As retailers and their trading partners work to make omnichannel a reality, many are leading the retail industry’s innovation by leveraging item-level electronic product code (EPC)-enabled radio frequency identification (RFID).
EPC-enabled RFID used at the item level ensures the inventory visibility retailers increasingly seek, and the accuracy needed to fulfill today’s increasingly diverse consumer demands— all the while driving efficiencies across the entire supply chain.
But how important is RFID to enabling omnichannel strategies?
Consumers now expect accuracy and speed across all shopping channels—two of RFID’s strengths. According the RFID Lab at Auburn University, EPC-enabled RFID reduces inventory cycle count time by 96 percent and increases a retailer’s confidence in item availability, which can help boost sales from 2 to 20 percent.
Since retailers are on the frontlines of delivering on a promise to the consumer, they are asking their suppliers to step up to the omnichannel challenge by tagging their products at the manufacturing source.
Source-tagging enables all trading partners to gain product visibility across the entire supply chain, leading to reduced operational costs, increased margins and a more efficient logistics process. By tagging at the point of manufacture instead of at the distribution center, RFID can help automate processes, record item location, identify objects and provide real time visibility to ensure the right goods are available, in the right place, at the right time.
Why tag at the source?
First, it’s important to understand that no matter where the tag is applied, trading partners that leverage RFID will realize the overall benefits of using global, interoperable GS1 Standards—the most widely used supply chain standards and the global system of which EPC-enabled RFID is a part.
When manufacturers and retailers leverage GS1 Standards, they minimize cost, maximize fulfillment flexibility and optimize supply chain operations.
The cornerstone of the GS1 System of Standards is the Global Trade Item Number (or GTIN). A GTIN uniquely identifies a trade item and can be serialized and encoded into a barcode or an EPC-enabled RFID tag to track individual items as they move through the supply chain. Used in conjunction with case and pallet serialization, these standards-based data carriers provide real-time asset tracking and accuracy across the entire supply chain network.
An EPC-enabled RFID tag, encoded with the serialized product code, could be used in conjunction with other master product data and electronic transaction information to provide key information like location, country of origin, production date, materials used and handling process, and can be retrieved anywhere in the supply chain.
Tagging at the source can be a more cost effective, streamlined solution than tagging at a DC or somewhere else. When products come into a DC untagged, cases might have to be reopened and diverted to a special Value Add Station (VAS) to affix an RFID tag to each enclosed item. Staff would have to be trained in this procedure and possibly taken away from other work within the DC. These inefficiencies are worsened when retailers have to tag at the store. Staff could possibly miss sales opportunities or create inventory variances with inconsistent tagging.
Add to that, when RFID tags are applied at the manufacturing stage, they can help identify products upstream and verify their authenticity, which in turn enables traceability and the near-real-time inventory visibility that every brand wants.
What are other benefits of RFID tagging?
While retailer RFID benefits have been discussed more publicly, manufacturer benefits have not.
For suppliers, receiving, pick and pack and shipping accuracy are just some of the key benefits RFID helps with. RFID also speeds up the reconciliation process and increases granular data. On the logistics side, suppliers benefit from improved electronic proof of delivery (EPOD) and faster receiving times—up to 90 percent faster, according to Auburn University research.
With RFID applied at the item level, manufacturers can improve shipping and picking accuracy by up to 80 percent. Additionally, RFID helps them reduce obsolete inventory write-downs and increases margins by having the opportunity for more products to be exposed to a wider audience.
How is RFID currently being used?
Some market leaders in this area are inspiring other companies to get on board with source tagging.
Levi’s, for example, was one of the first manufacturers to tag at the source and now the company is achieving inventory accuracy reads of up to 100 percent in some stores.
Many retailers have already been tagging their private label items at the source and are working with other manufacturers to encourage them to do the same. What started as a technology relegated to apparel replenishment categories (denim, for example) has quickly moved to other categories, as RFID costs have come down and its value has been proven.
Now fashion items receive equal attention in retailer RFID programs and major department stores like Target have been vocal about their aspirations to tag every product within its store walls. Category saturation across apparel, footwear, accessories and general merchandise product lines will expand as retailers engage, but there’s a need for strong leadership and industry collaboration to drive this forward.
Ultimately, item level RFID opens the door for manufacturers and retailers to transcend outdated supply chain processes and deliver a seamless experience to the consumer. By setting up the supply chain for success with source-tagging, manufacturers are actively participating in an important shift in the retail industry and enabling opportunity for future growth.
Melanie Nuce is vice president of apparel and general merchandise at GS1 US and leads the GS1 US Apparel and General Merchandise Initiative.