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Finnish Retailer Gets Quick ROI on Item-Level RFID

Finnish apparel firm NP Collection reports that it expects full ROI in less than six months for its 80,000-item garment tagging program. The payback comes from reduced out-of-stocks and improved replenishment at retail, and streamlined operations in the supply chain. The company plans major system expansion in 2008.
Nov 16, 2007This article was originally published by RFID Update.

November 16, 2007—Finnish apparel designer and manufacturer NP Collection says it expects full ROI in less than six months from a pilot program in which Gen2 tags were placed on 80,000 individual garments. The project has been so successful that the company plans to more than triple the amount of garments tagged in 2008, add new in-store applications, and expand collaboration with suppliers and logistics providers.

"Increase in turnover by reduction of out-of-stock situations is the major contributor to the business case. There are not any actual measurements yet, but we could assume that every fourth event in a store might end up as an out-of-stock case," NP Collection managing director Risto Rosendahl told RFID Update.

In an announcement released by tag supplier UPM Raflatac, Rosendahl said: "Thanks to our state-of-the-art RFID solution, the product handling rate has improved tenfold and human error has been eliminated. We expect to reach ROI in six months."

Garments are tagged at the point of manufacture in Europe and read each time they are received and shipped from distribution centers. Product tags are currently read in six company-owned stores and in an NP Collection distribution center. The company expects to tag 250,000 items in 2008, and to possibly extend source tagging to products manufactured in China.

NP Collection merchandise is sold in about 500 stores in Scandinavia, Europe, and Russia, and the company is working with retailers to install RFID infrastructure to support expanded tracking plus new merchandising, smart shelf, and possibly security applications. It is also expanding the system so its suppliers and logistics provider Itella make more use of RFID tag data and the advance ship notices (ASNs) that the system automatically generates.

"The apparel supply chain involves a lot of slow manual processes," said Rosendahl. "Stock-level inventory management and improved customer service contribute to the ROI. Improved processes [have] less mistakes, and this means a really huge cost savings in apparel logistics."

Finnish firms RDN, Salpomec, and Vilant Systems provided integration services. The readers came from ADT, and SML converted Raflatac inlays into smart labels.

NP Collection began tagging garments in September, the same month European retailer METRO Group announced an item-level tracking program that was hailed as the first of its kind (see METRO Unveils Warehouse-to-Checkout RFID System and Why METRO's Item-Level RFID Deployment Matters).

Apparel tracking is becoming increasingly fashionable in Europe. European fashion houses Lemmi Fashion and Throttleman each previously disclosed RFID programs (see Kids Clothes Firm Outgrows HF, Puts on Gen2 RFID and TAGSYS Announces Two Apparel RFID Deployments, respectively).

Dillard's was the last US retailer to announce an item-level garment tracking program, but provided few details (see Dillard's Announces Item-Level RFID Pilot).
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