RFID helps small suppliers take on the big guys

Small Canadian companies can use radio frequency identification (RFID) technology as an effective marketing tool to compete with bigger businesses on their own turf, according to a top executive of a global merchandising firm.

Apart from improving businesses processes, RFID enables SMBs provide value-added services to clients, said Khaled Haram, senior vice-president and CIO the Handleman Co.

A merchandizing company in Troy, Mich., Handleman supplies CDs, DVDs and video games to mass retailers such as Zellers, Wal-Mart and Costco.

“A well-planned RFID tagging implementation gives small operators the opportunity to [show] large retailers they can provide services equal to or better than what bigger suppliers offer,” he said.

Haram spoke at the recent RFID Journal Live! Canada conference and exhibition held in Toronto.

He described how his company is working towards “zero out of stock” incidence by implementing RFID tagging at the item level in a presentation titled, Leveraging EPC in the Entertainment and Media Supply Chain.

Considered the natural evolution of barcodes, RFID tags contain microchips, and tiny radio antennas.

These tags can be attached to products and transmit a unique identifying number to an electronic reader, which in turn links to a computer database, where information about the item is stored.

Tags can be read at a distance quickly, making it valuable for managing inventory.

At least one Canadian RFID expert agrees with Haram.

“Major Canadian retailers deploying RFID mostly get the publicity, but I think the technology offers a huge competitive advantage to SMBs that adopt it,” said Jack Brooks, vice-president of business development for EPC Global Canada, a non-profit strategic advisory council and standards development body for RFID users.

He said RFID technology has the potential to enhance supply chain management and improve sales, but advised companies to “take baby steps before jumping into full deployment.”

This, in fact, was the approach adopted by Handleman Co., a company that moves in excess of 85 million pieces of CDs and DVDs each year.

Haram said his company started deploying RFID tags some three years ago when Wal-Mart began asking their suppliers to tag cases and pallets of goods they delivered to the global retailer. “It was only in 2006 that we took the extra step of applying tags at the item level.”

One pilot project involving the tagging of 11 different titles and 10,000 disks for a Best Buy store in the U.S. ended only this week.

“The technology has dramatically increased visibility into the product and supply situation, and has enabled faster and more accurate decision making,” Haram said.

He cited two areas where item tagging can create immediate value:

Product promotion

When stores launch a product promo, the event only goes on for a limited time and retailers have a short window of opportunity to determine how the item is moving, and in which part of the store will it attract more buyers.

Bar codes do not indicate which specific unit has been sold when scanned at the cash register.

RFID tags on the other hand can identify each individual item.

A store clerk can simply wave an RFID reader in front of a display and find out how many items have been sold. By associating item and location, the system will also inform merchandisers which area of a shelf or the entire store is making more sales.

Reducing out of stock incidents

Most current inventory systems alert retailers that they are running low on a certain products by calculating inventory delivered and inventory sold. The system sends out an alert to order more when a certain number is reached.

One flaw in this system, Haram said, is it doesn’t have actual visibility into the goods.

A pallet which was part of the delivery may have been delayed, miss-delivered, or stolen but if recorded as received, the system perceives that it’s on the premises.

RFID tags on each item provide retailers an accurate report on what is in the store room and what is in the store shelves. When a shipment is received in the store, a scanner will record the quantity in the system database, as each item is sold or taken out of the store it is subtracted from the total. The system even aids asset protection as it can alert managers of possible theft.

Haram said at least one small Canadian beauty products manufacturer is using RFID tags on items it delivers to Wal-Mart. “Imagine a small company that can tell a large retailer they can provide this sort of added value. That’s a big plus in landing a big contract.”

The price of entry, he said, is not necessarily steep as several Canadian companies are offering RFID technology cheap. They include:

PureLink Technologies of Montreal – which offers an active RFID package for $18,985 for 50 tags and four receivers.

The package is suitable, among other things, for vehicle and personnel tracking.

“The set-up is ideal for small businesses that want to track fleet vehicles or large assets,” said David-Alexandre Bourbonnais, systems integration and software specialist for PureLink. He said active RFID tags contain batteries that enable them to transmit signals which enable them to be read at farther distances.

Banyan Commerce, a Toronto-based RFID provider sells a package for $5,000.

It includes an RFID tape printer, tape, software and training. The system can be pre-configured for compliance with the requirements of Wal-Mart, Target, Loblaws, Office Depot, the Department of Defence, or other companies.

“Small manufacturers who want to sell to big stores need not invest on costly consultants or expensive systems. This is an all in one package,” said Vijay Thomas, principal partner at Banyan Commerce.

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