Jul 18, 2023Brazilian retailer Pernambucanas has gained an item-level view into its inventory, thanks to an ambitious radio frequency identification (RFID) deployment that covers all of its stores, with 90,000 products tagged annually. Since the system was taken live this year, the company says it has reduced shipping errors, ensured products are available at stores, and decreased labor time and carbon dioxide emissions related to the transportation of goods. The company partnered with technology firms to build the solution, including Mojix, whose software-as-a-service (SaaS)-based traceability solution enables real-time item-level visibility across the retailer's 505 stores.
Sergio Borriello, CEO of Pernambucanas
Acura supplies the UHF RFID reader and antenna equipment, while Beontag has provided customized RFID labels and printers, as well as assistance with a printing service center built onsite at the distribution center. Once the retailer completed several years' worth of planning and piloting, it took just one month to roll out the technology to every store. The solution is now live as well as at the company's primary DC, located in Araçariguama, in the state of São Paulo. The company has built RFID into the point of sale (POS) at 90 stores, and it eventually intends to expand the POS functionality to every location.
The retailer is forward-thinking when it comes to technology, but it also has a long and storied history. Founded in 1908 and headquartered in São Paulo, Pernambucanas is Brazil's largest fashion retailer, with more than 14,000 employees. The company has survived two pandemics—the Spanish flu in 1918 and COVID-19 in recent years—as well as both World Wars. Now, the company has a focus on the future of retail, including omnichannel sales, as well as technology-based efficiency and sustainability efforts. To accomplish this goal, Pernambucanas says its investments in digital transformation technologies are aimed at inventory visibility and supply chain automation.
By tagging more than 90 million items with RFID labels, the company's present objective is to improve the reliability and visibility of its inventory, while simultaneously supporting its omnichannel strategy, according to Sergio Borriello, the company's CEO. With the help of Mojix's ytem platform architecture, Pernambucanas reports that it has raised its inventory accuracy beyond 99 percent, with shipping and receiving process accuracy at 100 percent, and search and pick time reductions exceeding 70 percent.
Printing Labels at the Distribution Center
Pernambucanas built a solution aimed at supplying a low-cost and efficient way to deliver UHF RFID labels to suppliers as they need them. That includes a printing station within the distribution site to provide labels to product manufacturers as needed. The retailer partnered with Beontag to build the printing station, by which tags are printed for products ordered from suppliers. Pernambucanas then hands over those labels to each supplier in a reverse logistics model, as the suppliers make their regular deliveries at the DC. This process reduces the time and transportation costs involved in getting labels to suppliers.
The company worked with Beontag to develop universal tags that could be used on all types of merchandise, and it began testing them with beauty products and electronics. That testing included finding the correct tag placement to ensure proper readability. One example is denim jeans, a notoriously challenging product for RFID technology. The partners not only created a tag that could be applied to jeans, but they also engineered the best placement location: the front of the pants' waistband, ensuring tag transmission would not be disrupted by the metal zipper.
The retailer's long-term tagging plans are to transition apparel tagging from the currently required three labels per garment (a price tag, a product composition tag and a third tag dedicated to care instructions) to a single RFID-enabled label serving all purposes. This transition could reduce the cost of labels, as well as the amount of material used for tagging, and thus increase sustainability.
Pernambucanas worked with Acura to design and build fixed RFID readers largely composed of sustainable materials, such as wood and metal for the reader framework. The company trained a population of metal workers to build the readers from recycled products.
How the RFID Solution Works
Most goods arrive at the distribution center from suppliers with RFID labels attached. The unique ID number encoded on each tag is already linked in the ytem software to details about a particular product. Employees at the DC can print and apply labels to products that arrive without tags. The tags are read as items are received, and the software is updated to indicate that those goods are at the DC.
Marcio Gomes Dos Santos, RFID and Systems Development Specialist with Pernambucanas' Project Management Office
Some products arrive on hangers and are passed through a tunnel reader, with tags interrogated at a rate of 100 pieces within 10 to 15 seconds, on average. When goods are shipped to a store, their tags can be read again. Currently, beauty products and electronics are being read via tunnel or other fixed readers, and apparel is also expected to be read in the future as goods are packed and shipped to stores. By the end of 2023, the company anticipates reading the tags of all goods shipped to stores.
"Mojix's ytem retail SaaS enables Pernambucanas to competitively shift from SKU [stock-keeping unit] to item-level data visibility," says Yanine Arellano, Mojix's operations VP for LATAM, "to provide business intelligence and business performance optimization around inventory management, product information management and multi-enterprise supply chain integrations." The collected data is harmonized into business events and analytics in the ytem cloud platform, she explains.
Ytem dashboards and reports provide data visualization and key performance indicators across all Pernambucanas processes and use cases. The technology reduces the amount of time workers spend receiving and shipping goods at the DC, and also helps to prevent mis-shipments, which could lead to costly re-shipments. In fact, the process is two times faster, according to Marcio Gomes dos Santos, an RFID and systems development specialist with Pernambucanas' Project Management Office.
In the future, Gomes dos Santos expects updated versions of the system to accomplish shipping rates three times faster than was possible with previous methods. The retailer next anticipates suppliers will be reading labels prior to shipping products to Pernambucanas. For the past two months, the company has conducted a pair of pilots with the help of Beontag, during which several suppliers were reading tags before sending goods. By the end of June 2023, the retailer intends for most apparel and home goods suppliers to be reading tags before shipping products to the DC.
Boosting Inventory Accuracy and Efficiency
At stores, inventory counting that previously required six or seven labor hours to finish can now be completed within one hour using the RFID readers. For the cell phone merchandise specifically, inventory counts that once consumed two to four labor hours are being accomplished within only 10 to 20 minutes. Stores will now conduct inventory counts weekly for some products, and monthly for others.
Another gain will center around enabling omnichannel sales. Pernambucanas ships goods to online shoppers from stores, and it also offers products via the "buy online, pickup in store" (BOPIS) model. The inventory accuracy provided by the RFID solution ensures the retailer can serve its customers online, based on the inventory data at specific stores. Pernambucanas recently worked with Acura to develop a specialized reader for points of sale, which has been deployed at 90 stores to date.
The readers provide store associates with a choice: they can opt to scan the barcodes of products being purchased, or they can read the RFID tags. "Our workers can choose which way they want to read," Borriello says. That's important, he notes, since some small products sold at the stores—small toys, for example—do not come with RFID tags attached. The long-term plan is to have RFID readers deployed at the points of sale for all 505 locations.
Once it committed to the technology, Pernambucanas needed to conduct the rollout at all 450 stores within just one month. "This is exactly the kind of challenge that our ytem retail service excels at," Arellano states. "We were not only able to meet that deadline successfully, but we also managed to meet Pernambucanas' just-in-time inventory model that is a unique characteristic and differentiator from other LATAM retailers."
According to Pernambucanas, the technology has proven to serve as part of a cultural focus for the company intended innovation. "We implemented an audacious project in a short period of time, which has been generating positive effects on our entire operation," Borriello says. "Other development stages are yet to be implemented, but the path taken so far is already serving as a reference for several partners."
Key Takeaways:
- With its RFID deployment, Pernambucanas has achieved inventory accuracy greater than 99 percent, shipping and receiving process accuracy at 100 percent, and search and pick-time reductions exceeding 70 percent.
- The retailer is now working with suppliers to apply tags to products during manufacture, while also rolling out RFID functionality for store point-of-sale stations.
