The meltdown of Lumber Liquidators stock price since a damaging report on 60 Minutes is a dramatic illustration of why retailers need full understanding of where products are sourced and quality control measures in place.
In this case, RFID may have helped Lumber Liquidators to avoid a severe public relations hit, as well as a costly drop in market cap approaching $1 billion.
The 60 Minutes report claimed that laminate flooring sourced from China and sold at many of its U.S. retail locations contains higher than accepted levels of formaldehyde, a chemical known to cause cancer.
Previously, Lumber Liquidators’ manufacturing partners in China had been accused of illegal lumber harvesting practices in Russia. Both incidents have resulted in severe damage control. As company executives plot how to regain the trust of consumers, RFID would go a long way toward restoring consumer confidence.
By applying RFID tags to laminate flooring at the source or at its plants in China, Lumber Liquidators would have better visibility into its products through the supply chain and could confirm where the product was sourced and that it meets safety regulations.
“It’s more of an issue of them being able to certify that yes, our lumber comes from a legal point of origin and a safety certified factory,” says Scot Stelter, RFID analyst with Chain Link Research. “They would know this because the product was tagged at the source.
“You can imagine a use case where Lumber Liquidators would require their harvesters or their laminate manufacturers to tag lumber at a the source and send some sort of certification of compliance listing the serial number of each validated package.”
Many apparel manufacturers are already moving to source tagging products in an effort to add supply chain efficiencies and a cradle-to-grave footprint for their products. During the NRF Big Show in January, Ken Duane, CEO of Heritage Brands and North America Wholesale, PVH Corp, told RFID 24-7 that his company will start to tag all of the products it manufacturers by the end of this year. Currently, the manufacturer of the Calvin Klein, Van Heusen and Tommy Hilfinger brands has only tagged underwear, core intimates and less than half of its dress shirt categories.
“One of the nice use cases for apparel manufacturers is being able to indicate the country of origin when it is imported into the U.S.,” says Bill Hardgrave, the Dean of the Harbert College of Business at Auburn University.
“The paperwork and the effort needed to show country of origin can be pretty onerous. With RFID they know exactly that the cotton for a certain shirt is from Egypt and it was sewn in Bangladesh. They can determine the country of origin for tariff reasons and also to make sure they are not sourcing from countries on a restricted list. That’s a nice use case for apparel and in this case for lumber, if you have an RFID tag you’d know where the raw material came from and which mill shipped it in China. So you have the history for each bundle shipped.”
Hardgrave says that a handful of furniture makers are currently using RFID, including a cabinet maker that inserts RFID tags into the wood either behind a joint or crown molding so that they know how much inventory is in storage when a large order is placed.
“There are some really unique and interesting things going on in the furniture space with RFID,” says Hardgrave.
Interestingly, RFID is on the agenda at LIGNA 2015, the world fair for the forestry and wood industries. The conference will be held May 11-15 in Hanover, Germany, and will feature a 538 square foot “RFID Factory” that will demonstrate how the furniture industry can benefit from RFID technology.