RFID: Beyond The Obvious
March 31, 2016
I can’ t tell you how many retail executives I have spoken to about RFID. They all know what is at stake and they all know that I have seen 7 successful implementations. I ask them why then they haven’ t gotten on board yet and I hear many derivations of, ‘ too expensive, too much on our plate right now, no room for another Capital expenditure. I always, very politely, tell them that they can get started for under $50k and…They don’t believe me!
With 1 successful pilot, they can prove the concept, create the infrastructure and begin to measure success beyond the obvious stats that have proven themselves time and again:
Inventory Accuracy – 99% item-level accuracy vs. 65%-70% of items being off by at least 1 unit
Out of stock – reduction 50% and sales lift 2%-7%
Loss prevention – 70% reduction of internal shrink
Locating product – sales lift 2%-7%
Just off the top of my head, for a 1-store pilot we are looking at:
Hardware to replace Symbol Scanners –$2500
WiFi – maybe a bump up, but not much if any for the pilot
Software – Based on Vendor, and they will likely do you a deal, $20-$30K. (These numbers need to be validated as this is from a few years back but early users found providers would loan this for proof of concept phase)
What I really don’t get is if these executives really know what is at stake, why don’ t they ask more questions instead of just saying, ‘ we can’ t do it right now.’ Every day they wait, the further they fall behind. And, it goes without saying that the costs will continue going up too.
One little fact that is beginning to rear its ugly head as eCommerce continues to grow is, eCommerce DOES come with a cost. Once upon a time in retail, we all thought eCommerce would be just another store. In many, if not most cases, in terms of sales, eCommerce business has become larger than the largest store. That’ s a good thing, right? Let’ s take a deeper look. With the added marketing, fulfillment, and shipping costs due to changing business models, expenses are being driven up faster than sales.
It has been tough enough for retailers to stay ahead of today’ s savvy and mobile shopper but profitability is on the line too. So what are retailers doing about this? They are going back to the drawing board to re-architect how they think about technology. How efficiently and accurately they are processing data and serving the customer. Inventory accuracy at real-time or near real-time is an essential component.
For starters, accurate information allows retailers to make better decisions and improve the distribution process. Just think about the impact that shaving a fraction off shipping costs might mean to your bottom line? With access to accurate, real-time data, along with intelligent distributed order management systems to optimize inventory procurement and allocation, Omni-Channel and savings are possible.
As quoted in RFIDinsider: What is OmniChannel Retailing?, “Macy’s CEO Terry Lundgren is so confident in omnichannel retailing that he predicts it will reduce the need for fulfillment centers. By knowing the exact inventory levels across retail stores, he feels that the stores themselves will beableto maintain the optimum level of stock. However, the improved processes are only achievable with item-level visibility, a feat made obtainable with RFID.”
Now let’s take another giant step forward into the ‘ Oh WOW’ territory. Why would Terry Lundgren say such things?
We know that some distribution centers such as those run by Amazon and Walmart are highly automated however, this does not speak to most DCs which continue to have many manual processes. A great example is picking orders. Many retailers continue to pick orders the same as they have for the past two decades. Print the order, run down the aisle, find the item, pack it and ship it. Time consuming and error prone, to say the least. Just imagine today’ s challenges due to rush shipments and the increasing number of Omni-Channel orders which must be picked at the individual level and shipped to individual customers.It becomes easy to see why problems persist and expenses are soaring upwards. With RFID augmented systems, not only is Omni-Channel possible, it may also make it more affordable.
Now that we have moved beyond the obvious stats that RFID claims, how about imagining that you can pick to the last unit? Retailers don’ t typically expose the last item of a SKU to online purchasing because they don’ t have enough confidence in their inventory accuracy or ability to find the item to make every unit available for customer orders. With the help of Tyco solutions, Macy’ s has been able to implement its “Pick to the Last Unit” (P2LU) program. Macy’ s P2LU program makes available the last unit of an item in any store, and RFID locates it.
“About 15 to 20 percent of inventory is accounted for by the last unitin the store,” noted Peter Longo, president of logistics and operations at Macy’ s.“It’s a massive amount of budget, either marked down ornot sold, anditis curable through RFID.”(as sited by Fierce Retail: Macy’ s finds omni-channel success with RFID)
Also with access to its full inventory throughout the entire store base, Macy’ s is able to use stores to support online orders, particularly those for single items. This allows them to use all of their real estate as flexible warehouses. Changes to inventory management supporting this Omni-Channel strategy have allowed Macy’ s to reduce $1 billion of inventory from its stores. (also found in the Fierce Retail article)
And, we can’ t have this conversation without mentioning the Internet of Things (IoT). When it comes to IoT solutions in retail the approaches are many and the applications vary. Perhaps providing a richer, more interactive experience through digital tags is a priority; or RFID-enabled smart dressing rooms and magic mirrors? For others, speed may be king (i.e., inventory cycle counting, throughput at checkout, customer service on the store floor). The bottom line? It all starts with RFID!
So, if you are still not on board to at least put pencil to paper then it’ s time to start asking some questions. I’m listening.