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MIT and IESE Study Shows RFID's Value
In a study involving Wal-Mart, Gillette and Kimberly-Clark, researchers find real financial benefits to deploying RFID EPC technology.
For the study, Gillette and Wal-Mart applied passive EPC UHF tags to promotional displays, monitoring their movements through the supply chain, starting from the moment the displays left Gillette's distribution center and ending when Wal-Mart placed them on the sales floor in its store. Wal-Mart and Gillette read the RFID tags on promotional displays and cases of product, both at the distribution center and at the store, experiencing read rates for up to 97 to 100 percent of the total cases shipped.
With RFID technology, the companies determined whether promotional products were put on display in the store by the promotion date. They also checked if the products still remained in the Wal-Mart's DC or store backroom after the promotion date passed.
The study determined that the amount of product sold during a promotion can be increased by as much as 19 percent by improving execution and ensuring promotional product is available at the store when needed. Researchers also found EPC RFID technology benefits where they did not expect them, Subirana says, noting that the misidentification of product cases is one common human error that can be rectified with radio frequency identification. "RFID speeds up the process, increasing accuracy," he notes.
In high-volume warehouses, multiple crates often arrive that appear similar but contain different product. Without RFID technology, warehouse employees need to identify each crate manually and match it with the correct purchase order. In the case of mixed pallets—those containing cases of different products—this can be a time-consuming process with a high error rate.
The above vignettes, Subirana reports, show that to extract value immediately, one need not have an entire RFID system in place. "It is possible to apply the technology in a subset of your operations, but in full production mode," he says. "The important message is to try it." In many boardrooms, Subirana explains, RFID implementations are stopped because of the complexity of a full-scale implementation. Still, he believes these vignettes should inspire management to elucidate use cases worth the investment on a small-scale basis.
"EPOD and promotions may be a place to start, but certainly are not the only option," Subirana says. "I'd like to encourage people to try to take a careful look at their operations and subsequently test the technology in a quasi-life scenario. We have found that in doing so, you will certainly discover things about your operations that you did not know." He adds that, "EPC technology will act as a magnifying lens of your operations and most certainly reveal shocking areas of value that you did not anticipate. I feel that EPC RFID will behave like SMS technology, fax, the Internet, mobile communications or e-mail, where it was not until management tried them that an explosion of value was perceived."
The vignettes are now available publicly at the MIT Auto-ID Lab's RFID Academic Convocation Web site, and at the EPCglobal Web site.
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