Radio Frequency Identification (RFID) technology is not new, but the tracking system has become essential for inventory accuracy among retailers focused on selling products to different locations, i.e. omnichannel sales.
Mike Graen is president of the Retail Supply Chain Initiative (RSCI), a strategic partnership initiative of the Supply Chain Management Research Center at the University of Arkansas. He said RFID has been used upstream for several years in retail for situations like tracking fresh food. Graen said counting inventory correctly has been shown to increase sales between 4% and 8%, and that’s a win for retailers and suppliers. Yet it wasn’t until the wake of the pandemic that more retailers felt the urgency to shift to omnichannel retail for apparel and other categories with many SKUs or individual items.
Retailers have invested heavily in RFID technology since 2019 to increase in-store inventory accuracy and improve omnichannel capabilities for online purchase and in-store pickup (BOPIS).
Bill Hardgrave, president of the University of Memphis, is one of the nation’s leading RFID researchers. He was previously a professor at the University of Arkansas which launched the RFID lab there. The lab has since moved to Auburn University. Hardgrave said Walmart began using RFID technology between 2003 and 2005 to tag items in fulfillment centers. He said the cost at the time of implementing the technology in thousands of stores on millions of items was high and there was no urgency to do so.
Graen said the cost of tags has gone down since 2005, from about 25 cents per tag to about 5 cents per individual traceable tag. He said the tags are also much smaller and are, in many cases, alongside the Universal Product Code (UPC) as a serial number or unique license plate which functions much like the identification number. vehicle number (VIN) of a car.
Graen, who contracts with retailers and suppliers on RFID projects, recently worked with Walmart on an RFID tagging initiative. Between 2005 and 2011, when patent litigation halted work, Walmart embarked on RFID tagging initiatives. By 2015, the dust had settled with patent litigation, and Walmart was then focused on rolling out its online grocery pickup business.
In 2019, Walmart started to see the value of RFID to improve their omnichannel business. Deanah Baker, who recently retired from Walmart, led omnichannel apparel for the retail titan in 2019. Baker said she lobbied for all apparel, including shoes and accessories, to are tagged for RFID. She said this would be the only way to effectively track inventory at the level needed for BOPIS or ROPIS, which is searched for online and purchased in stores.
The pandemic has advanced omnichannel demand, and retailers with accurate inventory visibility were among the biggest winners when COVID-19 closed many stores in 2020. Walmart was engaged in its efforts to label its huge clothing division. Baker said the only way to leverage in-store choice with general merchandise like apparel is to use RFID technology to consolidate exact inventory counts as to the sizes and colors of each clothing item.
« SKU [individual item] the number of garments is enormous, and there is a wide variety of sizes and colors in T-shirts, for example. There were so many items to label, and the seasonal nature of clothing was also a concern due to faster inventory turnover,” Baker said.
She said Walmart looked at Macy’s, Lululemon and Target, all of which used RFID for their clothing. She said the time has come, so by 2020 the retailer has met with suppliers and again launched a massive RFID initiative for its apparel division.
Justin Patton, director of the RFID lab at Auburn, has also worked with Walmart on tagging clothing for RFID. He said it took Walmart a year to fully implement, in coordination with its suppliers. Baker said Walmart suppliers bought it and paid for the initial costs of source tagging items as they roll off the manufacturing line. But at the same time, Walmart has invested in technology hardware and employee training to track available inventory with a higher degree of accuracy. Having inventory accuracy of 90% or more would allow Walmart to begin offering online clothing orders to pick up from stores.
Graen said that without high inventory accuracy, no retailer could run the risk of showing items online and not having them available when the customer is trying to complete the purchase.
Andy Murray, the founder of Big Quest Consulting, said shoppers have three budgets for shopping: money, time and frustration. He said shoppers who cannot find what they came to buy in a store will quickly use up the budget in frustration. Murray said first-time shoppers would likely buy a substitute, but the second or third time the stock-out occurs, they’re much more likely to switch brands or retailers.
Baker said if Walmart’s apparel division could be RFID tagged, there would likely be other use cases in different general merchandise categories, which has since happened.
Graen said Walmart held summits with suppliers this year and the tires and batteries for the automobile were labeled by the manufacturer. It’s also underway in the home and entertainment departments, including blenders, linens, tableware, toys, game consoles, computers and cell phones.
He said suppliers have embraced the RFID initiative because there are additional benefits to the perceived increase in sales through better inventory accuracy. Graen said suppliers can know where their products are at all times, which is helpful in combating claims for non-receipt or incomplete orders. He said it also helps brands like Nike fight counterfeiting.
Graen said Nike had been labeling its merchandise for years before most retailers. He said Macy’s has all of its inventory tagged, which can aid in retail organized crime incident recovery and loss prevention recovery. He said RFID is gaining momentum in other areas of retail, such as fresh baked goods in grocery stores. Labeling fresh baked goods packages with unique serial numbers lets the retailer know when something was made and when it needs to be marked down to reduce sales. He said it also lets the bakery know what needs to be baked on a given day through its accurate inventory with RFID.
“It doesn’t make sense to label every box of green beans or every box of cereal, but RFID can add value to produce or fresh food,” Graen said. “Pharmacies also use RFID to track counterfeit products, which is a problem in this industry.”
He expects most items in general merchandise categories to eventually be tagged with RFID at source. He said technology is improving and has even started to be incorporated into packaging.
“RFID is here to stay this time, and retailers and suppliers continue to find new ways to use the technology. Today, of the top 1,000 retailers, more than 70% are using RFID in some way. or another to improve their business operations,” Graen added.
Editor’s note: The Supply side section of Talk Business & Politics focuses on the businesses, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.