June 16, 2003 -- Gillette VP Dick Cantwell has been leading the company's RFID efforts. He is also chairman of the Auto-ID Center's Board of Overseers. Cantwell was unable to appear at RFID Journal Live! because he had to make a presentation about RFID to Gillette's board. But he agreed to sit down with RFID Journal Editor Mark Roberti.
Cantwell spoke about the company's decision to purchase 500 million RFID tags from Alien Technology, the cost of those tags, the company's RFID projects, smart shelf trials and other topics.
RFID Journal: Gillette has been a leader in the effort to develop the Electronic Product Code. Can you give us the background about why the company got interested in the EPC?
As our products move through the supply chain, we are not able to have the kind of information that allows us to know exactly where those products are at every point, from packaging to warehousing to distribution through the carrier pipeline into the retail DCs, the backroom of the store and eventually the store shelf. We see huge opportunity with the EPC to give us the ability to track our products to make sure they are on shelf when the consumer wants to buy them.
RFID Journal: There were other RFID technologies on the market. Why develop the EPC. What's special about this effort?
There are really three things that are special about it. One is it's a technology that will allow us to achieve low enough costs that we can eventually put tags with the EPCs on each of the 11 billion items that Gillette puts into the supply chain annually. It's a technology that's based on a standard architecture that everyone can use, so we are not talking about having competing standards or competing technologies. We can have one inventory with EPC on it. And it's based on interoperability, so everything fits together nicely for the retailer, manufacturer and consumer's benefit.
RFID Journal: Earlier this year, Gillette made headlines when it ordered 500 million RFID tags. I've heard people question whether it was a legitimate purchase or was just a way to promote EPC technology. Can you characterize the nature of the purchase?
It's a very real order. It's a signed contract between The Gillette Company and Alien for the purchase of half a billion Alien tags that are [EPC] compliant. As I said earlier, we put over 11 items into the supply chain annually, so while the order may seem large in the world of semiconductors or RFID, it's still only a fraction of what Gillette will eventually need. We felt we had to move forward with Alien to secure supply, to take advantage of their expertise in R&D as we develop our own capabilities, and provide a source of tags for the pilot initiatives we have underway.
RFID Journal: The goal of the center is to get the price of tags down to less than 5 cents. I know you can't talk about specifics of the Alien deal, but how close are you to that goal?
Prototype of Gillette's smart shelf
I can say publicly that the cost of the tags is well under ten cents. I can say that the Auto-ID Center vision for a five cent tags is very much on the pathway that we've established with Alien. And we're looking at add-on capability through printing and packaging to take the cost still lower by 20 to 40 percent by integrating the chip right into the printing on our packaging.
RFID Journal: Can you tell us what you will be doing with those half a billion tags?
We will start by using them extensively this year in the tests and pilots that we are doing to make sure that we understand how to apply these tags to our products, how to write to the tags, how to use the tags to trace and track our products as they go through our supply chain and with our retail partners. Then, as we begin to adopt the technology and implement it in a scaleable way, we'll be using those tags to initiate the role out, starting with our high value products at the case-pallet level and moving as quickly as we can to the shelf and item-level tagging.
RFID Journal: You have a couple of pilots going and in the works. Can you tell us about those?
The backbone of our program right now is our Devens pack center and distribution center project. I say project rather than pilot because it really is a scaleable implementation engineered to roll out to other warehouses as soon as we're ready. That project involves putting EPC tags on all cases and pallets of our Venus women's shaving system coming out of our East Coast distribution center. We will track those cases and pallets through the various stages of our pack center process and connect our distribution center to several customers who will receive EPC-enabled cases and pallets from us. Our intention is to learn about auto-ID and make sure we have it right, but also to understand the process by which our products go from factory to customer and look at the pain points where auto-ID can add value, removing cost, increasing efficiency, increasing accuracy and making sure what the customer ordered is what they received and helping us get product onto the shelf in the best possible fashion.
RFID Journal: Are there areas where you are looking for or expecting to get a return on investment?
The business case analysis that we've done within our four walls has shown a healthy return on investment. Some of the areas are a reduction of inventory, a reduction in labor and capital, an increase in accuracy. So there will be less losses or deductions coming our way and speed to market. The ability to move that product through our process more quickly, so the customer can replenish their shelves when they need to be replenished.
RFID Journal: You have a couple of smart shelf pilots going with Tesco and Metro and Wal-Mart. Can you tell us about those?
We see the smart shelf implementation being a ways down the road but we felt that it is important to get started now. As we engineer the case-pallet applications, and the warehouse to customers DC implementation, that we are also working at the shelf level, and we can begin to push backwards. Eventually the two will meet, and we will have an end-to-end solution.
Alien tag on Gillette razors
We have developed, in conjunction with the Auto-ID Center, intelligent shelving. The shelf is designed to let the store know what inventory it has on shelf. When it falls below a threshold level, that initiates a replenishment alert. They can then pull stock out of the back room in a very timely fashion and get it on shelf before it goes out of stock. At the same time, the backroom can initiate a reorder from their own DC and that DC can initiate a reorder from our own warehouse. We can make forecasting to demand much more streamlined.
The intelligent shelf also has the ability to predict theft. We know that our products sell at a certain rate per hour. If there is an unusual occurrence, where many more products are taken off shelf in a given instant, the shelf can alert store operations that there is a potential theft in progress. We can even take a picture of whomever it is removing the product, so we will have a picture of someone that the store needs to keep an eye.
The technology is being used in the US with Wal-Mart on a pilot basis. We've installed it with Tesco in the UK very successfully, starting last November. We've already found benefits in terms of predicting theft. It has also given Tesco much more real-time information about out of stocks and given them the ability to replenish their shelves more quickly. Right now, our Metro shelf is coming up to speed. It will be part of their store of the future concept, where reducing out of stocks is the major objective.
RFID Journal: Based on what you've seen so far, are you encouraged that EPC technology will fulfill the vision of reducing out of stocks, and if so, do have a sense of by how much?
It's very early days. We don't have the tangible evidence yet from the tests and pilots to prove the business case. It's assumptive, but we do know the technology works. The intelligent shelf is working and the early results from the Tesco pilot show that we can get significantly better visibility to in-stock positions. With that in mind, it is not too much of a stretch to expect that we can then replenish the shelf more quickly, more accurately and more completely. We know that in the consumer goods industry that out of stocks occur two to five percent on average. For high velocity products -- Gillette sells razor blades, batteries, electric toothbrush refills -- those out of stock levels can be several orders of magnitude higher. Based on the early returns from our pilots, where we are seeing the ability to better address out of stocks, if we can reduce out of stock levels by 25 percent our 50 percent, there is a huge win for the industry.
RFID Journal: I've heard people say RFID can't be used to replace EAS tags. Given what you've seen, how do you feel about that?
I think EPC technology provides a very attractive system for in-store security because you can determine at shelf whether there is the likelihood of a theft. That gives the store the ability to put the right protocol in place to apprehend a thief long before they are out of the store and running down the street. Also, because the store shelf is where the products need to be monitored and where out of stocks occur, the fact that EPC can get to item-level identification on shelf and give the store an immediate alert as to when they need to replenish that shelf, that is another significant and even larger win for the retailer.
RFID Journal: The Alien tags you purchased are UHF tags. The smart shelf pilots use 13.56 MHz tags. Is there a need to use two different frequencies, or will you be able to use UHF across the board?
: I see being able to use one frequency across the board at least in this geography, but with multi-frequency readers there is the possibility that you could read different frequencies and give us the ability to create a global solution.
RFID Journal: One questions I hear often is, Is this an IT issue, a supply chain issue? Where does it fit in a company, and how did Gillette resolve this question?
It is very definitely a supply chain issue. Our goal is to have an end-to-end value chain solution, so that we can get products from the factory to the consumer when the consumer wants to buy them. Clearly, however, IT is a major enabling factor. The way Gillette has organized around auto-ID to drive adoption is we've created a senior leadership team that is cross-functional. It includes value chain, IT, marketing, engineering, manufacturing, finance and so on. We sit as a team and cross-functionally lead the company, being on the early edge of the company's adoption. The work is then done by specific cross-functional teams, addressing all of the areas that have to come together to push this technology ahead.
RFID Journal: I'm sure there are a lot of executives at companies around the world that see the value of RFID technology. Do you have any advice about how they can get buy-in from senior management?
I think it is very clear that you need to establish the business case up front. Once you've done that, recognizing that this is a disruptive technology. It is different from what companies are using today. It provides in many, if not most instances, a better solution because of the end to end value chain implications of the technology. The important thing is to make sure that the company's existing infrastructure doesn't kill it -- see it as a competitor -- but that it is embraced an incubated within the company. That is what Gillette is doing. We've created a dedicated auto-ID team that is focused on sponsoring the technology and driving it forward. We've created a senior leadership team that is cross-functional to champion the technology and remove obstacles. We've set aggressive breakthrough targets to keep us pushing beyond what would be predictable for a company that already has installed ways to manage logistics, so that we are pushing auto-ID as hard as we can.
RFID Journal: Generally, how do you see things moving forward in terms of adoption? Do you see any catalyst driving adoption?
I think it will be exponential. Right now, there are dozens of sponsors -- manufacturers, retailers, and technology sponsors -- who are testing and piloting on an ever-increasing scale. Once the connections are made in real commercial terms between say, a Gillette and a retail partners of ours, and the benefits of the technology are publicized, I think you are going to find a groundswell of adoption, and it will move very rapidly to scale from there.
RFID Journal: Is there anything you would like to add or anything you would like to get across to our audience?
I don't have anything else to add, other than that I think we are talking about something that will dramatically change the way industry goes to market. It is going to give the consumer huge benefits in terms of being able to get the products they want when they want them. I wish I could be with you in person in Chicago to deliver this message, but I have to be back in Boston where I am selling this technology very hard to my management and making it happen on a very aggressive timetable.