As a leading retailer, you know what your customer wants, and you’ve done the hard work of building the right assortment, sourcing from the right factories, and making it available in time for the season. Now you need to make sure that your customers can have what they want when they want it.
Enter item-level RFID, a proven, ready-now technology that improves inventory accuracy and visibility throughout the global supply chain. In garment factories and DCs, Supply Chain teams can use RFID to ensure all outgoing shipments are accurate, without the increased cost of labor for manual validation. At the store level, RFID shows what’s actually in the store, vs. what your point-of-sale system reports should be in the store; providing a level of visibility that allows you to adjust for inaccurate check-outs and returns, as well as shoplifting, and replenish stock-outs to ensure that items are available when customers are ready to buy.
So why isn’t everyone using it already? One of the main reasons is the simple fact that many retailers have felt the need to prove it for themselves; every business is different and most companies want to see the benefits first-hand before diving in. To tackle any feelings of hesitation that go along with implementing RFID, we can focus on three key points of apprehension that are easily mitigated.
First: Initial RFID implementations in retail failed to deliver a strong return on investment. This is true, but only because early programs targeted visibility at the case and pallet level within the supply chain, vs. item-level in the store. It’s just been in the past few years that retailers have focused on the value of item-level inventory visibility for apparel. Leading retailers like Walmart, JCPenney, Macy’s and others have done extensive pressure-testing of the benefits of the technology, and they are moving ahead with full roll-outs. The retailers who understand the ROI the best are doubling down on their investments, and momentum has been growing.
Second: There isn’t a lot of specific ROI data out there. The same confidence in the technology that drives roll-outs also makes many retailers reluctant to reveal the performance-improvement details that will help them build a competitive advantage. Retailers may also be reluctant to share the “before and after” data because the “before” picture may make it appear as though the company was underperforming without RFID. For example, a typical retail stock level can be anywhere from 65% to 80% accurate at the SKU level, but with RFID technology you can gain more than 99% accuracy; discrepancies such as this, though accurate, can make some companies feel vulnerable.
Third: Cost. RFID involves significant investments in infrastructure, training and the ongoing cost of the RFID tags, but deploying this technology is not about the cost, it is about the return. Typically, retailers experience pay-back on their initial investment within one year. Additionally, if you look at what the technology brings in terms of savings through improved efficiencies and inventory accuracy, increased sales, improved loss prevention, reduced inventory levels and vendor fraud, the return far outweighs the cost.
So what does the future hold for RFID? As more and more large and well-respected retailers roll out RFID throughout their store networks, the discussion will shift from apprehension about implementing the technology to concern about being left behind. Once retailers have achieved the basic benefits of improved inventory accuracy and stock-out reduction, they will use the improved visibility and accuracy that RFID brings to drive refined loss prevention strategies, more timely and efficient supply chain execution, and finally a more personalized and effective in-store experience for the shopper.
In coming years RFID will let you know exactly where your merchandise is: after flowing smoothly through your global supply chain, it’s being bought right now by a happy customer.
Mark Hill is VP and general manager of global innovation and solutions development with Avery Dennison RBIS, a global leader in apparel and footwear industry solutions and a $1.5 billion division of Avery Dennison. Based in Framingham, Massachusetts, Avery Dennison RBIS, employs 20,000 people in 50 countries. For more information, visit www.rbis.averydennison.com, or email