Taking stock accuracy from 65% to 99% creates huge opportunities for efficiency and profit.
Author: Carl Michener
Most retailers think they have a much better handle on stock
levels than they actually do. Despite a widespread belief in 90%+
store inventory accuracy, RFID Journal pegs overall accuracy at
65%. The large disparity between what's on the screen and what's
really on shelves translates into huge losses in potential sales
and forces a massive amount of discounting.
The culprits? Infrequent cycle counts coupled with human error.
With barcode technology it can take several people more than a day
to completely inventory a large store and its storeroom. No wonder
counts happen only quarterly or yearly. Jorma Lalla, Business
Development Director at Nordic ID, sees RFID as the answer to
increasing visibility into stock levels on the floor and in the
storeroom. "With RFID you can perform a store-wide stock count in
minutes, not hours," he explains. "Since walking along a rack of
clothing while scanning can give reads that are more than 99.99%
accurate, it's no wonder that retailers move from quarterly
stocktaking to daily or even twice daily. RFID can help retailers
literally eliminate out-of-stock situations in their stores."
Professor Bill Hardgrave, Dean of Business at Auburn University
and an RFID specialist, agrees. He has found that retail systems
typically show out of stock levels of 1%, when in reality it is 12%
to 15%. That's just life…or at least it used to be…before RFID.
The technology may be sophisticated, but the everyday realities
of using RFID are really quite simple. Rubin Press, Director of
Sales & Marketing for Controltek, a U.S. provider of auto ID
solutions, explains. "RFID is touted as more accurate than bar
coding, which it certainly is given that RFID tags offer so much
more functionality for retailers to leverage. But the real secret
to its success is pretty basic stuff. Scanning is easy and fast,
which allows the frequency of cycle counts to skyrocket. This makes
system information much more accurate."
The technology, long in use within logistical processes
worldwide, is now hitting the mainstream in-store. Retailers like
Wal-Mart, American Apparel and Gerry Weber put RFID to work on the
sales floor and in the back office. Since RFID enables rapid tag
reading from a distance of several metres through boxes and walls,
a box containing hundreds of items can be scanned in seconds,
producing an item list that can be automatically checked against
what was ordered.
Reducing stock with RFID
When you know exactly what you have, you can kiss stuffed
storerooms goodbye. Press explains how RFID affects ordering and
inventory. "The increased visibility that RFID brings to what's now
on your floors-and having confidence in this information-allows you
to order what you need, versus what you think you need." Without
RFID, retailers aren't confident in what they have or don't have
and build in a large safety margin, leading to product that sits on
storeroom shelves. RFID also changes the mix for retail floorspace
allocation. "When you use your storeroom more for processing than
storage, you need less back room space," observes Press. He notes
that store overhead costs are reduced since storage and sorting are
also reduced. "RFID can reduce carrying costs as well, as less
fluff stock needs to be sent to stores to cover previous
Dr. Martin Gliesche, Manager at TAILORIT, a German management
consultancy based in Düsseldorf, illustrates how RFID helps improve
visibility upstream of retail locations. "At corporate
headquarters, planners may think that there isn't enough stock in
the store, but in reality there is-it's just not on the sales
floor," he explains. "With RFID you have accurate, reliable
information both about what's in front and what's in back. This
allows you to optimise your planning and merchandise
A balancing act
Indeed, for many retailers, improved inventory accuracy-and not
out-of-stocks on the sales floor-proves to be the unexpected lead
benefit after RFID implementation. With unfettered visibility into
stock levels, then, where lies the perfect balance between stock on
hand and deliveries from the DC?
"On one hand you're able to minimise space, but on the other you
don't want to run out of fast-selling items," says Lalla of Nordic
ID. "You've also got to weigh the costs of picking, packing,
shipping, receiving and stocking against the cost of store room
"If just-in-time (JIT) provisioning is what you want, RFID is
what you need to enable it," says Gliesche. "But you need to gauge
where maximum efficiency lies. It's a question of capital costs
versus reduced handling-in other words, process efficiency."
Gliesche notes that JIT really comes into play from storeroom to
sales floor. "Keeping in mind that replenishment from the DC may
take two days, RFID helps avoid OOS situations through frequent
cycle counts and in-store stock replenishment. Ensuring that this
happens smoothly is the daily business of the merchandise planning
departments of retailers like American Apparel who use RFID for
more accuracy in in-season management."
Source, DC or store?
Not surprisingly, accuracy goes up the further up the supply
RFID enters. Small chains and single retailers often create and
affix RFID tags in the storeroom as soon as goods come in. It's a
simple process involving a mobile RFID computer and a boxful of
tags. Other retailers, like Germany-based Gerry Webber, have
integrated RFID vertically to the source, sending registered RFID
tags to over a dozen countries where hundreds of manufacturers sew
them into garment labels prior to shipping. That way they can track
garments in transit, reducing shrinkage and enabling them to check
for counterfeits at resellers' locations.
Offloading RFID tag integration to manufacturers also saves cost
and improves logistics at DCs, since everything that arrives is
automatically scanned into the system. Press notes that
efficiencies are typically higher at the DC. "Overall costs per
item are lower than in-store, so if at-source tagging is not an
option for retailers trialing the solution, the DC is the RFID
entry point of choice for most pilots/pre-rollouts."
One thing that all experts agree on is that RFID provides a
definite advantage to those who embrace it. It's time that
retailers start implementing the technology to protect their
position in the market. Investing in game-changing technologies
now, rather than reinvesting in older technologies, confers
[Left] Jorma Lalla, Business
Development Director at Nordic ID, a leading manufacturer and
provider of efficient store operations management with RFID for
apparel and specialty retailers.
[Middle] Dr. Martin Gliesche is
Manager at TAILORIT, a German management consultancy based in
Düsseldorf. TAILORIT serves the fashion and clothing industry
[Right] Rubin Press is Director of
Sales & Marketing for Controltek, a U.S. provider of security
products and auto ID solutions based in Cranford, New Jersey.