STORES Magazine - October 2008 - (Page 50)

NUTS AND BOLTS / RFID Tagging items at the manufacturer’s location is emerging as the preferred method for retailers. quired OATSystems in June.) Last year, John Lewis began its first RFID pilot with women’s shoes, but the counting went askew. The challenge, Ager says, was finding a way to place RFID tags on the shoes rather than on the box. “If the customer is trying on three or four pairs of shoes, sometimes the shoes go back in the wrong box,” he says, “so you’re only counting boxes and not shoes.” Putting tags on shoes – women’s shoes, in particular — presents an issue because “they’re quite small and the sole is quite small,” Ager says. Another problem: the tags could be removed easily by customers or broken when the shoes are tried on. John Lewis “learned a lot about some of the limitations of RFID from that particular trial,” Ager says. The retailer moved on to hanging garments, which it found to be more conducive for cycle counting. “We realized very high tagcount rates,” Ager says. Accurate stock data In March, John Lewis piloted men’s suits for RFID counting in four stores. Cycle counting occurred on Mondays; replenishment runs based on the counts began on Tuesdays. John Lewis staff could perform cycle counting on the suits at least 20 times more quickly using RFID than using the existing bar-code processes, Ager says. As a result, “when our systems look to 50 STORES / OCTOBER 2008 replenish gaps on our sales floor, they’re using real, accurate stock information,” he says. “The idea is that you are replenishing to a true stock figure.” In a February 2008 report, research firm Gartner notes that retail commands about 14 percent of the RFID market, trailing discrete manufacturing (21 percent), national and international government (20 percent) and transportation (20 percent). In the government sector, new applications are focused on assisting with national security and curtailing identity theft, among other uses. The U.S. and other governments are moving quickly, for instance, to replace paper passports and plastic ID cards with electronic passports and smartcards that use contactless chip technologies. Paul Cataldo, vice president of marketing for OATSystems, says RFID applications are helping retailers address two key issues: shelf availability and the underlying problem of what he calls inaccurate perpetual inventory. “The root of all the evil in retail is imprecise, inaccurate perpetual inventory,” he says. “What retailers do, of course, to correct this problem is go through a manual process once or twice a year of cycle counting their inventory. But as soon as they do that … errors start to propagate the system.” In the case of inventory that is inaccurate as the result of shrink, not only are retailers “losing that item, they are losing follow-up sales of that item,” Catal- do says. “And because that item isn’t being reordered, they could be in an outof-stock situation for a period of time.” Avoiding the black hole Retailers also can pinpoint errors in their supply chain, distribution points and at the store level with RFID applications, avoiding what Cataldo terms an “operational black hole,” not knowing the fate of some stock. Tagging items at the manufacturer’s location is emerging as the preferred method for retailers, depending on their operational capabilities and those of the manufacturer. “Then you can use those tags to track merchandise throughout the entire supply chain and start to get visibility as soon as it leaves the manufacturer’s site,” Cataldo says. Ager hopes that John Lewis stores “will have millions of items tagged” within a few years, but the key to building the long-term business case for itemlevel RFID continues to be the cost of the tags. “I can foresee a time when most of our hanging garments are tagged,” he says. “The barrier to that, at the moment, is the unit cost of the tag and label; that is still quite high.” Pricing “needs to come down by 50 percent to make it an absolute no-brainer.” StORES M.V. Greene is an independent writer and editor based in Owings Mills, Md., who covers business, technology and retail. WWW.STORES.ORG http://WWW.STORES.ORG

Table of Contents Feed for the Digital Edition of STORES Magazine - October 2008

STORES Magazine - October 2008 Contents Executive Editor's Page President's Page Force of a Different Collar What Shoppers Think Bagging the Competition 10 Things You May Have Missed Numbers Worth Counting Full Price/Markdown Retail People Favorite 50 Sticky Strategies for Retention Concept2Watch Kiosks Online Business Intelligence RFID NRFtech Wrap-up E-Commerce Credit Warehouse Systems Logistics Selling Tools Supply Chain LOEB Retail Letter Arts Update Point of View NRF News Retail Crossword Retail Industry Calendar Last Laugh

STORES Magazine - October 2008

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