RFID for Better Store Level Inventory Replenishment (and other Retail Use Cases)

By Leslie Hand – September 3, 2012
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Retailers all hear the stories of resounding inventory control improvements at Macy's and other retailers. We have also all heard announcements from others including JCP (JCPenney) about how RFID will be integral to their next chapter of omnichannel commerce. I thought it would be appropriate to review a quick list of qualities that retailers will want to identify in technology partners that support their RFID enablement efforts.

I'll also provide a chart of vendors that are most frequently engaged in these efforts also. This was updated to reflect recent acquisitions, but was previously published in my report titled Business Strategy: Readying for RFID in Retail (IDC Doc# GRI228919).

A Quick Word Regarding the Business Case for RFID

I have to reiterate that I am convinced that the benefits are real for retailers, particularly for replenishable products, and the fastest path to success is through tagging articles with complex configurations like style/color/size. And they are really queued for speedy return on investment when the retailer is vertically integrated and already has some level of control over price or EAS tagging operations, whether they perform this process or someone else does.

The bottom line is RFID enables leaner store inventories, without sacrificing lost sales. Doing physical counts and making sure shelf availability is managed appropriately is no longer primarily an exercise to make our accountants and share holders happy, but an exercise that quite simply enables better customer service!

The value of improved shelf availability on the top line, on increased sales, is the best kept retail secret - or perhaps what I mean to say, is that very few retailers have uncovered the real value in 97% in stock positions, because very few ever perform this well on an annualized basis. Additionally, the truth is there are so many factors that go into increasing sales for a retailer, that it is nearly impossible to pin a true value on sales lift due to an isolated initiative. Perhaps, Myron Burke, Director, Store Innovation and Electronic Product Code, Walmart explained success at the shelf best, "If the customer finds what they want and it goes into the cart, that's success."

The key performance improvement metrics that I continue to hear over and over include the following:

  • Up to 30% improvements in inventory accuracy
  • Up to 50% of the OOS (out of stock) eliminated
  • 96% reduction in amount of time to cycle count, enabling more frequent and more valuable insight into real physical inventory

How to Identify Good Technology Partners for RFID Projects

The vendor landscape for vendors that are engaged in retail RFID projects includes vendors that can support projects from start to finish and specialized vendors that deliver one or two key technologies. Most retailers like to start projects by identifying a consulting or integration partner that can help guide the project from business case development through implementation and support phases.

  • Consultants / Integrators - When looking for an integrator or consulting organization to support your RFID initiative seek a partner with experience supporting retail RFID initiatives of similar scale, use case complexity and product ranges.
  • Hardware - Retailers will implement varying arrays of fixed and mobile readers and antennas. Key characteristics here relate to the time tested qualities of fit to retail purpose, use, and supportability. Retailers may align with RFID IC manufacturers, but will most likely spend much more time identifying the appropriate label producing partner, who may also provide source tagging services.
  • Software - Modern RFID readers do some of the low level read filtering, but the software that is employed needs to do higher level filtering and management that is closely tied to specific use case software processes. This is much more complex, and is somewhat on the specific use cases that are being implemented. But if we focus on the inventory replenishment use case applications should do the following:
    • RFID read filtering and management
    • Device management support for leading third-party RFID devices
    • Utilization of EPCGlobal data and RFID protocol standards
    • Industry standard API integration
    • Comprehensive and configurable real-time RFID based inventory management
    • Flexible built in analytics and reporting
    • Complete enterprise data management framework
    • Comprehensive application security, support, maintenance and disaster recovery processes

The Retail Vendor Landscape for RFID Capabilities

Again, the retailer's most important RFID enabling relationship will ultimately be with the vendor that provides consulting, integration and most critically software. These vendors are Tyco Retail Systems, Checkpoint Systems, HP, IBM and Terries. That said, some of the vendors that provide hardware, IC's and tags only are incredibly valuable resources for ROI evaluation or process review - particularly Impinj (Store Performance Simulator), Alien Technologies, Motorola, and Avery Dennison.



About the author

Leslie Hand

Research DirectorIDC Retail Insights

As Research Director for IDC Retail Insights, I provide fact-based research, analysis and thought leadership on supply chain, sourcing, product lifecycle management, sustainability, workforce…




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Leslie Hand
September 3, 2012

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