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Making RFID Work In Real Life

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A couple of weeks ago at the Retail Business & Technology (RBTE) conference in London, I had the opportunity to introduce a panel discussion about “RFID in Real Life”. Most retailers have at least considered some of the use cases that theoretically justify the investments required to make RFID work in their stores and warehouses, and some have a fairly long history trying to turn theory into reality, going back to the “Walmart mandate” in 2005. In RSR’s last benchmark of the status on Internet-of-Things (IOT) technologies in Retail (The Internet Of Things In Retail: Getting Beyond The Hype, October 2016), we found that at least 50% of the study’s survey respondents had considered RFID for either container tagging or item level tagging. That same study showed that for fashion & apparel retailers (those most likely to have gone down the path of item level RFID tagging), “inventory visibility” and “inventory accuracy” were the top two operational challenges that they are trying to address with the technology. Those are laudable goals, and in this age of omnichannel fulfillment, not achieving a high level of visibility and accuracy have escalated into being major inhibitors to progress.

So with that as a backdrop, I was interested to hear from three UK retailers who have extensive experience with item level tagging in the store. The panel discussion (moderated by Mark Tailford, Global Sales Director for ASREADER Global), featured Richard Jenkins, Head of Loss Prevention & RFID at Marks & Spencer, Rob Mitchell, Manager, Stock Operations at John Lewis, and Martin Speed, Loss Prevention Manager at River Island. The subject was “making RFID work in real life”, and rather than discussing if and how RFID helps in reducing shrink (as one might expect from the job titles of the participants), the retailers focused on the RFID’s ability to help their companies reduce capital investments in inventory by reducing stock levels while at the same time increasing service levels to customers.

RFID technologies have been quietly making their way into the retail mainstream since the 2005 Walmart “RFID mandate”. But unlike Walmart’s original requirement to streamline the shipment of goods from manufacturers to retailer DCs with case and pallet tagging, the retailers represented by the panel have used RFID for item-level tagging to improve inventory accuracy in the store. According to M&S’s Jenkins, that effort has been so successful that the company has been able to reduce backroom stock levels by 50% while at the same time reducing out-of-stocks. “The improved accuracy pays for the investment”, said Jenkins. John Lewis’ Mitchell agreed, commenting that RFID enables more accurate replenishment that achieves the double benefits of reduced stock levels and increased service levels.

The numbers are compelling. River Island’s Speed said that the company has been able to improve stock ledger accuracy from about 75% to 99%. Similarly, M&S’s Jenkins said that his company has been able to measure a 14% improvement in inventory accuracy. That level of accuracy delivers three benefits, according to JLP’s Mitchell: sales lift, stop-loss improvements, and a 30% productivity improvement in store associates’ cycle counting and replenishment activities. According to Mitchell, the productivity improvements are important because store associates can redirect their efforts on more selling activities that improve customer service.

Benefits And ‘Next Steps’

The panelists agreed that the improvements in the efficiency of their companies’ capital investments in inventory alone pay for the investment in RFID technology. But top line sales improvements are measurable as well; for example, John Lewis measured improved “control group” item sales compared to non-RFID store sales. M&S has also benefited from using the information generated by RFID tags to measure the product life cycle for particular items. Not only that, but the information generated by RFID makes it possible for the retailers to accurately measure the effect of various projects on inventory effectiveness.

While the focus of each of the retailers’ RFID projects has been on the stores, all agreed that the ‘next step’ is to improve inventory visibility throughout the supply chain, starting with the DCs.

But will RFID replace EAS loss prevention tags? Apparently not; according to M&S’s Jenkins, paper RFID tags are easily destroyed or defeated. Jenkins also commented on the privacy concerns related to embedded RFID tags (for example, tags sewn into the hems of garments). The panelists agreed the EAS tags are likely to stay for the foreseeable future for Loss Prevention.

So, Is Widescale RFID Adoption Going to Happen?

Despite the technical and cost concerns that were identified in early trials, RFID has been slowly but surely making its way into the mainstream of retailers’ consciousness, especially since a 2009 study conducted by the RFID Research Center at the University of Arkansas using American retailer Bloomingdales as a test case showed that the use of an RFID-enabled system could significantly improve inventory accuracy. Nonetheless, the 2016 RSR study showed that it’s still early days for the technology; while a majority of retailers indicated that “RFID for item-level inventory” and “RFID for supply chain inventory tracking” have “a lot of value”, only 30% of Retail Winners (and less of everyone else) report “implemented and satisfied” status.

But if the UK retailers’ experiences are any indication, the time is “now” for retailers – particularly fashion & apparel and specialty merchants – to take a new look at item-level RFID tagging.

 


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Articles & Opinions May 23, 2017
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