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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
Brian Schulte, Intermec's retail industry marketing director, and cochair of the GCI DSD EPC RFID subcommittee, says the survey resulted from discussion of RFID technology among the working group. The topic came up repeatedly, he says, and the group agreed to form a subcommittee to conduct a survey to determine the industry's thoughts on implementing the technology in the DSD supply chain.

Subcommittee members include Anheuser-Busch, The Coca-Cola Company, Dean Foods, Kraft Foods, Miller Brewing, EPCglobal and PepsiCo. The results were overwhelmingly against the near-term deployment of RFID in the DSD supply chain, and few said they expected to consider it over the next few years.

Because DSD manufacturers generally have visibility all the way to the retail shelf (since their own employees handle the shelf stocking themselves), the incentive for RFID is not as great as it would be for companies that lose sight of their product when they are delivered to a distribution center operated by a retailer or some third party.

"One of the appealing things about EPC RFID is the visibility it can pass back to the supplier," Schulte states. With RFID, goods suppliers can monitor when their products left the distribution center, arrived at a store's back room and moved to the front of the store, as well as when the cartons were taken to a trash compactor. However, he says, suppliers that ship directly to stores "already know all that."

The survey also examined areas that needed to be addressed before RFID technology could be fully deployed in the DSD supply chain. The primary area of concern to survey respondents was data synchronization, in which retailers and CPG manufacturers must have the same data about a product, such as size and pricing.

"We try to be really clear that this [survey] is a snapshot of opinion in a specific time—November and December of 2007," Schulte says, noting that business conditions, as well as technology costs and performance, can rapidly change.

As a result of the survey, Schulte says, GCI subcommittee members "are encouraging retailers and CPG companies to continue to talk about EPC RFID and look at [deploying the technology at] warehouse deployments first." Many CPG vendors, he points out, have two supply chain models—some products are sold through the DSD supply chain, while others go to third-party distributors, or to warehouses and DCs operated by a retailer, and then on to the store.

"The stage we're in now," Schulte states, "is to get the results of the survey out." He adds that GCI, in cooperation with Intermec, will conduct a webinar later this spring, and may revisit the survey in a year. "Our expectation is that we will see movement in how far out companies see their obstacles," he says. The GCI report is available at the Web sites of both Intermec and GCI.

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