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RFID, AIDC and IoT News: New Study from Auburn Finds EPC Eliminates Most Shipping Accuracy Errors from Brands to Retailers

 

The Cost of Implementing RFID at Brands is Less than Cost of Chargebacks, Research Finds

 

Oct. 17, 2018
SCDigest Editorial Staff

A new study from Auburn University's RFID Lab and the GS1 US organization to a deep look at vendor to retailer shipping processes using barcodes and RFID.

The goal of "Project Zipper" was to evaluate the benefits of Radio Frequency Identification (RFID) technology to retailers and brands through their supply chain shipping and receiving processes, with a special focus on shipment accuracy from brands to retailers.

Supply Chain Digest Says...

There is ROI for brands companies from using RFID in distribution processes because the cost of implementing RFID will be less than the cost of chargebacks

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To do so, the study team examined the flow of information between eight brands and five retailers from June 2017 to July 2018 to evaluate and analyze process errors. Three specific data streams were collected from each partner throughout the course of the study. Those first two involved collecting Universal Product Code (UPC) data from product barcode scans at the distribution centers (DC) of each brand and retailer, as well as electronic ASN data associated with relevant orders and shipments.

These two data streams comprise "legacy" supply chain data – processes performed using barcode technology as has now been deployed for more than two decades.

Additionally, these products passing through brand and retailer DCs were also tracked using RFID tags, allowing a direct comparison of accuracy of RFID versus barcodes. Suffice it to say that there were some errors on ASN accuracy (communication of what was shipped) versus what was actually received by the retailers using barcode-based processes, but much fewer errors using RFID tags.

Given the long time use of barcodes and the mature processes involved, the study expected high level of shipping accuracy. Instead, the research found almost 70% of the orders shipped contained an error somewhere along the supply chain process. These errors were manifested in picking, shipping, and receiving, resulting in inventory inaccuracies, at best, and at worst chargebacks from the retailers to the brands.

Interestingly, the study also found that brands and retailers generally accept the inherent errors in the process, and that they attempt "workarounds" which often result in additional errors.

Conversely, for those brands using RFID tags to capture information and reconcile shipments, order accuracy was greater than 99.9% (only one order had an error). During this study, chargebacks from the retailer were virtually eliminated for those using RFID technology.

While the study says the results from this preliminary research should not be considered representative of the entire population of brands and retailers, given that all of the study participants are major retailers and brands and that the study spanned over a year, the dramatic results observed "should be granted due consideration."

The report also notes that "In an era of omnichannel retail - which demands high inventory accuracy - the errors created in the supply chain propagate downstream and ultimately impact a retailer's ability to meet customer demand."

The study tested mostly apparel-related items. Most of the products tested had been sourced tag with RFID chips, so no tagging at the brand DCs was required. But we'll note that even if items are sourced tagged for shipments to an existing retailer, it doesn't mean the brand DCs are in fact using the tags for picking and shipping processes.


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On the RFID side, there were two basic use cases:

EPC Order Reconciliation is a method for validating EPC-enabled orders in which the brand picks the items for shipment as they normally would using a barcode scan, but they also capture the EPC information on a case level during the picking process. If the EPC pick data and the barcode pick data do not match, then the case is held, and the picker is required to investigate and re-pack the case until the barcode data and the EPC data are in full agreement.

EPC Order Monitoring occurs when the case is picked using a barcode scan system. After a case is picked and sealed, the case is scanned with an EPC scanner and its internal contents are recorded. If the EPC scan and the barcode scan are not in alignment, the discrepancy is noted but the case is not reopened or reworked.

During Project Zipper, two of the brands used EPC Order Reconciliation, while the remaining six brands used the EPC Order Monitoring method.

The actual description of how the barcode and RFID "data steams" were analyzed is long and rather confusing. It is complicated by the fact that most retailers have not fully RFID-enabled their DC receiving processes.

The test also found that using barcode-based processes, there was "alignment" between what the brand company said it shipped on the ASN and that the retailer said it received for just 31% of inbound orders – though what is exactly causing this discrepancy is not clear.

"In short, there are huge opportunities for improvement in ASN order accuracy, and there appears to be a disconnect between the items that are actually shipped vs the items that are actually counted in the auditing process," the report says.

Conversely, during the study, 14.7% of the orders were shipped from brands that are reconciling their outbound shipments by EPC. In over one year of data collection, the study discovered only a single error for a single item for these brands. In the last 10 months of the study there were no errors, and 100% ASN reconciliation between brand and retailer.

Perhaps most interestingly, as a result of all this, the study found that calculating ROI is a much simpler process than previous EPC implementations in retail sales environments. The equation is simply the cost of RFID tags plus RFID outbound reconciliation equipment and software, directly compared to the cost of claims for the shipments of that DC. A proper RFID reconciliation process will eliminate the claims cost.

In other words, there is ROI for brands companies from using RFID in distribution processes because the cost of implementing RFID will be less than the cost of chargebacks for real or perceived errors flagged by retailers, as simply illustrated below:

There will be a phase 2 or this research, the report says.

You can download a copy of the report here: Project Zipper Study


What's your reaction to this new report? Will RFID pay for itself by reducing chargebacks? Let us know your thoughts at the Feedback section below.

 

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