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On Wings of RFID, Supplying 'TrueDemand'

TrueDemand Software claims manufacturers can find more savings by using RFID tags in order to predict when goods will be in short supply.

The Los Gatos, Calif.-based company officially launched on Monday with supply chain applications that make use of data from radio frequency identification (RFID) to reduce out-of-stock supplies and excess inventory.

TrueDemand's ROI proposition is based on new methods of optimizing manufacturing and shipping, with an emphasis on consumer packaged goods and pharmaceuticals.

"We're trying to focus on out-of-stocks in the supply chain," said TrueDemand CEO Eric Peters, "and also trying to help companies when they introduce new products or run promotions to increase their effectiveness." He said a third benefit of the software would be to enable manufacturers and retailers to reduce the inventory they must keep on hand.

Peters said a problem with most supply chain applications is that they report when a product is out of stock, a situation in which the manufacturer and retailer already are losing potential sales.

"A consumer packaged goods company only knows what goes on in their own supply chain," Peters said. "Once they ship, they lose visibility until three or four weeks later, they get an order from a retailer."

Tagging cases or pallets of products with RFID tags is an increasingly common strategy to track goods from factory to shelf.

Thanks to mandates by Wal-Mart , Target Stores and the Department of Defense that their top suppliers begin pallet-tagging earlier this year. But simply knowing where a case of goods is in the supply chain isn't enough, according to Peters.

"If you had the 'demand signal,' you would have a more accurate forecast," he said. TrueDemand's software will analyze the event data from RFID applications and constantly fine-tuning the forecast of how much product any particular retailer needs, he said, providing that demand signal.

"With all these events occurring, if I can pick out the right events and run them through my algorithm, I can predict the next order with a pretty high degree of certainty," Peters said.

This capability is especially important when introducing a new product, he added, because the manufacturer may have only a two-week window in which to gauge demand and decide whether to up production on a hot item or scale back on a dud.

The software, expected to ship in September, will combine data from RFID with data from point-of-sale and logistics applications to better help manufacturers and retailers make inventory forecasts. The information can be fed into business analytics and enterprise resource planning systems to provide an integrated system.

The software can use data from any type of RFID middleware, and it integrates with SAP , which Peters said is the dominant system software used by consumer packaged goods companies. But customers will need professional services to fully integrate the product with their existing systems and also to get the predictive benefits.

"Where our software works is when a company is willing to make business process changes," he said.

The company, led by executives from supply chain software vendor Manhattan Associates, SAP and Stanford University, is backed by $6 million in funding from Mayfield and Bay Partners.