Path to Discovery

Many of the 137 companies that sought to meet RFID mandates started small in 2004, allocating much lower budgets to the effort than the $2 million to $3 million some analysts had predicted, says the ABI Research report, "In RFID's Second Phase, ABI Research Sees End-Users revert to Traditional Technology Partners." In 2005, however, these companies are increasing investments to scale up and integrate RFID into normal operations. Others are choosing to partner with technology providers rather than invest in RFID products, many of which are still in their infancy. For example, The Procter & Gamble Company (P&G) in May 2005 announced a multi-year, non-exclusive joint development agreement with T3Ci, an RFID analytics and applications company, to collaboratively identify and build high value RFID applications designed to leverage the EPCglobal RFID standards. "We chose to work with T3Ci on EPC analytics and applications after evaluating the capabilities of a large number of solution providers," says Steve Rehling, director of IT and head of RFID systems at P&G. "T3Ci was well ahead of the other companies we evaluated and demonstrated a clear understanding of how to eventually get value from EPC data across the supply chain,"

Service VS. Product

The two companies first started working together last year. According to Sara Shah, analyst for ABI Research, P&G was collecting RFID data but had no way to manage, aggregate, filter and make sense of it. sense of it. "P&G is not investing in T3Ci, but is utilizing its data analysis service," says Shah. "T3Ci provides useful information based on the data from P&G's RFID system, which P&G can utilize to make better business decisions." For P&G, this service-oriented philosophy made sense as the company is still in RFID pilot phases with a number of retail partners.

"The choice of service versus a product orientation is a point-in-time choice. As we have talked to technology partners, a number of them say, 'tell us what you need,' and we can give some rough outlines of that, but we expect to discover what we need over time through pilot activity," says Rehling. "We are in a learn-by-doing mode and T3Ci's strategy was oriented along that direction."

Shah is an advocate for T3Ci's strategy as well. "T3Ci is offering exactly what the market needs -- the option of a service in place of a costly enterprise system," she says.

So why did P&G decide to change its status from T3Ci customer to a co-developer of T3Ci RFID offerings? According to Rehling, "it's all about how P&G can get its RFID needs and [the RFID needs of the industry] met in the most efficient and effective way." Partner T3Ci believes P&G is an early pioneer in the exploration of the potential benefits of RFID and has demonstrated leadership in the development of EPCglobal standards. Working with P&G over the past year allowed T3Ci's learning cycles to gain insight and grow products based on actual learning. P&G and T3Ci would share ownership of intellectual property associated with applications spawned from their collaboration.

Setting Priorities

The joint development project will focus on leveraging analytical tools to determine the data that needs to be collected and shared among supply chain partners to gain value from the use of EPC technologies. First on the companies' list of potential applications are out-of-stock management, in-store promotions management and new item management.

Rehling says customer agreement is critical to the success of the co-development deal because retailers possess a lot of the data needed to build supply chain applications. "Not surprisingly, the customers that we have been working with understand that our intent is to find and institutionalize the benefits of RFID," says Rehling. "Part of that can be learning they can apply themselves. For example, from a retail standpoint, RFID presents significant labor productivity opportunities."

Both P&G and T3Ci also see a clear benefit from inventory management, which oftentimes tends to be a pain point for consumer goods manufacturers. With an inventory management application, a consumer goods company can balance the scale, reducing inventory while at the same time improving out-of-stock rates, says Rehling.

Additionally, counterfeiting is a big gripe within the pharmaceutical category, in which P&G also participates. T3Ci and P&G will also consider developing RFID applications that can stem drug counterfeiting, thus protecting life and the regulatory environment.

Continued Learning

While developing useful RFID applications for the consumer goods industry in conjunction with T3Ci, P&G will also work to pursue "use cases" -- out-of-stock reduction, new item management, etc. -- for RFID internally. "This mindset leads to some clarity on what products to focus on, what stores make sense, what work processes might need to change," explains Rehling. "What lies ahead [for P&G] is continued learning."

As for the consumer goods industry at large, Rehling chooses not to speculate as to when the widespread adoption of RFID might occur. "The approach, path and speed will somewhat be variable by context and product category," says Rehling. "It is a path of discovery."