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Logistics EDITOR'S NOTE
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The Value Is in the Data
What can suppliers do with that information? They can use the unprecedented level of visibility the data provides to improve replenishment algorithms, react to potential out-of-stocks, reduce safety stock, conduct root cause analysis when problems arise and much more. This is where the true value of the EPC system lies.
But to be able to leverage the data and seize the value, suppliers must go beyond slap and ship. RFID Journal's new report, The Complete Guide to Meeting Sam's Club's EPC RFID Tagging Requirements, explains why and how—in detail—and points to case studies we've published about companies willing to share their successes (bless them). The guide will enable you to determine the best approach to tagging sellable units for your company and products—and to save thousands of dollars in consulting fees.
Now, I can't say—nor can anyone—that for every 10-cent tag suppliers use, they'll get back 20 cents of value, or even 11 cents. The challenge in using RFID in the open supply chain is that the business case varies from company to company, and from product to product. Some firms might benefit greatly from improved replenishment algorithms, while others might get only minor benefits because the demand for their products is steady. Some suppliers might benefit hugely from using EPC RFID data to reduce out-of-stocks, whereas others might gain less value.
It's true that at current tag prices, some companies might not get sufficient value to offset the cost of tagging. But if people don't understand what data they get back and how it can be utilized, they have no way to assess the value of tagging for Sam's Club. If they blindly adopt a slap-and-ship approach, figuring that's their cheapest option, they might find they're missing a significant opportunity to cut costs and boost sales, through better promotions management and replenishment.
RFID Journal will continue to provide the information companies require to make smart decisions about how they can benefit from EPC and other RFID systems. But suppliers and other end users must step up and make the effort to learn, so they can determine the best approach to RFID tagging and using the data they get back.
You know what they say about leading a horse to water.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog or click here.
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But to be able to leverage the data and seize the value, suppliers must go beyond slap and ship. RFID Journal's new report, The Complete Guide to Meeting Sam's Club's EPC RFID Tagging Requirements, explains why and how—in detail—and points to case studies we've published about companies willing to share their successes (bless them). The guide will enable you to determine the best approach to tagging sellable units for your company and products—and to save thousands of dollars in consulting fees.
Now, I can't say—nor can anyone—that for every 10-cent tag suppliers use, they'll get back 20 cents of value, or even 11 cents. The challenge in using RFID in the open supply chain is that the business case varies from company to company, and from product to product. Some firms might benefit greatly from improved replenishment algorithms, while others might get only minor benefits because the demand for their products is steady. Some suppliers might benefit hugely from using EPC RFID data to reduce out-of-stocks, whereas others might gain less value.
RFID Journal will continue to provide the information companies require to make smart decisions about how they can benefit from EPC and other RFID systems. But suppliers and other end users must step up and make the effort to learn, so they can determine the best approach to RFID tagging and using the data they get back.
You know what they say about leading a horse to water.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog or click here.
READERS' COMMENTS
Sam's Club, Data and Tagging
Another good overview by Mark Roberti on what will eventually be a pervasive use of RFID with respect to item level tagging and visibility into the supply chain. There is one point I'd like to comment on and it has to do with the cost of the tag. I'm going to make a bold statement and it's this, the cost of the tag, within reason relative to a products value being tagged is irrelevant. Currently, reasonable estimates for the cost of Out of Stocks alone are a $120B, yes Billion, problem in the Retail supply chain and average 8% across the board, that's 1 out of 12 products being out of stock at any given location. The opposite problem is Over Stocks at $60B and shrinkage adding an additional $40B to the problem set. So as they say, a billion here and a billion there it starts to add up. The other challenge for the manufacturers is they get marginalized or no data from the retailer in the form of POS reports. On average only 4% of merchandise planners actually use POS data to drive product ordering forecasts. And only 9% of retailers on average use real time data to review sales receipts and drive stocking decisions. Dr. Thomas Gruen at the University of Colorado in a study they did there in 2007 determined that OOS casues were due to: 47% of poor visibility to in-store forecasting, 25% of the time the product is in the store but not on the shelf and 28% it is due to upstream causes involving things like lack of materials, shipping and logistics problems, weather and other causal affects. So given the amount of risk that manufacturer's and retailers take on what causes them the most pain is the last 50 yards in the store to the shelf. And this is exactly where item level tagging can reap rich ROI rewards. The question and answer is both hard and easy. What would retailers give to have exactly the right product on the shelf at the moment of truth when the consumers want that product? Answer is everything. If the products are not there neither makes a sale. That's the easy part. The hard part is who will invest in a solution to solve that problem? The retailer? The CPG? The answer is both should invest because to Mr. Roberti's point, they will jointly reap rich rewards once they begin to understand how the data can be used in their business to drive cost efficiencies, sustainability programs and remaining competitive in these fiscally challenging times. Every day, 100,000 people leave a WalMart* because what they went in to buy wasn't in the store. That's 100,000 trips in by car. The cost of gasoline alone is mind boggling not withstanding that a sale didn't take place. So to all the manufacture's and retailers out there, be bold, collaborate with a retailer and a product and launch an initiative to get item level tagging going and gaining visibility to YOUR INFORMATION. And if you need any help we here are ready to assist as appropriate. Sincerely, Bill James Vice President www.seeonic.com 612.281.1089
Posted By: B. James 10/17/2008 at 12:43:59 PM