It is time for the apparel industry to reap the benefits of RFID, but it's important to consider lessons learned from other industries.
By Michael Ibrahim, AmberDove Solutions Inc.
The apparel marketplace, with its unique inventory challenges, is particularly ripe to take advantage of RFID technology.
Sizes and other variations drive SKU proliferation unmatched by virtually any other industry. Moreover, a single fiscal quarter of 12 weeks often exceeds a fashion design's lifetime, making apparel inventory highly perishable.
These complications drive low labor productivity, lost sales and high levels of inventory spoilage. Nearly 50 percent of retail store labor time is spent searching for goods! And up to 20 percent of customers claim that they could not find a desired in-stock item! Improving these metrics translates into an opportunity to more than double operating income.
RFID to the rescue --
The (sometimes overblown) hype of RFID has now reached the apparel industry. This technology promises to supplement or replace barcodes in order to directly address apparel's unique challenges. RFID's automated and passive nature can perform frequent inventory checks, help locate items and increase inventory accuracy. Whereas today, a large department store takes inventory once to twice a year, with RFID the same store should be able to take inventory weekly or even nightly. The phrase every consumer knows -- "The computer says it is in stock, but I'll have to go check the floor" -- should finally become obsolete.
RFID does have a natural affinity to apparel. Many of the technical complications RFID experienced in other industries -- e.g. consumer packaged goods -- do not occur both because of the nature of the goods being tracked and new advancements in the technology.
The RFID Research Center at the University of Arkansas recently conducted a study testing RFID's efficacy in the apparel industry. The study, sponsored by the Voluntary Interindustry Commerce Solutions (VICS) organization and the Council of Supply Chain Management Professionals, implied a very rosy outlook for RFID. The lab tested scenarios of increasing inventory frequency, managing dressing rooms and mitigating shrinkage and theft. Though the results are yet to be published, the center's executive director, Dr. Bill Hardgrave, said the test results "exceed expectations in a realistic environment."
--but not business as usual
The opportunity is huge, and the technology seems to fit -- which unfortunately presents the new danger of forgetting the RFID lessons learned from other industries.
Integrators are eager to deploy arrays of readers and passive tags throughout apparel retail stores and the apparel supply chain in a manner that is virtually identical to deployments in the consumer packaged goods industry that met with mixed success.
To guarantee RFID's success in apparel, it is imperative that retailers and brands learn from the hard-knocks RFID deployments suffered in other industries. These lessons suggest that an RFID solution must meet the following three requirements:
1. Easy IT: Reduce the intensity of the IT infrastructure required to effectively run RFID;
2. Immediate payback: Provide "productized" solutions that offer payback in months, rather than integration projects which take many months to deploy; and
3. Manageable risk: Provide phased deployments where the smaller investment of each phase pays for itself, without the need for the entire investment to achieve meaningful ROI.
To be continued
In the next part of this two-part series, we will examine the motivations for each of these three requirements and potential approaches to ensure that they are achieved.
Michael Ibrahim is chief executive of AmberDove Solutions Inc., an RFID solutions company with a goal of revolutionizing the way that customers deploy RFID. As an operations expert, Michael optimized manufacturing and engineered supply chain services at multiple companies with more than $10 billion in sales. He was previously CTO of SafeWeb Inc., where he built the world's first product that converted complicated extranet IT projects into drop-in appliances. Michael has worked at McKinsey & Co. and Goldman Sachs. He has an MBA from MIT Sloan, a Ph.D. in physics from Yale University and is a Suma Cum Laude graduate of Gustavus Adolphus College. AmberDoveTM develops software designed to turn RFID projects into "drop-in products." For more information contact [email protected] or visit http://www.amberdove.com.