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P&G Executive Brings RFID Expertise to ESCA
By
May 30, 2007, 15:34

What do razor blades have to do with DVDs?  When it comes to in-store promotions, the answer is "everything" -- especially when it involves experience with the use of RFID to track promotional displays and new product introductions at retail.  Consumer packaged goods giant Procter & Gamble has taken a leadership role in the adoption of RFID for just such applications and heading the charge at P&G is Vice President and RFID/EPC Leader Dick Cantwell who has been at the forefront of demonstrating greater supply chain visibility, reducing out-of-stocks, and superior promotional execution with the use of Radio Frequency Identification (RFID) tags.

Cantwell joined P&G as part of the merger with The Gillette Company in 2005.  At Gillette, he has directed his company's involvement in RFID and was a co-founder of the Auto-ID Center at the Massachusetts Institute of Technology (MIT) in 1999.  He was elected Chairman of the Auto-ID Center Board of Overseers in 2001.

In 2003, EPCglobal was formed to be the global, multi-industry and user-driven standards organization to commercialize RFID in the form of The Electronic Product Code and Cantwell was elected to be the first Chairman of its Board of Governors.  He has since been reelected to the post, which he currently holds today.

Cantwell will be bringing his RFID experience to ESCA in June and he provided the following insights into the value of this new technology to the entertainment industry in this exclusive ESCA 2007 interview:

Q.  How did you get started in RFID?

A.  I am career-marketing guy; I first worked at Johnson & Johnson and then Gillette where I have worked for 23 years. I've been involved with most of the hit brands over the years and when I began working on our blade and razor business it became apparent that one of the biggest problems was that our products weren't always available on the shelf when they needed to be. I became involved with RFID in order to keep us on the shelf especially during new product launches and promotional events when consumers were being driven to the stores by our advertising and marketing campaigns.  Today, RFID is part of both P&G's strategy and vision.  We see it as a way of creating value for P&G and ultimately for the consumer.  We call its value "Actionable Visibility," which means that if we can see more about our products we can do more about our products and sell more of our products.

Q.  How do you turn "Actionable Visibility” into sales?

A. We turn that RFID data into business intelligence; it is like a crystal ball; it tells us where our products are and where they aren't. It allows us to work with our customers so that we can install work process improvements to change the ways we get our products to the shelf and, ultimately, improve and increase results.

Q.  Once P&G decided to pursue an RFID strategy, how did you adopt the technology into your work processes?

A.  At P&G we have adopted a so-called "EPC-Advantaged" strategy. We have done a portfolio analysis of all our products and are focusing our efforts with RFID on those events, those products, and those promotions where we can deliver value now, and ultimately provide greater shopper satisfaction. We have created three tiers:  the top tier includes the "advantaged products," products we can deliver value from right now from a promotional event; this includes products like Gillette razor blades and Crest White Strips. Next are "testable products," where the business case is not there yet, where there may be some technical challenges or where the business needs are not ready for prime time. The next tier are "challenged products," those that have the lowest ROI at this point or present real technical challenges, such as being high in metal or liquid content. We obviously spend most of our money on the advantaged products

Q. And where have you seen the most ROI for those advantaged products?

A.  We have decided to go after promotional displays as key opportunities.  Consumer packaged goods are driven by newness and excitement and wrapping some promotional spin around a product to pull people into a store. It is shocking that only 45% of our events were being executed properly, which meant that 55% of our events never got to the retail floor on time; in fact, some never got to the floor at all. I have examples of displays that were actually taken out to the retail floor after the holiday promotion had passed.  In CPG we also know that 30% of the displays that we invest in building are broken down and never put out on the floor at all; obviously there is often some type of a process breakdown in the store.  Today we are using RFID to change these processes, providing us with alerts so that we are finding the displays in the back room and putting them out on the floor when and where they belong and making sure they are being used.  This is creating pay out at about twice the hurdle rate that P&G uses to judge the value of its marketing investments and this is only going to deliver more ROI as the tags come down in price and as tagging becomes a more automated process.  Not only can we generate a return on the investment that the company expects but we can expect significant top-line growth due to the adoption of RFID technology.

Q.  How does this apply to entertainment products?

A.  I think this applies to any high margin, high velocity, event driven products that are time sensitive. I think the lesson to be learned by the studios is exactly what the CPG industry has learned, that RFID has its biggest ROI on big demand driving events that are not always being executed properly at retail. If P&G was a Hollywood studio making DVDs, those products would be in that top tier of advantaged products; not only are they time sensitive that need to be on the shelves when advertising breaks, but they are a fairly high-value purchase that can afford the cost of a 15 cent tag on a display. At P&G we are not tagging individual items; we are tagging cases, inner packs, pallets, displays and promotional fixtures, all of which we can track to the selling floor.

Q. Once you can track the promotion, how do you turn that visibility into Actionable Visibility?

A. We collect data at the point where our products pass a reader field, from the back room to the floor to the box crusher. With all of that data we associate it with point-of-sale data and do the necessary business analytics, which allow us to generate alerts, telling store staffs or merchandising store staffs to take action; it is a very robust system based upon the retailer and vendor sharing information.

Q.  How do you recommend that a studio get started with RFID?

A. Test and learn. It is very possible today for vendors out there to design and execute a small-scale test that will show them the kind of value that you can obtain from an RFID deployment. It is critically important that you have some very senior leaders on your team who are willing to lean forward and who understand the promise and future opportunity of the technology, who see it as a game changer and who see how it will redefine merchandising and give cross-functional teams the ability to think beyond what they can do today and put a stake in the future and map a course to the future, all the while doing course corrections as they learn. When we started down this path, we had no idea that promotional displays were such an opportunity, for example.  Today we are getting more and more diagnostic data on what type of promotions are optimum and we are going to rewrite the book on ways to how to build our merchandising moving forward.

Q.  What type of cross-functional teams are you referring to?

A. Without question you need to involve the marketers and merchandisers in your company in the process...that is where the rubber meets the road in terms of driving promotions and sales; with them involved the supply chain becomes a vehicle to enable marketing to do its job better. IT is also a natural partner since it is the part of the company that wires and engineers and enables the technology to work.  For RFID to work it needs to go end-to-end across the entire organization.

Q.  Can you quantify the improvements that RFID has made for P&G?

A. We have been able to generate a 10-20% uplift in promotional sales. With our Fusion razor launch we saw a 93% display execution within three days; of course that was a big event, but it was because we had visibility that we were able to make such a difference,

Q.  What about some of the "bad press" that Wal-Mart's RFID initiative has received in the business media?

A. Early on everyone was fearful that we were being mandated to do RFID by Wal-Mart.  We have moved past that. Everyone is emphasizing real value now; displaying execution excellence is something every retailer wants, and it is something that every supplier wants as well.  It is true that the single largest customer that is ramping up with RFID is Wal-Mart; they have 1,000 stores that have been RFID-enabled and they are going to double that by this time next year. But this is a disruptive technology; it is future facing; we only know what we don't know; we are inventing a future that has never been built before. What Wal-Mart has done is that it has put a stake in the ground by saying that this is what they want to do.  As we work with Wal-Mart, we all discover new things. Wal-Mart is always course correcting, always looking at better ways to enable and deploy RFID.  This is where some of the press misses the point. Maybe Wal-Mart is installing RFID in fewer stores or may be focusing more attention on certain business applications and product categories but going much deeper in its exploration. This may be perceived by the media as Wal-Mart slowing down its RFID process while actually they are only going through a natural discovery process - like all of us.

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