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Comment: How RFID improves operations and delivers ROI

Previously we've spoken to dispel some of the myths surrounding RFID in apparel retail, while answering two key questions that retailers pose: how does RFID improve operational efficiencies? And where does all that important ROI come from?

GS1 has a unique position globally, working closely with retailers all around the world to help them implement GS1 open supply chain standards. We've seen some great examples of retailers taking the lead and harnessing RFID within their businesses.

RFID tags are similar to barcodes – storing a number that can be machine-read to uniquely identify the item it’s attached to. Where it’s different is that RFID doesn't require a 'line of sight'. Instead, tags in the vicinity of a reader are able to transmit their data by radio waves almost instantly. What is known as a read event is then logged on a system, noting a time and date as well as a unique serial number for the individual product scanned.

This gives the technology three considerable advantages:

These advantages can have a positive impact throughout a retailer’s supply chain. But, if we were to focus on just the store, we can outline a more than convincing business case.

RFID can revolutionise store operations in apparel retail. It's a pretty plain fact that if a product isn’t available for purchase, it’s more difficult for consumers to buy – which leads to a lot of lost sales. So, one of the key benefits that RFID technology brings to the store is enabling staff to increase the on-shelf availability of stock.

In the US for instance, retailers have consistently outperformed controls in their pilots by up to 10%, taking on-shelf availability from 70% to 95%. While it’s difficult for us to comment on the exact number of lost sales that poor product availability cause, retailers globally are experiencing sales uplifts of between 2% and 20% – by exposing every product to the maximum number of consumers and selling it for the most profitable price.

RFID technology increases availability by enabling faster floor stock counts. With a system that knows what stock should be on every shelf, a handheld scanner can be used to quickly identify what’s missing. Staff can then retrieve exactly what they need from the stock room, which speeds up the entire replenishment process.

What’s more, because the technology allows staff to count the stock so fast and efficiently, stock takes can now be conducted as often as any business feels is appropriate. Counting 20,000+ items an hour means a few staff can do a full stock take in just a couple of hours even in large stores. Coupled with the serialisation of products, this gives retailers real time and accurate data on what stock is available on the shop floor and what is in the back – raising inventory accuracy from 63% to 95%.

By increasing the visibility of stock in store means that the amount of stock that is sent from the distribution centre can be reduced. Because, when replenishment orders are based on clean data, deliveries only contain what is actually needed. At GS1 UK, we’ve seen retailers reducing the amount of stock they hold in stores because of this, by nearly 50%. This results in less capital held within the business and easing cash flow.

These benefits have partly driven the successful business cases of many retailers from all over the world. But, as the use of the technology develops, retailers will undoubtedly find even more innovative ways to use RFID. We’re already seeing enhanced shopping experiences, improved anti-theft solutions and robots hitting the shop floor – all enabled by RFID.

GS1 UK provides a regular column for Essential Retail focused on technology, in relation to retail industry standards and the wider supply chain.

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