RFID Talk Blog

American Apparel relies on RFID to foil internal theft

Although loss prevention is viewed as a secondary benefit for retailers deploying RFID, it is a use case that is growing in popularity. Perhaps no retailer has been as successful at using RFID to curtail theft as American Apparel.

Like most retailers, American Apparel first deployed RFID to improve inventory accuracy levels. However, company executives quickly realized that they could cash in by using data from RFID to create exception reports that identify specific product categories that are prone to theft.

RFID in retail

American Apparel has reduced shrink by more than 30 percent by utilizing RFID.

Between 2010 and 2013, American Apparel decreased its overall shrink by more than 30 percent chain wide.

“That equates to more than $1 million in savings, and most of it is attributed to RFID and our inventory control and asset protection initiatives,” says Blue Montez, American Apparel’s global director of asset protection and risk management.

“We’ve had some very positive results. During a time when the majority of average retail’s shrink is on the rise, shrink at American Apparel is declining.”

This summer American Apparel used exception reports enabled by RFID to identify internal theft occurring at a store in Florida. A store cashier was creating fictitious refunds and pulling money out of the register during regular transactions. The company’s loss prevention team discovered similar theft patterns at a dozen other store locations in the U.S. and was able to halt them quickly.

“We saw huge discrepancies between RFID and our POS recording,” said Montez. “We started to dig back through the data and we found that it was on a particular day every week, and it was a certain dollar amount every week, and the same style code was used time after time to do the returns. It was easy for us to go back and identify which cashier was involved.

“This happened to be an employee who was caught stealing within a two week period of being put on the register. So we caught this pretty quickly. If it wasn’t for having this RFID system to build this special exception report for that one case scenario, we’d never have been able to act so quickly.”

RFID has allowed Montez and his LP team to take a new approach toward managing shrink efforts and developing internal investigations above and beyond what most retailers are able to do today.

“Asset protection utilizes an existing dashboard to determine if somebody is cheating the system and trying to slide merchandise out of one of our locations without being accounted for by our POS system,” said Montez. “We are able to highlight one individual within the store who might be walking out without paying for inventory.

“In the past we didn’t really have that visibility. We had reports but still needed to go back and review video, and sometimes it can be like finding a needle in a haystack. But by using RFID I get timestamps and reports and can drill down and figure out things much quicker than retailers without RFID.”

Because Montez is able to create exception reports for both POS and stockroom movement, his team has discovered that many internal theft cases originate with stock room employees, not necessarily cashiers.

“Traditional retailers run exception reports but 90 percent of the time they are only based around POS transactions,” says Montez. “With RFID I can get exception reporting for both POS as well as stock room movement. The big advantage I have in the LP arena is that I am able to generate more internal theft cases based off stock room and inventory movement that I can see quickly, versus traditional retailers that generate the majority of their cases from POS exception reporting.”

As reported by RFID 24-7 last year, American Apparel is still in the process of piloting an overhead antenna solution that offers the potential to reduce dependency on handheld readers. American Apparel is testing the solution in several Los Angeles stores to ensure that it works seamlessly within its store environment.

The American Apparel stores piloting the technology have between 70 to 100 antennas mounted into the ceiling track lighting that are spaced out in an interlaced grid that varies depending on the product density and store layout.

The solution allows real-time updates on as many as 75,000 RFID-tagged items per store, which helps both staff and customers easily locate merchandise, and gives management additional product sales information that can be used in conjunction with POS data to improve business analytics.

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