Procter & Gamble: Wal-Mart RFID Effort Effective

One ofWal-Mart’s top providers of consumer goods has found success by following the RFID requirements of the retailer.

The Procter & Gamble Co. in Cincinnati, one of the first 100 suppliers to comply with Wal-Mart’s requirements to tag its products with RFID chips, has improved the accuracy of its deliveries to the retailer, particularly during time-sensitive promotions, according to Paul Fox, a spokesman for P&G Global Operations. “Ensuring that the right product is at the right place at the right time is priceless,” he said.

In addition, Fox said, “we have seen significant benefits within our own four walls. It’s helping streamline processes and making them more efficient. We know what we’re about to ship, and there are no errors and no picking the wrong case and no miscounting.”

RFID technology has offered significant improvements over bar-code systems, Fox said. For example, he noted that workers can’t scan the same RFID tag twice because each one has a unique identifier. Bar-code technology lacks those capabilities, he noted. RFID automation has also allowed P&G to speed the process of moving products to a distribution center: It took 20 seconds to manually tally bar-code data on a pallet versus five seconds to read the RFID technology, Fox said.

The cost of each tag is less than 10 cents, making the technology economically viable, he said. RFID tags cost $2 each in 1999, Fox noted.

He said P&G’s overall investment in RFID technology, which he would only say was multiple millions of dollars, has been recovered. “Fundamentally, it’s been a fruitful collaboration between ourselves and Wal-Mart,” Fox said.

Some analysts remain unconvinced that the Wal-Mart RFID program will prove beneficial to all suppliers. Michael Liard, an analyst at ABI Research, said that more data is needed to determine whether RFID technology is significantly more cost-effective than bar-code systems.

Simon Langford, director of RFID and transportation systems at Wal-Mart, said the second generation of RFID technology has improved performance and accuracy for the retailer. Langford acknowledged that the company’s top 100 suppliers, which went live with the technology during 2005, faced some challenges while learning how to use it. Smaller suppliers that implemented the technology later on benefited from lessons learned by the earlier adopters, he said.

Copyright © 2007 IDG Communications, Inc.

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