HELPING SUPPLIERS WITH WAL-MART

CHRISTINE BLANK

ORLANDO, Fla. -- SInce pallets are one of the primary targets of RFID tagging, Chep, a major pallet-pooling company based here, has seen a major opportunity in RFID technology.

To that end, Chep has been field testing RFID-tagged pallets for five years, and earlier this month introduced its Plus ID service. The service features RFID-enabled pallets, as well as software applications to track the tag through the supply chain.

Chep is working with manufacturers to put the technology in place in the next few months, making it easier for them to meet Wal-Mart Store's January 2005 deadline for tagging pallets and cases.

David Mezzanotte, president of Chep, predicted that RFID mandates made to suppliers by Wal-Mart, Target and others will spark usage of RFID technology. "Wal-Mart has altered the timetable for everyone," said Mezzanotte during a tour of Chep's headquarters here earlier this month.

Chep has long believed that pallet-level RFID tracking, via readers set up at the distribution center doors, would provide significant benefits for its manufacturer and distributor customers, said Victor Mendes, chief executive officer, Chep.

In Chep's tests of RFID-tagged pallets with Wal-Mart, Target and other chains, along with manufacturers such as Procter & Gamble, labor efficiency improved between 7% and 20%, inventory was reduced by 5%, and there was a $1.50 to $2 savings per pallet in end-to-end supply chain costs. Other benefits expected via RFID include faster shipping and receiving, and fewer out-of-stock items, according to Chep.

Mezzanotte acknowledged that barriers to fully adopting the technology remain, including the declining but still high cost of RFID tags. "Today, the tags still have a significant cost," he said. "The cost was over $1, then it was $1, now it may be around 50 cents. When you multiply that by cases of goods, it becomes a huge number." Still, he believes the cost will eventually fall to between 5 and 10 cents a tag, as more volume gets ordered.

Chep's Plus ID system is 100% read-capable and meets standards being developed for the Electronic Product Code, the digitized information carried by the RFID tag on a microchip.