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50% OOS Reduction from Item-Level Tagging

AMR Research has released a report that suggests item-level RFID tagging can yield significant benefits today if managed correctly. When targeted only at certain consumer goods categories, item-level tagging can yield a whopping 50% improvement in stock availability. Read this article for more on the findings.
Dec 19, 2005This article was originally published by RFID Update.

December 19, 2005—AMR Research of Boston, Massachusetts, has released a report that suggests item-level RFID tagging can yield significant benefits today if managed correctly. When targeted only at certain consumer goods categories, item-level tagging can yield a whopping 50% improvement in stock availability. Furthermore, there can be a 15% to 20% savings win on the labor costs attributed to restocking and replenishment.

AMR cites three categories ripe for item-level tagging: DVD and video games, high-end fashion, and commonly stolen or counterfeited goods like pharmaceuticals and cosmetics. In most of these instances, the benefit of tagging individual items derives from their high profitability. Employing RFID as a means of decreasing out-of-stocks on these lucrative items drives higher sales and meaningful benefit. DVDs, which produce a statistically very high return per sales-floor square foot, are a prime example. As the report says, "... 60% to 70% of the lifetime sales of a new DVD will be seen in the first week of its release. Investing in systems that ensure that stock is always available during these high-traffic times is mission critical."

Despite the benefits, an item-level RFID deployment must be made with deliberate care, says AMR. There are a number of necessary steps retailers must take to achieve the desired results. In the first place, there needs to be RFID readers in the retail store and in the backroom to capture key shelf-level events (such as an empty shelf) and then be able to process them (by querying the backroom for existence of the product with which to restock the shelf). There must also be labor process reengineering such that when actionable events like empty shelves occur, employees are alerted and address the situation efficiently and effectively. Also necessary is a wider corporate infrastructure that is able to process, leverage, and provide visibility onto the new RFID data. Lastly, the retailer should recognize the shift in approach that item-level tagging represents and proactively manage the change from the existing processes to the new ones. This "change management" will require engaging and educating everyone from store-level laborers to merchandising managers. It is a step that should not be underestimated. After all, when implementing a targeted item-level tagging solution at the store level, "the process map is as important as the technology architecture."
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