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Suppliers Find No Incentive to Adopt RFID for Direct Store Delivery

A report issued by international trade association Global Commerce Initiative recommends suppliers and retailers initially focus instead on using RFID for products shipped to distribution centers.
By Claire Swedberg
Apr 14, 2008The direct store delivery (DSD) market is not ready for RFID, according to a survey conducted by Global Commerce Initiative (GCI), an international trade association that develops standards and best practices. Consumer goods providers, the report recommends, would be best served by focusing on deployment for supply chains that include delivery to distribution centers.

The DSD industry comprises suppliers that deliver products directly to a retailer's stores, and often use their own staff to stock shelves and track inventory at those locations. Beverage companies and manufacturers of other fast-moving goods typically use this model. As described in a report entitled "Supplier and Retailer Views on EPC/RFID Technology for Direct Store Delivery (DSD)," the survey of consumer goods DSD suppliers and retailers found that 94 percent of respondents failed to see a return on investment (ROI), either currently or in the next seven years, with an RFID deployment.

Brian Schulte
"But even if EPC RFID tags and equipment were free and EPC-enabled business processes were proven to provide strong business value," the report's authors write, "significant implementation obstacles would remain. Respondents recognize these obstacles, and currently believe they will remain in place for years."

Conducted online in November and December by the GCI DSD Working Group's EPC/RFID subcommittee, and sponsored by Intermec, the survey polled 111 of GCI's members working for consumer goods suppliers and retailers, the majority of which have a global consumer base but which are mostly headquartered in North America. Of that group, 36 responded, 29 of whom worked for CPG manufacturers, six for retailers and one for businesses identified as "other."

According to the survey, retailers have a slightly less negative perception of RFID technology than suppliers do. Ninety-seven percent of suppliers indicated the lack of ROI for the technology was a prohibitive or high obstacle to adoption of EPC RFID technology in DSD operations, compared with 83 percent of retailers that felt the same way. All agreed that broad trading-partner adoption was essential for the deployment of EPC RFID technology in DSD operations, and that quality read rates would also be critical.

All retailers polled said they felt RFID has the potential to make recall orders more efficient, while only 31 percent of DSD suppliers felt the same way. The two respondent groups also disagreed on cold-chain management for DSD shipments. All retailers felt RFID offers benefits in that realm, while only 7 percent of suppliers expressed the same opinion.

Due to the overall negative response from those polled, the GCI DSD Working Group reported that DSD products and processes should be considered "EPC-challenged," meaning business value is simply not yet present, either at present or in the near future, for DSD suppliers and retailers.

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