RFID Reconciles CPG and Retailer Relationships

The success of every retailer and every consumer-product-goods (CPG) supplier comes down to how well they work together to sell products and satisfy their consumers.

During a Supply Chain Summit session titled, “Maximizing the return from RFID,” retailers heard the perspective of $100 billion manufacturer Hewlett Packard (HP) and its RFID pilots across retail supply chains.

Speaking about opportunities for RFID in the retail supply chain, Robert Bliss, supply chain operations development manager for HP’s Imaging and Printing (IPG) Business Americas region, said the three focus areas to concentrate on are out of stocks, promotions management and claims reconciliation.

“There are big opportunities to be more efficient with our retailers to maximize sales, minimize inventories and improve the customer experience,” he said. “Working with T3Ci and utilizing RFID, we’re closing the loop on delivery and payment, and improving performance in the stores.”

T3Ci, headquartered in Sunnyvale, Calif., is led by co-founder and CEO Jonathan Golovin, Ph.D. The RFID analytics and applications company, which celebrated its 1-billionth RFID tag read this year, provides EPC (electronic product code) analytics to six of the top eight CPG manufacturers.

“RFID adds clarity to the supplier’s role within the retail supply chain,” stated Golovin. “RFID gives an understanding of what is in the back room or on the store shelf.”

Knowing where product is and having an accurate record of inventory are fundamental prerequisites for preventing out of stocks. RFID addresses two of the biggest inventory challenges retailers face: when inventory is in the store but not on the shelf, and phantom inventory, when the system says inventory is on hand but it is not.

“In many stores, the perpetual inventory [PI] is often more inaccurate than accurate,” acknowledged Bliss. “It only takes a small PI error to impact auto-replenishment of our products. In one of the intervention pilots when we tested RFID, there was a 50% reduction in phantom inventory and a 20% reduction in backroom inventory issues.”

For HP, one of the areas with the greatest opportunity for improvement is proof of delivery (POD). “Our POD claims are increasing in quantity and cost,” reported Bliss. “The reconciliation process is time-consuming, expensive and difficult to prove. Across our retail supply chains, there are many hand-offs between third parties. RFID provides visibility and becomes an arbitration mechanism for us.”

However, Bliss suggested the No. 1 application for RFID is in promotions management, because the timely arrival and execution of promotional inventory is key to maximizing sales lift. In an HP pilot that tested RFID on promotional product, 45 stores that executed correctly saw a 140% lift in sales. Conversely, 25 stores that were late setting up the floor displays had only a 30% lift in sales during the promotion.