New Technology Can Improve Asset Utilization, Inventory Accuracy and Customer Service
NEW YORK, June 12, 2003 – New technology that tags and tracks inventory and equipment could save manufacturers and retailers billions of dollars each year, according to research released today by Accenture. The technology, known as auto-ID, is a combination of electronic product codes (EPC) and radio frequency identification (RFID).
The research describes how auto-ID solutions can dramatically improve production operations, asset utilization, forecasting and inventory accuracy and, ultimately, customer satisfaction by pinpointing the location and status of products as they move through the manufacturing and retail value chain. These improvements can increase the quality and efficiency of the entire supply chain and lead to significant savings in areas such as inventory and labor costs.
“Our research found that by 2005, many manufacturers -- especially those in the consumer electronics and grocery sectors -- will be using RFID technology to track products at the pallet and case levels,” said Jeff Smith, global managing partner of Accenture’s Retail & Consumer Goods practice. “And retailers -- particularly in the consumer electronics, pharmaceutical and apparel industries -- should be among the first to use RFID tagging at the item level.”
The research results were published in three white papers Accenture developed as part of a business case program for the Auto-ID Center, a not-for-profit global research organization comprising more than 90 companies. The business case program assesses benefits for manufacturers, retailers and other participants in the supply chain. Accenture is a board member of the Auto-ID Center, which was founded by the Massachusetts Institute of Technology and now has locations in the United Kingdom, Australia, Japan and Switzerland.
The three white papers are “Auto-ID on the Line,” geared to the manufacturing industry; “Auto-ID in the Box: The Value of Auto-ID Technology in Retails Stores”; and “If You Build It, They Will Come: EPC Forum Market-Sizing Analysis.”
Enhancing Manufacturing Product Innovation, Customer Satisfaction and Efficiency
According to “Auto-ID on the Line,” manufacturers can dramatically improve production operations, customer satisfaction, profitability and shareholder value. For example, auto-ID technology can help these companies:
increase revenues up to 1 percent through improved quality and customer service; cut working capital 2 to 8 percent by reducing the amount of raw materials inventory needed for production as well as the amount of work-in-process and finished goods inventories; and reduce fixed assets 1 to 5 percent through better maintenance and utilization of equipment
“RFID can deliver significant economic and competitive advantages. Manufacturers have a tremendous amount to gain and can realize the benefits by using RFID and EPC at the case, pallet or item level,” said Lyle Ginsburg, managing partner for technology innovation in Accenture’s Products operating group.
Improving the Bottom Line in the Retail Industry
According to “Auto-ID in the Box: The Value of Auto-ID Technology in Retail Stores,” retailers using auto-ID could free-up labor from in-store receiving, stocking, inventory and checkout for more direct customer support. In addition, they could reduce product loss and the number of out-of-stock items. Retailers that face product obsolescence or spoilage will have better data to manage products nearing the end of their life cycles. The biggest benefits include:
increased sales of up to 3 percent from improved store in-stocks; reduction of in-store labor expenses of up to 65 percent in receiving, 25 percent in stocking and cycle counting, and 100 percent in physical counting; and reduction in product loss equivalent of nearly 1 percent of sales.
The Direction of the EPC Market
Inventory management and out-of-stocks are the highest priority applications for auto-ID, according to “If You Build It, They Will Come: EPC Forum Market Sizing Analysis.” This paper highlights market-sizing results from an EPC Forum conducted with more than 200 manufacturers and retailers, held in December 2002. Key findings include:
Pallet- and case-level tagging will be widespread in the next 12 to 24 months; the timing for item-level tagging will depend on product category economics and tag prices.
- Retailers expect to implement auto-ID solutions 12 to 18 months sooner, across more categories and at lower case and item levels than manufacturers expect to implement the solutions.
Standards are the key to enable interoperability between multiple vendors.
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.