RTIs (Returnable Transport Item) easily get lost due to misplacement. RFID has proven to have a positive effect on inventory visibility. This blog gives an example of how RFID can be cost-effectively applied to FMCG producer – retailer RTI pools.
RTIs are everywhere. There are roughly 4 billion wooden
pallets in the world, and over 400 million more are manufactured
yearly. A large retailer uses 500 000 - 1 000 000 plastic crates
for fresh food logistics alone. On top of these, there are kegs,
roller cages as well as trolleys for industry, postal services and
so on. So let's imagine that there are at least 6 billion RTIs in
the world. Yes - that is a huge amount and RTIs can be found
everywhere - even in our homes. Well, at least in Finland, where
practically everybody knows someone who has "borrowed" a white
Atria (Finnish meat producer) meat crate from the local store, and
never returned it.
Worldwide RTI loss is roughly €90
billion a year.
RTI shrinkage is one of the most common challenges for any RTI
pool owner. Both the EU funded Bridge project (2007) and Aberdeen
Group's benchmark (2004) suggest, that on a yearly basis, the loss
of RTIs due to misplacement accounts for approximately 10%. Another
cause for the loss of RTIs is breakage.
A pool owner's RTI visibility is often low due to
the fact that the RTIs are being used by several different parties.
In a retail logistics environment for example the players could be
FMCG producers, supermarket retailers, RTI manufacturers, DC
operators, pool handlers and transport companies. When RTI
visibility increases, the cost for handling the RTI pool lowers and
the turn of the RTIs gets faster. The picture below shows one
example of how RTIs for fresh food are handled.
So if there are 6 billion RTIs, it means that 600 million RTIs
are lost each year. At an average price of € 150 - who pays the €90
billion bill? Typically the cost falls on the RTI pool owners who
will the then apply the cost to their handling and rental prices.
Everybody (also RTI pool owners) has an interest in lowering this
RFID as a technology offers a better
visibility to assets. Many RTIs are already marked with barcodes,
but they may tear off and the reading is significantly slower.
Here's a real-life example:
Imagine a lorry with a fruit delivery that arrives at a
DC, which serves roughly 1000 stores. As the doors of the DC are
limited, the driver only has some minutes to unload and to free the
door for the next delivery: empty collapsible crates on their way
back to fruit and vegetable producers. Time is of the essence. When
the lorry driver with the fruits arrives, each crate needs to be
registered individually. The lorry has 500 crates. If the driver
would read a barcode from each box, it would take him 50 minutes
and he cannot spend that amount of time. When the crates are
equipped with RFID, however, the reading will only take half a
minute at best. But even at worst he would read them within a
minute and a half.
The above example from the South of France proves that it would
be impossible for the lorry drivers to register the assets with the
barcodes. The only staff that could take the time to register the
individual barcodes is the DC staff. However in many cases the
goods leave the DC within hours from their arrival, so the
registration of individual crates would be impossible with
barcodes. Registering the crates with mobile RFID readers or RFID
gates is so speedy that it can be done easily at the DC.
Furthermore as the DC registers where individual crates are
delivered to, the goods-in process in the stores speed up.
When all parties using the RTIs register the individual
RTIs as they arrive and leave, the system always knows where an
individual RTI is. This makes it possible for the pool handler to
demand the return of crates when the stock is getting too low. And
should an RTI get lost, the last handler who registered it, is seen
as the one who lost it - hence the one who should carry the
How to make it work in a retail logistics
From the point-of-view of the involved FMCG actors, what
would be needed from them? These days the technology is there. In
the table below I have listed the different investments the players
would need to make, in order to make it work.
The players will additionally share a cloud-based database,
which allows them to register data about the RTIs. This will help
with fulfilling EU's traceability clause as well as knowing best
where RTIs are and when to order more.
If we imagine an RTI pool worth of € 5 000 000 with a
loss of 10% on a yearly basis, the RFID system is likely to pay
itself back within 1,5 years from taking into use.
For more information, see these links:
The value of RFID for RTI management
Bridge Project 2007