NEW YORK -- Five new white papers demonstrating the business benefits of product identification technology pioneered at the Massachusetts Institute of Technology's Auto-ID Center have been made publicly available at no cost.
Three of the white papers were developed by Accenture, based here, while two were prepared by IBM Business Consulting Services (formerly PricewaterhouseCoopers Consulting), also based here. Both consulting companies worked in conjunction with the Auto-ID Center. The five papers, as well as three papers released last September, can be accessed at www.autoidcenter.org/howtoadopt_business.asp.
The two IBM studies focus on shrink and product obsolescence. Both examine the effects of applying Auto-ID technology, based on RFID (radio frequency identification), to these issues.
Auto-ID technology applies small RFID tags to pallets, cases and items. The tags consist of a microchip containing a 96-bit EPC (electronic product code) describing a product, as well as a tiny antenna.
According to IBM's shrink paper, "supercenter" retailers that normally experience shrink losses of 1.75% of revenues could reduce these losses by 47% on average, across seven product categories, including grocery, pharmacy, music and video, toys and health and beauty, through Auto-ID usage at the case and item levels.
Stephen Leng, principal consultant, retail practice, IBM Business Consulting Services, said the Auto-ID technology, especially when applied at the item level, provides retailers with unprecedented visibility into the location of items at all times, helping to prevent shrink.
Leng said the white paper's projected shrink reductions were based on the still-developing integration of Auto-ID systems with existing loss prevention systems such as electronic article surveillance and digital video cameras.
IBM's paper on product obsolescence states that in the grocery industry Auto-ID systems can generate potential benefits of $29 million at the case level and $67 million at the item level by tracking the condition of perishable products through the supply chain. According to Leng, the technology can automate the tracking of product rotation and markdowns, taking manual labor costs out of the process. In addition, in the future, temperature sensors -- currently not integrated in the tags -- will be able to track the temperature conditions of perishables like meat, enabling more to be sold at full price.
Among Accenture's three new reports, one focuses on improving supply chain efficiency (distribution and transportation) in the retail industry.
Accenture's retail report says that by applying Auto-ID technology at the case level, retailers can reduce labor costs associated with distribution centers by between 5% and 40% and reduce safety stock supplies by one to four days.
In one hypothetical case study, a 500-store specialty chain implemented case-level systems at a cost of $7.8 million per DC and a annual maintenance of $100,000 per installation. The paper projected the chain getting an annual savings of $16.7 million in labor expense and $6.9 million in shrink reduction.
A "blueprint" for Auto-ID technology will be made publicly available this September by the Auto-ID Center at a symposium in September in Chicago, noted Leng.