Pallet and Case Tagging for Retailers: Q4 Review
2006 11월17일 Raghu Das
As IDTechEx interview solution providers in the RFID industry, it is clear that many in this sector are licking their wounds. Most consumer packaged goods (CPG) companies saw the retail mandates as a cost to be delayed, which was a shame, because certain retailers were benefiting hugely. Indeed, even Altria Group (Miller, Kraft, Philip Morris) said, "Pallet/case tagging is a pain barrier - item level tagging is our utopia". One apparel giant told IDTechEx that they get no internal benefits from case tagging, because its warehouses have been optimized to take advantage of bar codes and because cases are shipped to retailers shortly after the apparel the retailer wants have been picked from warehouse shelves.
Speaking to many consumer goods manufacturers IDTechEx has found considerable foot dragging resulting in pallet/case tag purchases being as little as 250-300 million tags in 2006 at the heavily loss making price of around 10 to 15 cents each. Readers are also being sold at a heavy loss. And still the CPG companies do not want to buy them until the very last minute. These sums of money are among the smallest of any RFID sector. For example, it is less than esoteric niches like one company tagging random samples of mail to assess performance or one company earns from tagging cows. The point is that the mail tags are ten dollars or more and the cow tags are two dollars. Both of those companies have around $50 million of probably profitable sales. One could go on and on with examples like this.
RFID hardware suppliers that had prioritised the retail sector started to look elsewhere though none left the sector altogether because they know there will be a winner one day and most have strong backing. They are playing "Last man standing". There is oversupply. System integrators sometimes make money though.
The press and the industry have portrayed a different and ruggedly optimistic view about retail mandates in the main, choosing to concentrate on the minority of participants that have seen the odd benefit. Procter and Gamble found that tagging display cases for Wal-Mart with shared information led to a sales increase 19% of Fusion blades caused by more timely arrival at shelf. Hanna Candle Company found 90 pallets went missing but were found with the RFID reducing a knock on effect for ordering. Then there are some companies that find that the information from pallet and case RFID that retailers share with them is helping them to ensure that promotional offers are displayed in a timely fashion. However, these benefits are not necessarily paybacks and companies are not saying they are sustainable.
Retail mandates asked for their top suppliers to tag the pallets and cases of the highest volume products they sell. The highest volume products tend to be those which are lower value and lower margin and therefore it comes as no surprise that most consumer goods suppliers don't get a payback. Indeed, Richard Burns, Director of Logistics at P&G, told IDTechEx that an overlooked factor is the cost of applying the tag - which for them is about the same cost as the tag itself. He confirmed that they seek a 5 US cent tag APPLIED to get a payback on tagging pallets and cases. This year, P&G will use "a few million tags". The exceptions may be the US Military, which allows suppliers to load on the RFID cost and maybe some supermarkets such as Publix, Metro in Germany and Mitsukoshi in Japan that appear to claim to practice full mutuality of financial benefit with their suppliers but this needs checking as events unfold.
Basically, the RFID tagging of pallets and cases for major Western retailers of under 400 million pallets and cases over two years has already improved their margins by up to $100 million. This was provided at a loss of about $100 million by the consumer goods companies that supply them. In addition, the RFID suppliers to these consumer goods companies also lost about $100 million in the exercise. In the case of the RFID suppliers, that money came from investors and parent companies. It was certainly not predicted that those investments in RFID companies would, in effect, flow rapidly to the large retailers. System integrators are faring better, with some even claiming to make money installing pallet/case RFID infrastructure at CPG companies and retailers. At least with anti-theft tags earlier mandated by retailers, the tag and system suppliers to the mandated CPG companies - notably Sensormatic (now in Tyco-ADT) and Checkpoint Systems - stayed profitable because they did not price for volumes that never came. However, anti-theft tags did and still do cost the CPG companies heavily for no return and pallet/ case RFID is history repeating itself.
More work still needs to be done, particularly with managing the data between many different stores and suppliers.
For RFID suppliers, item level tagging for retailers is a better business where high value products are tagged first, such as Marks & Spencer apparel, BGN books or Best Buy video games. However, it is vulnerable to rapid design change. Like anti-theft tags, there are three incompatible options here - Near Field UHF, Far Field UHF and HF.
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