With dropping costs and entire product lines "ready-tagged", RFID is rapidly finding it's way into the inner core of the fashion retail sector.
Author: Carl Michener
1960s sociologist Morton Grodzins coined the phrase the tipping
point as a way of explaining how uncommon sociological phenomena
rapidly became generalized. It's a phrase that regained popularity
when journalist and author Malcolm Gladwell published his book, The
Tipping Point: How Little Things Make a Big Difference, in
When it comes to RFID use, a little bit of technology certainly
does make a big difference, namely increased sales and other
efficiencies. Integrating RFID with inventory management and point
of sale systems (POS) increases accuracy for accurate reordering,
reduces out-of-stocks and makes inventory counts a breeze.
RFID is becoming more and more pervasive, especially in fashion,
but not all major retailers have adopted the technology, let alone
the smaller chains in Europe, the U.S. and elsewhere.
The benefits of the technology are indisputable, but the
question is: have we reached a tipping point in retail?
Inventory edges out asset tracking
In a 2005 report, Aberdeen Group found that "…asset management
was, by far, the leading application of the technology [....]
followed by production, transportation and security." How RFID use
has changed in the ensuing seven years says something about its
evolution. JP Kamel, a Principal at RFID Sherpas LLC, explains that
asset tracking, though still important, has been superseded by
inventory tracking, in pure numbers if not in dollar value.
"Asset tracking has always made sense. Because you control an
asset from the beginning to the end of its lifecycle, affixing an
expensive, ruggedized RFID tag to an important asset was a good
move economically. In 2005, attaching an RFID tag to a garment was
cost-prohibitive. That has changed, with a far higher number of
inventory tags and implementations."
The first change involved supply chain logistics, where RFID
labels were affixed to items or, more often, boxes or pallets at a
distribution centre, adding visibility for better economy of
movement. Once a shipment reached the store, the venerable barcode
would take over. Since the early days of RFID-enabled inventory
management, however, the technology's role has changed again. Now
that the incremental cost of adding a passive RFID tag to a garment
label at source hovers around the ten-cent mark, tag price is no
longer a big obstacle.
A high point: fashion retail
No one can sing the praises of RFID in fashion retail better
than Jorma Lalla, CEO of Nordic ID, a mobile computer manufacturer
located in Finland. "In Europe, Nordic ID has been involved in 80%
of all RFID pilots and rollouts in apparel, and based on our
experience the benefits of shop floor RFID are incontrovertible,"
he says. "We see retailers move from 70% or 80% inventory accuracy
to 99%; a twentyfold or better reduction in stock-taking man hours;
vastly improved confidence in inventory numbers; and a reduction in
out-of-stocks that lifts sales on the order of 10%."
Most RFID implementations in fashion retail are retailer-driven,
with RFID tags affixed at point of manufacture or soon thereafter.
Tagging items earlier in their journey also gives retailers full
item-level visibility into a product's journey from manufacture to
sale. RFID can show precisely when a specific item was put on a
truck, when it arrived at the distribution centre, and at the
retail stockroom. RFID is now being used to complete the journey to
point of sale, increasing visibility in-store, including when the
item was moved from the back of the store to the front and when it
was sold. Metrics like these can help achieve far greater
Despite increased visibility and happy results, however,
retailers that pioneered the use of RFID to increase supply chain
efficiencies only use the technology selectively beyond the
stockroom. According to Patrick Javick, Vice President, Retail and
General Merchandise for GS1 U.S., the worldwide supply chain
standards organization, these retailers are using RFID to track
apparel and general merchandise where conditions for use are
optimal. "Switchability is the key to making RFID work in retail
right now," he explains. "Where there are hundreds of SKUs for
similar items, like clothing or tires, RFID helps tremendously in
preventing stock-outs. Retailers like Walmart base decisions on
select product matrices."
Theo Lutz, Team Leader in the department of Information
Technology Management, Institute for Industrial Management at
Germany's RWTH Aachen University, adds another perspective: read
ranges and materials also make apparel and the like ideal for RFID.
"In today's existing retail applications, there are hardly any
metals or liquids involved to complicate reading," says Lutz. "If
there were, you would need to go to quite a bit of trouble to
select the optimal tag for each product, to find out where to put a
transponder for best results, how to orient the product to increase
readability and so on."
THE TIPPING POINT
So RFID works very well in fashion retail where there are
thousands of SKUs, a short shelf life and season-specific inventory
challenges that makes just-in-time replenishment an attractive
option. There are other industries where it doesn't work as well.
So where does that leave us in terms of adoption? Are we
almost at a tipping point, or is that something we can even
According to Kamel from RFID Sherpas, one sign of the tipping
point's arrival is that certain suppliers have started putting tags
on entire product lines because it's cheaper to do so than to tag
selectively. "At that point, a retailer is paying for the tag in
the cost of goods whether they use it or not," he observes. "And it
is starting to happen-the tipping point is upon us. On the supply
side, one well-known maker of undergarments made this decision
within the past 18 months. With such a large proportion of product
being shipped to retailers like Walmart, JCPenney and Macy's, it
made sense to tag those product lines in their entirety."
Inventory confidence key to new models in
The benefit of RFID to fashion retail and similar business
models is evident, but not everyone has jumped on the bandwagon.
What's holding them back? Lutz of Aachen University offers an
academic perspective. His findings show that store managers often
look at RFID implementations for the wrong reasons. "A motivation
for many use cases seen is 'trying RFID out'. That was reasonable
at the very start of the RFID era, but to be successful nowadays
you need to address specific business problems," he finds.
"Sometimes it is better to solve problems with organizational
changes and use RFID to gain insight into processes. Being
solution-driven, not only benefit-driven, is the key to
Kamel thinks along the same lines. "People have to stop focusing
on the technology, and instead focus on the business problem that
we're trying to solve: improving confidence in inventory accuracy."
He sees business cases built around RFID every day, and most of
them have to do with inventory accuracy and visibility. "If you are
offering 'buy online, pick up in store', you need to have very
reliable inventory data. If the customer comes in to pick up an
item and it's not available, there is a 50% chance they will never
shop there again. That's a scary statistic if you have 70%
inventory accuracy, like most retailers do. To keep that from
happening, most retailers set a safety threshold, but then you're
five-deep in every SKU just to be sure."
GS1's Javick notes that a move to RFID is also sometimes delayed
because of departmental alignment. "RFID benefits are rarely
manifested in the IT profit and loss bucket, even if that's the
department that makes the initial investment. This disconnect
between departments has some companies struggling to see the big
picture. But since results are proven, the number of labels
moving to RFID is experiencing exponential growth in the U.S," he
says. Javick finds that smaller players are getting into the game
now, too; one-off stores have implemented RFID, as have big chains
with thousands of stores. He acknowledges that there are still some
big companies holding out. "Some of those holdouts have piloted
RFID, some have not," he says.
Cost and complication of implementation
It's certain that the cost of RFID tags is no longer holding
anyone back, but the cost and complication of implementation
sometimes is. Until recently, an implementation consisted of tags,
readers and software to get tags to talk to readers. A
large-scale, chain-wide implementation would often take about a
year. More recently, however, deployments have become less
expensive and more agile thanks to increased co-operation between
software, hardware and tag providers. By optimizing their products
to suit each other and offering the whole packing under the same
joint roof, the solution becomes easy to implement and
Interviewed for this article:
Jorma Lalla is CEO of Nordic ID, a leading manufacturer of handsets
for mobile data collection based in Salo, Finland's Silicon Valley
and home to mobile phone giant Nokia.
JP Kamel is a Principal at RFID
Sherpas LLC, a North American consulting practice focused
exclusively on the retail sector.
Patrick Javick is Vice President, Retail and General
Merchandise, for GS1 U.S., a global supply chain standards
Theo Lutz is Team Leader in the department of Information
Technology Management, Institute for Industrial Management, at