Consumer packaged goods firms: No quick ROI from RFID

Computerworld - CHICAGO -- Major consumer packaged goods manufacturers don't foresee any quick return from adding radio frequency identification technology to their packaging and distribution systems. Instead, they view it as the cost of doing business with major customers such as Wal-Mart Stores Inc. and the U.S. Department of Defense, which have mandated the use of RFID tags starting next year.
Mark Engle, director of IT at Campbell Soup Co. in Camden, N.J., speaking here at this week's RFID Journal executive conference, said his company views the incorporation of the technology as "tactical in nature" to meet the requirements of major customers such as Wal-Mart. "You're not going to get ROI immediately" from using the tags to help track products in the distribution chain, Engle said.
Mike O'Shea, director of corporate AutoID/RFID strategies and technology at Kimberly-Clark Corp. in Irving, Texas, agreed, saying his company views RFID as an investment needed in order to meet supplier requirements. And Tom Torre, associate director of business-to-business supply chain innovation at Procter & Gamble Co., said his company is still trying to figure out the "value proposition" of RFID.
He said P&G would eventually like to capture tag data from its suppliers to quickly evaluate store sales data, which could provide it with quick feedback on the sales of new products.
Torre noted that high costs of the microchip-based RFID tags are still nowhere near the 5-cents-per-tag price Wal-Mart has set as a target. An executive from Matrics Inc. in Columbia, Md., who declined to be identified, said that tag costs in volume now "could be in the range of 18 to 35 cents each."
But, he said, those costs depend on many variables, including the type of product the tag is applied to and the kind of adhesive used to secure it to a package. Antenna types also affect RFID costs, the Matrics executive said. A typical RFID tag consists of a microchip and antenna embedded in substrate material, such as paper labels.
P&G discovered in pilot tests that some products are easier to track than others, further compounding the ROI picture, Torre said. The company has since divided products into "RF-friendly" and "RF-unfriendly" categories. The products easiest to track are items such as powdered detergents, Torre said, while liquid detergents are more difficult because liquids absorb the radio frequency signals transmitted by tag readers. And foil-wrapped packages of dishwashing detergent present an even tougher challenge, he said, since the metal foil repels RF signals.
According to O'Shea, Kimberly-Clark found the use of RFID tags