The Benefits of RFID and EPC in the Supply Chain: Lessons from an Italian Pilot Study

Abstract

The adoption of RFID has undoubted economical advantages in the fast moving consumer goods (FMCG) supply chain, where it allows reducing labor costs, out-of-stock expenses, warehouse management costs, and inventory levels. Such improvements, however, are only a part of the overall RFID benefits, which also include new business opportunities and strategies. The purpose of this chapter is to quantify the potential benefits of RFID technology and EPC Network on the overall FMCG supply chain. The analysis performed and the data presented are based on the results of a recent pilot project developed at the RFID Lab of the University of Parma (Italy), and named “RFID Logistics Pilot.” The project involved 13 major players in the FMCG industry, either manufacturers, 3PLs, or retailers. The deployment was carried out by Parmacotto, an Italian manufacturer of ham, salami, and other processed meats and Auchan, one of the top 5 retailers in the Italian market. RFID tags were used to identify and track 12,000 cases and 800 pallets of sliced ham, sandwiches, and other fresh foods as they moved from production to the retail store shelves, between May and September 2008. The results of the project show that the largest part of the benefits of RFID can be achieved through collaboration between multiple supply chain players. Examples of such benefits include: (i) automation of supply chain processes, with benefits for all players; (ii) better inventory management and decrease in safety stocks, thanks to plain supply chain visibility; (iii) streamlining of other processes (e.g., administrative activities, such as billing); and (iv) increase in turnover due to better management of promotions, reduced stock-out, and increased service level delivered to customers. This latter, in particular, results from the possibility of improving the quality of product delivered to the final customer, in term of increased residual shelf life.