The worldwide leader in razor blades says radio frequency identification will keep it a cut above the competition.
"We call it perfect retail," says Jamshed Dubash, The Gillette's director of auto-ID technology. "It's having the right product at the right place at the right time."
Of course, it's still a dream at this point. Being able to track individual consumer packaged goods is still years away, held at bay by adolescent technology and high costs. But for Gillette, tracking cases of razor blades from distribution center to retail receiving docks soon will move from pilot phase to limited-scope reality.
Even at the case level, the financial benefits are enormous. Discrepancies between invoices and actual inventory received by a retailer can be eliminated. Human miscounts won't occur. Pallets of merchandise will no longer get lost in cavernous warehouses. With implementation of RFID by trucking companies, tracking inventory throughout the supply chain and minimizing theft of in-transit goods becomes possible.
"Eventually we'll have a new level of transparency," says Paul Fox, Gillette's director of global external relations. "We won't see quite end to end, but we'll see from our manufacturing floor into the retailer's back room."
Gillette is moving with care, figuring out the best place to affix tags, maximizing read rates, getting multiple vendors to work together and modifying systems to leverage the collected data.
It's slow going and a far different scenario than the one envisioned by RFID proponents who were fired up by reports that Gillette had ordered 500 million tags from Alien Technology Corp. in January 2003.
"Our agreement with Alien gave us the option to purchase up to half-billion tags," Fox says. "We have not done this."
Alien spokesman Tom Pounds concurs: "I can tell you that Gillette has taken delivery of more than 20,000 tags; they have not moved too far into the larger commitment."
On board early
But Gillette has long been committed to RFID hardware technology and the electronic product code (EPC) data -- an electronic bar code -- that each tiny tag carries. In 1999, the company was a founding member of the Massachusetts Institute of Technology's Auto-ID Center, an academic research effort that laid the technical groundwork for today's products.
By establishing its participation early on, Gillette became a key player and now is working with major retailers, including Wal-Mart Stores and the U.K.'s Tesco, to develop standards and agreements on how data and processes are shared. By viewing its own distribution center and IT capabilities as a set of small, reusable Lego block-like modules, Gillette has been able to work with a variety of technology partners, each of which offers expertise in a different area.
"You don't want to get into a situation where one vendor dictates," Dubash says. "If you modularize the interfaces, you should be able to use any vendor at any point in the entire chain."
Gillette's main challenge is to design long-term solutions that are scalable to mass-production levels and that focus on a range of different software and hardware interfaces. "Once you accomplish this, then it doesn't matter which vendor you use," Dubash says.
The company is doing just that. RFID tags from Alien are read by devices from Alien and Tyco Fire & Security's Sensormatic division, both of which are part of Tyco International.
Middleware from Oat Systems integrates with the readers, filtering and aggregating data for use by warehouse management software from Provia Software. The intent is to create an "appliance," a combination of fundamental electromechanical components (conveyors, shrink-wrap machines) and RFID components (readers and software) that can be deployed quickly and supported by one vendor.
It hasn't been easy. Although Gillette intended from the outset to use external vendors, it soon discovered that off-the-shelf solutions didn't exist. Modifications were and continue to be made, but not by Gillette. "Provia makes the enhancements and modifications to its own product," Dubash says. That's true for each partner.
At its cavernous assembly and distribution center, Gillette is running one production line, affixing RFID tags to cases and pallets of its Venus women's razor cartridge, one product with seven different stock-keeping units. Dubash says the idea is to track both homogeneous and mixed pallets as they ship out the door. "We're studying fundamentals, how to apply a tag and how to read it in a dense population, for example."
That's a smart move, says Jack Grasso of EPCglobal, the international standards-setting trade group. "There are inherent physical limitations with these tags: They are not easily read through metal or foil packaging or at great distances. Companies that move early to solve these assembly-line challenges will get higher readability levels and greater payback."
Dubash agrees. To assume that all cases on a pallet will be read all the time is "flawed thinking." He suggests the probability of reading each case on a loaded pallet is extremely low. "You can complain about it or accept it," he says.
At the other end of the pipeline, Gillette is one of eight suppliers assisting Wal-Mart with field trials in several Texas stores. Pallets, tagged at the case level, arrive along with merchandise from The Procter & Gamble Co., Kraft Foods Inc. and others.
Although Wal-Mart continues to pressure its suppliers to move their RFID programs from pilot to production in 2005, not all will be ready. Will Gillette? Dubash declined to provide specifics, saying that the company continues to learn from its efforts.
The cost of success
RFID traces its roots back to "Communication by Means of Reflected Power," a 1948 research paper authored by a visionary Harry Stockman for the Institute of Radio Engineers (which became the IEEE in 1963). His ideas were first used in a rudimentary 1950s "friend or foe" aircraft identification system. In the 1970s, RFID kept track of railroad freight cars, something it couldn't do with large bar codes painted on each car. Today, the technology is most often seen in the windshield transponders that drivers use on toll roads. As the decades passed, the technology shrunk and reliability grew.
The cost, prohibitive then, is still an obstacle, but not where you'd think. Although tags remain pricey, only having recently broken the US$0.20 barrier, it's the cost of affixing them to cases of merchandise that remains high.
That comes as no surprise to Christine Spivey Overby, a senior analyst at Forrester Research Inc. She projects that a hypothetical manufacturer, manually tagging about 15 million cases per year, would spend more than $5 million in its first year of RFID deployment, including $3 million for tags costing 20 cents apiece and more than $2 million in development costs. Manual "slap and ship" tagging adds another $469,000 in labor costs.
EPCglobal's Grasso acknowledges that the cost of the tags and readers remains a barrier to widespread implementation. "That will eventually change as more leaders emerge," he says.
And it is already. In August, Alien began making tags using a new "fluidic self-assembly" technique that integrates all tag-production steps into one automated manufacturing process. It boosts Alien's capacity to 2 billion tags per year and will lead ultimately to "far lower costs," says Alien CEO Stav Prodromou. Only then will it make sense to tag individual consumer goods. It's a far cry from 1999, when tags cost $2 apiece.
For now, Gillette continues to develop production case- and pallet-level solutions for automated tagging and shipping ("We do not use manual slap and ship," Dubash says) as it gears up for Wal-Mart's 2005 mandated launch and expands pilot programs in the U.S. with Target and Albertsons.
"The familiar UPC bar code will be here for many years and will coexist with its EPC counterpart," Grasso says. "UPC is still the best solution for the supermarket deli counter or for a pack of chewing gum."
Dubash agrees. "EPC is a parallel technology," he says. "Once this gets ubiquitous -- and it will, in 10 or 15 years -- it becomes redundant information."