In his third article on future technology trends in the retail supply chain, Tim Waters, a managing director at Alvarez & Marsal, analyses why RFID in retail is gaining momentum.
For years RFID has been the 'nearly man' of business with many organisations perhaps seeing the potential but never quite realising the reality of its use.
RFID as a technology has been around since WWII, where it was developed as a way to identify allied planes and prevent ‘friendly fire’, but many false starts have hampered its wide adoption in business, probably due to a combination of things such as the price of the tag itself, the reading technology and a lack of end-to-end systems behind the scenes capable of utilising the data. Early tags and readers often had read accuracy problems associated with mixed or dense products, liquids, glass and metal in general thus blocking several sectors from adopting its widespread use. If investing it is usually a prerequisite that the read rate is above 99%, otherwise why bother?
Recent advances in the technology have resulted in a wider adoption rate especially in certain retail sectors, I am fortunate to be involved in a current transformation project where the retail client has decided to adopt the widespread use of RFID as a means of inventory transparency, tracking and process control. Interestingly it enables activities such as omnichannel trading as well as in store spin offs such as fitting room to cash conversion ratios, i.e. how many customers actually bought what they tried on? By being able to track product through the selling store management can detect and analyse such intelligence, vital in understanding product attribute design and fit criteria. Other in-store benefits include NoSBoS (not on shelf but on stock) enabling superior customer service in finding products that have been delivered to store but are not in the right location, perhaps in a backroom.
End-to-end visibility helps streamline the supply chain by promptly detecting, reporting, and resolving operational irregularities. Tagging offers visibility of cargo movement in real-time, so there’s less possibility for items to go missing. Goods receiving, stock counting and movement all become much simpler processes simply by installation of read tunnels, door frame and hand held readers. Conveniently, the tags also double up as theft prevention devices, triggering store alarms if not re-classified at point of sale.
The real proof of concept is of course in tangible benefits. In like for like comparisons, stock that is tagged has out-performed identical non-tagged products in the same stores by double digit percentage points simply through being able to be either found in store (backroom or other location), offered through the omnichannel if not in store, or promised to customers vis home delivery where otherwise an apology would have been the response followed by a missed sale.
The cost of tags is dropping, and as adoption rates climb, greater volume will drive lower and lower costs allowing more and more businesses to adopt and use the technology. The winners will be businesses who can exploit scale and use end-to-end adoption to orchestrate their supply chains for greater competitive advantage and differentiation to the consumer. With such obvious benefits for retailers and consumers alike, such an expansion seems inevitable.