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Hong Kong Leather Goods Company Uses RFID to Track Inventory, Fight Diversion

The manufacturer of the Fortune Duck brand of purses and bags is using passive UHF tags to track goods from the point of manufacture to the point of sale, raising inventory accuracy by nearly 10 percent.
By Claire Swedberg
Jan 27, 2014

The Penta (China) Manufacturing Co., which manufactures the Fortune Duck brand of handbags, wallets, shoes and other leather goods, has increased its inventory accuracy from 90 percent to 99.9 percent, thanks to a radio frequency identification system that tracks each item from the point of manufacture to one of its own brand stores. Penta sells the leather products it makes not only through wholesale distributors, but also directly to consumers, via its retail locations in China and Hong Kong. The company owns and operates 37 retail shops that sell Fortune Duck merchandise, while three other stores are operated by franchisees. The technology is initially being used at only a single store, with plans to eventually expand the system's use to all branded stores.

In 2012, the Hong Kong company began looking into technological solutions to ensure that goods were always available at the store. Penta averaged approximately 90 percent inventory accuracy, with some goods ending up missing due to shrinkage before reaching the store shelf, while other items simply could not be located when needed. This 10 percent inventory inaccuracy ultimately led to a loss of sales when products were unavailable on shelves. The company was unable to determine at what point along the supply chain that merchandise went astray, and whether the losses were due to theft or error. To compensate for the inaccuracies, the firm opted to ship goods in higher volume, in order to provide safety stock to stores, but this sometimes lead to bottlenecks at the warehouse. In addition, the company found that some of its products were being sold illegally on the black or gray markets, which impacted the brand image.

At Penta's factory, workers attach RFID labels to handbags, as well as to suitcases, wallets and shoes.
With a goal of addressing these problems, the company began working with Hong Kong IT firm QBS System Ltd., which developed a solution known as RFID ILT, designed to increase the visibility of goods from the point of manufacture to the store. QBS also provided project management and consulting for the installation, while Netage Software Development Ltd. supplied the software that captures and manages the RFID read data. Penta installed the technology in late 2012, and then launched a pilot in early 2013. The pilot consists of tagging all goods destined for one of the company's own Fortune Duck stores, and then tracking those items through the distribution warehouse to store shelves and on the point of sale (POS), according to Gary Wong, QBS System's general manager.

At Penta's factory, workers attach labels containing C&C RFID Co.'s CCU 1111-4 and CCU 1111-2 RFID inlays (made with Impinj Monza 4 and Monza 5 EPC Gen 3 RFID chips, respectively) to handbags, suitcases, wallets and shoes. Approximately 60,000 items have been tagged to date. In addition, around 100 C&C on-metal RFID tags were installed on warehouse storage shelves at the DC, to identify the location at which goods were stored.

An RFID label made with C&C RFID's CCU 1111-2 RFID inlay
While tags are attached to goods at the point of manufacture, they are first read upon arriving at Penta's warehouse in China. The company installed Impinj R420 fixed readers at the warehouse's loading bay, as well as at the entrances and exits of storage zones. Handheld readers provided by Motorola Solutions are used at the store, as well as at racks within the zones, to identify goods and their location within the warehouse.

At the warehouse, as tagged items are received from the manufacturing site, the fixed reader captures each item's unique ID number and forwards that data to the Netage software residing on Penta's back-end system, thereby indicating which products have been received. Once the goods are put away on a warehouse shelf, their tags are interrogated via a Motorola handheld reader, and the tag attached to the shelf is also read in order to link those items with a specific shelf location.

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