Consumer Goods: Merchandise Moves With RFIDConsumer Goods: Merchandise Moves With RFID

For consumer packaged-goods companies, the supply chain is everything. So it should come as no surprise that the industry is experimenting with the use of radio-frequency identification. Companies such as Colgate-Palmolive, Eastman Kodak, Gillette, and Sunbeam are testing RFID for transmitting product information from electronic product codes embedded on pallets and bulk packages.

Many consumer packaged-goods companies, including Colgate-Palmolive and Gillette, are motivated in large part by the power of retailers such as Wal-Mart Stores Inc., which is requiring that its 100 largest suppliers support RFID transmissions from product pallets within five years. While few functional deployments are expected this year, the development of RFID technology is expected to accelerate in 2004, and many companies are likely to set their sights on refining use at the pallet level with pilot programs, says Paula Rosenblum, an analyst with AMR Research. In fact, a recent study completed by AMR predicts that RFID will soon become a bigger technology initiative among consumer packaged-goods companies than Y2K was, Rosenblum says.

Gillette is fine with zeroing in on pallet-level applications. The company, which has created a department to assess RFID and work with partners on its development, doesn't view Wal-Mart's recent cancellation of a planned RFID test that would have tracked individual packages of razor blades on shelves at a Wal-Mart store in Brockton, Mass., as a setback. Rather, it's a recognition of where the initial value of RFID lies, says Paul Fox, director of global external relations for Gillette. Pallet-level RFID will let companies like Gillette combat supply-chain losses, estimated at $70 billion a year in a recent University of Florida study. Half were attributed to supply-chain theft, the other half to inventory failure.

The technology is also expected to keep products on store shelves. RFID will "accurately monitor what you have, how much you have, and where it's supposed to be," Fox says. "The ultimate goal is to ensure our products are on the shelf when and where consumers want to buy them."

INDUSTRY LEADERS Rank Company Revenue in millions Income (loss)
in millions IT
employees 27 Colgate-Palmolive Co. $9,294 $1,288 825 107 Whirlpool Corp. $11,016 ($394) 550 112 Gillette Co. $8,453 $1,216 1,000 164 SC Johnson & Son Inc. -- -- 400 193 Liz Claiborne Inc. $3,718 $231 250 204 Black & Decker Corp. $4,394 $230 410 234 Johnson & Johnson Corp. $36,298 $6,597 3,575 266 Eastman Kodak Co. $12,835 $770 2,240 284 Sunbeam Products Inc. $1,300 $450 92 293 Avon Products Inc. $6,228 $570 1,400 297 Kellwood Co. $2,205 $42 177 306 Jones Apparel Group Inc. $4,312 $319 250 358 Dimon Inc. $1,260 $28 100 372 VF Corp. $5,084 ($155) 502 384 Brown-Forman Corp. $2,378 $245 150 393 WestPoint Stevens Inc. $1,811 ($13) 270 436 Dial Corp. $1,282 $17 9 458 Levi Strauss & Co. $4,137 $25 -- Financial data is from public sources and company supplied.
Revenue is for latest fiscal year.
Employee data is from information 500 qualifying survey.

SNAPSHOT INSIDE COMPANIES Average portion of revenue spent on IT 2% Average percentage of industry applications and business processes that have Web-based front ends 24% Companies with real-time business processes in place 76% HOW COMPANIES DIVIDE THEIR IT BUDGETS Hardware purchases 14% Services or outsourcing 17% Research and development 4% Salaries and benefits 30% Applications 21% Everything else 14% INDUSTRY FINANCIALS Average year-over-year revenue change 3% Average year-over-year net-income change 21% DATA: information RESEARCH
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