RFID Talk Blog

Item Level RFID Initiative may revolutionize the retail supply chain and consumer shopping

Wal-Mart’s summertime decision to pursue item-level tagging for some of its men’s jeans and underwear lines provided a much-needed shot in the arm for RFID technology.

This morning’s announcement that a number of retailers have formed a consortium to accelerate the deployment of RFID item-level tagging adds more fuel to a fire that has morphed into a raging inferno of item-level apparel tagging.

The joining of Walmart, JC Penney, Kohls, Jones Apparel, Macy’s, Dillard’s, Levi Strauss and others will likely lead to the biggest retail supply chain transformation since the bar code was introduced. The Item Level RFID Initiative, which also includes major RFID vendors like Impinj, Motorola and Avery Dennison, as well as industry associations and manufacturers, will create a strategy and a framework for industry engagement, education, adoption and responsible use of existing Electronic Product Code (EPC)-enabled RFID technology. Retailers believe it will foster innovation, improve business efficiencies, and lead to a better consumer shopping experience. While the use of RFID in apparel is its initial focus, the group will also examine the use of item-level RFID in many other product categories.

“It’s a huge deal,” says Drew Nathanson, senior RFID analyst and director of research operations at VDC Research Group, Inc. “It is going to create a lot more activity for overall item level tracking, which is driving a lot of what’s going on in the retail sector right now. This proves the concept that these bigger retailers believe in the technology and that it’s important enough for the industry to come together and work on this because [item-level tagging] is going to be there.”

Aside from improving a retailer’s ability to keep products in stock at all times and further reducing revenue losses from out-of-stocks, the Item Level RFID Initiative will likely push RFID tagging downstream to the point of manufacture, resulting in further cost reductions for RFID deployments, better visibility and more overall retail benefits. Today, many of the products that carry tags in a retail store are tagged at the distribution center or somewhere along the supply chain, or even at the store location.

“Once tagging gets to the point of manufacture, retailers have the ability to use that tag all the way through the supply chain to the point of sale and converge it with other solutions as well,” says Nathanson. “Then everyone in the value chain gets the additional benefit. It’s a win-win situation.”

Members of the initiative will spend the coming months developing measurable value propositions for retailers, suppliers and other stakeholders, as well as standards-based guidelines and business practices for each use case to support industry roll-out.

“We believe it is time for the industry to come together to advance the use of this technology throughout the retail supply chain,” said Peter Longo, president of Macy’s logistics and operations. “We are excited about the business improvement and customer satisfaction opportunities that this industry-led initiative affords us.”

Item level RFID technology is quickly moving from pilots to store-wide deployments at the retail level and throughout the supply chain. According to research done by the University of Arkansas, the technology has delivered compelling benefits to the retail industry and the results are clear:

  • inventory accuracy rates of more than 95%, up from an average of 62%
  • ability to count 5,000 items per hour using RFID vs. 200 items per hour using barcodes – a time savings of 96%
  • out-of-stock reductions of up to 50%, leading to improved customer satisfaction and sales increases
  • improved security and coordination throughout the supply chain

“For perhaps the first time in retail history, retailers can fulfill the promise of getting the right product to the right store at the right time for their customers,” says Bill C. Hardgrave, founder of the RFID Research Center at the University of Arkansas and now the dean of Auburn University’s College of Business. “This is thanks to standardized RFID technology and the high level of inventory accuracy it brings.”

Earlier this year, Nathanson published a research report predicting that more than 400 million tags will be consumed by retailers in 2010, a number that jumps to 800 million in 2011. By 2014, he projects 3.4 billion tags will be used in retail, including item-level tags, as well as tags used for smart courtesy cards and access control.

Consumers can also benefit from item-level RFID by having a greater inventory to choose from. Down the road, RFID will present consumers with a highly interactive shopping experience, where they can likely scan an apparel RFID tag with their cell phone to receive all kinds of information about that product, as well as competitor pricing and availability information. Someday, consumers will likely be able to purchase items by using their mobile phone, and arrange for shipping to their home, avoiding the entire check-out process if so desired.

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