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RFID on the factory floor - Protect the brand by integrating RFID at point of manufacture

RFID is a technology that’s been helping prevent stock-out situations and reducing shrinkage for over a decade. More recently, brand owners have been waking up to the fact that RFID is a powerful tool for safeguarding the brand in several ways.

Author: Carl Michener

Imagine attaching tiny cameras to every product you sell. They are fastened on as soon as products are made, recording date and location of manufacture. They show where products are at any given time, when they arrived, how long they spent in a distribution centre, and who delivered them. They can show you size, colour, model and other item-specific details.

Product-level cameras may never become a reality, but chances are we will never need them, either: all the functions listed above can be fulfilled by RFID. It's a technology that's been helping prevent stock-out situations and reducing shrinkage for over a decade. More recently, brand owners have been waking up to the fact that RFID is a powerful tool for safeguarding the brand in several ways.

Knocking out knock-offs

From Gucci handbags to patented medicines, counterfeit goods of every description are on the rise. Since many look-alike products can be made for 10% or less of their final sale value, it's no wonder that fake purses, imitation Nikes and knock-off Apple ear buds are flooding markets worldwide. The U.S. Chamber of Commerce pegs counterfeiting at a $650 billion industry, and growing.

Hanna Östman, in Marketing Communications at Nordic ID, a Finnish manufacturer of mobile RFID computers, has been tracking RFID use in the pharmaceutical sector for some time. She notes that America's FDA is encouraging the use of RFID to combat counterfeit drugs. "How it works is individual drug packages contain unique RFID tags," she explains. "Each tag contains information about the drug's origin-a so-called ePedigree (electronic pedigree), which is hard to manipulate."

Unlike barcodes, which are easily copied, RFID tags are difficult to counterfeit because each one is a unique identifier and also part of a series. RFID tagging, tracking and identifying the drugs on an individual basis has proven to greatly reduce the likelihood of a counterfeit drug reaching its ultimate destination. California-historically an early adopter of new, proven technology-will require ePedigree on 50% of prescription packaging by 2015. Every point in the supply chain will share data via a single ID number for each pharmaceutical package.

Fashion brand owners have begun employing the same techniques, in part to prevent the sale of knock-off garments that compete with and denigrate the brand. Gerry Weber, a vertically integrated fashion house based in Germany, has realized complete RFID supply chain integration. RFID-equipped labels are sent to authorized manufacturers in over a dozen countries and sewn into products. Manufacturers and logistics companies all use RFID readers to track products on their journey, resulting in near zero shrinkage. Importantly, Gerry Weber is able to perform spot checks for knock-offs at channel partner stores.


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A technology difficult not to afford

Christian von Grone, former CIO for Gerry Weber, knows that RFID is saving the company money on several fronts. "Garment labels carry RFID tags and electronic product codes (EPCs) at a cost of just €0.08 more than conventional care labels," he says. "For that small price we're experiencing zero shrinkage in transport, less than 1 percent stock-out situations and we've reduced theft while saving money on security." The RFID component of care labels is also designed to degrade after washing, quickly becoming unreadable and alleviating any consumer privacy concerns.

The metrics that von Grone reports make it plain that RFID is a net contributor to the bottom line. More businesses, from different sectors of the marketplace, are waking up to that fact. Jorma Lalla, CEO of Finnish RFID mobile computer manufacturer Nordic ID, the company that provides Gerry Weber with its handhelds, has witnessed a rapid widening of RIFD use across sectors. "When we began manufacturing RFID handhelds fifteen-odd years ago, our clients were mostly major retailers who wanted RFID tags and readers just so that they could perform stockroom and warehouse inventories more quickly," he notes. "Other applications hadn't yet developed and most other audiences wouldn't even give us the time of day. Now that RFID is proven, we're getting calls from manufacturers, logistics companies, service providers...you name it."

Shrinking shrinkage

Shrinkage is still a big issue for retailers, but it needn't be when you consider the role that RFID can play in eliminating it. Despite the use of robust anti-theft systems, retailers still experience enough shrinkage to significantly impact the bottom line. Persian Gulf retail giant Liwa Trading Enterprises' network of 19 GANT brand stores across the Persian Gulf region is a case in point. Anti-theft systems targeted customer theft, but management suspected employees. With stock counts taking place only once every year, Liwa was aware neither of the exact causes nor the total extent of theft.


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To fix the problem, the company selected a reusable RFID pin tag that carries a barcode in addition to RFID information. SmartPIN, from QID Solutions in Hungary, links RFID codes to item product codes with a simple scan at the DC. In Liwa's case, SmartPIN integrated nicely with their existing retail anti-theft tags and added more intelligence to the security system. Store inventory counts became weekly events, as they were reduced from 10 to 15 man-hours to 25 minutes, and shrinkage all but disappeared.


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You decide where the value lies

The cost of RFID implementation will depend on how thoroughly you track from manufacturer to shelf, and what you need to do with the data. Applying the RFID tag at point of source provides for an opportunity to read that tag at each point in the chain. Decide at each step if the value is worth the costs to deploy at that node.

End-to-end RFID visibility could mean investing in six to ten different operations, but that is not often the case. Once labels are shipped to your manufacturer and sewn into products, you may not need RFID visibility during transit between manufacturer and distribution centre (DC). Likewise, you might not need visibility between DC and stores. However, logistics companies are investing in RFID in order to make their offering more attractive, so your shipping partners may have already taken care of that link in the chain.


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At the DC, RFID can be put to use for receiving and delivery, picking, packing and verification, as well as improved stock management. The more processes that take place at the DC, the more benefits RFID provides. It's a matter of control. With item-level visibility, DCs gain the inventory precision and consequently the confidence to provide just-in-time service to retailers and to reduce inventory levels significantly. The end results are savings on the logistics side and fewer out-of-stocks at retail, not to mention the ability to take the sales model into omni-channel territory.

Fulfilling the brand promise

What drives RFID adoption is having the right product in the right place at the right time, meeting instantaneous customer demand. Revenue and sales lifts render the costs of tags inconsequential. A 20-minute mid-afternoon inventory count can help you replenish stocks where needed, reposition slower inventory from another store, and confirm that products are in fact available and in-store before customers make the trip.

Having every item in stock in the right size forms a big part of the brand promise. "When customers find satisfaction time after time, they develop preference and loyalty," observes Lalla, CEO of Nordic ID. "That's why out-of-stock situations are so crucial to avoid. The phenomenon carries more impact than just loss of sales opportunities."

Maximum benefits accrue when RFID data visibility is shared among manufacturers, logistics partners, store management, the brand marketing team, and other stakeholders. If part of your brand promise is cutting-edge fashion delivered every quarter or even more often, just think what granular RFID-derived sales data-specifying the size, colour and model of every SKU sold-can do for your marketing and design teams: analysis of today's trend can result in products that ride the crest of a trend a mere month or two in the future. When RFID data is harnessed and used to that extent, technology investment returns can go from double digit to exponential.

 

5 comments on “RFID on the factory floor - Protect the brand by integrating RFID at point of manufacture”

  1. Gravatar of Jesus MendezJesus Mendez
    Posted 21 February 2014 at 11:09:51

    Very interesting article. I have experienced many applications like you mention in your article in Spain, in Production Plants, Retails warehouses and stores, distribution centers... all the supply chain.
    Also, some partners have developped special applications for anti-thefth in retail stores.

  2. Posted 24 February 2014 at 09:20:53

    Hello Jesus,

    You are right, the anti-theft applications and EAS is already a go also.

    Would be interesting if you could contact Nordic ID with your cases, maybe we could work together to make good implementations.

  3. Posted 06 March 2014 at 22:02:30

    Great article to read! Did enjoy every-bit. If anyone need any help on the RFID and smartcards products, we will be able help and support.

  4. Gravatar of Kirsikka DrägerKirsikka Dräger
    Posted 07 March 2014 at 13:20:40

    Thank you Faz'Le

  5. Posted 02 September 2016 at 14:36:44

    Hello Mirva,
    Very nice article, thank you.
    I like the concept of a RFID system with many applications: retail, logistics, stock-control, information for customer, cloth authentication and brand protection,.. all that with just a RFID tag connected to the cloud

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