NEW YORK -- Three of the world's largest consumer packaged-goods companies last week formed a consortium to jump-start the slow-but-steady growth of source tagging.
Procter & Gamble, Cincinnati; Eastman Kodak Co., Rochester, N.Y.; and Johnson & Johnson, New Brunswick, N.J., unveiled a new alliance, called the Consumer Products Manufacturers' Consortium, that will seek to establish industry standards for security-tag technology.
Greater use of tags and electronic article surveillance equipment at the retail level could help curb shoplifting, which the consortium identified as a $16 billion annual problem in the United States alone. In addition, widespread tagging would help address product product counterfeiting issues, identified as a $200 billion annual problem.
Within the next few months, the consortium "plans to begin engaging other manufacturers, retailers and trade associations about what the standards need to be, because to work it must be a consensus standard," Larry Kellam, P&G's director of customer service and logistics and representative to the consortium steering committee, told SN.
He added that, prior to the announcement, consortium leaders talked to retailers including Ahold, Zaandam, Netherlands; Wal-Mart Stores, Bentonville, Ark.; and drug-store retailer CVS Corp., Woonsocket, R.I., "about the possibility of [the three manufacturers] being the catalyst for setting standards, and there was a positive reaction," said Kellam.
The consortium wants to arrive at "a low-cost technology" that lets manufacturers apply tags to a greater percentage of product, he added, noting that a standardized approach would allow tags to be placed on products during the manufacturing process, rather than by a wholesaler or retailer.
"We hope to have pretty well coalesced as an industry on consensus standards by the end of 1999," said Kellam, noting that the coalition would then seek to license the technological standards for a beta test "early in 2000."
In addition to providing consistency, such source tagging would be less expensive than current methods, both in terms of the labor needed to apply tags and because the increased usage volume would encourage security-system vendors to lower per-tag costs.
Retailers would save on the labor used to apply tags, and would be able to more openly merchandise high-ticket, high-theft products, said Kellam. "The way retailers currently handle non-tagged product, it's typically locked up or behind a counter," he said.
Not everyone is sold on source tagging as the ultimate solution to these problems, however. "Some of our members are already source tagging, but others see it as purely a retailer's issue," said Dave Mallon, senior director of industry affairs at the Grocery Manufacturers of America, Washington. "Some members who are source tagging think it's a bad way to go, because one thing we know is that it adds cost to the supply channel without necessarily providing results."
The consortium is hoping the combined clout of its three current members will help overcome some of the obstacles that have hindered source-tagging's growth. One issue is that competing technologies from the two major security-system vendors, Sensormatic, Boca Raton, Fla., and Checkpoint Systems, Thorofare, N.J., are already installed in numerous retail locations.
"That's part of the reason the three companies have come together," said Kellam. "Retailers have been talking to us about the need for security tagging for some time, and a problem has been the lack of a low-cost solution because of the multiple technologies out there."
The consortium's technology partner, NovaVision, Bowling Green, Ohio, is charged with helping to specify the various requirements needed to establish standards. Some of its initial activities will include "talking to other providers of technology to help us meet that goal," Al Caperna, president of NovaVision, told SN.
"The technology that best meets future needs" will be the one that's eventually chosen, he added, noting that low cost and widespread acceptability were two key factors. "One of the goals is to keep the cost at a minimum for retailers to make whatever conversions are necessary," he said.
"Whatever is established will be a voluntary standard," noted Kellam. "This won't be like a light switch where it will instantly be applied to 100% of products and 100% of retail locations. It will happen gradually as manufacturers and retailers upgrade their technology systems."
