Andy Robson, supply chains solutions manager at not-for-profit organisation GS1 UK, which sets industry standards for unique product identification used in barcodes and RFID tags.
RFID (radio frequency identification) is not a new technology, although today it is more significant to the world of retail than ever. Current global usage of RFID stands at 6.9 billion tags, and this is projected to be 25 billion by 2020. The retail industry, and in particular clothing and accessories, is driving this explosion in use as retailers and brands in the UK and globally adopt the technology to generate multichannel growth. RFID provides the visible, accurate and real-time stock information that is essential for fashion retailers to provide the seamless experience that their customers expect today – both online and in-store.
Tesco and American Apparel are just two examples of the leading retailers who have recently deployed RFID tags on their clothing ranges to boost product availability. And Marks & Spencer are perhaps the best known example, deploying more than 400 million tags per year. With better visibility of what is on the shop floor and in the stock room, these companies have seen increased sales both in-store and online. For example, US shoe retailer Lord & Taylor reported a 4% sales uplift through the use of RFID.
Companies also typically cut their out-of-stocks by up to 50% and see an 80-90% time saving using RFID for stock management. Without RFID, staff have to manually count stock on the shelves and in the back of store, checking colours and sizes to ensure full availability. This is a time-consuming and therefore expensive process. With RFID, thanks to its ability to store more data and the ease and speed at which this data can be read, an accurate stock count of a rack of suits for example, can take just seconds.
However, the ultimate vision of an efficient and seamless supply chain, from source to consumer, remains the biggest attraction. Once an RFID tag is applied at source, visibility is improved throughout the supply chain and processes such as picking and packing, dispatch, receiving at warehouse, dispatch from warehouse and receiving at store can all be greatly improved.
Tracking every piece of merchandise, in every stock location, increases inventory accuracy from an average of 63% to 95%. While barcode scanning improves these processes too, RFID tags can be read simultaneously and don’t have to be in line-of-sight of a reader.
Greater supply chain visibility and more efficient stock management have led to fashion retailers improving their on-shelf availability from 70% to 95%. As every retailer knows, having the right product, in the right place at the right time is vital to a sale.
In recent years the global EPC (Electronic Product Code) standard has made it cheaper and easier for industry to adopt a single type of RFID tag. The EPC standard has been developed with the industry by GS1, the standards organisation behind the globally accepted barcode standards. This has led to smaller retailers and brands being able to implement RFID, safe in the knowledge that their systems will work with each other.
With operational efficiency across the entire supply chain key to a retailers’ success, the mainstream use of RFID technology is simply a question of when.
How much does RFID cost and what is the return on investment?
The cost of an RFID system will of course vary enormously, depending on the size of the retailer, the number of products that are sold and the level of implementation: is it just in-store or the entire supply chain, from source? But research from GS1 UK and Cranfield University, based on the modelling from RFID Journal, builds a compelling case for RFID at store-level. For example, a small high street retailer with 5,000 items on the shop floor benefits from:
- £7,000 a year cost savings for receiving goods, inventory management and stock replenishment
- An increase in stock availability from 70% to over 95%
- An increase in sales of £60,000 per year
How do RFID tags work?
An RFID tag contains data used to uniquely identify an object. Unlike the traditional barcode no ‘line of sight’ is required to read the data. Instead it is transmitted by radio waves to an RFID reader. This means multiple tags can be read almost instantly, vastly speeding up operations such as good receiving or stock taking. Also, unlike barcodes, more data can be stored in a tag, so that each individual item can be uniquely identified, rather than just the type of item.