EPC Success Requirements |Wal-Mart's Green Scorecards | CASPIAN and AMEX Tussle over RFID

| Supply Chain News Bites | Supply Chain Videocasts | Feedback | Trivia | Stock Report

March 15, 2007 - Supply Chain Digest Newsletter
SupplyChainDigest - Your first stop for supply chain information

Become a Sponsor Click here for information on how to become a Sponsor
Send to a Friend Send this newsletter to a friend. Click here!
Not already subscribed? It's free! Click here.

Archives | Events | Featured Report | Featured Offer | Upcoming VideoCasts | Feedback
Featured Report

Sponsored by Infor

Free Download: Aberdeen Inventory Technology Report

How are best-in-class companies leveraging inventory technology and processes? This Aberdeen Group benchmark report details why two-thirds of respondents are considering new inventory optimization technology. See how these companies are thinking of inventory as a way of gaining market share and competitive advantage.

Download the complete report compliments of Infor

First Thoughts by Dan Gilmore, Editor

EPC-RFID Success Requirements Revisited

We covered the recent splat over Wal-Mart’s RFID program with interest over the past few weeks. For those who haven’t followed, we had:


  • A negative story in the Wall Street Journal on Wal-Mart’s rollout, saying it was going slow, consumer goods manufacturers were grumbling that there was no ROI, and RFID wasn’t significantly reducing supply chain costs.
  • Wal-Mart and others responded, with a letter to the editor from CIO Rollin Ford, who basically said the program is on track, vendors see the value, and it’s all about reduced out-of-stocks, not operational cost savings. Wal-Mart also mustered up support from a few CPG companies, such as positive statement from Campbell Soup’s CIO Doreen Wright, who said "It's hard to dispute the value of this technology," referrring specifically to RFID use to track store promotional displays.
  • Meantime, the CIO of Sara Lee said tagging costs were too high and performance of reads too spotty to deliver value right now.

As a publisher, it’s been fun.


We are going to take a new look at all of this over the next few weeks. If you have anything you would like to share, publicly or privately, please contact me at the feedback button below, or at our new office number (937-350-7915). As always, we’re going to be objective, analytic, and hopefully thought-provoking.


That said, we thought it would make sense to review the perspective SCDigest Technology editor Mark Fralick and I shared back in 2005, when we sensed a lull in the EPC movement, and offered our suggestions on The 10 Things Needed for EPC/RFID to Thrive (see the full report).


To be clear, this was specifically related to the Wal-Mart and other retail-related programs, not RFID in general.

Here are the 10 factors we identified then, with updated comments:

  • Clear identification must emerge of the incremental benefits of RFID over other auto ID technologies and/or the general benefits of new supply chain software applications - Then: “Today, this is often too muddled.” Now: Some progress in specialty applications, like tracking promotional displays, but not much progress for identifying unique RFID benefits for core logistics/distribution processes. Analyst firm Gartner has previously and persuasively suggested RFID has the most benefit in addressing “chaotic” processes.
  • Total supply chain costs must be lowered -  Then: “This means net of variable tag and fixed infrastructure costs – regardless of who nominally pays for the tags.”  Now: almost no one is talking about supply chain costs anymore. It’s all about increased sales through reduced out-of-stocks.
  • Reference to the “five-cent tag” should stop - Then: “At this point, it’s almost counterproductive.” Now: We don’t hear much about the 5-cent tag. Sara Lee’s CIO noted that with tag, label and application costs in the DC, it’s running about 50 cents per carton.
  • Tag and tag application costs must come down - Then: “Obvious, perhaps, but there just can’t be real ROI at current variable costs.” Now: tag prices have dropped marginally, though they are still not much above actual tag supplier production costs. But, the added cost of putting them in a label, plus applying tags as part of distribution processes, means it’s still very costly. Not nearly enough volume yet to move tagging into manufacturing and automate the application process.
  • Real global standards must emerge - Then: “Getting close with EPC Gen 2, but not quite there yet.” Now: Gen 2 has helped. We may not have a true global standard, and companies may have to upgrade technology later, but we're not sure this is really a huge barrier today.
  • Technical performance must improve - Then: “Still too much a science project.” Now: it’s better, but still not reliable. Most have given up on the idea of “x-raying” a pallet full of cartons, unless you put an array of readers around a stretch wrap machine and turn it for a good while.
  • Roll-outs should be pushed at a measured, ROI-driven paceThen: Must be more sync between costs and benefits for manufacturers.” Now: Funny, that’s what’s actually happening, in a sense, though more from vendor resistance and the fact that Wal-Mart has many other things also on its plate than this is actually the strategy. U.K’s Tesco does approach it a lot more this way, while most other U.S. retailers besides Wal-Mart are treading EPC water.
  • Thought leaders need to share more specifics about ROI -  Then: Let’s hear more detail from those companies that think they really have the insight. Now: Only marginal progress. The one area where this is not true is on tracking promotional displays from vendor to aisle floor. Is this the main area where the value prop is clear, or are those in the know keeping quiet to gain competitive advantage? Procter & Gamble said last year that for a group of its products, the benefits of EPC were clear, but we haven’t heard a lot of detail besides that statement. We really need more openness here.
  • RFID-centric business applications must emerge - Then: “RFID doesn’t provide value, business applications using it do, and these are very immature right now.”  Now: We are still very early in the RFID software game. There has been some progress in analytics, but the deployments are still so small that it’s hard to really see a lot of progress in RFID-enabled software yet.
  • Ecosystems to enable upstream tagging must develop -  Then: Efforts to get upstream/offshore suppliers to tag (where it makes most sense) will be very hard.” Now: We think this will emerge as an issue for many companies when volumes finally ramp, but since everyone is pretty much tagging as a postponement process now it doesn’t have much impact.

Net, net: In retrospect, we think we nailed this list pretty well, and we’ll keep them just as they are here in 2007. The fact that only marginal if any progress has been made in most areas explains why, two years later, volumes even at Wal-Mart are low, and not many other retailers are breaking down the RFID gates. Agree?

More on this over the next few weeks. We’ll note RFID is being used with increasing regularity in myriad other applications outside the vendor-to-retail chain.

Let us know your thoughts.


Dan Gilmore


Supply Chain 

Videocast Series

On-Demand Videocasts

Workforce and Labor Management Success at DSC Logistics

How They Did It, and Real Feedback Straight from the DC Floor

It is a unique and outstanding presentation

Watch it On-Demand, On Your Schedule


View the Broadcast



Things returned to normal last week on Wall Street after the turbulence of the week before, making it a pretty good week for stock in our index. The biggest winners were supply chain software provider Logility (up 4.2%), and rail carriers CSX (up 4.6%) and Norfolk Southern (up 4.7%).

See stock report.


This Week’s Supply Chain News Bites – Only from SCDigest

March 15 , 2007

Global Supply Chain: Will Potential Intel Plant in China Give away too Much?

March 15 , 2007

Green Supply Chain: Growing Number of Sustainable Supply Chain Conferences Shows Strong Interest


March 14 , 2007

RFID News: Is there really a RFID Technology Resources Shortage?


March 14 , 2007

Supply Chain, Inventory Improvements Help the Bottom Line of Retailer Big Lots


The Emerging Role of Chief Procurement Officer Comes with Lots of Dynamics, Study Finds

Frequent changes in CPOs, reporting relationships are common, CAPS Research finds; perhaps surprisingly, many non-purchasing professionals given the job


Wal-Mart Releases Packaging Scorecard Data, Plans for Electronics Suppliers

Scorecards will impact vendor selection, information provided to consumers in 2008


Consumer Privacy Group and American Express Tussle over Technology to Track in-Store Shoppers

CASPIAN says Amex agrees to notify consumers; the interesting American Express RFID patent application


What’s the Likely Impact of First Steps Towards Allowing Mexican Trucking Companies to Operate in the U.S.?

Great news for the claimed driver shortage, or a bad idea?


Q. What happened in Troy, OH in June, 1974?

A. Click to find the answer below


Do use an RSS reader? Do you have a MyYahoo! or personalized Google page? For these and more you can have SCDigest delivered right to your personal pages, all week long.

You can subscribe to our RSS feeds in two ways:
1. Copy our RSS link into your RSS reader - it's easy!
2. Click on a button below to quickly add it to your favorite reader.
  Add to My Yahoo! Subscribe with BloglinesSubscribe in NewsGator Online

Feedback is coming in at a rate greater than we can publish it - thanks for your response.

We're now reallyl behind - be patient if your letter has not yet been publishedBig Changes Next Week!

More feedback from our two part series on inventory levels (see Are we Making Inventory Progress? Part II. That includes our Feedback of the Week from John Vacca of Stratus, who says wonders if some companies haven't let Lean strategies "go wild." You'll find that and a few others on this topic again below.

You'll find his letter as well as a few more below.

Keep the dialog going! Give us your thoughts on this week's Supply Chain topics. As always, we’ll keep your name anonymous if required.

Feedback of the Week – On SCDigest's Inventory Report

Thanks for pulling together timely information like the Inventory data in this article.  Although absolutes like higher turns or lower DIOs are motherhood and apple pie to all of us supply chain geeks, has anyone written anything relative to what I now refer to as “Lean Gone Wild”?  

This is the phenomenon where CM’s are being driven to reduce inventories at the expense of creating material shortages that interrupt their own ability to ship revenue. This usually occurs as a result of a de-commit by a supplier. The result can be increased expenses involved in resolving these shortages like expedited freight and supply chain man hours wasted expediting suppliers, and overtime. Or in the worst case manifestation, missing revenue shipments and creating customer satisfaction issues. 

This also sometimes leads to changes in the behavior of the OEMs in that they can try to compensate by driving material earlier than they really need it to protect against stock outs. This behavior completes the perfect circle of “Lean Gone Wild.”


John Vacca

Supply Chain Manager

Stratus Technologies

More On SCDigest's Inventory Report:

I think that the growth of imports is a driver of higher DOS.  I typically see turn rates below 3 vs. about 6 for domestic goods.  It must be the long ride over that does it; maybe a bit more disjointed production planning environment as well.  Apparel might have improved with seasonal SO&P indeed improving plus the containers flowing direct to retailers and bypassing DC’s.


I find this of particular interest as a warehouse based 3PL as my labor to square goot ratio is dropping which creates a headwind to leveraging our space to grow revenue.


Tom Miralia

Distribution Technology Inc

The one factor you did not address as a cause for higher inventory levels, especially in consumer goods and retail, is SKU proliferation. With 10 different types of Coke, 20 varieties of toothpaste, and even different scents of soaps, inventory levels overall are going to rise. While lengthening of the supply chain is definitely a factor, so is the broadening of SKUs. The challenge would be to define how much each factor impacts inventory levels and then devise strategies for attacking each factor , as well as the whole.

Jim Le Tart

Director, Marketing

RedPrairie Corp.

From the RetailWire:

Though this might not be the largest driver of poor inventory performance, one of the things that has always confounded me is the lack of integration in sales forecasts across different functions like Supply Chain and Marketing.

Most Supply Chain forecasts base forecasts largely on supply-side factors like costs, capacity, material supply fluctuations etc. Marketing, on the other hand, concerns itself more with the demand side of things, with factors like consumption and the drivers of consumption like advertising and promotions (pricing is one of the few common factors that most forecasts factor in). Working with several clients in my consulting career, I have noticed that forecasting process is siloed within each of these different divisions, so inventory management may not be as aware of short term fluctuations in demand due to marketing activities as they need to be (and conversely marketing is not as aware as it needs to be about supply-side factors that may cause temporary fluctuation in sales).

Joy Joseph

Information Resources Inc.

It goes without saying that every business, worldwide, is trying to minimize its inventory. Apples to apples comparisons are hard to make. Companies change their business mix. For example, the Wal-Mart figures include non-US retailing. Furthermore, contracted inventory that's not legally owned might still be an obligation.

Those obligations are generally not reported. Certainly that is a big issue for any retailer with a major private-label business. Captive suppliers, like Visteon, are also subject to that issue. There's a saying, "Listen to the music, not the notes." The theme of The Inventory Management Opera is own as little as you can. Everyone's a performer in this opera. And the fat lady hasn't sung yet.

Mark Lilien

Retail Technology Group


Q.  What happened in Troy, OH in June, 1974?

A. The first true bar code scan of a product in a retail store, at a Marsh Supermarket,we believe using a scanner from NCR, headquartered nearby in Dayton. The very first item scanned, in a cart full of items, was a pack of Wrigley's gum.

Copyright © SupplyChainDigest™ 2003-2005. All Rights Reserved.
To Unsubscribe: Click Here
PO Box 714
Springboro, Ohio 45066