Boosting inventory accuracy with RFID technology

  • Technology
  • December 14, 2015
  • Sarah Dunn
Boosting inventory accuracy with RFID technology

The main retail applications for RFID are: stock and inventory management, supply chain logistics, manufacturing process optimization, point of sale operations and merchandising or marketing.

In practical terms, RFID technology means that using scanners, retailers can count or track any item bearing an RFID chip by walking past the display or pallet with a scanner, rather than having to scan each barcode or manually count the items. In New Zealand, Farmers has recently implemented RFID across its network.

Despite an initial failure to launch, RFID has been gaining popularity with larger retailers overseas for some six or seven years. Walmart’s former CIO, Linda Dillman, has been credited with introducing retailers to RFID way back in 2003, when she asked Walmart’s top 100 vendors to implement RFID tags on all cases and pallets by 2005. Forbes reports that the plan was abandoned by 2009 because the new technology didn’t work any harder than existing, simpler technology to solve Walmart’s inventory problems.

“The argument for RFID was that it didn’t require line-of-sight to be read. Unfortunately, radio frequencies don’t pass through liquids and metal well, so you couldn’t get the kind of reliable read rate originally anticipated.  So we were back to square one, requiring line-of-sight.  RFID was DOA.”

However, in the intervening years, RFID reader technology has become cheaper and more effective. Rising omnichannel sales have also made inventory accuracy more important.

After promising pilot tests in 2009, Macy’s began installing RFID infrastructure across its 850-strong network of stores. It has found greater benefit in using the technology on its sales floors rather than its supply chains - Bill Connell, Macy’s senior VP of logistics and operations, told Fortune that RFID allows the stores to count inventory up to 24 times per year to a high degree of accuracy.

In July this year, a feasability and scoping study was carried out by Alan Mayo, Grant Pugh and Bruce Hutchings of The New Zealand RFID Pathfinder Group to judge the potential for introducing RFID-enabled stock tagging and counting at Wellington single-store retailer Harfords Menswear. The store has around 1700 products which are held in three locations.

The study found that introducing RFID is “technically feasible” but the cost saving benefits were marginal unless Harfords made a strategic decision to aim for high inventory accuracy through monthly inventory counting.

This approach comes with extra benefits, says the report: trust in the stock numbers held in the inventory system; the ability to support integrated online sales; enablement of auto-ordering processes to operate efficiently; and enablement of centralised management of inventory were listed. Implementation costs were found to be around $20,000, with annual costs of around $1500.

Ultimately, the study did not offer a recommendation for Harfords either way, but the authors did mention that the case for introducing RFID into a chain of apparel stores with centralised control would be much clearer.

“Given technical feasibility, accurate centralised inventory figures would likely deliver significant supply chain benefits and cost savings.”

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