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RFID Study Quantifies ROI for Apparel Suppliers

University of Arkansas researchers find that by using item-level RFID tags to audit shipments, a garment manufacturer could dramatically improve shipment accuracy, as well as confidence in that accuracy, thereby reducing the incidence of retailer chargebacks.
By Claire Swedberg
Dec 21, 2011Following a nearly 12-month study involving 15 apparel supplier locations within the United States, as well as two third-party facilities, researchers at the University of Arkansas' RFID Research Center have determined that the use of item-level RFID tagging can provide a return on investment (ROI) for suppliers, by reducing costly errors resulting from mistakes made during the packing of shipments. The greatest benefit that radio frequency identification can offer to suppliers is accuracy, the team reports, enabling companies to save money despite the added expense derived from applying RFID tags to thousands or millions of garments. The researchers found that although tags add a cost that might exceed what a company typically spends to manually verify shipment accuracy (that is, without the use of RFID), the reduction in claims costs resulting from inaccurate shipments can be greatly reduced via RFID. Consequently, the technology's deployment could result in overall savings.

The purpose of the Research Center's Phase II study—funded by national trade association American Apparel & Footwear Association (AAFA) and standards organization GS1 US—was to determine whether item-level RFID technology could provide benefits to suppliers, and if so, to quantify those benefits.

David Cromhout, research director of the RFID Research Center
Thirteen global apparel suppliers participated in the study, which was conducted by a research team from the university. As part of the project, these suppliers offered researchers access to 17 distribution sites, all based within the United States. The size of each supplier varied, from $37 million in annual revenue to more than $10 billion. While all companies were tagging some of their products for specific customers, two of the supplier-operated distribution centers had RFID interrogators installed, and were reading tags for their own purposes. Researchers studied the two RFID-enabled sites, comparing their auditing results against those of the 13 other supplier-operated locations. In addition to these 15 facilities were two run by third-party logistics providers, says David Cromhout, the RFID Research Center's research director. The study's results will be released at the National Retail Federation's Big Show 2012 exhibition, being held on Jan. 15-18, 2012. At that time, the research will be described in a white paper titled "RFID Item-Level Quantity Auditing for Apparel Supplier Distribution Centers," which will be posted on the RFID Research Center's Web site.

Some of the researchers' key findings were discussed at a webinar hosted last week by AAFA. The webinar's presenters included Cromhout, as well as Shawn Neville, the group VP of Avery Dennison Retail Branding and Information Solutions; Brent D. Williams, a University of Arkansas assistant professor of supply chain management; and Jay Craft, the VP of product development at VF Corp.'s VF Jeanswear Limited Partnership.

Since January 2010, researchers at the University of Arkansas have shifted their initial focus from retailers to suppliers, in order to determine the return on investment that suppliers might expect to achieve from the use of item-level tagging. In January 2011, Cromhout and his colleagues published a paper singling out 60 unique use cases (see University of Arkansas Study Finds 60 Ways to USE RFID in Apparel Supply Chain).

During Phase II, the group focused on one specific use case in depth: the quantity audit of product by staff members at the DC, and how RFID could improve on that process, thereby increasing accuracy and reducing costs. A supplier's DC typically conducts quantity audits in order to ensure that the proper amount of goods are being received and shipped, and that the correct product styles and sizes are included in that shipment. Quality audits, by contrast, are conducted to ensure that products are free of flaws and meet quality standards. The research team carried out visits to distribution centers, which Cromhout declines to name, throughout the United States.

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