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End Users Discover RFID's Value

RFID technology can deliver a return on investment in the retail/consumer-packaged goods supply chain—and in many other areas.
By Andrew Price
Feb 01, 2007—At the end of 2005, RFID Journal forecast that 2006 would be remembered as the year in which consumer-packaged goods companies, faced with tagging requirements from retail customers, "discovered the return on investment in Electronic Product Code technologies." Our prediction was only partially correct. It turns out that companies in many industries without mandates also discovered the hard benefits of various types of radio frequency identification technologies.

Leading CPG companies, including Procter & Gamble/Gillette, Kimberly-Clark (KC) and Campbell's Soup, used EPC data provided by Wal-Mart to identify clear business benefits. The benefits today fall into three main areas: an increase in sales due to better tracking of promotions and new product introductions, fewer invoice deductions by using RFID for electronic proof of delivery, and a reduction in chargebacks or penalties, due to improvements in shipping accuracy.

CPG companies believe they can save millions of dollars every year from electronic proof of delivery.
An EPC trial carried out in February 2006 by Procter & Gamble increased sales of its new Fusion razor. The details of this trial were presented for the first time to attendees at the RFID Journal LIVE! conference, held in Las Vegas in early May. "On average, EPC-enabled stores realized greater sales than the control stores," Dick Cantwell, vice president and head of RFID at P&G, told the audience. He added that those sales "paid for the tagging of all of that merchandise many, many times over."

And it's not just the leading CPG companies that are discovering the benefits of tagging cases. Blyth HomeScents International, a wholesale supplier of candles and fragrance products, is tagging cases for Wal-Mart to ensure that it ships exactly what the retailer ordered. It developed a mobile picking application that has improved picking accuracy, reduced chargebacks and enabled the company to create metrics for rewarding employees who pick products accurately. The application required high read rates, so the company had to overcome the challenge of reading tags on products packaged in different materials, including glass, ceramics and metal cans.

Other CPG companies that have not yet come forward with the results of their studies told rfid journal that they believe they can save millions of dollars every year from electronic proof of delivery. These companies say they lose money when a retail partner says it didn't receive all the cases it ordered. Items that are miscounted are often not paid for, even if they were delivered.

Many companies outside of the retail/CPG sector have discovered benefits from using RFID internally. At its plant in Regensburg, Germany, Toshiba is using UHF Gen 2 tags to track the 9,500 laptops it customizes each day for customers in Europe, the Middle East and Asia. The technology is reportedly boosting worker productivity, easing bottlenecks and improving order fulfillment.

Bemis Europe, the U.K. division of bathroom furnishings maker Bemis Manufacturing Co., is using passive RFID and a manufacturing execution system to track and measure both the injection-molding machines used to make its products and the performance of the operators who work those machines. The goal is to shorten the time needed to manufacture products at its plant in Burnley, Lancashire, by better understanding where and why inefficiencies occur during production.

Crown Equipment, a manufacturer of electric lift trucks, is saving $200 to $300 per day on costs associated with lost and unrestocked tools, thanks to an RFID portal that tracks the movement of items from drill bits to rubber gloves. Crown installed an RFID system at a tool crib—akin to a movable closet for tools—at its New Bremen, Ohio, facility in June. The system was so successful that the manufacturer installed a second portal at the same site in November.

Health-care companies, pharmaceutical drug manufacturers, paper and pulp companies, transportation and logistics providers and many others also have discovered how RFID can be used to solve specific internal business problems or enhance efficiencies. Even municipalities are jumping on the RFID bandwagon.

The German city of Warendorf is using RFID technology to improve its ability to comply with laws mandating that sewage canals and pipes be checked on a regular basis. To track the maintenance of its 205-kilometer (127-mile) network of canals, it tagged the manholes with roughly 5,500 RFID tags. Workers scan the tags, providing the city with an up-to-date overview of which canals have been monitored. The RFID system also reduces the number of errors made by workers confused by the layout of pipes at some intersections.

In 2007, RFID is likely to continue to expand into new areas as more companies learn about the success of new applications in different industries. Vendors that have been struggling because of slower-than-expected adoption are hoping these success stories are the thin end of a wedge that leads to widespread adoption for closed- and open-loop applications.
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