Melanie NuceHow can you sell something if you don’t know where it is?

This is the question being addressed by many retailers as they determine their omni-channel retailing strategies. What they have found through numerous pilot programs and academic research is that efficient inventory management is foundational to delivering the “always-on, always-open” consumer experience that is so coveted today.

Innovative retailers and their trading partners have now come to realize that item level radio frequency identification (RFID) is the key to knowing what is in stock, where it’s located and having confidence that inventory levels are accurate. GS1 US research findings indicate that awareness of the benefits of using item level RFID for inventory accuracy has reached record highs among retailers and manufacturers, with more than half of the industry implementing RFID programs this year.

So how does RFID work? Why is it requisite to optimizing inventory management?

The Electronic Product Code (EPC), which serializes the identifier for each individual item in an organization’s inventory, used in tandem with RFID tags enables the movement and sharing of data through many disparate retail systems. The EPC standard enables improved supply chain interoperability and, as the last ten years have shown, consistently delivers more than 95 percent SKU-level inventory visibility.

Global supply chain item visibility has significantly increased when EPC-enabled RFID tags are attached to individual items, as opposed to cases or pallets. When a manufacturer assigns a unique, serialized identifier to an item, it forms the strategic foundation that allows users to perform outbound reads at a manufacturing site in Asia, for example, inbound reads at an American distribution center, and then another outbound read as each shipment heads to a retailer.

This complete visibility is essentially a trail of “digital breadcrumbs” that lets users perform downstream inventory reconciliation, tracking products all the way to store shelves and stockrooms. As an example, retailers can integrate more granular data with their existing enterprise resource planning (ERP) software and their knowledge about the product can go from “This is a hammer” to “This is sledge hammer #1 or ballpeen hammer #2.” In addition to this level of product serialization, RFID readers can simultaneously scan many tags at a significantly faster rate than traditional inventory management methods that rely on line-of-sight barcode scanners.

With strong support from leading retailers like Target and Macy’s, RFID is reaching a tipping point in retail, where it has become a key driver of innovation and success. Here are 10 specific ways RFID is powering retail inventory management.

1. RFID raises inventory accuracy. Item level tagging enables the tracking of every piece of merchandise, in every retail stock location, raising SKU-level inventory accuracy from an average of 63 percent to 95 percent, according to research from the RFID Lab at Auburn University. With this level of intelligence, retailers can gain quick insight and make speedier decisions about the type and quantity of inventory required at any specific e-tail or store location.

2. RFID reduces cycle count time while improving labor productivity. RFID enables near automatic cycle counts because it doesn’t require line-of-sight scanning (as with barcodes). Cycle count times are dramatically reduced by 96 percent. Imagine the possibilities when retail staff can count 20,000+ items per hour, instead of just 200. This frees up the sales associate’s time to do what they do best – assist customers.

3. RFID reduces out-of-stocks at retail. With RFID’s inventory accuracy, retailers know what they have in stock at all times, leading to fewer consumer disappointments. With pinpoint accuracy, retailers are adopting more agile supply chains where product can be more easily ordered, forecasted and diverted to where ever it needs to be to satisfy today’s on-demand consumer.

4. RFID increases item availability to boost sales. RFID Lab research shows sales may increase from 2 to 20 percent when item level RFID is implemented. Sales opportunities also grow with RFID, enabling the retailer to expose more products faster and in real time for consumers. This enables popular flexible fulfillment options, such as click-and-collect or buy in store, ship to home. An RFID-based system helps ensure the customer never hears “we can’t find it” upon pick up.

5. RFID improves shipping and picking accuracy. Manufacturers who have been asked by their retailer partners to collaborate on RFID implementation with the mutual goal of capitalizing on new sales opportunities are also reaping the benefits of this transformational technology. More and more items are being tagged at or near the point of manufacture, which enables all trading partners to gain the most efficiency throughout the supply chain and ultimately delivers an 80 percent improvement in shipping and picking accuracy and improves receiving time by 90 percent, according to the RFID Lab.

6. RFID reinforces product authenticity. RFID helps verify product authenticity, as products can be uniquely identified at the item level, rather than at the batch level. Brand owners assign a unique serial number to each item, which is then stored in a database. On the retailer’s end, employees can scan the tag and immediately find out whether the numbers are among those assigned by the original manufacturer. Serialization also helps a retailer spot out-of-sequence numbers that may signal counterfeit products; thereby reducing the entrance of fake products into the retail value chain.

7. RFID speeds the reconciliation process. Aside from the collective benefits of enhanced visibility, RFID also speeds the reconciliation process for the manufacturer and allows them to be paid more quickly. With unique item level identifiers, more granular data becomes available which can help accelerate any kind of problem-solving.

8. RFID expedites the returns process. With item level RFID, the returns process is made more efficient and enables retailers to get products back on the shelf (digital or physical) faster. With its added bonus of product authentication, RFID also helps reduce return fraud.

9. RFID enables electronic proof of delivery. RFID creates benefits at multiple points in the supply chain. Enabling electronic proof of delivery, which can benefit factories, suppliers, distribution centers and retail stores alike. Additionally, errors are reduced due to the elimination of outdated and proprietary paper-based systems.

10. RFID enhances loss prevention capabilities. RFID’s unique identification benefits enables trading partners to pinpoint products as they move from source to store and within the retail environment. With these enhanced tracking abilities, missing deliveries can be found faster and retailers can more easily isolate areas of supply chain or in-store shrinkage.

In today’s consumer-centric supply chain, RFID is an invaluable tool that puts omni-channel promises into action. With wide usage and fast adoption in the retail industry, this technology provides the inventory management foundation that will enable the retail industry to evolve with the consumer’s needs.

Melanie Nuce is Vice President of Apparel and General Merchandise with GS1 US


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