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Focus: RFID and Automated Identification and Data Collection (AIDC)

Feature Article from Our RFID and AIDC Subject Area - See All

From SCDigest's OnTarget e-Magazine

March 16 , 2011

RFID and Auto ID News: More Thoughts on What Went Wrong with CPG to Retail RFID


Additional Highlights from Our Expert Panel; A Wide Variety of Views - A Boondoggle, or Path to More Value from RFID?

SCDigest Editorial Staff

Last week, SCDigest editor Dan Gilmore wrote his First Thoughts column on CPG to Retail RFID - What Really Happened? (You can find that column here.)

That included very brief comments due to space limitations from several industry observers very involved at the time, culled from what were often fairly long interviews.

SCDigest Says:


"In CPG, everything was "slap and ship." Hard to create value for suppliers like that, and we never got past it in CPG. We can do that in apparel."

Patrick Javick, GS1 US

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As promised during the column, here we publish more extended versions of these comments, selecting highlight from the interviews with each commentator.

Dean Frew is CEO of Xterprise, a RFID-focused solution provider headquartered in the Dallas area. He and his company were very involved with WalMart suppliers throughout WalMart's first "mandate," and now is similarly involved with the apparel item-level tagging programs at soft goods retailers and manufacturers, as well providing RFID-based logistics and IT asset tracking applications.

Let me fundamentally say that early on there was a vision that real-time visibility to serialized items and cases in consumer goods to retail using RFID could drive a lot of operational efficiency gains and reduce out-of-stocks.

I still believe that.

Should that vision have started with CPG type products? I don't know. What has happened though is that that vision and WalMart's RFID program generated $1-1.2 billion in investment in RFID technology from venture capitalists and RFID solution providers that tremendously moved the technology forward. This would never have happened without the WalMart mandate. We have built a platform for moving forward as a result.

And that has led to the current item-level apparel programs. This is it - the pot of gold. We have our "killer app."

Yes, you could say the CPG program was a false peak, and we had to go back into the valley. But with item-level apparel we are now climbing a new mountain and this one is very real.

WalMart is different. Based on their size and scale, they can afford to experiment a bit. I am not saying they didn't expect the CPG-focused program to work. They did. I am just saying that could afford to launch a program and see where it would take them. That was a way to innovate. It didn't work out for WalMart now in CPG. But it led them to the apparel program.

I do think WalMart in the CPG program probably under-estimated the challenge for suppliers. I think even for CPG type products that the value was very clear for the retailer. But it was less clear for the supplier. That led to resistance.

There were some errors in thinking in the early days of the MIT Auto ID Center that carried forward. This idea of the "Savant" was never going to fly, and we probably didn't push back hard enough on some ideas like that.

But the basic idea, that everything should have an identity, and we should know where it is, that vision was very powerful and I think absolutely correct. I believe that value is still there for CPG, but it doesn't make the cut right now in terms of action versus the return available in the apparel area. But it will come back someday.

Simon Ellis is now an analyst IDC Manufacturing Insights, but was a "Supply Chain Futurist" at Unilever/Best Foods North America through about 2007. His primary focus for much of that time was RFID.

We were all caught up in the euphoria of the Auto ID center and all that.

I remember a few conversations even as far back as the Auto ID days with members before EPCglobal about whether CPG really should be the "early adopter" of RFID technology - maybe it should be higher margin type products. But the wave kept moving along.

Looking back, when you could see that even at 5-7 cents per tag - and we were nowhere close to that at the time - that whether it was Cheerios or shampoo you were talking about doubling the cost of the secondary packaging. In retrospect, that wasn't really practical financially.

It also turned out that perhaps you can get more out of bar codes than maybe we realized. Unilever has a highly automated DC in the UK, almost a "lights out" operation with robotics and other automation, that runs entirely on bar codes.

I don't think many CPG companies really well investigated the true value prop. Why is that? Hard to say today. There was clearly a sort of collective euphoria.

Early on, Gillette pushed a business case around theft and loss prevention. But it wasn't really clear about how RFID helped that, and it was very specific to products like razor blades that were subject to a lot of theft.

We just never found the "killer app" that would produce the value for CPG. Even at 5 cents per tag, at Unilever we shipped something like 50 million cases per year. That's $2.5 million or so just in tag costs every year, plus readers, software, tag application, etc. You have to identify a lot of savings to make that work.

I know a lot of CPG companies were investing heavily in this. At Unilever, we only had two people, myself and one other. Some other companies had significantly more than that. My strategy was to be a fast follower, not an early adopter. But to a certain extent, to look like an early adopter while actually being a fast follower.

But by 2005 or so I became convinced this wasn't going to work at this time.

I will give WalMart credit for starting something, even if it didn't work out. It was a bit of "collective madness" perhaps among many of us. Cost justifying improved visibility is always difficult, even if you know it is beneficial.

RFID is just becoming another tool in the Auto ID toolbox, to be used when it has the best value versus other tools. There is nothing wrong with that.

(RFID and AIDC Story Continued Below)




Patrick Javick is VP of Industry Engagement at GS1 US, which includes EPCglobal under its wing. Here has been at the organization for some seven years, and been very involved in both CPG as well as apparel-focused programs.

I think in general we are finding that it is easier to find a business case for higher value/higher margin products than it is for lower margin items like CPG.


When suppliers to large retailers were asked to invest in tags and reader programs they naturally looked for the ROI – and were hesitant when the business case was not clear.


I think it's important to also consider how long it takes for new technology to clearly take hold. Compared to bar coding, for example, you could say RFID has made even faster progress. We’re only 8 years past launch; when the U.P.C. was 8 years old, there were just over 10,000 company prefixes issued in the U.S.  Today there are over 250,000.


We haven't really had that in RFID yet. It is starting to happen in apparel and soon shoe retailers.  Before it was sort of "1 to many" - one large retailer to hundreds of suppliers. But with apparel item-level tagging, it is becoming more of "many to many" scenario.  That is how you gain critical mass. It takes collaboration between multiple retailers and multiple suppliers for new technology to take off.


Right now, GS1 US is working to bring retailers and suppliers together in apparel and pushing a "category-based approach" [tagging all products in a specific  retail category or department]. This is what generates real value. That's what can lead tagging at the point of manufacturing to reduce application cost.


In CPG, everything was "slap and ship." Hard to create value for suppliers like that, and we never got past it in CPG. We can do that in apparel.


You ask if WalMart RFID program set the industry back? I would ask it a different way. Would we even be here today if it wasn't for the WalMart program?


The comments below were from a manager at a RFID hardware and software provider that was very involved with WalMart during its first few years of compliance program. He is now with a different company and asked not to be named.

I don't think WalMart really had a well thought plan with regard to the IT side. They may have had 11 or 12 people working on this at some point, but it seemed to be a core group of just a half a dozen or so most of the time.

These guys were "hackers." I don't mean that in the negative way it sounds - these were smart guys. But they were middle or lower level in the organization, and they were learning as they went along.

That had some cost to the RFID effort. I saw the data WalMart was pulling out of the RFID readers from the stores. It really wasn't usable. It couldn't have been very useful to WalMart or its suppliers. We had an alternative that would have been much better in terms of the data being generated, but the WalMart team wanted to do it themselves.

These handful of guys were making a lot of decisions that had big impacts on the direction of the program and all of WalMart's suppliers. There did not seem to be a lot of supervision from the top of the organization, from what I could see. That led to problems.


What is your reaction to these comments? Which commentator do you think best hit the nail on the head? What do you think went wrong with RFID in CP to retail - or was it just part of the journey to apparel tagging and beyond? Let us know your thoughts at the Feedback button below.


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