Why manufacturing companies and retailers need to prepare for adoption of EPCglobal tags.

1. EPC highway,
Focus
on
Logistics
next right
I
magine the ultimate in consumer
shopping experience: Catherine
goes shopping in her favorite
supermarket; today she is excited about
this story she heard on TV last night,
about a new chip they are putting into
her products which replaces what she
reckons is this somehow old-fashioned
barcode that the cashiers have to scan
at the checkout counter, sometimes
taking ages before she can get out of
the store. This time the scanning of the
“RFID” codes at the checkout counter
takes only a few seconds for the entire
shopping cart, and the cashier’s role
has changed to helping her pack the
With major goods.
global players
forging ahead with RFID,
the time for manufacturers Coming soon to a supermarket
and retailers to make strategic near you?
decisions regarding
EPC adoption is now, Until last year, many industry experts
or risk finding themselves and analysts believed that this scenario
at a competitive disadvantage was still 10 or 20 years away. Today,
in the near future with major global players like Wal-
Mart, Metro, Tesco, the US Department
of Defense and others forging ahead
by with RFID, Catherine’s new shopping
Erwin experience may be much closer than
De Spiegeleire, most people think.
EAN
International There is, of course, a roadmap for the
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2. implementation of RFID at Point of Germany recently announced that it
Sale. In fact, several pilot trials and would impose a similar practice on its
experiments are being conducted top suppliers by November of this year.
on item level tagging of DVDs and Metro is also piloting WiFi technology
garments [for example by Gap, Marks & for high-speed wireless transmission
Spencer and Kaufhof (Metro)] although of EPC data from each data collection
nobody is quite ready to organize location to Metro’s back office. But the
“Catherine’s” new shopping experience winner for early adoption of RFID is
just yet. But first things first: the RFID without doubt Tesco (UK), which has
barcode, named EPC (Electronic Product announced that it would implement
Code), will initially be applied at the RFID from April 2004.
“shipping” unit level. Its use will only
expand to encompass goods at the item As with most of the technological
or “consumer“ level when it has really revolutions of the past (the telephone,
proven itself. the fax machine, Internet, and mobile
phones) the secret to widespread
acceptance and use lies in scaling
The timeline for RFID adoption fast. Mass adoption only occurs if the
market is ripe for reaching a critical
In 2003 and 2004, numerous tests mass that drives, sometimes indeed
have been or are taking place to pilot forces, other players to join the game.
EPC implementation. One of the most
impressive projects is the Metro Future How the benefits
Store Initiative, which is showing how The costs of the RFID revolution of RFID
RFID will revolutionize supply chain add up
management (SCM) and ultimately the RFID-barcodes come with a cost, in the case
consumer’s shopping experience. there is no question about that. of one Metro
In January 2005, Wal-Mart’s top 100 Manufacturers and retailers will need supermarket
suppliers must apply EPC codes on all to invest in tags, readers, infrastructure,
products they supply to the leading and business process changes that
retailer. That’s only eleven months from are necessary to adapt their systems
now. What’s more, Metro Group of and make the EPC network work. For
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3. a manufacturing company like the The real benefits
“Best Company to Work for in 2004”
(Fortune’s laureate: The J.M. Smucker EPC benefits at the manufacturer’s
Company), the investment will be at factory and warehouse levels accrue
least $10 million. through the automation of a number of
manual processes. At the pallet tagging
In return for such investments in level, clear benefits arise from (but are
RFID technology, manufacturers will not limited to) automation of barcode
gain from a significant increase in scanning, pallet assembly optimization
supply chain management efficiency. (less operator time), goods receipt,
Through increased accuracy, the warehousing staging (automation of
ability to gather information from storage location verification), truckload
additional locations along the supply assembly and truck loading.
chain, and e-collaboration between
trading partners, EPC will reduce the As seen Depending on whether we speak about
costs of launching new consumer with other tagging of cases or pallets, the benefits
products in stores. Following the old technologies at the distribution centre level are in
and still valid economic principle of in the past, areas such as shipment receipt, pallet
supply and demand, the cost of RFID there will be staging, pallet breaking, order assembly
chips (and their readers) will go down a switchpoint and truck loading.
exponentially when sufficiently large in the EPC
orders are placed by consumer goods adoption curve, Finally, at the retail store level, the
retailers and manufacturers to the after which benefits are in the areas of order
chip manufacturers. A few USD/Euro companies receipt, shelf restocking, mixed pallets
cents is the target for making EPC fly at will have and return/recall processing. The table
Catherine’s shopping basket level. to adopt on the previous page shows how these
the new standard benefits add up on a yearly basis.
in order Another huge benefit for the retailers
What do you do to do business is theft reduction, both at the backdoor
with all this data? level and in-store. With the proportions
that theft has taken on, there are
The EPC network - with chips sending millions of dollars to be saved with
data to readers, and readers sending EPC tagging. For Wal-Mart, knowing
data to an internet based
infrastructure via the ONS
(Object Naming System -
similar to the DNS used for
Internet) - will generate an
incredible flow of information.
One of the key challenges for
users of this new technology
will be to wisely select what
data they need. This is “Good
News” for the software
industry. Furthermore,
consumer privacy must be
preserved (and the technology
is there to enable that).
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4. where the products are at all times already gearing up.
will generate $575 million savings, the With an adoption trend similar to that
bulk of which comes from the much of Global Data Synchronization (and
improved security that the tags provide before that, mobile phones and the
in the warehouse alone. Internet), the CPG industry will reach
the critical mass for RFID on pallets
On the scale of Wal-Mart, the benefits and cases at the end of 2004, and the
of RFID implementation can be critical mass for consumer items will
estimated at US$8.35 billion, broken be reached at a much faster pace than
down as follows: currently anticipated.
• $6.7 billion: savings in labor costs
by eliminating manual scanning at the To stay ahead in the game, companies
case and pallet level; should get in touch with EPCglobal.
• $600 million: reduction in the level of By joining the EPCglobal User Action
“out of stock” products; Group and companies can play an
• $575 million: savings from reduction active role in the development of
of employee theft and “administrative” EPC solutions for data standards
errors; through GSMP, the Global Standards
• $300 million: savings from more Management Process. GSMP is a global
efficient tracking of its 1 billion pallets; platform and a community of hundreds
• $180 million: reduced inventory by of experts from leading companies
knowing which product is where at worldwide and from EAN.UCC.
anytime.
The relevance of global
Time for action standards
There is a double reason why companies The beauty and relevance of having
need to make the strategic decision put global standards on the agenda
to prepare for EPC implementation. of the CEOs of the world’s leading
First, the Global Data Synchronization manufacturers and retailers lies
Network (GDSN) must be prepared, in the fact that never before
which is a pre-requisite for full EPC has the connection between the
implementation. In fact, as the EPC ultimate “raison d’être” of retailers,
network will generate a vast quantity manufacturers, EAN International and
of information, it is vital to ensure movements like GCI (Global Commerce
that only clean and aligned master Initiative) and ECR (Efficient Consumer
data is exchanged between trading Response) become so naturally clear:
partners. Otherwise, “garbage in insisting on global standards, using
becomes garbage out”, and errors in state-of-the-art technology in a
the master data carried by EPC tags and truly collaborative environment, and
transmitted by EPC readers will spread enhancing best business practices and
like an infectious disease. processes across the entire value chain
Second, retailers and manufacturers adds up to “shaping a better world
who delay plans for EPC for consumers”.
implementation may find themselves
with a competitive disadvantage, as This is the price of Catherine’s
leading retailers and manufacturers are satisfaction.
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