P&G Finds RFID Razor-Sharp

Pushing RFID deeper into the retail supply chain, consumer-products giant Procter & Gamble is working with Vue Technology to test the industry's first end-to-end electronic product-code (EPC) solution.

Vue's networking platform will enable individual items in a simulated environment to be tagged and traced from factory to checkout counter, providing complete "visibility," i.e., tracking from a centralized P&G location. Designed to reduce shrinkage (i.e., employee and customer theft), delays, and product mis-shipments, particularly for high-value and promotional items, the EPC system is being showcased at a P&G demonstration facility in Cincinnati.

Procter & Gamble has been in the forefront of supply-chain innovations involving RFID since the late 1990s, when it helped create the Auto-ID Lab at MIT, says P&G director of global external relations Paul Fox.

"The reality of today's supply chain is that it's inefficient, it's riddled with issues, which means that products don’t move seamlessly through to the store floor, and significant losses occur," says Fox, adding that the U.S retail industry loses $56 billion annually due to shrinkage and lost sales. The potential of EPC, Fox notes, has the potential "to provide unheard-of levels of visibility to the movement of goods from manufacturer to retailer."

Spun out from major packager MeadWestvaco in August 2005, Vue Technology provides a networking platform that enables RFID readers to collect data from multiple antennas, drastically reducing the cost of implementing pervasive electronic tags in warehouses, distribution centers, and stores.

"With item-level tagging you want antennas everywhere," says Vue senior VP of product management Tim Von Kaenel. "In the past you needed one reader for every five antennas or so, and the simple math around doing item-level deployments shows that that would bankrupt most companies. Our innovation is to add networking capability between the reader and the antennas, so now they can read across thousands of antennas, bringing RFID out of the backroom and into mainstream retail environments." (See RFID: A Market in Waiting?.)

Antennas cost anywhere from $2 to $5, while readers are a bit pricier at $1,500 to $2,500, according to a Vue spokesperson.

The addition of Vue is part of P&G's long-range strategy to deploy RFID widely across its product divisions, starting with what the company calls "advantaged" products -- ones that are ideally suited for carrying RF tags. An example was the launch last month of Gillette's new, five-bladed "Fusion" razor, the company's most important launch since the Mach III razor was released in 1998. Store display stands carrying EPCs were distributed to 400 stores of two retail chains that Fox declines to identify. The progress of the units from factory to P&G distribution center to retail outlet was monitored by P&G's EPC team of two dozen people in Boston. The findings were dramatic.

"What the EPC tags allowed us to do was to see the pallet arrive at the store, and then see the promo units go out to the store floor," explains Fox. The progress of promo units to the sales floor was signaled either by RFID readers on the storeroom doors or, by inference, when the tags themselves were crushed in a cardboard compactor after the units were unboxed. If shipments went awry or displays sat in storerooms, the company could take action on the fly.

"The best previous benchmark we had for getting the product from our own distribution center to the retail floor so we had solid coverage was 14 days," adds Fox. "What we saw was that we had 92 percent in-store availability after three days -- an absolutely astonishing result."

Other RFID providers working with P&G to develop an end-to-end supply chain solution include Provia Software and OATSystems. Fox declines to specify how much P&G has invested in RFID technology but says that the Fusion launch and other pilot programs indicate that annual ROI will reach 20 to 25 percent. Real-world deployment of EPC tags on pallets and cases is going on today, and Fox expects the tags to be ubiquitous within the next three to five years. Item-level tagging will wait until the cost of tags -- now just under 10 cents apiece -- drops to a fraction of a cent.

"Right now we're heavily focused on that journey from manufacturer to retail store," Fox adds. "And the technology has taken us all the way to the backroom right now. In the future we will be looking at the last 100 yards, from the backroom to the sales floor -- because that's where we really win or lose."

— Richard Martin, Senior Editor, Unstrung