Retailers and manufacturers first tested RFID technology in the supply chain over a decade ago, and the landscape could not be more different now than it was back then.
This was a topic of discussion at the Retail Industry Leaders Association (RILA) Supply Chain Conference I attended in late February. The lively conversations I had with supply chain leaders convinced me that regardless of how efficient logistics processes may be, with new challenges and opportunities in retail, there is still much room for improvement.
Supply chains need more resilience than ever to weather constant storms of change. RFID is one of the key enabling technologies that supply chain professionals can use to mitigate risk and enable rewards.
Supply chains have changed dramatically in the past few years to create new efficiencies, which in turn, have created less margin for error. In the past year alone, supply chain leaders have experienced significant service disruptions (West Coast port dispute, weather-related delays in major cities), as well as a sea change in consumer expectations. Specifically, omni-channel retailing has essentially “broken” the traditional supply chain into a direct line between vendor and consumer.
Deploying RFID Technology to Manage Supply Chain Risk, and Enable Omni-channel Rewards
RFID technology enables supply chain visibility and efficiency – and at the ground level of supply chain operations, RFID is making a difference in the following areas:
Reduction in overall inventory: Many supply chain leaders admitted to me that they increased their inventories by 15-20 percent in anticipation of omni-channel orders. RFID inventory management can put working capital to work, and make it available where needed, to reduce the inventory buffer. Otherwise, excess inventory bloats the balance sheet, and doesn’t necessarily guarantee that the customer’s desired item will be in stock at the point of consideration. Overstocks can be as problematic as out-of-stocks, since additional items in the back room and sales floor make it harder to find specific items and compete for shelf space.
Extending the supply chain to the end customer: Traditionally, the supply chain function at many retailers is responsible for getting product to the store, not the end customer. Omni-channel retailing means supply chain is more involved in store fulfillment. Many logistics processes are now customer-facing, such as new delivery options like buy online and pick up in store and ship from store. A recent article in RFID 24-7 by my colleague Phil Morrow outlines how RFID can optimize omni-channel fulfillment in stores.
Managing transportation costs: Omni-channel retailing is wiping out many of the cost savings gained from centralized distribution, as aggregated shipments are making way for hundreds of small expedited shipments from store to store, or directly to the end consumer. We are working with retailers to provide cross-channel RFID inventory accuracy at the item level, so that inventory allocation at the store level can be more dynamic. This strategy keeps expedited inter-store transfers to a minimum. Dynamic inventory allocation and RFID-enabled ASN shipping and receiving can also help create efficiencies at flagship stores and distribution hubs near population centers that are taking on additional omni-channel order fulfillment responsibilities.
Risk reduction through chain-of-custody tracking: RFID is used to manage risk from multiple handoffs in the value chain. While we started using RFID for chain of custody tracking to improve product and aftermarket service quality in the aerospace value chain, we are increasingly talking with luxury goods and consumer pharmaceuticals firms that want to deploy similar processes to guard against counterfeiting and diversion.
Improved inventory allocation for fashion retailers: Historical sales figures are less reliable in inventory allocation for retailers who have a small percentage of replenishment items — after all, the aim of fast fashion is to sell out, not restock. RFID can provide up to the minute inventory figures that can fuel a dynamic inventory allocation system for shipments to stores.
Consumer buying behavior is changing at a very fast pace. As a result, retail supply chain functions must be more efficient and do more than ever before. RFID technology can help provide the agility and resilience required for forward-thinking retailers to profit from uncertainty, while less informed retailers try to weather the storm.
Anurag Nagpal is Director of RFID Solutions at OATSystems, a division of Checkpoint Systems. He has been involved in more than 50 RFID supply chain and logistics deployments in retail, industrial manufacturing, aerospace and healthcare.