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Bloomingdale's Tests Item-Level RFID

A 13-week project, which involved using EPC Gen 2 passive RFID tags to monitor the inventory levels of denim jeans, improved accuracy by 27 percent, while reducing labor costs.
By Mary Catherine O'Connor
Aug 26, 2009Adding to the growing body of research and studies it has developed in relation to the use of RFID in the supply chain, the RFID Research Center, a part of the Information Technology Research Institute (ITRI) at the Sam M. Walton College of Business at the University of Arkansas, has published the results of a 13-week item-level tagging initiative it had conducted at Bloomingdale's stores last fall. The study's authors determined that when the retailer relied solely on its current inventory management system (which shows what should be on hand based on what has been received in shipments and what has been sold), the accuracy of the inventory decreases over time. But when inventory was counted using RFID, the accuracy was improved by 27 percent. The researchers also found that using RFID to identify and count individual items took, on average, 96 percent less time than using bar codes for the same task. Finally, they found that using RFID to determine which items had been stolen helped further improve inventory accuracy.

Retailers devote a great amount of resources toward improving inventory accuracy because inaccurate inventory levels can lead to either out-of-stock products, resulting in lost sales or overstocks, necessitating that retailers discount product prices in order to sell excess inventory. Some studies have shown, however, that retailers' perpetual inventory counts (that is, the amount of stock retailers believe they have in their stores at any given time) can be more than 55 percent inaccurate.

The item-level tagging study involved two Bloomingdale's stores—a control store and a test store—in northeastern United States. At the test store, Avery Dennison EPC Gen 2 passive UHF RFID tags were placed on men's and women's denim jeans. The tags were attached to the items as they arrived at the test store, and sales staff were instructed to remove the tags at the point of purchase. Returned merchandise was retagged by a store associate using an RFID printer-encoder. There were anywhere from 800 to 10,500 RFID-tagged pieces of merchandise in the test store at any time during the pilot (the number varied based on how many products were received and how many sold on a day-to-day basis).

For counting the tagged inventory, staff were supplied handheld Motorola EPC Gen 2 UHF RFID readers. During the first five weeks of the pilot, store staff used both RFID readers and bar-code scanners (reading the bar code printed on the product hangtags) to count the RFID-tagged stock in the test store. They also scanned the bar codes attached to the same SKUs in the control store. They did these counts in both stores three times per week, counting stock of denim jeans both on the sales floor and in the back room. Hardgrave's team used this data to establish a baseline for the inventory in the men's and women's departments in both the test store and the control store. For the remaining eight weeks, counts (both bar code and RFID counts) were conducted two times per week by a contracted inventory service. The inventory service followed the same procedures throughout the study to count inventory on the sales floor and in back-room storage areas. The data collected during these remaining eight weeks was used to compare with the baseline data.

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