just-style management briefing: Retailers hail benefits of new label technologies
Major clothing retailers are benefiting in significant ways from the new data collection and management options offered by new technology in labels, especially regarding radio frequency identification (RFID) tags.
US department store giant Macy's Inc is one example of a retailer already largely implementing RFID. The company is currently in the process of equipping all its Macy's and Bloomingdale's locations with item-level tags on garments by the end of 2012, according to senior vice-president of logistics and operations, Bill Connell.
The company first tested RFID technology in late 2009, with a single store pilot at Bloomingdale's SoHo location in New York City. Through this project, says Connell, "what quickly became apparent to us was the fact that this technology enables you to count really quickly, and facilitates frequent cycle counts - which enables us to keep our physical inventory files very accurate."
In early 2011, the pilot was expanded to seven additional locations, and throughout the course of last year "[Macy's Inc] began building all the back office system connections necessary to catch all this quickly-read data and upload it to our inventory management and our replenishment reorder systems."
Throughout 2012, Macy's Inc will be outfitting all its stores with both the hardware and software required to utilise RFID technology at item-level, and working with suppliers to begin coordinating the application of RFID tags at the source, as part of the trim on garments.
Connell says that about 30% of Macy's Inc's total business is replenishment, with the company anticipating getting RFID into all these areas by 2013.
While the main benefits of RFID for retail outlets are keeping physical inventory files accurate through frequent cycle counting, benefits exist for suppliers, too who can reap benefits from RFID in terms of verifying cartons automatically, as they are ready to ship.
"Our suppliers spend a lot of time auditing and re-auditing the contents of cartons before shipping to retailers - [RFID] would make that more efficient," says Connell.
Other retail roll-outs
German-based manufacturer and retailer of women's fashion, Gerry Weber International is another company implementing RFID in a significant way. The company began rolling out RFID in January 2011, and today, 100% of Gerry Weber's production is tagged - that is, approximately 26m items, according to chief information officer (CIO) Christian von Grone.
Within the company's supply chain, the tags are used to speed up counting processes and to reduce the error quota on outgoing items, he says, adding that in this regard, wrong/missing/excess items can be detected automatically, and boxes then routed to clearing points to correct errors.
"In our own stores, we support the goods-in process by doing weekly cycle counts of our inventory [versus once annually]; and the EAS (electronic article surveillance) system - by replacing conventional RF hard tags with RFID," says von Grone. "The data collected is used decentralised to speed up crucial parts of the process."
The University of Arkansas's 2011 study of the potential uses of RFID in the apparel retail supply chain contained the findings of several large companies that have piloted RFID programmes such as Dillard's, JCPenney and Bloomingdale's.
Studies indicated that with RFID tags, store inventory accuracy improvements ranged from approximately 5% to 27%, and overall, the use of RFID substantially reduced cycle time (96% less time in the Dillard's study).
Antonio Rizzi, founder and director of the RFID Lab at the University of Parma, in Italy, says that in recent years, he has seen a massive interest in this technology from retailers, as the apparel sector begins to realide how useful RFID can be.
"I believe that no [industry] is positioned better than the apparel industry in terms of getting the benefits of RFID," explains Rizzi.
"A lot of the time, it is a closed loop supply chain - major manufacturers own the stores where they merchandise their products. So, while in the fast moving industry of consumer goods, manufacturers ship to retailers and cannot get the benefits of RFID from that point on, in the fashion industry, the manufacturer can really benefit, too, at the distribution centres and the stores."
Innovative RFID uses
Aside from the obvious benefits of RFID tags such as efficiency in the supply chain, and higher inventory accuracy levels, there will probably be many innovative ways to use the technology going forward, he believes.
In some retail RFID pilots, for instance, the technology has been tested in fitting rooms of retail stores, where readers scan each garment being tried on. "If you cross check what people are trying on with what they are actually purchasing, you can determine which styles and colours are tried but not sold...and decide if you need to drop a certain style," Rizzi explains.
Germany's Galeria Kaufhof, for example, has already deployed a fully-integrated RFID system in its menswear department in the high-end retail store in Essen, Germany, where it has tested RFID-supported applications such as 'Smart Dressing Rooms' and 'Mobile Assistants'.
Sybille Korrodi, head of marketing at TexTrace AG, notes that while most early RFID projects focused on warehouse and in-store inventory counting, "people are now realising that the potential is almost unlimited."
As well as customer loyalty, retention, marketing and brand protection, "think of future mobile applications where people can read the chips in the garments and get brand information like when the next store is going to open, updates on sales and promotions, and VIP events.
"Also, in e-commerce stock accuracy is absolutely crucial. With RFID, warehouse data on incoming and outgoing goods goes into your online portal, so when customers click on the product they can see if it's available in their size, or when it will be delivered. And since the stock information is accurate, you make sure you can deliver on what you promise."
Because TexTrace's new woven RFID brand label is sewn onto the garment, its applications can even go beyond the point of sale, contributing to a closed-loop garment supply chain where RFID can be used to track quality issues, handle warranty cases and product recycling.
Overall, says Connell, in regards to industry-wide adoption of these tags, "strategically, it's impossible to imagine - with RFID having this much potential - this industry is not going to be as transformative as the barcode was some 25-30 years ago."
Click on the links below to read other chapters in the management briefing:
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