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Soap Maker Cleans Up with RFID
Canus, a maker of goat's milk soap, is deploying RFID to cut distribution costs, keep products from spoiling in transit and meet Wal-Mart's tagging requirements ahead of schedule.
Aug 30, 2004—For André Beauregard, the founder and CEO of Canus, a Canadian manufacturer of skin care products made from goat's milk, the decision to adopt RFID in the company's manufacturing and supply chain operations was a simple one.
"When I heard about the technology about a year ago, I could immediately see the potential advantages and the cost savings for us," says Beauregard. "Anyone who can't see the benefits of this technology isn't from this planet or at least isn't doing business on it."
In partnership withShip2Save, a software integrator that specializes in transportation and logistics, Canus deployed its first RFID pilot in April as part of a multiphase plan to test, configure and deploy RFID across the company's three Canadian distribution centers and two manufacturing sites.
According to Canus, the impetus for deploying the technology was not to meet specific retailer mandates but to drive savings and improve the performance of its own operations. "RFID will give us an edge in the market, and we don't want to wait. We have to be at the head of the train," says Beauregard. "We have told Wal-Mart we are waiting for them."
Canus is convinced that RFID deployment will drive savings by enabling the company to know exactly where inventory is at its distribution centers and while in transit, and by reducing the manual labor needed to check the status of shipments and deliveries. "We have between a half and three quarters of a million units per SKU in our distribution centers at any one time," says Beauregard, "and that inventory will rotate around 17 times a year."
Canus also plans to extend its RFID system to enable real-time monitoring of the temperature of its products en route to customers. The company sells a range of soaps and fragrances made from plant extracts and oils, but the bulk of its products are derived from fresh goat's milk. Many of these products spoil if they are not kept between minus 4 and 40 degrees Celsius (between 25 and 104 degrees Fahrenheit). In its five years of operation, Canus has only twice lost entire shipments because the temperature in the truck had exceeded that range. But the cost to the company was significant enough to warrant investment in trying to prevent it from happening again.
"Each time it has happened it has cost us around $60,000 [Canadian]," says Beauregard. "That works out as a charge of $24,000 for each year we have been in business."
The company also believes that by tracking the temperature of its products, it will learn at what point products may have been spoiled. "Right now, the first we know about a product having spoiled is when we receive a complaint from a customer," says Beauregard.
Canus is the second-largest soap manufacturer in Canada, and the company is looking to Europe and the United States to expand its sales. Last year, 80 percent of the privately held company's business came from sales in Canada, but Canus believes its U.S. business will grow from 15 percent last year to 30 percent in 2004, fueled, at least in part, by growing sales in Wal-Mart stores.
Ship2Save is funding the trials as part of its efforts to develop its own RFID services and software aimed at small and midsize businesses. "We are trying to do this as R&D to show that medium-size companies can deploy RFID," says Sam Falsafi, director of business development and RFID strategy at Ship2Save, which, like Canus, is based in Quebec. "We have to make sure we can come up with a cost-effective offering for small and medium-size businesses."
Canus's only direct expense has been a $100,000 investment in upgrading its accounting system to Microsoft Navision business management software to better support Ship2Save RFID middleware.
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