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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

- 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:


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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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)





But will it turn out to be multi-channel commerce that serves as the real catalyst to drive rapid RFID adoption in retail, not only soft goods but beyond?

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.

The stakes are large. Macy's, for example, has just announced it is spending millions to make a number of changes to enable 292 of its more than 800 retail stores to serve as fulfillment centers for on-line orders. "Order on-line, pick up in store" is a capability almost every multi-channel retailer is pursuing, and while sometimes that merchandise might be delivered to the store from a DC, just as often it may be committed based on store inventory levels in the computer.

Can these types of multi-channel strategies survive without high levels of in-store inventory accuracy? Probably not. Can those high levels of accuracy be achieved without use of item-level RFID? Again, it seems unlikely, based on history.

While generally improved inventory accuracy is of great benefit, it does not appear on its own to have dramatically energized all but a small number of department store and specialty apparel retailers to move towards RFID. But the need to excel at multi-channel retail is at the top of the priority level for many retailers, across all sectors.

In fact, a few weeks ago, the SVP of Logistics for one of the largest retailers in the US told SCDigest editor Dan Gilmore that he firmly believes the challenges of multi-channel commerce will be disruptive and really separate retail winners and losers.

Therefore, it seems logical that investments in RFID that might not have made the budget cut based on the benefits of inventory accuracy in general might get made as a necessity to support multi-channel excellence. Retailers have just sort of learned how to live with low levels of inventory accuracy in traditional store operations, but that status quo may just not be acceptable in a multi-channel world.

In fact, we wonder whether Macy's fairly aggressive moves in RFID over the past year were in large part driven by its even more aggressive strategies in multi-channel commerce, beyond just the benefits of in-store accuracy on its own.

Do you think multi-channel commerce might by the catalyst that ignites retail use of RFID? Let us know your thoughts at the Feedback section below.

Recent Feedback

 The new shopper requies the retailer to exceed expectations, so unless Multi Channel Commerce can deliver on the customer experience, it will not be viable for the retailer. The highest levels of accuracy for merchandise inventory is essential to match customer expectations, and only item-level RFID provides accuracy that is near perfect (99+%). While I agree that it is important to get the shopper into the store whenever possible---it saves shipping and forges customer loyalty----the retail store is the face of the retailer, so has to be "perfect".  How the store and sales floor look depends on the entire supply chain.  If there is a breakdown at any level, the retail face will be distorted.  So, yes, the demands of Multi Channel Commerce will help drive wide spread implementation of RFID within the apparel industry.  Our company, Truecount is already seeing the momentum build, still we are just beginning to scratch the surface for this industry.

Zander Livingston
Truecount Corporation
May, 31 2012