Radio-frequency identification (RFID) tracking technology is used in only a tiny slice of the supply chains that carry the stuff companies make to the shelves where we buy it. Despite that narrow application, companies such as Gillette, Levi Strauss, and Wal-Mart are getting data they've never had about where goods get stalled on the way to shoppers.
One Wal-Mart supplier found that some shipments spent 24 hours longer than it expected at one point along delivery, Simon Langford, manager of global RFID strategy for Wal-Mart, told attendees Tuesday at this week's Retail Systems show in Chicago. That prompted the company, which isn't tagging every product line coming to Wal-Mart's RFID-enabled distribution center, to tag at least one case on each shipment, so it can track its progress.
"When they started seeing that data, and getting that visibility, there were some 'Wows' in there," Langford said.
Here are some other insights shared Tuesday by executives from Gillette, Wal-Mart, Levi Strauss, and Michelin:
Gillette is using RFID to test whether, when it runs a Sunday ad, say, for its M3Power razor, enough of the battery-powered razors reached the store before Sunday and made it to the shelves. That's new data: RFID, which carries an electronic product code (EPC), lets stores put readers only at the dock door and also on the door from the back room to the store.
"We wouldn't have had this information without EPC," said Jamshed Dubash, director of Auto-ID technology for Gillette.
Dubash offered anecdotal results that showed one recent promotion worked well, but also revealed an opportunity for making more money.
Using RFID-EPC data, Gillette found all the stores that it measured received the product before the promotion ran. And, of all the stores that moved products from the back room to the store in advance, average dollars per point of sale was 48% higher than those that did so after the promotion start date. So, the promotion worked. But 38% of measured stores didn't execute correctly. "We see this as a huge opportunity," he said.
Gillette has been among the leaders in RFID, and over the past two years it has built a business plan in which it estimates 80% to 90% of the benefits will come from collaboration with retailers. Put another way, 20% or less of the benefits will come from operational improvements it can make on its own, within its walls. "Our approach has been to launch and learn," Dubash said.
Gillette initially got started into RFID with the foremost goal of reducing theft of its products, Dubash said. It now sees reducing out-of-stocks as its long-term goal. Gillette has taken the approach that if it's shipping to a retailer's distribution center that's RFID-enabled, it puts RFID tags on 100% of its products bound for that distribution center. Many companies only ship select products with RFID tags.
Reducing out of stocks "is still our focus, our mantra, but to get there, we think there are smaller benefits we can start getting now," Dubash said, citing proof-of-delivery, inventory reduction, and promotional performance.
Wal-Mart Stores Inc. has learned it doesn't need to get perfectly complete data to get value from RFID, Langford said.
Wal-Mart knows what inventory it has in each store, since it closely tracks shipments arriving at the store, and sales going out the door. But in stores where it doesn't have RFID, with readers that tell if a product moves out of the back room, it doesn't know where in the store the product is. "Today, without RFID, we don't know what's in the back room and what's in the front of [customers'] hands," Langford said. "RFID gives us that window."
And for tracking that information, even less-than-complete data can give the company fresh insights. "If we get 95% read rates, that gives us 95% visibility to the stock in the back room, which is tremendous," Langford said.
One of the big opportunities for the future is how Wal-Mart will use that data. During the busiest shopping times, Wal-Mart employees at times can only fill one out of every 12 out-of-stock situations on the store floor, Langford said. Any improvement to that would produce instant benefits, and the company is testing various handheld and wireless devices to let employees more quickly locate merchandise in the back room. Eventually, the company would like to help prioritize that process as well, to help employees choose the highest-priority merchandise first. "It's how you use that data," Langford said.
Like Dubash's "launch-and-learn" philosophy, Langford urged companies to map out the benefits they're likely to get and "share the learning, share the success stories." He also urged companies not to over-complicate the process by trying to make too many technology or business-process changes. "Don't try to take the whole gauntlet of process changes at once," Langford said.
Levi Strauss & Co. is both a retailer and a supplier to big retailers such as Wal-Mart.
It recently equipped a store in Mexico City so that every item carries an RFID tag, allowing it to take a full inventory every morning in about 30 minutes. "We're almost fast-forwarding RFID," said Fred Betito, who manages global IT strategy and enterprise architecture for Levi Strauss.
The project's too new to have yielded a lot of hard results yet, Betito said. But by taking inventory more often, and getting more accurate data on sizes on the shelves, it's likely to yield benefits in terms of reducing out-of-stocks and improving customer satisfaction.
Tires can have as many as a dozen optical marks on them, since every automaker wants different information or uses a different system. Michelin, while it would like to see RFID chips made a part of the tire that lasts throughout its life, is pushing for a more coordinated approach for consumer tires. "So standards come first," said Patrick King, a leader of global electronics strategies for Michelin North America Inc.
But the company already is using RFID in connection with large, industrial tires, including those involving re-treads, where the chips are useful in tracking the product's life cycle.
As far as factors needed before RFID will take off, King reached back to the history of bar codes, and reminded attendees that the emergence of small, inexpensive readers were key to its adoption.