RFID in Retail - growing interest in item level
Jun 20, 2006 Raghu Das
Jim Noble of the Altria Group gave a brilliant insight into his company's RFID progress. Altria are a massive company - they have annual sales of $97Bn and own companies such as Philip Morris, Miller and Kraft. They are usually very secretive about their deployment of new technologies and systems in order to gain a competitive edge, but RFID is different because they recognise that the Altria Group cannot do it on its own.
Jim felt that the industry is aiming at the wrong target - it shouldn't be about EPC/RFID (pallets and cases) but collaborative commerce and new consumer services and benefits. He also felt that so far the industry has been moving far too slowly. In some cases on low value products the tagging of pallets and cases has marginal if no benefit for them, other than meeting retailer mandates. Jim wants the RFID utopia of item level tagging, and sees the tagging of pallets and cases as the "pain barrier." If Altria's companies were to tag every item they make, it would demand 80 billion tags a year.
Altria is currently "betting" on most technologies and applications, with over a dozen major pilots beyond pallet/case level, testing where RFID can derive strong paybacks.
For example, they are piloting RFID on packets of cigarettes (they make 1 billion cigarettes a day), because the EU holds them responsible that the correct taxes are collected even though they do not sell directly to the consumer. Here they think RFID will be a very valuable tool for them. In other cases, rather than a problem looking for a RFID solution, it has been the other way round, such as their tagging of some foods shipped to Wal-Mart at pallet level where they felt they did not have any problems in the first place. He described the economics of meeting this mandate as a "challenge".
Redesigning the package around the technology
Altria has also been developing the packaging itself to work better with RFID. Smart Labels Analyst recently covered how Procter & Gamble, speaking at RFID Smart Labels USA, designed packaging for their new fusion razor product based on RF principles so they could get high reads from tagged cases. It worked. Philip Morris, the owner of brands such as Marlboro cigarettes, faced a similar problem with metal in packaging - each cigarette pack contains some foil which was causing problems when trying to read tagged cases. However, by microscribing the foil it no longer has an effect on the RF field and allows the RF energy to pass through. The microscribes do not change the appearance of the foil.
A different Altria company has problems with mayonnaise, and Jim stated they are looking at tags which can form a peer to peer network and see "through" the stack of cases as a result.
RFID and Wal-Mart
Wal-Mart updated us on their RFID progress. They have RFID "enabled" 5 Distribution Centers in the US, 475 of their stores and 36 Sam's clubs outlets. 300 of their top suppliers now ship pallets and cases to these DC's with RFID labels on. These suppliers are tagging the pallets andc ases of their highes volume products. Wal-Mart currently receive 3 million tagged cases each week. Carolyn Walton, project lead at Wal-Mart, said that they have not needed to overhaul their enterprise system and have so far only needed to implement a small change to their software.
Reporting on the paybacks, Carolyn said that for products sold 6 to 10 times each day, they saw out of stocks reduce by 48%, and that RFID enabled stores were up to 63% more effective at replenishing items. Speaking of the Procter & Gamble Fusion blades, where all cases have been tagged by P&G (see the April issue of Smart Labels Analyst for full details), Carolyn revealed that they saw sales increase by a massive 19% compared to not having an RFID system, mainly by reducing Out of Stocks.
Another RFID success story was Hanna's Candle Company. A trailer that contained 90 pallets of candles had been wrongly stored. Because the pallets had been RFID enabled, Wal-Mart could see that they had been sent but not received and they were able to track down the pallets. This was a large payback for both companies - the candles went on to be sold and had they not been found, Wal-Mart would have assumed the product was not popular and its forecasting systems would have reduced future orders with the company.
Learn more by reading the full report in this months Smart Labels Analyst.
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