 | Tuesday, April 1, 2008
Issue 809 | | Will Smith, Editor |  |
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Editor's Note: Today's top story is a new study from the Global Commerce Initiative that found considerable skepticism about the value of RFID technology for direct store delivery (DSD) operations. DSD suppliers and retailers see possible benefits from RFID, but reported other options have more value potential and conditions for RFID adoption won't be favorable for years.
Omnitrol Networks and Texas Instruments have announced a joint solution for printed circuit board (PCB) manufacturing applications. Leveraging the Omnitrol's work-in-process visibility software with TI's Gen2 tags, it enables electronic and contract manufacturers to identify and track PCBs all the way from the factory floor to delivery.
Lastly, OATSystems today announced the availability of OATenterprise, a software platform designed to enable visibility across an enterprise, be it a single facility or 1,000. The company indicates that the solution capabilities were driven by customers, many of whom are graduating from pilots to enterprise-wide deployments. |
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| - PCB Tracking & Visibility Solution from Omnitrol Networks (site)  | | - Employees steal over $1 billion per week from employers (site) | | | Training & Certification | | - RFID Essentials e-learning - Learn RFID in hours! (site) | | | Employment | | - RFID Recruiters - 100% Focused on RFID Recruiting (site) | | | Upcoming Events | | - AWA PABS08 N. America Conference, Sept 11-12, Chicago, IL (site) | | - AWA PABS08 Asia Conference, Dec 4-5 - Hong Kong, China (site) | | - European Supply Chain & Logistics, 13-15 May, Germany (site) | | - RFID World Asia 2008, 8 to 11 April, Suntec Singapore (site) | | - SCAN & RFID CHINA 2008, June 19-21, Guangzhou, China (site) | | | Research & Whitepapers | | - RFID Marketing Strategies Report (site) | | | RFID Tags & Labels | | - Ferroxtag HF tags: Smart on Metal! (site) | |
DSD Study Finds Skepticism About RFID Value
Retailers and consumer goods suppliers currently see more obstacles than benefits for adopting RFID technology in direct store delivery (DSD) operations, according to new research being presented today by the Global Commerce Initiative (GCI). The study, titled Supplier and Retailer Views on EPC/RFID Technology for Direct Store Delivery (DSD), found 94 percent of retailers and suppliers surveyed say return on investment (ROI) is a high or prohibitive obstacle to RFID implementation in DSD operations, and most companies feel it will remain an obstacle for at least seven years.
Direct store delivery refers to the practice of replenishing supermarkets, convenience stores, drug stores, and other retail outlets directly from the manufacturer, rather than through the retailer's distribution center. Representatives from DSD suppliers visit stores regularly, often daily, to monitor inventory and prepare orders. Common DSD products include soft drinks, beer, snack foods, baked goods, and dairy products.
GCI is a global trade association that develops standards and best practices. Its executive board includes approximately 40 of the world's largest consumer products manufacturers and retailers. GCI has a direct store delivery working group that has developed a variety of business process standards and recommendations.
The GCI DSD Working Group formed an EPC/RFID subteam, which surveyed GCI members about their attitudes about using RFID technology. The subteam includes representatives from some of the best-known food and beverage brands, including Anheuser-Busch, The Coca-Cola Company, Dean Foods, Kraft Foods, Miller Brewing, and PepsiCo. The results were compiled and interpreted in the report, which was presented today for the first time at the GMA Information Systems / Logistics Distribution Conference, and will be available soon on the websites of GCI and Intermec Technologies, which sponsored the research.
The report, based on 36 survey respondents, notes inventory management, replenishment, and other processes are different in DSD than in typical distribution center-based replenishment models, and thus RFID technology does not have the same benefit potential as it does for DC-based operations. It recommends suppliers and retailers pursue RFID for warehouse delivery operations before they pursue it for DSD.
"Because DSD supplier representatives frequently work inside retail stores for delivery, replenishment, and merchandising, they already have a base level of inventory visibility that is higher than that of warehoused products; therefore, there is less potential for EPC/RFID traceability to make a meaningful improvement," the report reads. (Editor's note: The study uses the term "EPC/RFID" instead of the more general and widely used "RFID" for describing the technology. Gen2 and other EPC standards are widely used in the consumer goods and retail industries, and are considered by GCI to be the foundation for RFID activity.)
Retailers were generally more optimistic than suppliers about RFID's benefits and when conditions would be favorable for adoption in DSD. Nearly half (48 percent) of suppliers described themselves as "skeptical" of the technology for DSD, compared to just 17 percent of retailers. Conversely, 17 percent of retailers said they were "optimistic" about RFID, compared to just three percent of suppliers.
Retail and supplier respondents did agree on other topics, however. They identified three major reasons why RFID is not considered a good fit for DSD operations at this time:- Limited ROI potential. As noted, many respondents feel achieving positive ROI is an obstacle to adoption. Only 22 percent think ROI conditions will be favorable within three years. Thirty-six percent feel it will be at least seven years, and 25 percent expect ROI conditions will never be favorable.
- Unfavorable opportunity cost. Respondents were very clear that they think there is currently much greater value potential in other technology and business strategy initiatives they can pursue. These include: implementation of advance shipping notices (ASNs); Demand Driven Supply Network models; collaborative ordering; increased bar code utilization; and Global Data Synchronization (GDS). RFID was rated last among these and other options in value potential.
- Limited opportunity to leverage RFID investments. Companies say trading partner adoption is very important to their own pursuit of EPC/RFID, which may be creating a chicken-and-egg situation since there appears to be little current adoption momentum. However, the report does not directly mention recent activity by METRO Group, Sam's Club, and the US Department of Defense that could cause more suppliers to implement RFID, or to expand existing systems (see METRO Expands RFID to 200 More Locations, Sam's Club RFID Mandate No Big Deal?, and DLA to Expand RFID Labeling with $8.5M Order).
The report was careful not to be dismissive of RFID technology or its value potential. One passage reads: "While the general outlook for near-term ROI is not encouraging, respondents did acknowledge EPC/RFID holds at least moderate potential to improve some specific processes. The majority of DSD suppliers and retailers said EPC/RFID technology has medium or high value potential for ASN reconciliation, shelf/stock/code date management, delivery and receiving, and returnable asset management."
The report also notes the survey represents a specific point in time (data was collected in November and December, 2007) and that attitudes could change. The conclusion reads in part: "Respondents acknowledged during discussions and interviews that conditions could change and EPC/RFID won't necessarily remain a low-priority consideration...The industry remains undecided about the role and value EPC/RFID will play, and the technology remains largely unproven. These circumstances will certainly change, but how and when are far from certain."
The GCI study paints a more somber picture of RFID's value potential in the consumer goods supply chain than previous reports from other sources, perhaps because it is the only known research specifically focused on direct store delivery operations. A study of RFID systems at Wal-Mart stores issues last month found RFID could improve inventory accuracy and reduce the labor needed to make adjustments (see RFID Yields 13% Reduction in Understated Inventory). The same researchers previously found RFID inventory management applications could significantly reduce retail out-of-stocks (see 30% Out-of-stock Reductions from RFID).
The GCI report is expected to be available free from the Intermec website and shortly thereafter from the GCI site. Representatives from the GCI DSD Working Group are scheduled to present the study again at the U Connect conference June 9th through the 12th in Dallas.
Forward this to a colleague | Request reprints: reprints at rfidupdate dot com |
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| Products & Services | PCB Tracking & Visibility Solution from Omnitrol Networks
Off-the-shelf solution provides automated real-time visibility and complete electronic pedigree for traceability on parts and WIP providing real-time dashboards, alerts and reports for shop-floor management. The pedigree information is automatically programmed into Texas Instruments' RFID tag for access to critical data without the need for connection to a back-end database. Learn more. | Employees steal over $1 billion per week from employers
the American Management Association reports. 95% of businesses are victimized by employee theft. Managers are reluctant to ask questions, because trusted employees may feel offended, leaving business owners in a difficult situation. What can you do? Nox: Intelligent Perimeter Defense from Simply RFID provides advanced security and protection for business assets. | | | Training & Certification | RFID Essentials e-learning - Learn RFID in hours!
RFID Essentials, new Web-based training from RFID Revolution, gets professionals up to speed quickly and cost effectively. Course 1, "Introduction to RFID", is a comprehensive, hands-on workshop, accessible anytime from anywhere. In eight hours, you acquire the knowledge you need to advance your organization's RFID initiative and speed return on investment. Learn more | | | Employment | RFID Recruiters - 100% Focused on RFID Recruiting
Whether your company is looking for the best RFID talent or you have the best RFID talent and are looking for the best RFID employer, RFID Recruiters offers the most focused approach to your objective. To learn how the RFID industry and the RFID job market are evolving, visit www.rfidrecruiters.com | | | Upcoming Events | AWA PABS08 N. America Conference, Sept 11-12, Chicago, IL
AWA is organizing the Product Authentication & Brand Security Conference 2008 on September 11-12 in Chicago, IL. The event includes presentations and panel discussions with brand owners, legal authorities, associations, converters and suppliers; also networking sessions, a supplier forum, a social program and more. Find more on the program here. | AWA PABS08 Asia Conference, Dec 4-5 - Hong Kong, China
AWA presents the Asian Product Authentication & Brand Security Conference 2008, to be held on 4 & 5 December in Hong Kong, China. PABS08 Asia focuses on the threats specific to the Asia Pacific region, various elements of IP Theft, and leading-edge solutions. Find more on the program here. | European Supply Chain & Logistics, 13-15 May, Germany
Bringing together Europe's leading providers of supply chain management to evaluate best practices and to move the supply chain agenda into the boardroom. Also, featuring the AMR Research Strategy Session: What makes a supply chain world class in today's global market? More information here: www.supplychain.eu.com | RFID World Asia 2008, 8 to 11 April, Suntec Singapore
RFID World Asia 2008 is THE event for finding out the transforming power of RFID for your business and its future. Sign up now for RFID Asia Summit 2008, targeted at senior-level executives; to understand and reap the benefits of this new business tool. For more information go to www.terrapinn.com/2008/rfid | SCAN & RFID CHINA 2008, June 19-21, Guangzhou, China
As one of the earliest, most specialized and authoritative exhibitions in China, approved and supported directly from State Ministry, the 8th SCAN & RFID CHINA 2008 will present you the impressive up-dated development and market of RFID technology in rising China. To know more, please go to www.scan-china.com. | | | Research & Whitepapers | RFID Marketing Strategies Report
Thirty-nine pages of original research on RFID audience perceptions, including 30+ figures of tactics, content & messaging, and recommendations to guide marketing strategy. Also, Top-10 RFID company rankings based on 550+ survey respondents. View the executive summary free, with Top-3 sample rankings. Only $495 Individual License or $795 Corporate License. Available now | | | RFID Tags & Labels | Ferroxtag HF tags: Smart on Metal!
Ferroxtag is a new family of HF RFID tags suitable for operation on metallic surfaces. Ferroxtag's special ferrite antenna was developed using Ferroxcube's years of experience in ferrite technology. The high performance antenna means longer read range with a smaller tag. Visit www.ferroxtag.com |
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