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Focus: RFID and Automated Identification and Data Collection (AIDC)

Feature Article from Our RFID and AIDC Subject Area - See All

 

From SCDigest's OnTarget e-Magazine

- Sept. 30, 2014 -

 

RFID and AIDC News: Zara's Aggressive Move to Item-Level Tagging Features Plan to Re-Use Tags

 

By Placing Tags Inside EAS Housing, they Can be Reused Many Times

 

SCDigest Editorial Staff

Zara, the dominant banner in Spain's Inditex SA retail portfolio, recently announced major plans to roll out item-level RFID tagging in all its stores.

As details of its program begin to emerge, interesting news that Zara has come up with an approach that will allow it to re-use the passive RFID chips and thus reduce its operating costs for the program.

SCDigest Says:

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It is assumed that Zara will ship the RFID tags to EAS tag makers, which will insert the chips into the EAS housing as part of their own production processes.

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Item-level RFID tagging of course is the big wave in retail soft goods right now, not too far away from reaching a tipping point to mainstream adoption. Macy's has been leading the way, citing general benefits from RFID but especially for omni-channel fulfillment by ensuring store inventory counts are highly accurate. Macy's is using several hundred stores as fulfillment points for ecommerce orders.

American Apparel and Walmart also have strong item-level tagging programs, while other retailers such as JC Penney, Kohl's, Dillard's, GAP, Saks's Fifth Avenue, the UK's Marks & Spencer chain, and others are moving down the item-level path with pilots or rollouts of one kind or another.

Sak's, for example, appears to have plans to tag nearly all its apparel items by early 2015 (see Sak's RFID Implementation Guide).

Zara had been using RFID at some 700 of its retail stores before announcing in July that it would roll the technology out to all 2000 or so of its outlets by 2016. Inditex says it will then implement RFID at thousands of more stores under its other banners after that. Zara is also said to be using RFID at some of its distribution centers.

Like other such as American Apparel, Zara sells exclusively its own private label goods. This vertical integration makes it easier to roll out a tagging program since the entire supply chain is largely under Zara control, and in a sense eliminates battles about who will incur the cost of the tagging, the retailer or the supplier - in Zara's case, it will simply pick up the tagging costs.

And with hundreds of millions of items sold each year, and EPC tags still in the 10-cent or so range even for large volumes, those costs can be substantial. But Zara has found a way to reduce those costs over time.

Most retailers embed the EPC chip inside a label or hang tag on the garment or good. The downside of this approach is that the tag becomes a throwaway - in fact, some consumer advocates have been concerned that somehow retailers or others will be able to track what a customer buys through the tag once the purchase is taken home.

Zara is taking a different approach, simply including a tag inside the plastic housing that contains the electronic article surveillance (EAS) tags it has had on its garments for years to combat shoplifting. That means when a customer goes to check out, the RFID tags can be scanned to verify the SKU being purchased, but then the EAS tag - with the RFID identifier - is removed and sent back in bulk to the distribution center for re-use, just as the EAS tag always has been.

Reports are that Zara has contracted for some 500 million tags in preparation for the rollout. That's about one out of every six EPC tags that apparel makers are expected to use globally this year, according to U.K.-based research firm IDtechEX.


(RFID and AIDC Story Continued Below)

 

 
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It is assumed that Zara will ship the RFID tags to EAS tag makers, which will insert the chips into the EAS housing as part of their own production processes. Once a store sends those EAS units back to a DC, operators there can simply connect the RFID serial number to a new item headed to the stores (EAS tags themselves work as a simple "on/off" switch.) The EAS housing protects the tags and makes a nice vehicle for handling them over each tag's lifecycle, which could be for years.

Zara is using the tags for in-store physical inventories. At Zara's largest stores, the process using bar code scanning of each item tied up a team of 40 employees for five hours. With RFID, 10 employees can repeat the same process in half the time.

That increase speed also means inventory can be taking more often, about once every six weeks now versus every six months in the past.

Those benefits are real, but there continues to be some mis-reporting on the effects of RFID. For example, a recent Wall Street Journal story noted that now at Zara "each time a garment is sold, data from its chip prompts an instant order to the stockroom to send out an identical item. Previously, store employees restocked shelves a few times a day, guided by written sales reports."

Sound like a good system - except that that part of the system could easily be achieved from bar code scanning as well. It seems like Zara simply used the switch to RFID as a catalyst to add in-store functionality to improve the shelf/rack replenishment process.

The Wall Street Journal does quote Bill Hardgrave, dean of Harbert College of Business at Auburn University and formerly head of the RFID lab at the University of Arkansas, as saying retailers have boosted sales between 2% and 30% after installing RFID systems, and that most traditional soft goods retailers have perpetual inventory accuracy of just 60% or so. With RFID technology, accuracy levels exceed 95%, Hardgrave said.


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