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Meeting Wal-Mart's RFID Mandate
Mark Engle, Director of IT, Campbell Soup
Mike O'Shea, Director, Corporate AutoID/RFID Strategies & Technology, Kimberly-Clark
Tom Torre, Associate Director Supply Chain Innovation, Procter & Gamble
Moderator: Mark Roberti, Editor, RFID Journal
Apr 18, 2004—Roberti: It’s now my pleasure to introduce the panel. We are have three gentlemen who are actually beginning to grapple with these issues; they are all among the top 100 suppliers. Tom Torre from Proctor & Gamble. Michael O'Shea with Kimberley-Clark and we have Mark Engle, director of IT at Campbell Soup. Welcome gentlemen, and thank you. As we heard, there are a lot of issues that you guys have to deal with. How do you begin going about the addressing thi question of trying to get a return on investment?
Torre: Good morning. Speakers hit on a number of the key things this morning. The one of the most important one is ROI—trying to identify and quantify the collaborative benefits between manufacturer and retailer. The reality is that we have done a pretty good job at P&G. We believe in optimizing the use of the bar codes within our own four walls. So if you look at that, and you look at the benefit pool that we have been able to identify, [the benefit from RRID] turns out to be more incremental versus breakthrough. If we work just within our own four walls, the business benefit from the business case is in positive. So as such, we need to really focus in the next six or twelve months on ROI, trying to understand what the collaborative benefits are between us and our regional partners. That’s more focused on learning about what those benefit pools are and importantly what are the applications and technology requirements to get those benefits.
Roberti: Is collaboration the key t getting the benefits?
O'Shea: This is kind of a re-definition as far as what collaboration is all about. I have to have a little fun here with Tom. Everybody should know that our two companies are pretty avid competitors, and just a couple of months ago, I got a phone call from somebody within P&G, and he said to me: "You know, I never thought I would ever be calling somebody from Kimberly-Clark to talk to them," and I assured him that I would be easy on him this first time. We did talk but the collaboration is evident. Just take a look within EPCglobal and the diversity of the companies working together there.
EPGglobal may be a little CPG-centric, that’s true. That’s where the energies are, and I bet within, within that group there are a lot of companies working together trying to develop these standards. As far as internally on the collaboration, as we’ve socialized this, this concept within Kimberly-Clark. In my 25 years with KC, I haven’t seen as much energy as in people wanting to get involved and to start seeing how they can reinvent some of our business process and drive it. So, yeah, collaboration is necessary. We’ve seen benefits from their collaboration both internally as well as externally and I think it’s just laying the groundwork for a successful roll out the future.
Engle: We're a member of the EPCglobal. One of the things that we want to do from that perspective is to help try to drive those standards because as, as a supplier of a high-volume sort of a low-margin type of product, we want to make sure the points of variability in this whole effort are controlled, whether it’s 96 bits, 128 bits, 256 bits, some thing of that nature. We would like to have one standard so that I don’t have to do something for Boise versus Minneapolis versus anybody else. We want it to be consistent across the board, and that’s one of the benefits of joining the EPCglobal trying to help drive those standards. It does simplify a complicated environment that we’re starting to live in.
Roberti: I mentioned earlier that data synchronization is very important, a prerequisite for RFID. Do you consider that as part of the cost of the deployment or is it something separate?
Engle: I had written down some notes about the biggest challenges that we have. The first item that I have is about data synchronization and getting that in place. I’ve always stated that that really is the foundation for us. We have gone back into the legacy systems, cleaned up our data, participated in UCCnet. When we get to the EPCs, we’re prepared internally to do that, and I challenge others that you need to get to that point and start to clean that data up, communicate good accurate or clean data, so I do believe that’s a foundation.
O'Shea: I agree. RFID is not driving data synchronization. That effort was going on internally within Kimberly-Clark and with our customers but, uh, first to really to realize the value, uh, of RFID we need to have all that data cleansed and synchronized throughout the value chain.
Roberti: As you work through the areas where you’re hoping to achieve benefits, is there an opportunity to rethink some of the business processes and fix some of the things that are broken, Tom, things that might not be as efficient as they could be?
Torre: Yes, certainly. Fundamentally you are going to have to re-engineer work processes to get the full advantage of this technology. Simply doing things the same way but having it enabled within an RFID system, while you get some benefits, you certainly aren’t going to accrue the type of benefit you could if you don’t re-engineer how you do work.
Roberti: Christine Overby [of Forrester Research] mentioned that the warehouse offers the best short-term opportunity. Is that what you’re seeing in your evaluations?
Unidentified panelist: We’re looking at the same stream of benefits that you probably heard many people articulate around hands-free data entry, efficient receiving and shipping, how do you improve labor productivity through those processes, but I think that’s only scratching the surface. Again, I think the real, focus needs to be, at least from our perspective, on how do we work collaboratively with our retail partners to get better visibility into the, into the supply chain? How can we use this technology to improve things like new product introductions, better visibility about compliance? There are a whole lot of other benefits that again, I think are going to require collaboration between trading partners that frankly are bigger benefit pools because we’re pretty efficient within our warehouse operations today.
Roberti: All three of you have a large number of brands, a large number different products. How do you pick out which products you’re going to begin tagging first, begin doing some testing with? Mike, you want to take that?
O'Shea: Sure. We broke it down, sort of left to right very logically. All of our products sold, products sold to one particular customer, product shipped to those particular three distribution centers [DCs]. Those products that were successful in some earlier field tests that we did in our Paris location— Paris, Texas location. It was a food chain kind of concept of how we get to some compliance so that we were successful in our compliance and having some of the learnings and things of that nature that you talked about previously.
Roberti: Campbell Soup obviously makes a lot of canned goods. Mark, are you are having actual problems, getting the read rates that you need to get?
Engle: In the Paris field test that we ran in December, we actually had pretty good success reading those pallets, which was sort of disappointing . . . if you were trying to leverage the metal-liquid concept to not go forward (laughter). So with that in place, one of our products that we did go through the testing was successful. Now, you have to look at the pallet level. You can’t read those [cases in the center of a pallet]. We know that, but having the GTINs in place and the hierarchy in place of what's on the pallet, what it’s made of and looking at the points of the distribution flow, you start to figure out where that pallet is and what’s really configured on that. So some of the products that we have weren’t as successful, such as microwaveable bowls. The chips that we were using were brought in specifically to attack the metal and liquid issues. So, there are some challenges out there. Knowing that, we can read individual cases and have done that with the correct portal configuration. So, we've had positive results and we are moving forward based on that.
Mike, Kimberly-Clark makes Scott towels, Kleenex, Huggies, all of these products seem RF friendly. Have you run into any products that are difficult?
O'Shea: Baby Wipes are wet brick. Actually, back in 2001, 2002, we were part of the Auto-ID center’s field tests, and we did not follow the advice of the previous speaker. We probably took the most difficult product because we wanted to see if we could stress or break the technology. I’m happy to report that we were successful, and we did break the technology because Baby Wipes did not work. But we feel we’ve got some solutions there. Our packaging engineers are working towards that, but the other products are less of a challenge, and I’m glad I don’t have to deal with the metal cans, toothpaste and other types of things.
But when we’re putting together our deployment strategy, it was an involved process. We have 11 different product categories, and we built a model on each of those product categories and then we narrowed it down to three different scenarios as far as how we’ll deploy the technology. So, basically we have 33 different models that we evaluated and our deployment strategy will be to roll out those product categories where the price of the technology and all the things fall in place. So, we’ll be scaling this up according to maximize our returns.
Unidentified panelist: Just, just to build on that, we’re doing some pretty rigorous performance testing. You need to look at both the cost and the performance and so, you need to look at the business case for the individual product groups.
Torre: What we’ve basically done is classify our product lines in one of four categories. Our friendly products like paper, diapers and the like; little more RF unfriendly, like powder detergents, which have a little bit more density and additional moisture content; and tougher yet are the liquids—things like Pantene shampoo and liquid Tide. Then we’ve got the ultimate test, which is Cascade dish detergent which is in a foil wrap package. It is packed very tightly in cases, just like a cube of metal.
We’ve been testing technologies that we believe are scaleable. What I mean by scalable are technologies that we believe have or on the path to potentially be at our target price points, so we’re not testing every tag and reader combination. What we’ve discerned thus far is we can read individual cases on a conveyer with the right of portal configuration. We can read individual pallet tags going through a dock door one at a time.
We’re not able to read inner cases in a pallet so mixed pallet we can’t do yet. So we’re in the process of really trying to understand the different tag and reader combinations, their performance, characteristics. Our next step, when we’re having a problem, is to figure out what are some things that we can do to work around that. Then, of course, we’ll have to understand what the cost associated with that is. So, in one sense, you want to start with RF-friendly products from the roll out stand point, but that might not be where your business case is either because our business case is probably better in a health and beauty care environment.
Roberti: Christine Overby mentioned that there is a cost associated with applying the labels at this point. Presumably, equipment will be developed to automate that. But is a certain amount of slap and ship inevitable at this point in order to meet the requirements from retailers?
Engle:Our goal going into January 2005 will be tp take it one step further out of our Paris location. We go through some re-packing activities for special packs and things of that nature. From a disruptive perspective within the supply chain, we felt that was the best place to put it. When you come and see a manufacturing line producing cases of soup, they’re moving rather rapidly. We’re putting bar codes on them right now, and they’re keeping up, but once you add the RFID portion of that, it slows that down, and when I represented that case to our vice president manufacturing, I said we can slow our line down, that didn’t go over real big. (Laughter)
From a disruption perspective, we’re going to go do that. We’re going to learn from all those steps along the way so, going in we didn’t want to have to do that but that’s how it seems it’s going to play out. In the long run, we need to bring that back in, all the way to our suppliers and things of that nature, but right now, we’re learning the technology, sorting it all out. That’s our game plan.
Roberti: Mike, there’s been a lot of talk about the fact that the cost is being put on the suppliers. Is there an opportunity for suppliers to collaborate with their packaging companies to begin to spread the cost across the supply chain?
O'Shea: The cost is going to have to be shared throughout the value chain. But in order to justify that, everybody’s going to have to realize some value on that, and we are in discussion with some of our suppliers to see how we can bring added value into the our current business processes . . . You really have to go in there and disrupt—borrowing yesterday's comments—how we’re doing things and really maximize the value of the technology. So we’re exploring those opportunities.
Roberti: Are there any areas where you've identified savings?
O'Shea:We did our business case, and we did find substantial opportunities that did exist within our four walls. After Wal-Mart’s announcement last spring . . . we redirected our efforts a little bit because we’re all working with the same pool resources internally. But we feel that if we can integrate some new manufacturing processes and new maintenance processes and how we bring in raw materials and finishing thing supplies, it will offset the significant portion of the cost we got as far as going externally where the cost structures are today.
Engle: When we talked to the different executives and the supply chain folks, what we were trying to do was get the cost concept of that chip out of their heads. Once they got that cost piece out of their head, they were coming out with application or business process after business process where we could actually utilized this. We do utilized the technology now, even for tracking of tomatoes and things of that nature. So its nothing new to the Campbell engineers. They’re all over it.
There’s not one big bucket, at least in our supply chain, because after 137 years we’re pretty efficient when its come to that. But there are small buckets along the way that can improve the business process, give us better information, start to drive some advantages.
Roberti: Tom, is RFID a little bit like the Internet where you spread the cost across many, many applications?
Torre: I don’t know, I understand Mike does have the killer application. He hasn’t decided to share it with the group yet. Yeah, I think it is. Our innovation people would tell you that we’re really good at pinpointing the costs and being conservative in that regard and we’re also very conservative in what we attribute to the benefits. An important part of what we are going to do in the coming year is get some hands-on experience with how the technology works, and we’ll find those different benefit pools, some that we have an even thought about yet.
I would like to just add one other point as it relates to the whole benefit area. It’s one thing to identify benefits. We’re also trying to understand whether the technology capabilities today allow us to access those benefits. For example, in our business case, one of the areas that offers potential benefits is where we do a lot of case picking in the health and beauty care area. So you identify what the potential benefit area is, then you say, Alright, what are the applications and technology requirements that I’m going to need to access that. Something as simple as picking a case out of a big slot. I have to have a hands-free way of reading that case—not any of the cases around it, a way of putting git on a pallet, and confirming that its on that pallet. As you talk about what applications are required to do that, there's still a lot of development work that needs to be done. So simply identifying the benefit pool is the first step, but then what are the technology requirements and applications required to get at those benefits is really important work that we need to do as an industry in the next four months.
Roberti: In terms of organizing the effort to begin looking at the business case and begin figuring out where to deploy, do you have any advice, Mike or Mark, about whether this is an IT led effort, a supply chain led effort? Does it matter?
O'Shea: Internally within Kimberly-Clark, it was actually a joint effort between the research organization and the supply chain organization. Since I came from the supply chain organization, and we feel that’s where the low hanging fruit is right now, that’s where our initial focus is. But IT is heavily involved. Our computers services group is looking at all the hardware configurations and their impact within our facilities. We need to engage packaging. We’ve got a dedicated packaging team trying to developed the solutions there. We've got support from our procurement group as far as how they can support this on a global effort because this is a global effort. We do have research scientists available to us from our research organization who are dealing with the laws of physics and helping us to develop some of the solutions with our packaging team. So it’s a joint effort, everybody is taking their own piece of the pie and working on it. So I wouldn’t say it’s necessarily IT driven within Kimberly-Clark. It's a collaborative effort with all those functions.
Engle: You know, I live in a matrix world. I report up into the supply chain and then report into IT and the beauty of this one right now it is supported really by the CEO. I’m figuring out what we have to do and things of that nature. Last week, we spent three or four days with our new global supply chain lead going over different initiatives. So I’m hoping it gets away from being IT driven and goes more into the supply chain. We have really staffed up the project team to get to that point.
Roberti: Typically, how involved is the CEO? How is it CEO looking at this?
O'Shea:I don't think you can underestimate the importance of having executive sponsorship for this project. We have two sponsors of this project, or CIO and our supply chain officer, and then on a regular basis our global leadership team, which is the leadership team of the CEO. You need to have that top level support to really move forward in the way that that you want.
I report to the chief technical officer and she reports to the CEO. You know she’s our executive sponsor, but there's an executive committee working with her and that is the heads of all our businesses, our global businesses, so they’re all engaged and aligning the resources at the deployment level to make sure that we can make this all happen. We've got resources dedicated to the development of the technology, development of the processes and then we’ve got resources dedicated to the deployment. How are they going to execute this, working at the facilities, to get things ready for January 2005.
Roberti: Ladies and gentlemen, please join me in thanking our panelists.
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