What's the Future of Item-Level RFID?

For the past 18 months we have witnessed the beginning of a remarkable transformation within the apparel industry — one that has been championed by a determined and ambitious group of industry veterans. With a long history of collaboration and compelling use cases on their side, companies are implementing Radio Frequency Identification (RFID) in their day-to-day business operations, attaching tags to individual products, and opening the door to unprecedented levels of inventory and supply chain visibility.
The impact of their work may even outstrip the now ubiquitous U.P.C. barcode.
So far, the most compelling business cases involve the tracking of physical inventory within the retail store space, and the movement of goods from distribution center to store, but the way industry leaders see it, that’s only half the story. The future of item-level tagging in the apparel industry involves going a step further or — shall we say, going a step back. Back to the source, to the manufacturing facility.
Education is essential to greater industry adoption of standards
It takes a lot to move an entire industry and change the way it does business. One key differentiator in the apparel industry movement is the participants’ adoption and use of an RFID standard when tagging products, specifically the Electronic Product Code (EPC) standard. The U.P.C. was not the first barcode considered for retail, but it succeeded because a critical mass of retailers and suppliers agreed to use it. This provided the necessary consistency and assurance for all and lowered overall costs. The EPC, which, like the U.P.C., is administered by GS1, is doing the same for RFID.  
This July in Hong Kong, during an educational workshop that focused on item-level tagging at the point of manufacture, more than 80 leaders from both the supplier and retail side of the industry gathered to share experiences and discuss how to best design a roadmap for even broader industry implementation. Organized by GS1 US and GS1 Hong Kong, panelists and speakers underscored the value of standards as “the global language of business,” and appreciated the opportunity to share best practices, and discuss challenges and solutions around optimizing supply chain processes, in an open, yet neutral, forum.
During the 3-day conference, several industry colleagues, with specialized knowledge of the global supply chain, shared my prediction: The use of item-level EPC-enabled RFID tagging will take the apparel industry to new heights of supply chain excellence in a matter of only a few years.
It was all about the technology…until 2010
RFID was “discovered” in the late 1960s, so the various uses of this technology and its potential benefits have been argued and explored for decades. Inside apparel industry circles, conversations during this time were mainly focused on the technology itself. That was up until last year, when an industry-led group established the Voluntary Interindustry Commerce Solutions (VICS) Item Level RFID Initiative. These forward-thinking retailers, manufacturers, suppliers, industry associations, technology providers and members of academia joined forces to change the way the retail industry does business. Exploring and incorporating the concepts of full supply-chain visibility into their business philosophy, these influential industry players triggered an important cultural shift by taking a more pragmatic look at how RFID can improve their business processes exponentially. In June, the VICS Board announced its support of EPC Standards for the Item-Level RFID Initiative.
Add to this the expanding use of the technology over the past few years, which has led to drastic price drops for hardware and software. For example, tags now cost as little as 7 cents per piece in some cases. At the same time, the changing landscape of retail (read: mobile commerce) and the proliferation of cross-channel marketing and sales activities are influencing customers to demand the right product, at the right place, in the right quantity and at the right time.
Back to Source: The way of the future
As David Cromhout, co-director of the RFID Research Center at the University of Arkansas said at the GS1 Hong Kong Item-Level Workshop, benefits to retailers are already proven. RFID provides up to 99 percent accuracy in inventory count, which translates to improved efficiencies, more sales, and better customer satisfaction.
The next step in paving the way toward source-to-store supply chain traceability is to better understand how suppliers can realize similar benefits. In fact, Hong Kong workshop participants argued that suppliers can gain competitive advantages and strengthen trading partner relationships by utilizing the data that item-level RFID tagging affords — including in-store fulfillment improvements and greater replenishment efficiency. When a supplier can quickly and accurately meet the demand for specific items based on the thoughtful analysis of real-time inventory counts and shifts, both suppliers and retailers are bound to increase revenue by being able to provide and sell products that customers want.
Global and industry-specific influences
The global nature of the apparel industry, with production houses for the same products often located in multiple countries, continues to accentuate the need for a universal language that can help trading partners communicate. There is great value in the interoperability that standards can bring, including better logistics planning for brand owners who are now able to see “into” their supply chain and continuously identify opportunities for efficiency improvements.
Tagging at the point of manufacture also takes on special importance as brands are sharing source materials, and the network of suppliers keeps expanding with more and more complexities surrounding each link in the supply chain. When you are truly able to count on the accuracy and interoperability of automated data that RFID technology carries through the supply chain, all stakeholders are empowered to make business decisions that ultimately result in fewer out-of-stocks, smarter logistics planning and happier customers.
Hong Kong workshop speaker Tommy Lui, senior vice president of logistics at Li & Fung Group, explained how source tagging allows manufacturers to know where their materials are — the ability to trace a shirt back to the roll of fabric it came from and which supplier provided it, and even which factory production line created it. In essence, source-to-store visibility provides supply chain participants the ability to measure performance by the metrics they deem most important to them, including customer wait time, fill rate, perfect order rates, as well as inventory, processing and transportation costs.
Higher levels of quality control can also be expected in the long run as a result of the industry-wide adoption of standards. Item-level RFID can help pinpoint affected products in the event of a recall and minimize the cost and risk involved.    
Identify business problem first, then adopt EPC-enabled RFID
What I’ve learned from working closely with companies that have fully implemented RFID across their operations is the importance of identifying the specific business challenge your organization wants to address with EPC-enabled RFID. For example, speed-to-market and inventory management in the seasonally changing fashion world are critical drivers for item-level tagging. Many of the benefits are now quantifiable: up to 99 percent inventory accuracy, inventory labor productivity increases by 96 percent, out-of-stock reductions of as much as 50 percent, and sales increases have been documented from 2 percent to 20 percent.
If manufacturers tag at the origin at the factory level in the apparel industry — they can improve and streamline their business processes and increase productivity. Demand planning is likely to become more precise and “steady” as suppliers reduce the peaks and valleys of production that can make employee scheduling and resourcing a disruptive challenge.
When source tagging is implemented across the apparel industry, it will be as if all the overhead lights along the supply chain are lit up at the same time, providing complete visibility of the data that can help answer important business questions regarding store and supplier operations, ordering, replenishment, forecasting, checkout and promotions.
As reported in Using GS1 Visibility Data to Improve Business Processes, the GS1 US Visibility Framework provides the foundational standards necessary for the technologies behind these processes to deliver accurate data that organizations need to operate efficiently at the speed business demands.
Road to adoption is paved with standards
The question is no longer if, but how the apparel industry will achieve industry-wide adoption and use of RFID technology from source to store. A three-pronged approach of education, implementation tools and community engagement will allow all supply-chain stakeholders to realize the full savings and benefits of EPC-enabled RFID. The road to adoption is paved with EPC-based standards, adoption and public policy guidance.
I believe that by 2015, most major retailers and their trading partner brands will embrace and will have implemented EPC-enabled RFID into their operations. Source-to-store benefits will be seen and appreciated by businesses and consumers alike.

For additional RFID news, please see:
Macy's Fast-tracks Nationwide RFID Rollout
Patrick Javick is vice president of industry engagement at GS1 US, a not-for-profit organization that brings industry communities together to solve supply-chain problems through the adoption and implementation of GS1 standards. More than 200,000 businesses in 25 industries rely on GS1 US for trading-partner collaboration and for maximizing the cost effectiveness, speed, visibility, security and sustainability of their business processes.

Apparel Q&A with Zander Livingston, CEO and Co-founder, Truecount Corporation

Apparel: As apparel companies work to gain one single view of the new breed of omni-channel customer, it’s imperative, likewise, to gain one single view into their inventory. How can apparel retailers achieve the visibility they need to optimize their inventory management?
LIVINGSTON: RFID is the single best solution available today. It is a powerful enabling technology that can work seamlessly with a retailer’s existing inventory management systems to deliver unprecedented visibility throughout the supply chain. From the manufacturing floor to the store shelf, to the final action by the customer, RFID lets retailers see the movement of merchandise.

RFID is the fastest way to count. It is 100 times faster than manual counting, for example, and many times faster than bar codes. Working with retail pilots, I have seen first hand that RFID is capable of counting hundreds of items per second.  While a manual cycle count can take days and many employees to complete, one employee equipped with a handheld or mobile RFID reader can execute a reliable inventory count in minutes flat — with 99+ percent accuracy.

We all know the advantages of visibility, especially within the current, highly competitive retail environment. Today’s customers are demanding. They expect to find exactly what they want, when they want it, or they take their business elsewhere. The real-time visibility facilitated by RFID makes it easier for retailers to meet customer expectations by maintaining properly stocked shelves, a near-perfect sales floor and a smoothly functioning back room.

Other than RFID, there are very few options that make economic sense due to limitations inherent in the method or system. Counting by hand and bar code scanning require intense manual labor and time. Both labor and time cost money.  RFID is the first technology that has impressive economies of scale because of the ease, speed and accuracy that advanced RFID enables for counting. These three key factors — ease, speed and accuracy — allow retailers to strategically position read points where they have never been able to position them before, or even consider the positioning, in order to gain visibility.  

RFID not only delivers the enhanced visibility and accuracy apparel retailers require, it also can identify where, what and when problems, distortion and shrink are occurring so these issues can be addressed and corrected immediately.

A: Inventory represents the “right time, right place” portion of that tripartite holy grail of retailing. On the other side of the coin is consumer-centric merchandising. How does item-level RFID enable apparel companies to gain greater insight into their customers to achieve that third component — right product?
LIVINGSTON: Most importantly, retailers can utilize RFID to immediately improve the accuracy and efficiency of their current ERP systems to allow for proper replenishment and forecasting — resulting in reduced out-of-stocks and over stocks.  

With its unprecedented visibility, RFID can be applied to fitting rooms to provide conversion metrics that alert retailers to what their customers are trying on, purchasing or rejecting.  Using interactive stations, such as the fitting room app, retailers can now know precisely what items in what styles and colors their customers are selecting from the racks. This intelligence can then be utilized for suggestive selling, to locate product anywhere or even to drive e-commerce capabilities.  

An exciting element for apparel retailers is the trend towards combining social media tools with RFID capability. This is an excellent way to track which products customers are talking about, and to make products more easily accessible to customers.

A: For an apparel company considering an RFID pilot or rollout, what would you advise are the top three questions to ask when it comes to figuring out what type of setup is best for their particular enterprise?
LIVINGSTON: The first question should be: How will we utilize RFID within our current model to provide greatest benefits? I would advise any apparel company considering a pilot or rollout to study their current processes, and to consult with a knowledgeable RFID provider, someone who has experience in the apparel industry, to determine the best way to apply RFID for optimal results and the least impact to business operations.

The next vital question relates to the what, where and how of tagging. Tagging decisions can be the most critical decisions for a retailer. What type of tag is required? Where within the supply chain should I apply the tag, and how do I attach it to garments? How do I work with RFID software that has advanced functions, such as in-line tagging capability, built in? This can solve some of the tagging issues, and help you gain efficiencies and faster ROI.

The third, and ultimate, question is: Which RFID solutions provider will provide the most effective result based on my specific goals, needs and budget. Take time to vet potential RFID vendors regarding their experience. Make sure you work with a vendor who has expertise in both retail and RFID. Ask about their software.  Many vendors use RFID software designed for purposes other than retail, reconfiguring the software to fit retail requirements. Ideally, any software platform/solution you might consider for your pilot or roll-out should be created specifically for the retail space, from the ground up. This will bring the highest results, and the greatest ROI.

A: What is the next evolution of RFID, and how will the landscape look two years from now when it comes to managing inventory from factory through to the retail shelf?
LIVINGSTON: The next evolution will incorporate customer service applications available on media devices, such as RFID-enabled smartphones. Customers will be able to assist themselves when researching, locating and purchasing product, accelerating the sales process. Look for more and deeper insights into customer behavior and purchasing patterns.

Fitting room applications, kiosks and digital-RFID-enabled signage will assist shoppers, study conversion metrics and provide suggestive selling opportunities.  
The speed and accuracy of RFID counting will enable more precise ordering and forecasting. That in turn will drive more efficient, targeted manufacturing decisions. Overstocks will be significantly reduced or completely eliminated and the entire supply chain will be streamlined. The retail sales floor and shelf will be “perfectly” stocked with the items customers want to buy.

As e-commerce continues to grow, retailers can utilize the “near-perfect” inventory accuracy at their stores to maintain smaller, more efficient distribution centers “on-site.” This will reduce shipping costs and bring e-commerce shoppers into the store.  

RFID will become a standard in loss prevention, from the manufacturing source to the check-out counter, based on its ability to provide detailed information relating to what, where and when questions regarding shrinkage. As RFID continues to mature and new industry standards are set, inefficiencies and unreliable data due to factors such as human errors; the tedious labor involved in counting, packing and receiving merchandise; distortion and shrink; ineffective legacy systems and improper forecasting will all be corrected.  

In the RFID-enabled future, which is very near, everyone in the retail supply chain will have visibility into inventory, all the time. This will help retailers and suppliers ensure that the proper item is in its proper location for the proper customer, at the right time.