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  Consumer product manufacturers (CPG) and retailers looking to navigate an expected four-year transition period as the industry adopts radio frequency identification (RFID) tags should focus on key areas including data synchronization and finding uses that deliver meaningful benefits to consumers, according to a new report.
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A.T. Kearney's new report, RFID/EPC: Managing the Transition, sees 2004 through 2007 as critical years, as the industry rushes to adopt RFID in response to a mandate from Wal-Mart. During this transition period retailers and CPG manufacturers must closely collaborate on RFID trials and not risk money or consumer goodwill on uses that don't provide a clear consumer or business benefit.

“Companies need to be realistic in their approach to adoption and concentrate on using RFID to achieve maximum benefits such as reduced out-of-stock items and labor cost savings,” said Dave Donnan, A.T. Kearney vice president and author of the report.

The report outlines nine key areas companies looking to successfully navigate the RFID transition period should focus on. Foremost of these are data synchronization and the promotion of consumer-level benefits.

Many manufacturers and retailers still exchange inaccurate product data despite industry efforts toward standardized data formats. A.T. Kearney's analysis for the GMA and FMI found companies can gain $1 million in additional earnings for every $1 billion in sales through data synchronization. Even more significant, without data synchronization between trading partners, much of the data exchanged using RFID will be wrong.

Consumer concern about privacy issues surrounding RFID can be attributed to miscommunication and lack of understanding about the technology. Rather than tout the intangible cost saving benefits to consumers, retailers should focus on testing RFID applications that will clearly improve people's lives. Examples include easier item traceability for food safety, control of counterfeit products — particularly drugs — and providing easier access to warranty information.

Since 2001, A.T. Kearney has led three studies for the Grocery Manufacturers of America and the Food Marketing Institute, examining the impact of common data standards across retailers and manufacturers. A November 2003 A.T. Kearney study was the first to calculate the cost of RFID adoption for CPG manufacturers, pinning it at roughly $33 million annually for a $5 billion manufacturer.

A copy of the report, RFID/EPC: Managing the Transition (2004-2007) is available at www.atkearney.com/main.taf?p=5,4,1,95.
 
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