By Mindy Long
Portable readers, lower prices and improved technology have led to increased use of RFID for managing inventory at the item level, to tracking goods in the manufacturing process and enhancing the consumers’ experience at retail.
Stephanie Brush, director of Motorola RFID business development for the fashion market, says, “RFID is becoming more mainstream and it is becoming a work tool. In the last two or three years people wanted to test the technology and make sure it worked. Now we know it works, so the question is what problem can it solve for you?”
More and more retailers are relying on item-level tagging to address four key elements of inventory management: reducing out of stocks, improving inventory accuracy, locating product and preventing loss, according to Bill Hargrave, professor of Information Systems and the executive director of the Information Technology Research Institute at the University of Arkansas, Fayetteville, Ark.
Sue Hutchinson, senior director of Lawrenceville, N.J.-based EPCglobal US, a subsidiary of GS1 US, says she is seeing many more uses of RFID for asset management and for tracking work-in-process inventories than ever before. RFID is being used from raw material tracking, through the manufacturing process, into the supply chain and then into distribution centers and the stores themselves.
“Once the tagged goods are in the store, we see many different uses for inventory visibility and control and for tracking promotional displays to provide more real-time information about promotion execution,” Hutchinson says.
Item-Level Tracking
New Balance athletic company has implemented item-level RFID to track footwear from the distribution center to the corporate factory store. “Our goal was to gain improved visibility into item-level inventory levels at every step along the supply chain — from the distribution center to the store backroom and all the way to the retail shelf,” says Jim Tompkins, president and COO of New Balance, Boston. The company has seen greater than 99.5% item-level accuracy as a result.
One of the largest changes in the industry to make item-level tagging more efficient is the availability of mobile readers that can be taken throughout a store. “A few years ago you bolted a device to the floor and that is where it stayed,” Hargrave says.
Last year American Apparel, Los Angeles, began using RFID tags at the item level so employees could use fixed and mobile readers to track inventory on a real-time basis. With the technology, American Apparel’s weekly inventory process was reduced to two people in two hours from four people in eight hours. “In this economy it is important to be efficient,” Schaumburg, Ill.-based Motorola’s Brush says.
Wal-Mart has said Sam’s Club, which sells items in bulk, will require RFID tags on all pallets by October 2009 and at the item level by October 2010. “We don’t think of it in terms of a mandate; we think of it in terms of a supplier requirement,” says John Simley, spokesman for Walmart.
“We are moving from smaller and smaller quantities, from a pallet, to the case, to the item. That is starting with one distribution center in Texas, the expanding to four, then to 17 more, so it will be at all 22 Sam’s distribution [centers],” he says.
Simely stresses that product needs to be compliant with its EPCglobal tags, and if a product isn’t tagged, the manufacturer could be charged $2 per pallet. Walmart is under way tagging by product category, starting with baby care, but expects to have 14 categories in seven departments implemented by the end of this month.
“Really what this is about is ensuring the efficiency of the supply chain so we don’t have out of stocks or gluts in inventory in the distribution and supply chain,” Smiley says, “but also so we can track things as they move through the supply chain”
Hargrave believes Wal-Mart’s goal for Sam’s Club is realistic, saying, “I think we’re still a ways off from seeing it on individual cans of soup or bottles of ketchup. DVD’s and electronics is where I think the very near future is taking us.”
Costs Coming Down
Given the size and significance of Walmart, those interviewed agreed that brands will have to comply. Mark Sapp, vice president of product development for mobile technology company InfoLogix, Hatboro, Pa., says smaller suppliers may not be able to recognize the economies of scale that larger companies will.
“Right now, the biggest challenge for suppliers is the cost and being able to match up an ROI,” he says. “I think you’re going to see a lot of companies entering the marketplace that help these suppliers get integrated, identify the ROI and streamline their business.”
Walmart’s Simley says some suppliers have said “they can’t bear the cost of it,” but at the same time has heard from suppliers who implemented RFID tagging without an issue and wished they had done so earlier.
The economy has divided companies into two distinctive groups — those who say they need to stop all capital expenditures and those who say now is the best time to utilize RFID, Hargrave says. “We are seeing more companies saying now is a better time than ever to invest in a technology that can help us reduce costs, increase consumer satisfaction and grab market share from our competitors,” he says.