RFID Case Study: Gillette and Provia Part One: Background

Background

Radio frequency identification (RFID) is constantly on everyone's lips and every relevant enterprise application vendor is hedging its bets towards becoming RFID-ready (see RFID—A New Technology Set to Explode?). Provia Software (www.provia.com), a privately-held provider of supply chain execution (SCE) software solutions, too can tout the results of its RFID endeavors, as it has already put much effort in terms of the proof of concept in the field. Provia and other vendors are responding to the demand for an RFID-compliant solution by Wal-Mart, Target, Albertsons, the US Department of Defense [DoD], and so on.

As already discussed in "SCP and SCE Need to Collaborate for Better Fulfillment" , in addition to the above demanding functional capabilities of supply chain management (SCM) applications, seamless integration of transactional and decision-support applications has become quite important, and consequently, modern SCE systems provide the tactical, transactional backbone for order fulfillment and visibility atop their core functionality of order management, warehousing, transportation, yard and inventory management. To be able to react to fluctuating demand, respond to customer specifications, and coordinate real-time event messages from multiple disparate systems, these systems are being further enhanced with decision support capabilities and planning engines aimed at order fulfillment and inventory and order status visibility.

Although corporations and government agencies around the world recognize RFID's potential to cut supply chain costs, increase operational efficiencies, speed delivery time, minimize theft and waste, and so on (e.g., warehousing and distribution units should benefit from increased shipping accuracy, labor savings, inventory accuracy, and reduced inventory shrinkage; retailers should benefit from reduced inventory shrinkage and reduced out-of-stocks on shelf; while the entire supply chain should benefit from automated lot, expiration and serial tracking, and no need to relabel at every step), the idea of RFID implementation can logically seem insurmountable at this stage of the general users' education (see RFID—A New Technology Set to Explode?).

This is Part One of a two-part Case Study.

Part Two will discuss Challenges and Lessons Learned.

Provia Delivers for Gillette

In September 2003, Provia was likely the first SCE vendor offering full RFID support for a warehouse management system (WMS) in a standard product, which was already compliant with the most recent electronic product codes (EPC) specifications at the time. Provia has also worked with a high-profile client, The Gillette Company, to test RFID support as part of the client's plan to track selected RFID-tagged items through the supply chain.

Unlike other vendors announcing support of RFID in anticipation of serving the market need, Provia was the first supply chain software company at the time to actually be involved in testing RFID technology with a large client for real-world use. Not only was the implementation meant to satisfy the Wal-Mart mandate, but also for gaining real-time visibility into the supply chain, as to be able to share this improved visibility with the customers, which is supposed to yield many benefits for users, including increased shipping accuracy, inventory accuracy, and reduced inventory shrinkage.

Throughout the process of designing its RFID-compliant solutions, Provia has drawn upon its heightened degree of RFID knowledge and experience owing to its May 2003 initiated membership with EPCglobal (formerly the Auto-ID Center), a not-for-profit research organization headquartered at Massachusetts Institute of Technology (MIT) that is designing the critical elements and creating global standards for the next generation bar code—called the EPC Network—in partnerships with MIT and several leading retailers.

Established in 1999 by The Gillette Company, Procter & Gamble, the Uniform Code Council (UCC), and other interested sponsors (end users and technology companies), EPCglobal and its over 90 members have since been working to create standards and technology solutions needed to establish a new network for tracking items that use RFID tags that can be employed within a supply chain. The EPC Network RFID tags are designed to help participating companies better track and control inventory—from warehouses, to loading docks, to trucks, and even on store shelves. For additional information on EPC see "Electronic Product Code (EPC): A Key To RFID".

Provia's decision to join the Auto-ID Center was part of an ongoing RFID project with The Gillette Company—a founding member of the Auto-ID Center. By working with Gillette on this first full-scale RFID project, Provia was at the time the first SCE vendor with real-world experience in RFID and at a Tier 1 warehouse environment. As a result, Gillette now has a distribution facility utilizing the RFID technology where Provia's ViaWare WMS has been used for some time to track and monitor RFID tags on select products as they arrive and depart the facility. The ability to track products through their production life cycle has reportedly enabled Gillette not only to reduce losses resulting from out-of-stock, stolen, or lost products, but also to improve efficiencies across its operations by monitoring the status and location of products.

Loss prevention along its entire supply chain has initially galvanized the company to try new approaches to solving a venerable predicament. With eight major product categories, Gillette's long-term vision has been to eventually apply EPCglobal technologies to all of its products globally. To meet the goal of having complete verification of all products, the company has recognized early it had to build up the requisite knowledge through a series of pilot projects and test the capabilities of its software and hardware vendors.

Pilot Project Goal

The goal of the pilot project was not to see whether RFID tags on pallets and cases could be read automatically (although one should not assume that it is easy to achieve), but rather to develop or improve the systems and business processes needed to sustain higher levels of efficiency and productivity. While many other Wal-Mart and DoD suppliers will simply slap RFID or EPC tags on cases and ship them, whereby the technology will be an added cost, Gillette hopes that when it rolls out the EPC infrastructure developed at the pilot site to all its other packaging and distribution centers globally, it will not only meet Wal-Mart's mandate, but will also be able to use the technology internally to eliminate manual case counting, scanning, and other labor-intensive expenses.

Namely, while RFID is often touted as the new way to streamline supply chains and increase efficiencies at retail outlets, if deployed in its basic form, the technology would simply replace current identification methods (i.e., barcodes) but significantly increase the cost. Thus, to achieve these additional above-touted business benefits, RFID use must automate business processes for better stock identification, and the act of automating information collected from stock movements requires considerable additional business logic and analytics.

For example, just an RFID reading event will not give any indication as to whether the stock is moving "out" or "in", and without the use of multiple readers upstream and downstream, and the analysis of previous read events, directionality of stock movements cannot be assumed. Whereas manual inventory management processes inherently "know" the direction of stock movements owing to set up hard steps (i.e., stock receipt, delivery, inventory transfer, etc.), RFID simply automates the process of reading a product or item ID and then passes control back to the application for determination. Therefore, RFID has the potential to transform supply chains but only when applied to improved business processes that can absorb the additional tag and infrastructure costs within the business case.

Hence, in order to maximize the benefit of RFID, extensive rework has had to be done within Gillette's internal operational processes and systems. While the company still considers this one of its biggest challenges, it is also potentially one of the most rewarding, which should also serve as an object case to other companies planning RFID implementations—implementing without a companywide information strategy and reevaluation of business processes and workflows will merely create islands of information and processes that fail to take advantage of the opportunities that the advanced technology enables.

Further, Gillette has launched RFID pilot projects on two fronts:

1) within its own operations; and

2) at the retail shelf.

Additionally, the project was internally divided into two phases:

1) to first create a scalable pilot in one location, with the goal of expanding companywide; and

2) to connect the verification process to a retail customer's distribution center operation.

The first phase started early in 2003, while the second one started in the second half of 2003, with Wal-Mart being the first retail participant. Gillette has also been conducting pilots in the US and in the UK to test "smart shelving" capabilities of RFID, first with partners Wal-Mart and Tesco, while further pilots are planned with Sam's Club, Target, and Home Depot, in case of encouraging initial results. Like in the above example of supply chain workflows, RFID-based applications extend the need for distributed architecture at retailers' sites too by introducing distributed analytical requirements in addition to basic data collection and publishing at the register.

This scenario is complicated by the introduction of shelf readers where the data about previous stock movements must be checked to verify the validity of the read, the direction of the stock movement, and the item's new potential current location. Again, RFID would offer very few benefits to retailers over conventional product identification methods (e.g., barcodes) without also leveraging new distributed analytic and data processing capabilities.

This concludes Part one of a two-part Case Study.

Part Two will discuss Challenges and Lessons Learned.