Feb 23, 2010Online merchants live and die by their customer-satisfaction ratings. Trends & Brands GmbH, which claims to be one of eBay's top "power sellers" worldwide, is implementing radio frequency identification to improve its inventory accuracy and keep those ratings high.
Trends & Brands operates KissAFrog, a seller of other retailers' overstocked luxury fashions and accessories. "Online customers demand that the goods they order are available," says Ali Abbassi, Trends & Brands' CEO and founder. "In our outlet stores, it's easier to break the news to a customer if we don't have garments in the right size or color."
Trends & Brands uses its four outlet stores in the German state of North Rhine-Westphalia as warehouses, in addition to its distribution center in Bonn. When the firm advertises an item online—that is, on its Web site, or via eBay—Trends & Brands must know for sure that the product being promoted is in its warehouse or at an outlet store. This requires that accurate data be maintained regarding goods received into and shipped out of the company's facilities.
At present, Trends & Brands tracks incoming and outgoing goods via a scanner that reads each item's bar-coded EAN label, and also conducts inventory once every year, in January. The inventory process takes about 45 employee-hours using bar-code scanners. But the resulting data is unreliable, Abbassi says, because the process is undertaken infrequently, and is ridden with errors made by workers using bar-code scanners.
In early 2009, while in talks with a company regarding RFID-based customer loyalty cards, Abbassi began exploring the idea of implementing RFID to improve its internal processes. While researching the technology, he came across RF-iT Solutions, an RFID systems integrator and software developer based in Graz, Austria, and specializing in the retail sector.
RF-iT Solutions designed the application for Trends & Brands, and helped the firm to secure assistance from ProZeus, a government program that provides advice and expertise about how to improve business processes and cooperation between companies. ProZeus contributed 50 man-days to the project, in which Trends & Brands is investing €70,000 ($95,000).
The initial test, conducted during a span of several weeks in late 2009, involved 1,000 tagged items, including beachwear, underwear, jackets and other apparel. For the purposes of the test, Trends & Brands performed its own tagging. In February, Die Fabrik began applying EPC Gen 2 passive RFID tags to all items it delivers to Trends & Brand. Over the course of 2010, the company is expected to deliver roughly 130,000 tagged items.
During the test, Trends & Brands' employees sorted incoming items and entered them into the firm's merchandise-management system. After identifying and pricing each item, the workers printed RFID tags on a Toshiba RFID printer-encoder. The tags contained EPC Gen 2 chips made by UPM Raflatac. The items were photographed so they could be sold online, and workers wrote a short description, also to be used online. The goods were then placed in the DC's warehouse, or moved to outlet stores.
At present, picking is performed manually at both the warehouse and at the stores. Warehouse workers are given a rack number and must search for the items in that location, while those in outlets look for items that are sorted by brand. If a product is ordered online and is available in both the warehouse and at one of the stores, warehouse employees will be assigned the picking job. If that item is only available at an outlet, the computer system e-mails a message to that site, and a worker is instructed to pick the product from the outlet's store floor as soon as possible.
According to Abbassi, the company intends to test RFID-based picking at the DC through April, using two Nordic ID handheld computers with built-in RFID interrogators. After the trial phase has been completed, the firm plans to decide if it wants to expand its RFID use with additional handhelds.
Here's how the system works: When it's time for the goods to be packed and shipped, Trends & Brands' staff scans each item's RFID tag with a reader provided by Deister Electronic, so that a delivery notice is generated.
In addition, the information collected from interrogating the RFID-tagged items updates the inventory data, which is used in the company's e-commerce applications to ensure produce availability.
Abbassi believes the RFID system that Trends & Brands is implementing is the first RFID project at the item level for an online retailer. He also says the system will help the company avoid out-of-stocks for its online customers, because it will be able to conduct inventory every month at its outlets rather than annually, and every quarter at the DC, where it keeps roughly 200,000 items in stock. Using bar-code scanners to conduct monthly inventories at its outlets and quarterly inventories at its distribution center, he explains, would have been too time-consuming and costly.
Trends & Brands has yet to implement the RFID-based customer loyalty card that it originally discussed with a partner. The company may eventually do so, Abbassi says—but in a way that integrates the card into the RFID-based processes currently being rolled out.
Abbassi says he and his managers are considering whether they will tag only the new items that come in, or also go back and tag all goods stored at its distribution center. "In the outlets, we will definitely tag all items," he states, "since this is where we have the biggest problems with inventory inaccuracies."
