Through a special arrangement, presented here for discussion is a summary of a current article from Supply Chain Digest.
Has there been anything much stranger than the tale of RFID in the consumer packaged goods to retail supply chain?
The journey has gone from visions of supply chain transformation to now, literally, the concept being at a near dead standstill -- though there is clearly a connection to today's very lively efforts with RFID for item-level apparel.
Walmart is doing nothing with EPC tagging in the CPG area, now focused on apparel programs. A P&G spokesperson told me recently that as far as he knows the company has no active RFID projects or pilots currently underway. This from a company that was leading the charge not that many years ago and had at one point, I believe, at least 20 people working on RFID. P&G, as just one example, developed what became the industry standard requirements document for RFID-capable fork trucks. Even Tesco and Germany's Metro chain, which continued ahead after Walmart had clearly started to bail, have done nothing new for about three years.
Was this vision in the end just full of mush? Or is the value still there waiting to be reignited?
"There was sort of a collective euphoria back then that probably didn't look hard enough at the real business case for consumer packaged goods," said Simon Ellis, an industry analyst at IDC Manufacturing Insights and for several years a "supply chain futurist" at Unilever North America. He noted that even at five to seven cents per tag, a level we are just getting to now, that would equal the cost of the secondary packaging itself, "which would be very difficult to justify" in low margin CPG products.
As the reality started to hit relative to the cost impact of the Walmart program versus the benefits, CPG companies started to push back despite such strong earlier enthusiasm.
In
the end, here is what I believe happened:
- CPG companies and Walmart did not do enough "hard math" to really understand the returns before making substantial investments in RFID. Other retailers sat back and let Walmart do the "dirty work."
- There was a "herd" mentality that contributed strongly to this, supported by the self-interested RFID hype machine in some parts of the media and consulting community.
- Many CPG companies did and continue to believe there is great ROI in some product categories, the most prominent being in promotional execution but also others. But Walmart basically gave up on those (not clear why) and no other retailers have stepped up. Manufacturers can't do it without retailers.
- Walmart did not design or execute its program well, especially in having a mass mandate across hundreds of suppliers, when P&G and others were arguing for a segmented approach based on value. I believe the value for these "advantaged" products (P&G's term) is still there. This is more the approach Walmart is smartly taking now with apparel.
- Venture capitalists lost hundreds of millions funding RFID companies when the Walmart bonanza never happened, but those investments moved the technology rapidly forward, enabling today's apparel programs and more.