Data Synchronization, Consumer Focus Among Keys to Managing Transition to RFID

A.T. Kearney has been at the forefront in helping the retail industry analyze the impact of electronic collaboration among trading partners. Since 2001, the company has led three studies for the Grocery Manufacturers of America and the Food Marketing Institute, examining the impact of common data standards across retailers and manufacturers. A November 2003 A.T. Kearney study was the first to calculate the cost of RFID adoption for CPG manufacturers, pinning it at roughly $33 million annually for a $5 billion manufacturer. A.T. Kearneys new report, RFID/EPC: Managing the Transition, sees 2004 through 2007 as critical years, as the industry rushes to adopt RFID in response to a mandate from Wal-Mart. Specifically, 2004 and 2005 will see many test programs as retailers, CPG companies and technology vendors learn what RFID can do. By mid-2006, A.T. Kearney anticipates that clear winners will emerge from the numerous vendors now developing the technology. During this transition period retailers and CPG manufacturers must closely collaborate on RFID trials and not risk money or consumer goodwill on uses that dont provide a clear consumer or business benefit. According to A.T. Kearney, companies looking to successfully navigate the RFID transition period should focus on nine key areas: -- Complete data synchronization efforts. Many manufacturers and retailers still exchange inaccurate product data despite industry efforts toward standardized data formats. A.T. Kearneys analysis for the GMA and FMI found companies can gain $1 million in additional earnings for every $1 billion in sales through data synchronization. Even more significant, without data synchronization between trading partners, much of the data exchanged using RFID will be wrong. -- Promote consumer-level benefits. Consumer concern about privacy issues surrounding RFID can be attributed to miscommunication and lack of understanding about the technology. Rather than tout the intangible cost saving benefits to consumers, retailers should focus on testing RFID applications that will clearly improve peoples lives. Examples include easier item traceability for food safety, control of counterfeit products -- particularly drugs -- and providing easier access to warranty information. -- Solicit other supply chain partners. For most manufacturers, one retailer, no matter how large, will not be enough to justify the expense or generate the enterprise-wide benefits of RFID. Achievement of supply-chain-wide inventory visibility and retail in-stock position benefits requires wide adoption of the technology. -- Manage parallel systems for several years. Inventory management systems will need to be agile enough to accommodate a variety of data capture technologies, from bar codes to RFID, during the transition period. -- Leverage the invested infrastructure. Manufacturers and retailers will be making large investments in RFID readers, tags and information systems. Other opportunities for using this product tracking information should be considered beyond simple inventory management. Possibilities include using the retail store systems for merchandising opportunities and using distribution center systems to track and trace recalls. -- Adapt business processes to take advantage of new supply chain data. Case-level tracking of merchandise will offer new opportunities for inventory management, product tracing and recall management. Realizing the benefits will require substantial change to current business processes and perhaps even to enterprise-wide systems platforms.