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Why RFID Will Be The Backbone of Your Supply Chain

Radio Frequency Identification (RFID) is the future. It will be as important to retail as barcode scanners were a generation ago. Simply, it will enable you to track every single item from the moment it’s manufactured to the second it leaves your store in the hands of a customer.

RFID is a means of identifying and tracking objects using radio frequency transmission. The chip contains a serial number and other information about the item in which it is embedded. An RFID scanner will automatically read that information and merge it into a database when it is close to the object.

Dennis Cicetti, Group Managing Director of William E. Connor and Associates, says of RFID, “If you want to talk about inventory control, we can take it a lot faster and more accurately. I’m a big proponent of that as a control method and a great way to do inventory control.”

Research studies have indicated that RFID technology can reduce labor intensive processes by 20%, allow for a 25% reduction in inventory by enabling complete tracking, and dramatically improve supply chain transparency.

The technology started in the warehouse, but now it’s moving onto the factory floor and into the showroom.

Wal-Mart and JC Penney have launched widespread adoptions of the technology that will speed customers through checkout (or, at JC Penney, eliminate it entirely). American Apparel has RFID at every store. Banana Republic has rolled it out at 100 stores.
Why RFID? Right now, inventory accuracy on the shop floor is around 65%. At the warehouse, it may be closer to 80%. With RFID, every single garment has a distinct identity from the moment it is manufactured, meaning you know what’s in your shipping container before it leaves the port, and you know what’s in the replenishment truck before it arrives at the store. Coupled with robust warehouse management and PLM software, that can bring you closer to a 100% accurate inventory, saving time and money.

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In a world of omni-channel retailing, when companies are trying to use store inventory to fulfill web orders and shift their sourcing process into a single procurement stream, no one can afford to tie up dollars and have unsatisfied customers because of outdated inventory processes.

Retailers are rolling out RFID on high replenishment items first, then moving to items with lots of sizes and colors, like shoes. They then try the technology with non-replenishment fashion items.

The cost of chips and scanners has fallen to the point where this technology is competitive with barcodes. The labor savings on inventory (a worker can literally wave a device over a rack of clothes and get a 100% accurate count) can offer a real boon, particularly for legacy retailers that have a lot of distribution centers in the states, or companies that handle a high number of product categories. And the benefit to customers, whether through quicker check out times, more accurate e-commerce offerings, or faster replenishment of popular items, can make a real difference to your bottom line.