THE FLANARANT: Is RFID in apparel finally coming of age?
By Mike Flanagan | 8 February 2011
The apparel industry appears to be taking RFID much more seriously
With apparel retailers and brands looking for new ways to bring down their buying-in prices, could now be the time for Radio Frequency Identification (RFID) to finally come into its own? Mike Flanagan certainly thinks so, pointing out that costs are coming down, suppliers are beginning to collaborate, and benefits could include better management in garment factories.
2011 is probably likely to mark two major turning points in apparel marketing and retailing. Neither will come as a surprise - but the connection between the two might.
- Retailers and brands will stop expecting regular falls in clothing prices. In itself this isn't earth-shattering: buyers have been getting more ingenious at stopping hikes in apparel vendors' prices ever since Sam Walton, James Cash Penney, Michael Marks, Thomas Spencer and dozens of other retail heroes first twigged they could drive prices down. Their successors are likely to prove just as tough and ingenious. What's is new, though, is that 2011 will be the first time for nearly 20 years that buying-in prices won't be falling as a result of moving production to poorer countries.
- 2011 is also likely to be the year Radio Frequency Identification (RFID) finally starts to be taken seriously in the apparel industry. This would be a pleasing coincidence, since 2011 is also the tenth anniversary of Gap Inc apparently announcing in 2001 that a one-store, one-category RFID trial increased sales by 15%. Since then the past decade has been characterised by massively over-hyped claims for benefits never delivered and rarely of any substance - but in 2011, RFID not only might (just might, mark you) start to be used in clothing, and it might also revolutionise how garments are made.
Dismissing a decade's hype
To see how exciting a role RFID might play, we need to understand just how vacuous the past ten years' publicity has been.
Gap in fact said little about the 2001 technical test, other than admitting it had tagged denim in one store with RFIDs, and denim sales grew faster in that store than in others. As retailers all know there are many reasons sales increase after any single-store trial - few of which have much to do with what's being trialled.
Gap said next to nothing about RFID after that, but for years afterwards techies' articles about RFID made absurd, unfounded claims about the scale and impact of Gap's test.
Something similar happened in 2004, after word leaked that Inditex had done some technical trials of the chips. Instantly, the Massachusetts Institute of Technology claimed the Inditex business model of constant new product launches was attributable to its use of RFID. In fact the opposite was the case, and Inditex never made any public RFID claims.
By 2004 it was becoming clear that the main benefit of RFID in retail was in more accurate, cheaper, inventory control. For Inditex, this wasn't altogether crucial, since they were (and are) less concerned with keeping track of stock levels than almost any of their competitors.
Their obsession has always been keeping a constant flow of new products, and using information technology to help generate ideas. RFID, at least as it seemed to work in 2004, just wasn't the most important information technology for Inditex's business needs.
But the high point of techie overclaim about RFID in our industry probably came just a year ago, in early 2010. Proudly, a vendor to American Apparel announced "the largest fashion retail RFID roll out in North America". This "largest" roll out involved precisely ten stores.
Now it wasn't the retailers who made these excessive claims: it was IT vendors or passionate advocates of the technology. But the claims bred and kept on being quoted - so anyone researching the use of RFID in apparel over the past five years has seen all sorts of assertions about its use which, on investigation, turn out to be about long-abandoned, two-store, trials with no reported results.
And scepticism wasn't helped by Wal-Mart's insistence, midway through the decade, that suppliers must attach RFID devices to every pallet or case - then changing its mind.
Improving inventory control
So RFID got a reputation as a techno-freaks' self-indulgence, yielding few benefits. Often worse than that, RFID got seen as the retailers' self-indulgence, imposing substantial costs onto garment suppliers (it's not just the chips that cost money, but the added process of incorporating them in a garment), sometimes improving retailers' inventory control, but giving suppliers nothing back for their time, trouble and cash.
Now for some retailers, better inventory control is a pretty big benefit.
For Marks & Spencer - which has probably pushed the use of RFID across more of its products in more of its stores than any other significant garment retailer, but has been shrewdly quiet about publicising the details - cutting the cost of finding out its stocks was a very useful benefit to have.
But I bet they get a lot more out of it. Given all the places stock might be in a busy clothing store, knowing exactly how much each shop has of each colour and size has probably been a near-transformation.
Some of the M&S core categories - like schoolwear, men's formal jackets and trousers, and lingerie - come in a huge range of colour and size combinations. Not being able to find the trousers in the right waist and length will inevitably lose a suit sale worth hundreds of pounds.
Getting good size/colour data by branch must let M&S tailor ratios to local needs as well. Some stores need lots of small sizes for their young, svelte customers. While others, like the micro-M&S nearest me, need to offer a wider range of sizes for the colourful but often dimensionally challenged gang of prime ministers, Nobel laureates, Oscar winners and just-style Ranters who use it whenever they need a new shirt.
In M&S, getting all this right must mean more sales. So given how completely M&S dominates many of its suppliers, it's clear that "mere" inventory control can help a lot of manufacturers sell a lot more clothes.
Taking RFID more seriously
Now as many retailers' wariness of the technology shows, those benefits might not apply to everyone. But late in 2010, we saw signs that suppliers, as well as more major apparel retailers, are taking RFID much more seriously than they have for the past decade.
In the US, major apparel retailers - such as Wal-Mart, Dillards, JC Penney and the Bloomingdales division of Macy's - announced smallish trials were being extended to more (though far from all) stores and categories, while Gap's Banana Republic was widely rumoured to have started a substantial trial.
Perhaps more importantly, a number of their suppliers - brands like Levi Strauss, intermediaries like the Jones Corporation and, biggest of all, the Li & Fung buying agency - have, together with major US retailers, now formed the Item Level RFID Initiative (ILRI) to agree common standards and methods.
And apparently most significant of all, in mid-January, a survey released by the University of Arkansas' Information Technology Research Institute (ITRI) claimed to have found 60 new benefits for suppliers in using RFID.
According to the press release for the report, David Bradley Cromhout, ITRI's co director, claims an "academically neutral confirmation of the use cases that exist" showing that "logistics guys...in many different types of facilities, including sewing, assembly, knitting...can see that RFID touches every aspect of the supply chain."
In fact that's not quite what the survey showed. Very few of the sewing and knitting plants used by the suppliers interviewed actually belonged to the suppliers. And the RFID benefits they cited weren't currently being achieved; they were useful things suppliers thought would occur once RFID became widely used.
Nonetheless the list of anticipated benefits was impressive - and a surprising number concerned factory operations. Cutting the cost and improving the accuracy of increasingly complex export documentation; speeding up quality control; faster, more targeted response to defects; more accurate knowledge of what, exactly, is where in a factory.
All these might seem pretty mundane, but anyone who's been exposed to the organised chaos of a busy garment factory can easily see that better knowledge of where everything is might well be as transforming in many assembly plants as it's probably been at Marks & Spencer.
Real-world RFID benefits
It's still early days. ITRI's survey is really a pitch to get funding for more trials to help determine real-world RFID benefits all the way from the cotton field to a garment vendor's DC to leaving a shop.
But as everyone knows, we're now in a climate of ever-growing wages in developing countries. Guangdong province has just announced its second minimum wage rise in less than a year - this time, at 18.6%, over four times the rate of Chinese inflation.
Controlling garment production costs isn't going to come from trying to stop the tide of wage hikes; it's by buyers and suppliers working to get greater supplier productivity.
Often, the real scope for better garment factory productivity isn't in faster sewing, but in nurturing better management in an industry where many plant owners, deep down, still believe the answer to every problem is to throw more workers at it, but make sure they're paid as little as possible.
If ITRI's preliminary survey is confirmed, RFID may well generate a revolution in production just as wide-reaching as barcodes were in retailing. And for once, the gushing techie press releases might be based on more than hot air.
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