan the parts they use, virtually eliminating redundant or inaccurate data entry from estimating through invoicing and ordering. And once in place, bar coding can be used for tasks beyond inventory management. Say a marina winters boats in one area and engines in another. Bar code labels can be applied to each so that when it comes time to commission the boat in the spring it is an easy task to wed them.
That said, the big push behind both UPC and RFID is ultimately a seamless supply chain. MarineMax’s standardization is the first step in that direction. All parts information is now centralized with one data entry point in Clearwater as part of MarineMax’s IDS dealer management system. In addition to freeing parts managers up to spend more time serving customers and managing their departments, everyone is now looking at the same information — part description, number, price, UPC code, case pack quantity and any other data uniquely tied to that product. Should the San Diego store need a part that isn’t yet in the system, the relevant data is entered into the main system and then it will be made available to every store.
Standardization took more than two years but the investment is already paying off. “Our gross profits on our parts sales have definitely gone up,” said Martin. “Our retail pricing is much more consistent and accurate across the board. Our costs are also more accurate because they are entered centrally and then pushed down to the stores. If a vendor gives us a price reduction, for instance, we can get it into our system and very quickly everyone will be using it on their purchase orders.”
Productivity flows
Just as West Marine uses bar codes to track product from its distribution centers through its point of sales, it also uses the data to provide detailed weekly forecasts to each of its vendors so they, in turn, can more accurately plan their production cycles.
Some retailers take that a step further with vendor inventory management, in which a qualified supplier can access the retailer’s system via the Web or receive detailed sell-through reports to track how their products are doing. Garmin International, Olathe, Kan., for example, works with many of its customers to help manage their inventory.
“We are able to work back and forth with the retailer, which helps in getting product forecasted, produced and shipped out in a timely manner,” said Ronnie Lamendola, senior national merchandising and promotions specialist, Garmin International, Olathe.
As a Wal-Mart supplier, Garmin can tap into Wal-Mart’s inventory database to see how its products are doing in real time, but it is just as happy to help its small retailers, said Lamendola. “We’re here to help them and us sell more product,” he said.
UPC codes are vital for sharing forecasting and sell-through data.
“It is all UPC driven,” said Dave Karpinski, vice president of sales and marketing, Taylor Made. “The UPC codes link the suppler and retailer or distributor across all channels. If everybody uses the information available, it creates the opportunity to drive inventory just in time and takes costs out of the channel of distribution.”
Taylor Made has more than 21,000 finished SKUs. It prints all of its UPC codes in house, scanning all finished goods at various check points as they move from production to the warehouse and out to the trucks.
“Customers are holding us more accountable to achieving first-time on-time fills, because that is the way that you really drive profitability,” said Karpinski. “Some are implementing fines or some other remedy when suppliers don’t ship what they asked for. So we are using scanners as an additional verification going out the door. We don’t want any errors out in the marketplace.”
Taylor Made uses both UPC codes on items and SCC, or shipping container codes, on master packs to aid inventory management both in its warehouse and by the customer. To streamline order filling even more, the company is also in the process of reorganizing its warehouse, moving from almost exclusively bulk storage, in which pallet is stacked upon pallet, to more pallet and hardware racking. The goal is better “pick” time — that is, picking stock to fill an order — by eliminating the need for operators to move boxes around to access the items they need.
“We’d like to reduce pick times by 30 to 50 percent,” said Chris Yarsevitch, who splits his time doing process engineering work at Taylor Made and serving as product manager for Taylorbrite brand.
In addition, logical work zones are being created. For example, longer product is being segregated into one area, while specialized racks now hold miscellaneous hardware such as nuts and bolts.
In general, Yarsevitch likes putting in visible controls for inventory management. “If you need to keep 10 pallets, at minimum, of a high-running part and you have room for 20, build a visual reminder into the system to tell you when you need to reorder,” he said.
Whether placing an order card halfway down a pile of stock or using a two-bin system in which product is ordered as soon as one bin is empty, visual cues can keep inventory turnover smooth.
Back to the future
As with anything, some trial and error is involved in good inventory management. Taylor Made, for instance, started using wireless SCC scanners a year ago that allowed operators to scan stock locations from a distance. However, that decision is now being revisited as the long-distance scanners are not convenient for short-range scanning such as during picking. Operators end up switching back and forth between scanners.
Whether the company returns to short-range scanners, however, isn’t as important as the fact that its inventory tracking system benefits both the company and its customers.
“In the end, the point is to have scanners to replace a paper-based system that is manual and very time consuming,” said Yarsevitch.
Which ultimately, it seems, means RFID. Will there come a time when smart shelves will trigger a purchase order or send out an alert that a part was placed on the wrong shelf? Probably.
In the meantime, anything a dealer or distributor can do to better manage inventory is becoming increasingly important.
“I think we have more than 700,000 parts in our system now,” said Martin. He compares the proliferation of parts in the marine industry over the last several years to what happened in the automotive industry.
“They used to deal with just the Big Three, then the equation got bigger and bigger, and they couldn’t manage it the old way,” he said. “Now it’s time to embrace some of the newer ways for managing inventory in the marine industry.”