From SCDigest's OnTarget e-Magazine
- May 28, 2012 -
RFID and AIDC News: Will Multi-Channel Commerce Be the Catalyst that Finally Drives RFID into Retail?
Super High Levels of Inventory Accuracy become Necessary to Commit and Fulfill Multi-Channel Orders
SCDigest Editorial Staff
The saga of RFID in the consumer goods to retail supply chain has been a very interesting one.
First there was the initial mania phase, starting in 2003 when Walmart announced its "mandate" for RFID tagging of cases for its top 100 suppliers in phase I of its program. That lasted for a little more than two years, as some subset of that top 200 did start tagging in sort of pilot mode starting in early 2005, and Walmart announced plans for future waves.
SCDigest Says: |
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| The key factor: the need for extremely high levels of inventory accuracy in store, as commitments are made to customers about orders taken over the web, smart phones or other device.
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What Do You Say?
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But things started to go off the rails not long after that, as Walmart vendors started to question the costs and the value for them from the tagging program, and Walmart's execution of its initiative left a lot to be desired.
The Walmart program really started to degrade from that point on, despite numerous claims to the contrary from both Walmart and some of the hype machine in certain quarters of the media. From 2006 or so until 2009, the program was in sort of "walking dead'" status.
The original Walmart pallet/case program ended with barely a whimper in 2009/10. Most other US retailers such as Target stores had tempered their own initial plans to roll out case-level programs as they watchd the Walmart experiment, and when it crashed, RFID at the case level in the retail industry, especially with regard to traditional consumer packaged goods, was virtually dead, with no real path for revitalization.
Even the RFID program at Germany's Metro stores, which was ahead of Walmart and seemed to have enthusiastic support from the company executives, also went South not long after Walmart's program stalled, and today seems to be semi-dormant.
But from those ashes, in a sense, arose growing interest in item-level RFID in the apparel sector. That included Walmart itself, which started to roll-out an item-level program in jeans and underwear and has since expanded to other categories, as well early trendsetter American Apparel, which had the advantage of a vertically integrated supply chain that reduced barriers to RFID adoption.
In 2011, Macy's and JC Penney also announced major deployments of item-level RFID programs.
The big driver: inventory accuracy, devilishly hard to achieve in-store, but especially so in the apparel/soft goods sector, where the core SKU is broken into multiple colors and sizes, playing havoc on inventory management. Add in trips to the dressing room, items getting placed back on the wrong rack or display, and a bit of shrinkage, and inventory accuracy is especially difficult.
Noted RFID researcher Dr. Bill Hardgrave of Auburn University is among those noting how hard it is to have accurate perpetual inventory levels in stores.
He recently 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%.
But using RFID, he said it is clearly possible to get those accuracy levels to more than 90%. (See Dr. Bill Hardgrave on Keys to Item-Level RFID Pilot Success.)
The Multi-Channel Imperative
While there has been growing interest in item-level in apparel, with real activity, the progress is taking longer than many observers (and RFID vendors) would like to see.
(RFID and AIDC Story Continued Below)
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