By Randy Dunn, Director of Global Sales & Professional Services, Tyco Retail Solutions
September 4, 2013 — During the last decade, RFID has been pronounced dead several times. It’s been mocked and criticized. It’s been shelved and tabled. Yet, there has been no substitute technology offering the same unparalleled benefits.
Combined with the fact that omni-channel retailing is placing enormous pressure on retailers’ quality of inventory information, this means that RFID has finally found its rightful place in the retail ecosystem and is poised to become the most critical retail technology of our time.
RFID has been pointed at a number of retail business problems during the past 10 years with varying, but disappointing, degrees of success. Whether it was supply chain efficiency, loss prevention intelligence or customer experience enhancement, RFID never seemed to fully live up to its promise. Until now.
RFID helps retailers meet modern customer expectations
To be successful in the game of omni-channel retailing, a retailer must have the capability to enable the customer to shop however she wants, to buy whatever she wants, and to take delivery wherever she wants for all of the merchandise within the enterprise. This expectation puts tremendous pressure on retailers to be much more precise about knowing what they have to sell and where it is located. The shorter the time period between promising her she can have it and when she can take delivery significantly increases the degree of difficulty associated with this task.
RFID, with its ability to count items 50 times faster than the barcode, allows retailers to sustain accurate in-store inventory positions in their systems of record through regular cycle counting and system of record updates. This is an essential capability if a retailer plans to leverage the inventory merchandised in its stores, and still allow the store shoppers to interact with the merchandise consistent with a traditional shopping experience.
Eliminating inventory distortion
The traditional shopping environment has been shown to produce a 2 to 3% monthly level of unpredictability in a retailer’s inventory data. Distortion, that drift between what a retailer’s system of record says is in inventory and what is actually in inventory, becomes a huge problem when a customer wants to know with a high degree of certainty if an item she is looking for is in stock. If distortion rates reach 25-30%, it becomes very difficult to use that information to make any meaningful customer-facing promises.
RFID effectively addresses that challenge. By cycle counting on a regular basis (because it now happens 50 times faster!) retailers can true up their in-store inventory position and be confident that the data they are relying on to satisfy a customer in fact has that effect.
RFID – today and tomorrow
Today, the primary use cases for RFID are associated with the benefits of having more accurate inventory information. However, as stores become more saturated with RFID-tagged inventory, second order use cases like loss prevention and work force execution become viable. Supply chain execution and customer experience innovation are also ripe areas of opportunity for creating value. In addition to these areas of value, a considerable amount of work has gone into making RFID handheld devices more intelligent, which helps minimize the per store cost associated with deploying RFID.
Admittedly, weaving RFID into the fabric of how stores operate is a much bigger challenge that it appears to be on the surface. Changing core business process and educating store employees on the technology is a significant change management issue.
However, as retailers come to realize the significant value of RFID to effectively compete in today’s omni-channel world, there are opportunities to test the RFID waters without making a huge investment in time or resources. For example, many retailers start with a specific category of merchandise such as denim or women’s intimate apparel. A RFID pilot will be focused on this subset of merchandise where it may be easily and frequently counted daily or every few days to maintain an accurate inventory count and enable needed replenishment. This type of pilot will immediately provide increased store process efficiency and selling floor availability, all resulting in reduced out-of-stocks and increased sales.
Another entry point for an RFID pilot is shoe display compliance, ensuring all back stock shoes are represented on the shoe display floor. This business case requires a limited amount of initial RFID tagging and provides immediate process efficiency and increased compliance. These examples offer immediate ROI at a relatively limited initial cost upfront.
Once deemed disappointing, RFID has finally coming into its own. Fueled by a demanding and savvy consumer market, retailers have come to understand, with great certainty, that RFID is the cornerstone of omni-channel retailing success. And while the immediate need is to meet the demands of an omni-channel strategy, the long term benefits of RFID extend well beyond the current trend. RFID will prove to be one of the greatest enabling technologies of its time.