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Item-Level RFID Pilot Sees Major Benefits, Proves ROI

Australian telecommunications provider Telstra has completed a successful item-level RFID pilot in which the company tracked 15,000 cellular phones across the supply chain to its retail outlets. The benefits were considerable, and the company may expand the rollout next year.
Jul 07, 2009This article was originally published by RFID Update.

July 7, 2009—Australian telco Telstra recently completed an RFID pilot in which the company tracked 15,000 cell phones from a third-party distribution center to its retail stores. The company estimates that by rolling out the asset tracking solution across its 130 stores, it could potentially save $4 million per year in labor costs linked to non-customer-facing activities, reaching a positive return on investment in 18 months.

The company utilized its own RFID tracking system, the Telstra Wireless Asset Tracking Solution, which utilizes Telstra's Next G network, along with the company's wireless resources, network integration, application hosting, consulting and managed services.

"The pilot proved that wireless asset tracking will support improvements in on-shelf availability, reduction of delivery lead times, and the real-time information and alerts bring the material flow back in sync with the information flow across the supply chain," said Julien Marchand, wireless asset tracking sales specialist at Telstra Enterprise & Government, in an e-mail interview with RFID Update. "Currently, without anywhere, anytime data, human agents within an organization are prevented from responding in real time to supply chain events."

Telstra began working in the RFID market three years ago, developing a tracking system (called the Adaptive Asset Manager) that was used in trials with returnable pallet provider CHEP and GS1 Australia.

Wireless products distributor Brightstar Australia initiated the current project to help reduce shrink in the supply chain, partnering with Telstra Enterprise & Government's Wireless Asset Tracking Solution team and NEC.

Telstra tracked phones from a distribution center to six designated Telstra Retail outlets in Australia over a three-month period. Brightstar staff at the distribution center manually applied passive RFID labels (Gen2 Mini-Squiggle tags from Alien Technology) with unique identification numbers to the packaging of each mobile phone destined for the pilot stores.

When phones were picked for shipment, staff scanned the bar code label on each unit, which provided item and shipment details for Telstra's Adaptive Asset Manager (AAM) tracking solution. As shipments were dispatched from the DC to freight forwarder Australia Air Express, they passed by a fixed-position reader from Alien, and the system generated electronic proof of shipment for each phone.

A fixed reader at the entrance of each store logged the arrival of each phone, and another reader on the stockroom door provided additional tracking data.

"To receipt the order in the store, the stock controller had to slightly adjust the existing process by wheeling in the delivery on a radio frequency-friendly trolley through a stockroom door equipped with sensors," Marchand said. "Goods were then received automatically without the need to open every box, and an electronic proof of delivery was delivered on AAM. Any discrepancy was picked up immediately, details were made available on AAM, and Brightstar was notified by alarms via e-mails and SMS messaging."

As phones left the store premises, the RFID tag was read again at the store exit to automatically update stock levels in real time.

According to Marchand, Telstra achieved a 99.2 percent read rate for the phones being transferred to the freight forwarder, with the failures credited mostly to faulty tags that had been damaged during manual application.

The average read rate at the stockroom door in the retail locations was 98.9 percent after a maximum of two walk-throughs. The pilot also achieved a 95.7 percent read rate at the store exits, where the readers were placed in the ceiling up to three meters above the doorway. "In such an uncontrolled area where no additional process could be applied to customers leaving with their purchases, this rate remains well above industry benchmarks," Marchand said.

Telstra store managers, stock controllers, support team members and loss prevention managers, as well as Brightstar staff, were able to access tracking data via a web portal.

Armed with real-time data, Telstra was able to reduce labor and better control shrink at the store level. At the retail locations, Telstra improved productivity by reducing receiving activities by 75 percent and cutting the time to take inventory by 50 percent. Managers also had greater visibility of merchandise moving between the stockroom and the sales floor.

"The potential for a reduction in non-customer-facing time activities was rapidly demonstrated," Marchand said. "It is the most immediate and tangible benefit as the need to manually identify each phone on delivery disappeared, allowing administration staff to focus on exceptions."

The company was also able to reduce shrink/theft investigation times by 50 percent because RFID provided an audit trail of missing items, along with alarm notifications. Loss prevention managers were able to track the last location of the missing item and associate it with the store closed-circuit TV (CCTV) camera system.

"Instead of a mobile phone being missing for two weeks and the stock level being adjusted only at the next stock take, they were notified and could investigate quickly by linking the history of the handset with CCTV footage," Marchand said.

Marchand added that the company could save nearly $300,000 annually through shrink reduction across the supply chain by rolling out the solution to all of the company's stores. The technology could also improve demand forecasting and planning and provide the capacity to support and enforce existing inventory management processes.

Based on the results of the pilot, Telstra may begin rolling out the solution to its other stores as early as next year.
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