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Consumer products giant tests benefits of radio tags by tracking shaving products from its manufacturing plants to retailers' back rooms—and beyond.

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Dubash declines to disclose how many cases of Fusion razors it is shipping—and tagging—citing competitive reasons. Of the roughly 1.5 billion product cases that P&G makes and ships every year, the company is "actually only tagging somewhere between 5 million and 10 million cases," he points out.

The Fusion test is described as "an extraordinary big deal" by Sanjay Sarma, an associate professor of mechanical engineering at the Massachusetts Institute of Technology, former chairman of research and co-founder of MIT's Auto-ID Center, and chief technology officer of OATSystems of Waltham, Mass., a software company that provides analytics and other software to P&G.

"The lowest published cost for RFID is 5 cents a tag," he says. "At 100 million quantity, let's say, at 5 cents, that's $5 million." Additional costs include RFID readers, which scan the tags, and software to collect and analyze the information—such as time and location—as each case tagged with a radio frequency chip travels past a reader. P&G did not disclose the number of tags and readers it is using.

Typically, RFID tracking systems deploy a limited number of readers at strategic locations along the supply chain path, but P&G's Fusion test is more robust and therefore uses far more readers than typical, says Paul Fox, a director of global external relations for P&G. Fox did not disclose the number of additional readers in use compared with other installations.

Dubash argues that for manufacturers such as Procter & Gamble, whose customers tend to have strong brand loyalty, supply chain transparency facilitated by RFID can help retailers even more than manufacturers. If a customer is looking for a particular Gillette razor and sees none on the shelf, that customer will likely not buy any product and go to a different retailer to find it, Dubash says, preserving the sale for P&G but losing that sale for the retailer.

Another concern for P&G: Should it share RFID information with Wal-Mart or other partners? And if so, how much?

"Security's a huge concern for us. It would be a disaster if a competitor were able to see our data," Dubash points out.

The most obvious remedies, however, bring their own problems. P&G has explored building additional security into each tag, but has had to determine whether to share encryption codes with retail partners, who also work with direct rivals. "In this realm of data exchange, what is the most effective way of doing this? Do you make the tags bigger and more expensive?" he asks.

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How long the Fusion line will continue to be chipped depends on how the experiment continues to do and whether P&G sees value in continuing the effort.

But either way, the consumer giant will be conducting a "large-scale" RFID experiment with Wal-Mart this summer, Dubash says, adding that it will be large enough to try and get statistically valid data for what works, and what doesn't, with RFID.

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P&G's Five-Blade Wonder RFID Project

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    This article was originally published on 2006-06-28
    Evan Schuman is the editor of CIOInsight.com's Retail industry center. He has covered retail technology issues since 1988 for Ziff-Davis, CMP Media, IDG, Penton, Lebhar-Friedman, VNU, BusinessWeek, Business 2.0 and United Press International, among others. He can be reached by e-mail at Evan.Schuman@ziffdavisenterprise.com.
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