Auto-ID Technology Could Help Packaged Goods, Retail and Freight Transportation Industries Save Billions of Dollars Annually, Accenture Study Finds
NEW YORK; Feb. 6, 2003 — New technology that tags and tracks inventory and equipment could save the packaged goods, retail and freight transportation industries billions of dollars each year, according to a study released today by Accenture (NYSE: ACN). The technology, known as auto-ID technology, is a combination of electronic product codes and radio frequency identification (RFID).
The study describes how auto-ID solutions can extend a company’s ability to capture accurate information about the location and status of physical objects—an ocean container, a pallet of paper towels, hazardous materials or expensive stereo components, for example—and track the objects as they move from the manufacturing shop to the retail store.
This capability increases the efficiency of individual processes and asset utilization, enhances forecasting and inventory accuracy, and improves the ability of companies to respond to rapidly changing supply and demand with a high degree of certainty. The result of these supply-chain efficiencies is reduced inventory and labor costs and increased sales.
“Our experience shows that the benefits of auto-ID are available today,” said Lyle Ginsburg, managing partner for technology innovation in Accenture’s Products operating group. “In fact, we expect the RFID application market to expand to almost $7 billion by 2008. Companies that wait to use this technology will not only miss out on significant cost savings today but also risk losing their future competitive edge.”
The study results were published in three white papers that Accenture developed in collaboration with the Auto-ID Center and its members as well as with clients vendors and members of academia. Accenture is a board member of the Auto-ID Center, which is an informal association of 90 companies and universities to explore the benefits and impacts of auto-ID technology.
Helping Packaged Goods Companies Improve Demand-Planning Forecasts
According to “Auto-ID on Demand:The Value of Auto-ID Technology in Consumer Packaged Goods Demand Planning,” consumer goods companies could increase the certainty of demand signals throughout the supply chain, improving demand planning forecast accuracy by 10 – 20 percent. For instance, auto-ID technology could help these companies:
- increase sales 1-2 percent by reducing out-of-stock items;
- decrease inventory 10-30 percent by reducing the amount of safety stock or minimum stock needed for immediate demand; and
- increase manufacturing and distribution capacity and asset utilization while reducing capital expenditures.
“Our research indicates that pallet and case-level tagging will be widespread within one to two years,” said Ginsburg. “Among the drivers of this adoption are data standards, lower-cost tags and retailer support. Manufacturers should prepare to meet the demands of their biggest customers, who are already—or will soon be—requiring suppliers to employ auto-ID technology.”
Improving Supply Chain Efficiency in the Retail Industry
According to “Auto-ID on Delivery: The Value of Auto-ID Technology in the Retail Supply Chain,” retailers using auto-ID technology could move product to and from distribution centers at record speed, with nearly 100 percent accuracy. The report states that retail companies could reduce safety-stock inventory, labor costs and shrink while increasing product visibility, or tracking, during the supply chain process.
“Auto-ID technologies can unlock unprecedented value for retailers and enable them to radically change the way they do business within the supply chain,” commented Ginsburg. “For example, retailers could reduce labor costs between 5 and 40 percent by enhancing distribution center processes and, depending on lead-times, reduce their safety-stock supplies by one to four days.”
Helping Freight Companies Better Manage Operating Expenses
Whether freight transportation companies require better management of cardboard trays, ocean containers or locomotives, they can realize significant value from auto-ID technologies, according to “Auto-ID on the Move: The Value of Auto-ID Technology in Freight Transportation.” Accenture investigated the impact of this technology on freight companies’ ability to reduce costs in shipment handling and delivery, shipment theft and loss, and automation of manual activities.
The research found that asset utilization and operational efficiency were two areas that would see early positive effects from employing auto-ID technology. For example, improved asset tracking and asset utilization through tagging will result in a reduced need for new equipment and more efficient use of existing equipment. A decreased number of sorting and delivery errors will not only improve operational efficiency but also customer service.
Another area effected by auto-ID use is security. With better information on the whereabouts of containers and packages, transportation companies can maintain closer control of their assets and can more easily provide regulatory agencies with accurate information about any package in their pipeline.
“Clearly, shippers’ and consignees’ expectations for shorter delivery times and better availability of in-transit shipping information will continue to grow,” Ginsburg said. “In response, Auto-ID technologies can help freight transportation companies manage their operating expenses and provide higher levels of service to their customers, while operating more safely and securely.”
Accenture is the world’s leading management consulting and technology services company. Committed to delivering innovation, Accenture collaborates with its clients to help them realize their visions and create tangible value. With deep industry expertise, broad global resources and proven experience in consulting and outsourcing, Accenture can mobilize the right people, skills, alliances and technologies. With more than 75,000 people in 47 countries, the company generated net revenues of $11.6 billion for the fiscal year ended August 31, 2002. Its home page is www.accenture.com.
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