Preparing For The EPC

New tool enables companies to analyze and plan for implementationof the Electronic Product Code.

Meanwhile, several companies with long histories of RFID in­volve­ment have already made progress. Some have already applied the model to their businesses and see the value.

"By using this tool, a lot of companies will be able to accurately see how they can save money—and how much money they can save—by adopting RFID technology," says Dayna Fried, an RFID spokesperson for Hewlett--Packard, Palo Alto, CA, which is pleased with the early results that the model is providing.

Paul Fox, a spokesperson for Gillette, says, "The model is an analytical tool that can be applied on a systematic and continuous way for the various processes that you find in the supply chain. It allows us to absolutely quantify what the business benefits are to us as a manufacturer. With the aid of the value tool, we’ve been able to demonstrate that we can generate a 25 percent improvement in efficiencies per distribution center. That in itself is a significant value."

He also believes that companies not currently deploying EPC technology will also learn something. "It allows them to take this robust tool and apply it to their own businesses and quantify the results. So rather than being subjective, it becomes objective."

The experiences of HP and Gillette provide optimism to other companies that hope to benefit from this emerging technology. So what will it take for the industry to make a quantum leap forward on RFID?

"I think it would be if retailers figured out how to share visibility with their suppliers in a common way," concludes Clauss of IBM. "If the retailers can all agree on how that data will come back to the manufacturers, I think that's where the leap is."

According to Clauss, the potential for an ROI is clearly bigger for the retailer than it is for the manufacturer. That's because the manufacturer has the recurring cost of buying tags. If the retailer is going to put the cost of buying the tags onto the manufacturers, he points out, the retailers should give something in exchange.

"Some retailers are willing to share [data and visibility]," he explains. "To a degree, Wal--Mart, Target and Albertsons are all public and are all sharing with their vendors. They’re just choosing to share in different ways."

Long Term Success

Karlen of Oat Systems adds that the key for CPG companies is to take competitive advantage of the RFID data shared by retailers. To do this, it is critical that the company take "an incomplete, error--laden and noisy data set and infer from it the actual movement of goods in the physical world."

From this clean view of goods movement and inventory, the company can:

  • Measure product velocity and inventory;
  • Detect stock--outs and excess safety stock;
  • Automatically reconcile invoices and resolve ship/receipt disputes; and
  • Track promotional items and new product introductions to ensure they reach the sales floor on time and in compliance with the promotional programs.
  • There is some disagreement over the timeline for widespread deployment of ECP technology. Most prognosticators agree that high--value goods and luxury products would be item tagged first, followed soon thereafter by CPG items, but there is some question about the pace of change.

    "I view success as being very long term," says Clauss of IBM. "The best analogy for how long it will take is the barcode. It really took 25 years for the barcode to become completely pervasive. I’m not saying that RFID will take 25 years to mature, but it won’t mature in five years. I think we all need to go into this with our eyes wide open about a long adoption curve. There is going to be a gradual diffusion of the technology over a decade at least. It will gradually seep its way into more and more of the supply chain."

    Fox of Gillette predicts that EPC tagging will be adopted widely at the pallet and case level over the next three to five years. In terms of item tagging, he sees two constraints:

  • Infrastructure costs for the technology to support tagging, particularly in the retail environment. The cost of readers will need to come down; and
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