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Operational excellence by RFID

Uwe Quiede of TAILORIT wrote an insightful white paper about how RFID can be used to streamline processes and achieve operational excellence. RFID can aid retailers to achieve major goals: create transparency, fulfill customer needs and increase sales.

Today a lot of fashion retailers use RFID in their companies, but some retailers still hesitate to engage in RFID. High tag prices and complex EPC integration into the existing back-end systems are the most mentioned reasons. Quiede's White Paper describes in a very convenient and pleasant way, the reasons why fashion companies should engage in RFID. It is based on best practices and concrete figures, thus readers swiftly gain an understanding of the RFID success story. We feature an overview of Uwe Quiede's White Paper on the RFID Arena, for the full version please visit the TAILORIT website.

A product is only in the right place if it doesn't stay there for long

Time pressure is ever increasing in business and with stagnating markets worldwide, competitive pressure is growing more and more intense. Prices for transport and raw materials are increasing, and the high sales figures which were once a given are now a thing of the past. We increasingly have to pay attention to details, while still keeping track of the big picture.

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For the complex, fast-moving fashion retail industry this means that there is a need for a strict organizational structure, easy access, quick processes and transparent information. In other words: we need to become and remain an example of operational excellence. Also we need to focus on customer needs more than ever before, because they will only buy from us willingly, repeatedly and in large quantities if we offer them more than they expect. Our customers don't want products; they want shopping experiences. 

Fashion retailers all over the world are pursuing two strategic aims - operational excellence and shopping experience - and they are doing so with increasing success thanks to RFID technology. RFID has now become a powerhouse in the textile value chain, speeding up goods flows, reducing costs, and impressively boosting sales.

Stock management problems: The value chain and its weakest links

Customers vote with their feet, and this golden rule of trade continues to apply even today. But what has changed dramatically is the demand consumers place on their desired products and personal shopping experience. Nowadays, if a retailer cannot meet the high expectations of variety and availability, and cannot provide the desired item in the right size or at all, it will be very quickly punished by the market.

This is particularly the case for replenishment products in the low to mid-price range, i.e. basics and NOS (Never Out of Stock), with similar style and quality. The lower the brand loyalty and affinity, the higher the likelihood of operational errors impacting negatively on purchase behaviour.

Gaps in stock result in dissatisfied or even lost customers:

  1. Customers can't find their size and leave.
  2. In a more favorable case, they will ask the salespeople and wait.
  3. If the warehouse search is unsuccessful, which has proven to be the case over 50% of the time, this has a negative impact on customer satisfaction.

If an outlet does not separate its stock by back store and front store, this has consequences:

  1. Half the items sold are generally out of stock in the outlet warehouse. The consequence: the trip was in vain.
  2. Items not found in the sales area are not bought by the customer. But they are not replenished either, because they don't appear in the sales report. The consequence: they stay in the warehouse.

A representational customer survey conducted by TAILORIT as part of an RFID project showed that, after repeated unsuccessful attempts to find a certain size, around one third of interviewed customers never returned to the shop and instead switched to a competitor brand, a multi-brand retailer or an online marketplace.

Although these sales losses, coupled with decreasing customer loyalty, are painful for any fashion retailer, they can be avoided if the retailer identifies and eliminates the causes of the stock problems. Where do stock management problems arise?

  • Manufacturer picking errors
  • Picking errors in distribution logistics
  • Errors in outlet logistics
  • lost items throughout the entire process chain

A technological innovation and its advantages

RFID is a sales driver and source of added efficiency: this has for years been the credo of many solution providers in this field - and they are now right. Global standards, dipping hardware and software prices, and documented successes by reputable fashion retailers have meant that well-thought-out, strategically planned investments in RFID are now considered necessary, wise and safe. 

While the first RFID pilot projects (e.g. at Kaufhof, Karstadt and Bloomingdale's) provided important experiences for the entire industry, it was the subsequent holistic approaches adopted by companies like Marks & Spencer, American Apparel and Adidas/NEO which proved that the advantages of this technology enable an impressive ROI in the mid and long term. 

Typical RFID areas of application

RFID in Logistics:

  • picking checks, incoming and outgoing goods checks at all stations throughout the entire value chain - through item recording in the RFID tunnel or via mobile RFID devices
  • recording inventory - through stock-takes using mostly mobile RFID devices

 RFID at stores:

  • recording of incoming goods at mobile or fixed reading points
  • price changes supported by an item search using mobile RFID devices
  • electronic article surveillance in the logistics facilities or outlets (conventional security tags no longer have to be removed at the check-out)
  • inventory recording and stock-takes using mobile hand-held RFID readers
  • item identification at check-out

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Creating a system systematically: Requirements for a successful RFID project

The success of an RFID launch depends on many framework conditions. A feature in which RFID differs considerably from comparable identification technologies should particularly be incorporated into strategic considerations. While the successful scan process is confirmed audibly, e.g. when recording by barcode, item recording with RFID works differently. 

One key advantage of RFID technology is its ability to identify items without visual contact. Although this principle significantly simplifies and accelerates the registration process, employees cannot always be sure the items have actually been recorded. This is just one of the reasons why the following factors need to be taken into account when launching an RFID project.

  • Detailed, consistent planning of resources, expenses and investments is both a critical success factor and a realistically composed business case for the project.
  • Involving all participants and later users of the RFID system ensures maximum acceptance and smooth change management right from the outset.
  • All participants must be precisely informed about the technology's features, and which benefits each individual staff member can expect when using it in their daily work.
  • The "Touch & Feel" principle is of key importance, particularly for RFID. Employees must be able to develop a feeling for the new technology early on, so as to better estimate its possibilities and limits.
  • The intensive training provided to store and logistics staff as part of a professional, consistent support scheme is particularly essential

More about the TailorIT White Paper

TAILORIT has been part of famous and public RFID projects in Germany. Information and results of these projects have formed the basis for this White Paper. It includes information gained through experiences and lessons learned in RFID projects since 2010, e.g. at s.Oliver, Adler Modemärkte, Marc O`Polo and Adidas. 

From stock management problems to the RFID launch - the White Paper describes all common RFID benefits, based on the challenges of the fashion retailer´s business of today and in the future. Consequently this enables the reader to estimate what benefits he probably can realise in his company. It contains a guideline how to execute an RFID project in 11 steps, starting with building up technological and process knowhow to the sustainable ensuring of the project success. Also it offers the most important key success factors that should not be underestimated and an outlook of the development of RFID in fashion retail in the next years. 

For the full White Paper on the TAILORIT website, click here

For more information about TAILORIT, visit the TAILORIT website

TAILORIT-Foto -Uwe -Quiede -2012-2

Uwe Quiede, Principal RFID at TAILORIT, a German management consultancy based in Düsseldorf. TAILORIT serves the fashion and clothing industry exclusively.

1 comment on “Operational excellence by RFID”

  1. Posted 19 June 2014 at 16:12:44

    Rfid system is the future. Future is now.

    Great Post
    Ian

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