by Theresa Gilmore
Chain Digest Editor, Dan Gilmore, sat down
to discuss RFID with Dick Cantwell, Vice
President of Auto ID at Procter & Gamble.
He is also Chairman of the EPC Global board.
Cantwell has been very active in the Electronic
Product Code (EPC) community, and also been
a vocal proponent of the potential of RFID/EPC
in the consumer goods-to-retail supply chain.
Gilmore has questions, Cantwell has answers,
in Part 1 of this two-part Unplugged interview.
Part one of the full interview transcript
is below. For Gilmore’s commentary
Unplugged on RFID
seen every plan in the book to get better
retail execution, and I’ve not
seen anything that had ever lived up
to its expectations. What RFID
does, is it gives you, for the first
time, real actionable visibility.
What do you say?
us your comments here
Long term, I have been very bullish on RFID,
and am bullish right now in many applications.
But in consumer goods-to-retail, for a variety
of reasons, I am a bit skeptical in the
I have a lot of sympathy for your skepticism.
I don’t think there is anybody who
doesn’t believe RFID is going to happen
and is going to be a technology that is
going to revolutionize the future. The question
is how long is it going to take and how
is it going to play out.
I think we
have all done things in 20/20 eyesight that
we learn from and that’s the discovery
process of this journey we’re on.
So there are no real absolute right and
absolute wrong answers to the discovery
process that has allowed us to continue
to make the technology more reliable, more
predictable, more robust. And as we
have gone from the early days of seeing
this technology that was about all things,
all the time, to right now, where we have
evolved to prioritizing the opportunity
so we can deploy the technology where we
can get value in the short term.
In the past,
we were also doing all kinds of pilots and
tests across the whole value chain and across
many, many products, but we weren’t
getting any real value. We were just learning
how to use the technology. Now we’ve
narrowed our focus and we are going much
deeper into specific applications, and we’re
getting value. Proctor & Gamble
has already achieved several million dollars
of incremental sales. And that’s
just from a number of tests
sites we’re deploying in. I have demonstrated
over and over again that the return easily
exceeds the minimum of our company’s
financial hurdle rate for invested capitol.
That’s with tag prices that I know
are going to drop, and with retail sites
that I know are going to expand, and that’s
without benefit from further economies of
scale. That’s with just certain
products and using still a semi-automated
into the future: tag prices come down, there
are more sites, and tag application is more
automated. My ROI is going be significantly
higher. So, I am feeling like I used
to be bushwhacking through the jungle, which
is what we were doing 5 years ago. Now,
I feel like we’re on the road, headed
in the right way. It’s a journey and
there’s discovery, and discovery brings
new ways of looking at the benefits.
often been asked, Why hasn’t Wal-Mart
slowed down? Why has Wal-Mart not
done what they said they were going to do?
Why have they changed their tone?
And my answer to that is it’s a discovery
process. We’re inventing something
that no one knows what it will look like.
This isn’t looking in the rear view
mirror and rolling out a new enterprise
system, or a new warehouse management system
based on incrementally improving what we
inventing a new way of doing business and
as our group president for North
says, “We only know what we don’t
know.” And with that kind of
paradigm, we have a 24-month road map. We
look out to the next 6 months with very
finite plans, and during that process
we learn things, and then we adjust.
Move 10 degress to the right and then 10
soon, the opportunities we are shooting
come into full view. It might be different
than what we thought 6 months ago, but they
are real. We have a much better shot of
achieving them based on the work we have
done. And I think that is what Wal-Mart
is going through. They’re going
through kind of a trial and re-assessment,
trial and re-assessment, constantly fine-tuning
their lens on where they
want to deploy and get the most value.
and P&G, and any other manufacturer
or retailer in the CPG category, is faced
with the fact that in our individual operations,
the management that is in charge of those
facilities have to be convinced that they’re
going to get value from the technology.
You can’t just toss it over the fence
and expect that they’re going to plug
it in and embrace it overnight. There has
to be a process of socializing it and convincing
the people it will work and having them
own the process change that is going to
we’re seeing now within our organization,
within Wal-Mart’s organization, are
more and more people are saying “If
I’m going to hit my objectives, in
terms of driving sales, reducing inventory,
limiting shrink, hitting my cycle times
on new items in displays, reach my business
objectives, I’m going to have to use
this technology, so how do I do it?”
The more progressive people are getting
behind it. And that’s going to be
a continually evolving process.
I think if Wal-Mart had articulated the
scenario as you have just done, and stopped
acting, what has seemed to me, to be more
like a politician trying to justify to the
media what’s happening, we all would
have been better off. I think they
got too defensive about the whole thing.
They should have said “It’s
nobody’s business but ours how we
roll this out. Leave this alone and
we’ll tell you when we’re done.”
I think that would have been a better approach
for Wal-Mart and this industry – and
to admit the uncertainties.
I think Proctor & Gamble could have
done a little bit better job too.
We were tagging pallets of commodity goods
and not finding a business case. So
we went sideways for awhile. We were being
perceived as being among the skeptics at
one point. Now, we’ve gotten ourselves
back on the road. We’re focused on
a strategy that’s looking at opportunities
where we can deliver value now. We’ve
taken advantage of all the advancements
in EPC technology, and we’re producing
our return for the company. We have a business
plan that shows a positive return on investment.
So now we’re becoming more vocal and
more interested in communicating that this
is absolutely something that works.
At the opening of Alien’s RFID Lab,
I heard for the first time the notion that
P&G has 3 levels of products classification
when it comes to RFID potential. Can you
just take me a little deeper? What do those
designations really mean?
Sure. We did a portfolio analysis and we
ranked our products and our marketing events,
such as marketing a new product launch or
promotion, based on the value proposition.
In other words, how quickly could we leverage
EPC to provide value to our customers and
to P&G. We also cross referenced the
product characteristics that made RFID technology
friendly or not.
The RFID technology friendliness being purely
from a readability perspective, based on
packaging and materials and other factors?
Yes. There are obviously products that are
easier to read and products that are more
difficult to read. Products that have
more value going into the market place,
products that are more commodity products.
So we want to find the lowest cost solution
so that we can put more tags on the commodity
products, but at the same time we want to
make sure we engineer around the laws of
physics to be able to put tags on products
that are high in metal, liquid, packaging
that make reading more difficult.
So we created
what we call the “EPC Advantage”
strategy. At the top of the pyramid
are Advantage products - higher value products
or higher value marketing scenarios that
deliver a business case for EPC right now.
For example, promotional displays are a
huge opportunity that is advantaged.
In the CPG industry, our life blood is new
products and promotions. We take consumer
insights, turn them into new products or
new line extensions, bring more benefits
to consumers, and then we put them into
the marketplace with displays, and splashy
launches and put some advertising behind
our brands fresh, and it gives the retailer
what they need to create excitement within
their store. This is the engine that drives
our categories. To be able to get
more executional excellence out of our new
product launches and our promotional display
events is a huge advantaged benefit.
The nice thing about this is that, generally
speaking, you’ve got a corrugate
shipper that has numerous items in it, so
we only have to put one tag, and that one
tag on the outside of the shipper can be
amortized over all the products in the display.
It returns an ROI more quickly than putting
a tag on an individual item of toothpicks,
Also in the
advantage category, are high-margin, high-velocity
products like Gillette razor blades, Crest
white stripes, Duracell batteries.
So, given the state of play, there is more
than enough we can do to build the infrastructure
and the process to get value out of these
are Testable products. These are products
that are on the bubble. They need
more work to establish value. They need
a price of entry, the price of the tag has
to drop a bit more to make the ROI work
here. Maybe there has to be more process
change in place to make these work or a
few technical bugs that have to be worked
category is Challenged products. They
don’t have a business case yet.
There are technical handling obstacles that
have to be overcome. For example,
a box of Cascade dishwasher detergent –
it is like a block of metal. The crystals
themselves have certain properties and then
they are wrapped in foil, and the foil is
put in a foil box, and it is a tough nut
to crack. That would be an example
of a challenge product. We spend our
budget probably 75% against the advantage
products and probably 15% against the testable
products, and 10% against the challenge
products. It’s something like that.
constantly using what we learn from our
advantage products to demonstrate business
value, give us new business case learning.
That then generates more value, more opportunity,
which drives volume, lowers cost, and provides
funding and resources to mine the challenged,
and the testable opportunities.
When it comes to promotional displays and
out-of-stocks, many retailers have a store
execution issue, it seems obvious to me.
Is the way to solve that store execution
issue to go spend billions of dollars on
In a word, Yes. I’ve been in this
industry with Johnson & Johnson, Gillette,
and now P&G for over 25 years, keeping
up on both the marketing and the supply
side. I’ve seen every plan in
the book to get better retail execution,
and I’ve not seen anything that had
ever lived up to its expectations.
What RFID does, is it gives you, for the
first time, real actionable visibility.
It gives you the systems to really know
where your products and displays are.
What we discovered
in 50 or so individual pilots and research,
all showing very reliable, repeatable results,
is that only about 45% of our displays are
actually being executed according to plan
in the store. If you had asked us
even with all the programs we had in place
in order to correct that before RFID, we
would have said 80-85%.
45% of our displays being correctly implemented,
that’s a huge opportunity cost, and
also huge in terms of shopper satisfaction.
What we’ve also found is that 30%
of our displays that we ship in, where we
pay the customization cost to build them,
get broken down and the display merchandise
is used to stock shelves. This is
because perpetual inventory is inaccurate,
and the displays provide a convenient source
of inventory to put on the shelves.
But, it’s also because there is no
automated process for finding displays and
getting them out to the store floor where
What if a retail store manager has an electronic
list that would list the 6 displays that
have to be on the floor today or your bonus
gets docked? Wouldn’t you try that
first before you tried RFID?
It has been tried. We’ve had a number
of very significant launches – The
Fusion razor (from Gillette), the Sensor
razor before that; these launches are backed
by hundreds of millions of dollars of marketing
support - advertising on the Super Bowl
– no company is as good as Gillette
at surrounding the consumer with that initial
I can tell
you that down to the aisle clerk in the
stores on Day 1, they are anticipating and
ready for the displays to be there.
And we get 85%, maybe 90% compliance on
a good day. This is a one-off launch
that happens only every 4-5 years, one of
the biggest things for Gillette, one of
the most important events that our retailers
But we have
hundreds of other events, that when you
combine it with the hundreds of thousands
of other events that our competitors are
also putting out there, despite the fact
we know we can apply manual pressure and
the store manager can generate lists, and
the store manager can crack the whip, the
fact of the matter is, half of these displays
do not get put up correctly.
take out the portion that they eventually
get put up, but maybe they are late, you
are still talking about 60%-80% compliance.
My answer to your question is, if you are
relying on a manual process to do that,
given the motivation and the chaos and the
low wages of the people doing the picking
and the placing, you are going to run into
errors, noncompliance, lost goods, and RFID
takes that out of the equation. It
gives you an automated system where you
come to work and there is an automated report
that says do this. And if it isn’t
done, the store manager knows and the regional
headquarters knows, because they can tap
into the same automated system to monitor
this kind of performance.