2021 RFID Trends Will Include a Greater Focus on Supply Chain and EAS

By Claire Swedberg

BSN consultant Philip Calderbank predicts new partnerships between solution providers and RFID companies will address over-stocking trends, and that loss prevention will be a second area of growth.

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BSN, a packaging materials manufacturer and solutions provider, has been developing products aimed at the latest pain points for the retail market. The company has found that radio frequency identification is poised to provide several solutions for newly emerging challenges in that environment. These include addressing the out-of-stock problem for omnichannel sales (see A Time to Rebuild) and providing reliable electronic article surveillance (EAS). With omnichannel sales, RFID is required more than ever in the supply chain, says Philip Calderbank, the company’s RFID consultant.

Philip Calderbank

It may be up to RFID companies to open discussions with the logistics software and solution providers with which large retailers and distribution centers are used to working, Calderbank says. That collaboration between software providers and RFID companies could usher in the use of automatic-identification technology instead of traditionally barcode-driven systems. For EAS, he notes, the benefits of having RFID tag already applied to goods, with more sensitive tags coming into the market, means stores have a new interest in the technology to prevent product shrinkage. Several stores are piloting systems that display what is being removed from their premises as it takes place, thereby deterring theft.

The COVID-19 pandemic has accelerated a trend toward e-commerce that was already under way and challenging the retail supply chain, Calderbank says. A large percentage of retail sales currently take place online, using delivery models such as “buy online, pickup in store” (BOPIS), curbside pickup or delivery to direct a consumer’s door.

BSN is a global manufacturer and provider of digital printing, RFID labels and packaging for footwear, apparel, bags, furniture, cosmetics and accessories. Calderbank has been observing the trends that BSN and the RFID market have faced as the retail market has undergone dramatic changes. He has 20 years of experience in RFID, having worked for 13 years at Sensormatic, focused on EAS and loss prevention, as well as at Avery Dennison, Impinj, Invengo and SML Group.

One key challenge has emerged for retailers and their supply chain constituents, Calderbank says, regarding out-of-stocks for e-commerce purchases. Such events, in many cases, occur due to a lack of visibility of goods in the supply chain. The result is products being over-stocked in an effort to prevent potential sales losses. “Everyone has a story to tell about trying to make a purchase online and seeing ‘out of stock’,” he adds, likening that to what he calls the most quoted statement in 2020: “You’re on mute” for digital calls. In one way or another, he says, technology has failed those depending on it.

While the RFID industry has served the retail market with item-level visibility for some time, Calderbank says, the focus has been on the store level. “We’ve been talking for years about item-level visibility across the supply chain,” he explains, but in most cases the tags being applied to consumer goods and apparel are being leveraged for inventory tracking at stores rather than throughout the supply chain. In fact, logistics providers, distribution centers and suppliers have traditionally relied on barcode-based tracking instead, with workers scanning barcodes on cartons or pallets of goods in order to capture data regarding where specific product containers are located at any given time.

That solution worked well for decades, Calderbank says, until the recent supply chain strain created by the explosion in e-commerce sales. The systems being leveraged with barcodes are typically provided by software companies that have little experience with radio frequency identification, while RFID software companies have solutions for supply chain visibility but tend to have little experience with the logistics market. The answer to this challenge would be the integration of RFID with existing logistics solutions, Calderbank says, but that would require new conversations and partnerships between large software providers, logistics companies and those specializing in RFID.

The need was never greater, Calderbank says, adding that he has little doubt over-stocking is taking place in the supply chain. Goods are being manufactured at a record pace in China and other countries that out-pace purchasing by consumers in North America, Europe and elsewhere, he explains. Calderbank cites an increase in Chinese economic growth, with manufacturing increased by 18 to 22 percent in 2020 over 2019, though he says holiday buying was up by consumers worldwide by only about 8.3 percent above the 2019 season, according to CNBC. Inventory supply diminished in the first half of 2020, so some “make-up” stock was likely purchased by retailers in the second half of last year, but that would be unlikely to account for the entirety of the difference.

Where unpurchased goods might be located is a question now being answered by barcode scans. However, barcode-based data is limited to what is contained within a carton of goods, and it does not specifically indicate what each item in that box might be. On the other hand, RFID can bring light to that specific inventory information, and thereby reduce the need for overstocking in the supply chain. Even reducing overstock needs by 1 percent, Calderbank says, could cut costs for large retailers or suppliers by millions of dollars annually.

That, Calderbank says, is a benefit RFID companies should be discussing with large retail operators and their software providers. These businesses serve as a new audience for RFID companies, which have traditionally spoken directly with retailers about preventing overstocks in their back rooms. To address the latest challenge, Calderbank expects these introductions and discussions will be under way within the next four to six months, with the goal of helping companies understand how RFID can help them meet their omnichannel demands.

In fact, Calderbank believes companies that resolve their omnichannel inventory visibility first will have an advantage over those that do not, simply by being able to deliver online-purchased items quickly. “Traditionally, RFID has been sold for on-shelf visibility,” he states. “This is a different set of people in e-commerce,” but an important one for the future. “I expect to see 2021 be the year when we start to see acceptance of RFID in the supply chain.” In most cases, he notes, RFID is an enhancement tool for existing supply chain software, and it could mean a reduction in safety stocks, and eventually the elimination of barcode scans for supply chain visibility. BSN, Calderbank says, offers software that can be built into existing solutions.

The other area of RFID growth BSN is eyeing is the use of RFID for EAS purposes in stores as they reopen to shoppers post-pandemic, Calderbank says. Traditionally, EAS systems have not employed RFID due to the unreliable rate of tag reads at a door gate, as well as the risk of stray reads of tags dwelling in the gate’s vicinity. Both problems, however, are now being resolved, he says. Stray reads can currently be prevented with more sensitive readers, advance software and antenna tuning, he explains, and tags are more reliably responding to interrogation while passing through reader gates. Calderbank cites Impinj’s 700 series chips, for instance, which he says are more sensitive than previous-generation chips, enabling tags to be read at a longer range.

As a result, some retailers are piloting the technology as a replacement for traditional EAS systems. BSN offers a solution, now being piloted by several large retailers, to capture data from tags as they leave the store, for the purposes of loss prevention and deterrence. With the Impinj chip, the tags can be effectively turned off at the point of sale by being switched to data-protection mode so that they can only be interrogated at an extremely short range. A shopper can carry any tagged items he or she purchased through the exit gate. If any tag has not been switched off, meaning that item was not purchased, the reader will capture the tag’s ID number, which is linked to information about that product.

Software can then prompt a picture of the item to be displayed on a screen in a security room, or above the exit door. This serves as a deterrent, Calderbank says, while preventing theft attempts in progress. For instance, while thieves may be accustomed to hurrying through EAS gates that sound an alarm but do not identify what is being taken, they might hesitate with an RFID system. If someone were stealing a pair of sunglasses with an RFID tag attached, for example, the tag ID would be read at the gate. An image of the sunglasses would be displayed prominently at the door where both the thief and security personnel could view it, and the security guard could then search for the item being taken.

Because the latest RFID labels can be switched to data-protection mode and then be switched back on if necessary, Calderbank says returns may become easier for retailers. If a purchased item were returned with its tag, that tag could be switched back on to make product tracking automatic once more, or to allow retainers to put the product back on the shelf for sale, either in the store or online. BSN intends to demonstrate the RFID-enabled EAS solution at the NRF retail show in June, he says, and several pilots are taking place in the meantime, though the retailers have asked to be unnamed.

According to Calderbank, both trends in the RFID market for retail could pose a significant return on investment (ROI) for retailers and their suppliers. In the past, he notes, retailers have looked at the cost of RFID labels when considering whether or not to adopt the technology. While the label cost isn’t likely to drop much lower than its current price, he notes, the ROI is rising. By reducing overstocks in the supply chain, ensuring that omnichannel sales are not lost due to out-of-stocks, and preventing theft, he adds, those in the retail market could achieve significant savings.