Radio frequency identification (RFID) technology was a multi-million-dollar investment for Toronto-based Conros Corp., but the purchase was worth every penny, says the company’s chief technology officer.
For Navin Chandaria, the decision
was a no-brainer because it ensured that buyers of Conros’ products leave retail stores armed with protection against a bitter cold wrought by unexpected and unrelenting wintry climes.
“If there is no product on the shelf on a cold night, do you know how many people go home disappointed?” said Chandaria
Conros manufactures synthetic fire logs, matches, wood firestarters, and citronella candles. The company has captured 65 per cent of the fire-log market in the U.S. and 93 per cent in Canada. In a bid to accurately meet customer demand, and to ensure the firm maximizes its sales at each of the North American retail stores it supplies, Conros is now using RFID tags: tiny chips with antennae that can be embedded in retail items. It’s also using RFID readers that electronically identify, track and store information on the tagged items, giving up-to-the-minute status on the whereabouts of those products.
It’s an important move for Conros since Wal-Mart, one of its high-profile retail chains, has mandated the use of RFID for its top-100 suppliers by 2005. This means suppliers are testing the technology on certain products and spending millions to revamp their supply-chain systems.
Conros’ testing stage has just come to an end after piloting RFID on a product line of logs. The pilot involved applying RFID tags to each case as it came out of the production line, said Victor Garcia, managing principal for the mobility program office at HP Canada.
Another tag is applied to a pallet that houses some 60 cases. The tagged products were read as they left the factory and again as they arrived at the warehouse. They were also read as they left the warehouse and as they arrived at retail stores.
Once Wal-Mart’s system is fully operational, antennas will read the products once they arrive at each store, and once again as the products move from the backroom to the floor. Once a product is received and read by Wal-Mart equipment, suppliers will eventually be able to log on to a Web site and track the status of their products.
“RFID will not only identify whether the shelves are empty, but it will also tell us where the products are in the supply chain, and allow us to move products from one store to the other where the demands are greater,” said Chandaria.
“We take away the dead inventory, and we’re solving the problem of having inventory lying in the backroom or in trailers for which there is a great need.”
Chandaria would not reveal the exact cost of Conros’ RFID equipment, but said: “We do hundreds of millions of dollars in sales. Investing a few million is neither here nor there. So the cost is really relative.”
The biggest challenge for Conros was calculating how much business was lost in the past because products were not on the shelves where customers demanded them, he said.
“This could have an impact of 25 per cent or 50 per cent growth. It’s very hard to say. What we do know is it’s a humongous opportunity.”
For HP, one of the bigger challenges was to ensure that an RFID tag applied to a Conros log could still be read, said Garcia.
The logs are made of very dense material, and when they first come off the production line they are still wet, he said. Both of these factors threaten the tag’s readability.
“One of the first things we did is take an entire pallet, and send it to our lab in Houston, (Tex.) to test how RFID would perform with the product,” said Garcia. “We tested it to make sure it perform well in both the pallet and individual boxes.”
As for the cost of RFID tags and readers, Chandaria is confident it will come down as more people buy into it. The cost of RFID tags has been estimated at $3 to $5 per tag, but is expected to decline to $1 per tag as bulk purchases are made by product manufacturers and livestock-tracking agencies.