October 01, 2005
RFID in retail and CPG
Item level tagging on a global scale that encompasses retail, accounting, defense, and other sectors could cost $ 200 billion per year. However, the potential benefits could be up to $ 300 billion. Between the retail and the CPG industry, it is the retailers who stand to benefit more from implementing item-level RFID. This is because RFID will enable them to reduce operational costs by around 10% and increase sales by around 2% and they will have to pay only a quarter of the cost for implementing RFID in the supply chain. The CPG supply chain does not achieve savings commensurate with its inputs to the implementation of RFID in the supply chain. For CPG to achieve a return on their investment, it needs to implement pallet-level tagging at 5 cents a tag and item-level tagging at 1 cent a tag.
Item-level tagging has picked up momentum in areas such as tagging of books, gas cylinders, liquor barrels, laundry, and baggage at airports. Wal-Mart has instituted item-level tagging for type 2 drugs. Early adopters of RFID like International Paper and Trenstar are in a position to sell their expertise to others. Apart from retail chains, even IT companies like HP, Sun Microsystems, SAP, etc have realized the value of large-scale item- level tagging. At the other end of the spectrum are companies that are pursuing a “slap and ship” policy and consequently losing out on the benefits offered by RFID.
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