I had the opportunity to attend the GS1 Connect 2016 conference last month, an event that enables supply chain partners to communicate with one another and learn about GS1 standards. I came away with two takeaways: Reaffirmation by knowledgeable retailers that omni-channel retail initiatives can’t be independent of RFID, and that retailers no longer have to work hard to encourage suppliers to accept RFID because they’re already starting to experience its benefits.
Omni-Channel and RFID Go Hand in Hand
You may already know that omni-channel and RFID are intrinsically linked. In recent years I’ve heard many retailers claim that they can’t focus on RFID because they are prioritizing on omni-channel initiatives. That statement is so counter intuitive.
So it was refreshing to hear several retailers take on the issue at GS1, including early adopter department stores such as Kohl’s and Macy’s. Bill Connell of Macy’s said something that simplified it for me. He noted that if A equals B, and B equals C, then A equals C. Then he explained that if to be successful in omni-channel environments you need accurate inventory (A=B), and to achieve accurate inventory you need RFID (B=C), then to get omni-channel to work right, you must involve RFID technology (A=C).
Apparently, retailers are listening. Dr. Bill Hardgrave of Auburn University noted that more than half of U.S. apparel retailers are already using RFID in some form. He expects to see that number rise this year, noting that omni-channel is the primary driver behind apparel retailers using RFID.
RFID Carrots Have Replaced Sticks
It was also apparent that many suppliers are discovering powerful benefits from RFID, shattering the common perception that RFID is only gaining traction with suppliers because of compliance requirements. Although that was once an accurate statement, the conversations I had with suppliers indicate that RFID is a win-win for both suppliers and retailers.
Bob Carpenter, president and CEO of GS1 US, told attendees that more than 40 percent of apparel brands are now source tagging with RFID. He added that RFID has become a new requirement for omni-channel, which equates with what I heard at multiple panels with participating manufacturers. One apparel supplier noted that his firm is now capturing mistakes before merchandise leaves the factory, reducing supply chain costs significantly because of fewer returns and increasing customer service because merchandise is available on store shelves.
In another show of progress, it was telling that there is now a GS1 operational award for source tagging, won by Levi Strauss & Co. this year. Because Levi Strauss is both a manufacturer and retailer, it is experiencing benefits at both ends of the supply chain.
Different RFID Drivers for Different Suppliers
Essentially, I heard four reasons why suppliers/brands are showing increased interest in RFID.
First was operational efficiencies, something discussed earlier. If you send out accurate orders, you get fewer returns. Next, brands like Levi Strauss that also own stores can reap double rewards at the brand and retailer level. In addition, once brands are tagging 30 percent of their merchandise, they tend to reach a tipping point at which it makes financial sense to tag everything. Once a brand has significant amounts of special orders, pre-packs, requests for extended product attributes, exceptions become the rule, and RFID tagging (and associated data sharing) becomes a way to streamline outbound shipments to retailers.
And finally, pop up stores, such as kiosks – particularly when they physically exist within another store and have no control over the larger store events — are getting into the act. These “store within a store” retailers are RFID enabling shelves so they can replenish merchandise quickly and accurately, thereby connecting the supply chain end and beginning points. This last trend has proven particularly beneficial for those with strong sales ebbs and flows. Knowing when inventory is low in real time and eliminating out of stocks has increased sales and made them more predictable, enabling them to control their own destiny.
Considerations for Brands, Retailers
Based upon my experience at GS1, here are a few points that brands and retailers should consider:
* If you haven’t done so already, find a way to align your RFID and omni-channel initiatives.
* Share data with your brands so they better understand the benefits of RFID. Show them the carrot before the stick.
*Open up the lines of communication with your retailers to ensure you are getting the information required for efficient tagging
* Because you can expect more compliant shipments and faster invoicing, look into financial terms to see if you can accelerate payment processes. Efficiencies should enable you to receive invoice information immediately without having to wait for reconciliation from an end vendor and retailer.
* Investigate ways to reduce the number of variations for different retailers, and normalize the manner in which data is shared. GS1 provides standards for data and packaging, and complying with those standards will enable you to meet most retailer requirements, saving you time and money.
Phil Fisher is Director of Product Management, RFID Supply Chain Solutions at Checkpoint Systems. He has over two decades of supply chain experience in solutions architecture, sourcing and DC operations. He often comments on supply chain and logistics topics on Twitter @fisherphi