From SCDigest's OnTarget e-Magazine
- March 28 2012 -
Dr. Bill Hardgrave on Keys to Item-Level RFID Pilot Success
Stores Almost Always Overestimate their Current Levels of Inventory Accuracy, He Says; Getting to 70% Takes "Extraordinary Effort" without RFID
SCDigest Editorial Staff
After the collapse of the case-level RFID tagging initiative, as the Walmart program that was the locomotive to the industry's train ran out of fuel a few years ago, now like a Phoenix rising from the ashes RFID in the consumer goods to retail supply chain has enjoyed a resurgence in item level tagging in the soft goods sector.
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| In fact,Hardgrave observed that without RFID, "it takes extraordinary effort" to get accuracy levels over 70%, and the highest he has ever seen is 80%.
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PWalmart itself has been a big part of the charge, actively rolling out RFID programs in several soft goods categories, and more recently looking to expand even to hard goods categories such as tires and some consumer electronics. JCPenney, Macy's, American Apparel, The Gap stores and others are either rolling out item-level RFID or actively piloting the technology in-store.
Soft goods such as apparel and shoes are especially attractive opportunities because for each SKU there are a number of colors and styles. That makes inventory management in-store especially challenging, which leads to lost sales as inventory counts get off and items aren't replenished, items are in the wrong location on the floor, and/or items that should be on the floor are in the backroom, among other issues.
RFID can be used to rapidly take cycle counts of store-level inventory at the item level, dramatically improving accuracy while reducing the time it takes to conduct the counts by many hours. These cycle counts can also identify when a product is in the wrong location, or in the back room when it should be on the shelf or floor.
Dr. Bill Hardgrave, now Dean of the business school at Auburn University, made a name for himself in the RFID industry in the latter half of the 2000s with some excellent research on RFID at the University of Arkansas's RFID center, where he did quite a bit of work in item-level RFID before moving to Auburn, where he continues research programs.
Hardgrave spoke last week at the VCF (Vendor Compliance Federation) Spring meeting in Orlando on 10 keys to item-level RFID pilot success.
Hardgrave noted that the real inventory management challenges, especially in apparel, are in the store, not the DC, and that this is probably where the industry needed to start, not at the case/pallet level as it did with the Walmart program.
He also noted that in his work with retailers, RFID data always shows "there is a lot of difference between what retail executives think is happening at the store versus what is really happening."
He said that using his definition that an accurate inventory count is one where the true on-hand inventory level exactly equals the count in the store's perpetual inventory system, most retailers have accuracy levels of only 50-60%.
He said he recently worked with one 600-store chain that thought it had accuracy levels of about 80%. It turned out to be 28%.
"Virtually all retailers overestimate their accuracy levels," Hardgrave said.
In fact, he observed that without RFID, "it takes extraordinary effort" to get accuracy levels over 70%, and the highest he has ever seen is 80%.
Hardgrave added that RFID can have a major impact on the "big four" retail in-store inventory challenges:
• Inventory accuracy
• Out-of-stocks
• Product location
• Loss prevention
He said that today, in reasonable quantities, RFID "inlays" - the basic tags themselves which can sometimes be used as is but in soft goods are more likely to be embedded in a paper tag or label construction - can be had for about 6 cents apiece. While at that level ROI for items level programs can often be easily justified for soft goods and other more expensive items, it isn't going to work for a can of soup.
(RFID and AIDC Story Continued Below)
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• As indicated above, store-level RFID projects have to start with inventory accuracy. "Nothing else matters if inventory accuracy in store is poor," Hardgrave said. The point was the team and executives need to have this firmly grounded efore any real effort begins.