RFID – the best of the early adopters
Date: October 04, 2015
Category: Opinion piece
Author: Andy Robson
As important as it is to have a theoretical understanding of RFID – it’s very much an operational tool. A key part of informing yourself on RFID is to look at examples and learnings from the companies that are already using this revolutionary technology.
RFID in Apparel – the Value Market
10-15 years ago, the early explorers of RFID looked into the technology and concluded it was indeed valuable but too expensive for retail use. Thanks to the critical mass achieved through the EPC standard, the price of tags has come down considerably but the perception that RFID is expensive still lingers. So it’s interesting that the early adopters of RFID in apparel have come from the value market where volume is high but retail price points – which cover the costs of the tag - are modest at best. Walmart, Asda George, C&A, H&M and Tesco F&F have dived into world of RFID – each for different purposes. Let’s look at 2 of these in some detail;
Walmart began looking at RFID back in 2003 with the vision of creating an RFID enabled fool proof, error free and transparent supply chain. Their business case was built on the benefits of better managing their inventory, reducing data errors and lowering human labour costs across their supply chain. To do this they tagged all product cases by tagging at source. Such is the weight of Walmart that their initial goal of achieving compliance with 100 suppliers exceeded expectations with 129 coming on board. Initially there was some resistance but it seems none of them wanted to be left behind.
Walmart began their pilot by installing RFID readers at receiving docks, between the back room and retail floor and near trash compactors. Using 12 pilot stores and 12 control stores, as the cases were labelled, any goods shipped into store were recorded at arrival without needing to be opened. Tags were then read again before being brought to the sales floor then cases were read at a box crusher after the items had been put out. In this way their RFID project focused on distribution processes to better manage their stock – no surprise really considering Walmart view distribution as the key to their success.
Walmart was of the view that RFID wasn’t about the technology but rather the data that it would provide and this is clear in their results. From the published pilot results Walmart were able to improve their stock availability with a 16% reduction in out of stocks. Of the items that did go out of stock - these were replenished 3 times faster than in control stores, leading to increased sales and more orders for their suppliers.
But it wasn’t all smooth sailing, whilst Walmart were able to drive compliance across over 100 suppliers there was some backlash. Suppliers initially balked due to the added costs and change to their processes. Thankfully the benefits of Walmart’s pilot were sufficient to balance out the costs but it brings to light the need to work with your suppliers when implementing RFID. Not all of us have the buying power of Walmart but Introducing RFID is a technology project as much as it is a change management project. Having a communication plan to sell the benefits to your various stakeholders and then managing their expectations is vital in achieving this.
So Walmart focused on improving distribution, by contrast Tesco’s clothing label F&F implemented RFID to improve the overall customer experience.
Since its inception, F&F has grown from a tiny clothing category within a giant grocery retailer to one of the UK’s top 5 apparel brands in terms of volume. As the label continued to grow the next challenge was to improve stock visibility which was seen as a key driver for the whole business. By improving stock visibility F&F hoped to improve the efficiency and accuracy of replenishment from DC’s. This would improve the range of sizes and product available to their customers thereby enhancing their store experience.
Unlike Walmart, who started out tagging cases, F&F tagged all apparel at the item level. Garments were tagged at source in the Far East and they partnered with their solution providers to educate suppliers and ensure compliance. Readers were installed in stores in the back of house, goods receiving area and between the stock room and sales floor to monitor product flow. F&F also placed a lot of importance on education staff - instructing stores on accurately conducting stock takes with hand held readers.
F&F have not released details of their results of the pilot to the public. However, the fact that F&F piloted RFID in a few stores then rolled out to over 500 indicates their results exceeded - or at the very least met - expectations of improved inventory accuracy, stock availability and the sales benefits that result from that. Further to this, F&F have continued to innovate with RFID moving beyond hand held readers to trialling robots that will take on some of the more manual tasks of RFID – like data collection or stocktake –leaving the smart analytical work to the human staff.
For those of us not residing under a rock, you’d be aware that whilst the pilot was taking place - Tesco as a whole were experiencing a number of significant challenges. To stay on track and expand their project in the midst of a company restructure is a real testament to the strength of F&F’s RFID pilot. Which leads me to my next learning; RFID is a long term project with long term goals. To borrow from a shampoo commercial; the benefits won’t happen overnight, but they will happen. But to realise this requires commitment and a workable project plan that identifies what good, better and best would look like and realistic timelines for when this will happen. I’m yet to come across an IT project that doesn’t experience a setback of some description, but you don’t throw the baby out with the bath water. Approach your RFID project with clear KPI’s, acceptable time frames and contingency plans for any surprises.
Look out for a future feature in which we’ll look at RFID examples from the high street and luxury market.
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