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Developing an RFID Strategy

The approach each company takes toward an RFID deployment can make the difference between disaster and profitability. Here are three basic strategies that companies can adapt to further their long-term business goals.
By Bob Violino
Be Customer-Centric
Retailers, manufacturers and logistics providers all have an opportunity to improve their relationship with their customers by using RFID. Marks & Spencer, the British retailer, has been testing RFID on all the clothing items moving between one of its distribution centers and a single store. The goal is not simply to cut costs but to make sure customers can always find the colors, styles and sizes they want. If the technology proves cost-effective, M&S could develop kiosks that help customers find matching accessories or obtain information about whether the item is in stock in a different color.

The most innovative attempt at a customer-service-oriented RFID rollout was Prada’s use of the technology at its mega-store in New York City. The deployment was unsuccessful—the RFID system was disabled last year—because the system wasn’t intuitive enough for staff and customers to use easily, but many of the concepts were sound. All the items in the store were tagged. Staff had access to handheld readers with which they could scan a tag on a suit or handbag. The system would then display information about the color, cut, fabric and materials used to create it.

Customers were also able to get more information on items they were eyeing. An RFID reader in each high-tech dressing room would scan the tag on any item. The information would be displayed on a screen in the dressing room. Customers could flick through a digital catalog of accessories by touching the screen, or see the same item in different colors. The goal was to provide information in context as a way of cross-selling to the customer.

Prada considered, but never deployed, wireless handheld computers. The idea was to give salespeople on the floor access to real-time inventory, which would enable them to find out what was in the back of the store without leaving the customer’s side. And if the item the customer wanted wasn’t in stock, the salesperson could provide accurate information about whether it was in a distribution center and how long it would take to get it to the store.

With tag prices of 50 cents or more, only a handful of top retailers like Prada could afford a customer-driven strategy. But it would be cost-effective for some retailers to tag certain high-value items in the store, such as stereo equipment, televisions and computer software. As prices of RFID tags and readers fall, these retailers would be in the position to expand customer-service-driven RFID applications to more and more products in the store.

Logistics providers could improve their relationships with manufacturers and retailers by outfitting their distribution centers, cross-docking facilities and, eventually, trucks with RFID readers. That way, they could give their customers real-time information about product that’s in the pipeline, perhaps guarantee 24-hour deliveries and have an electronic audit trail to back up their service-level agreements.

Manufacturers can use RFID to improve the level of service they give their retail customers—not just by adopting aggressive tagging strategies but also by working with retailers on ways to share information and revamp business processes. Providing advance shipping notices with Electronic Product Codes for all cases shipped is only the beginning. Manufacturers can work with retailers to shorten replenishment cycles, lower inventory levels in retail distribution centers and reduce out-of-stocks. “If you are able to improve your relationship with your best retail customers [by deploying RFID], the CEO should be jumping all over that,” says Accenture’s Tobolski.

All companies are going to want to use RFID to cut costs, gain an edge on their competitors and improve their relationship with their customers. The issue is one of focus. If you are Wal-Mart, it makes more sense to focus relentlessly on lowering supply chain costs. Prada also wants to cut supply chain costs, but it might achieve more benefit by improving the service it provides to its upscale clientele. In the end, a company’s overall competitive strategy must be the single animating force behind its RFID deployment.

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