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Strike the perfect balance of stock at retail with RFID

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.

Shutterstock _141945166_refill _fashion _store _2_web

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.

Simple stuff

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 inaccuracies."

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 allocation."

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?

Balance -of -stock _web

"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 space."

"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 undeniable benefits.

Jorma -Martin -Rubin

[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 exclusively.

[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.

18 comments on “Strike the perfect balance of stock at retail with RFID”

  1. Posted 28 April 2014 at 11:03:32

    did you count ROI? Could you please unveil more datails? (type of garment RFID labels, whether EAS + RFID, soft etc.)

  2. Gravatar of Kirsikka DrägerKirsikka Dräger
    Posted 28 April 2014 at 15:55:17

    Hello,

    a great article describing ROI calculation in more detail, please check this article: http://www.rfidarena.com/2013/9/12/the-essentials-of-roi-calculation-in-retail-rfid.aspx.

    BR, Kirsikka

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