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Tracking Products to Thwart Thieves
To reduce losses and boost efficiency, Woolworths has launched a pilot that uses RFID and other technologies to track products through the supply chain.
Woolworths purchased 15,000 of Savi's EchoPoint tags and is putting them on all of its dollies in the UK. The original aim was to track only high-risk merchandise, like expensive clothes and CDs. But the company decided to extend the system to all items.
Woolworths experienced only a few minor problems in setting up the system. Some of the 15,000 tags put on the dollies fell off or weren't put on correctly. "One of the things I learned from this pilot is that RFID, as a technology, is relatively straightforward," he says. "It's the process issues that go around it that can make a success or failure of it."
To avoid process-related problems, O'Neill and his team worked very closely with the team running the distribution operation and with the drivers so that the system would suit their requirements. The company uses plastic and metal dollies. The company had to make a housing that could be bolted on to the metal dollies to protect the tag. The drivers advised O'Neill's team where the housing should be. Then a few were put out in the field to see if the housing would stand up to the rigors of life in the supply chain.
It's not clear yet how much the system will reduce shrinkage. Clearly, it can't prevent someone from stealing items off a truck. But if there is a theft, the company will have a good idea of when and where it occurred, and if necessary, procedures can be changed. The system also prevents orders from being sent to the wrong store, which not only is inefficient but could also lead to lost sales because an item is not in stock.
In recent years, Woolworths has worked aggressively to cut shrinkage, which is now running at 1.9% of sales. With $3.7 billion in sales in fiscal 2002, it's obvious that any RFID system that can significantly reduce shrinkage will more than pay for itself. An equally important question is whether the system will also deliver the expected benefits from improved availability and reduced inventory. O'Neill believes that the improved visibility will enable those benefits to be realized.
So is there any chance Woolworths will deploy the system when the pilot concludes?
"Internally, we have to produce a report that says this is what the business case is for any future investment in RFID," says O'Neill. "That business case will have to stand up against other business cases for other investments in our business. The ones with the best return for our shareholders, customers and employees are the ones that will be taken forward. I would hope this is one of them, but you never know."
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