It's a common problem facing retailers. The computer says an item is on the shelf, only it's not where it's supposed to be or even in stock. For retailers, as well as manufacturers, visibility into the supply chain is one of the most important factors in effectively managing inventory throughout the year. And, during the holiday season, the need for complete visibility is magnified even more as shoppers flock to stores in hopes of landing the perfect holiday gift. Many retailers and manufacturers are turning to RFID item-level tagging technology to help them see more and do more within their operations.
Item-level tagging involves small RFID tags being embedded in apparel tags, allowing each item to be tracked as early as production. The solution enables retailers and manufacturers to follow the inventory throughout the product's lifecycle, improving visibility in the supply chain. It also benefits customers, as item-level tagging helps stores stay stocked with the items they want to purchase.
Major companies are realizing the value of RFID item-level tagging and investing in the technology. Within the last year, Wal-Mart and Macy's have both publicly announced they will implement RFID item-level tagging into their operations. And, these major retailers are not the only ones adopting this technology. According to ABI Research, the item-level tagging market is expected to grow annually at a 37-percent rate through 2016 across the U.S. and European markets.
Why the renewed interest in item-level tagging? For years, case and pallet tagging was the status quo for the retail supply chain, but the technology left much to be desired in terms of visibility and accuracy. Retailers faced unreliable inventory counts, with accuracy levels sometimes dropping to as low as 60 percent. These figures are unacceptable for retailers who are already facing shrinking margins and need to provide customers with the right product at the right time in order to make a sale.
Perhaps one of the biggest drivers behind the recent trend of increased adoption is advancements in the technology behind item-level tagging. RFID chips have increased in sensitivity, while failure rates have dropped dramatically. For instance, chip fallout rates were once roughly 15 percent, but are now only around one to two percent. In addition, there has been a proliferation of readers that scan RFID tags, either actively or passively, allowing manufacturers and retailers to choose the type of scanner best suited for their industry. And, by implementing RFID to complement existing barcoding technology applications in the supply chain operations, it allows for multiple items to be scanned at the same time, without the need for a clear line of sight. Finally, RFID technology is now more affordable than ever.
Benefits for the Retailer
The benefits of these technology advancements have retailers excited. They can perform physical inventory checks on a more regular basis and raise inventory accuracy to around 90 percent, with some retailers even quoting 95- to 97-percent accuracy for in-store items. Macy's is already seeing this benefit, with IDC stating that item-level tagging has reduced the company's out-of-stocks items by 50 percent and decreased the time required for workers to perform cycle counts by 96 percent, enabling more frequent cycle counting without increasing labor costs.
Another benefit of the technology for retailers is improving replenishment and buying cycles. Tagging each item gives it a singular "digital voice," providing retailers with actionable intelligence that empowers, informs and drives their business decisions. For example, if a store has 50 pairs of a brand's jeans in size 32 by 30, but can only sell 20 of them, the store would be forced to place the excess items on clearance, ultimately losing revenue because of the surplus. In contrast, a different store could carry 15 pairs of the same jeans, but sell out of them, losing potential sales. Item-level tagging allows the retailers to predict and learn from sales and inventory patterns.
Benefits for the Consumer
In addition to the direct benefits on the bottom-line, item-level tagging also benefits the consumer. Item-level tagging enhances the traditional customer experience by assuring that consumers find exactly what they desire after entering the store. The technology helps them easily find the size, style and color of the garment they are looking for; eliminating the common headache of searching through endless racks of clothing only to find a size is not on the floor.
RFID also helps create a more seamless experience between brick-and-mortar locations and the online store. For example, if a customer orders a product online for pickup in the store, the retailer can quickly locate it and have it ready for the customer. Additionally, it makes the process of locating merchandise in other locations easier. The technology eliminates the need to wait as store clerks call alternative locations to find out if the merchandise in the computer is actually there. It also allows the customer to track the shipment from the store to his or her home.
Although item-level tagging improves the customer experience, there is sometimes a negative perception about the practice brought on by consumer advocate groups. These groups spread the idea that tagged items will continue to be tracked past purchase, thus invading the buyer's privacy. However, contrary to these beliefs, the privacy of customers is at the forefront of item-level tagging movement. The RFID tags used have no information that can be linked to a customer and, after purchase, the tags are typically destroyed. One of the most important things retailers and supply chain managers can do to quell the misinformation around the technology is to be transparent about the tags and what information is on them. Consumers need to know the tags are there to benefit their shopping experience.
Benefits for the Manufacturer
Traditionally, retailers have taken the lead in implementing item-level tagging into their operations, but more manufacturers and suppliers are beginning to adopt the technology further up the supply chain. By doing so, they can create better storage models and ensure the right product is available and ready to ship at the right times. In addition, RFID can help manufacturers enhance their relationships with retailers as the downstream RFID tagging saves retailers implementation costs.
What Lies Ahead
Item-level tagging benefits retailers and manufacturers by giving them unparalleled visibility into the supply chain. Although this technology is already producing concrete benefits, research and development teams are working tirelessly to advance the technology.
The future of item-level tagging will be tailored around the full lifecycle of a product. With more and more manufacturers tagging items at the source of production, it will be possible to view each product from manufacturing to distribution to the warehouse or back room to the sales floor. This visibility will give retailers and manufacturers the data to make more actionable decisions that can boost efficiency and bring accuracy to near flawless levels, eliminating shortages and shipping errors. As more objects are tagged, the communication between items will improve, providing customers with an ultra personalized service that gives them the confidence to know the products they want will be at the right store exactly when they want to purchase them.
As the 2011 holiday season approaches, item-level tagging is one thing that should be on every retailer's and manufacturer's wish list.
Source: Zebra Technologies
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