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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
In the test store, the inventory "was counted by both bar code and RFID to get a comparison of accuracy and to compare to system counts," says Hardgrave. "It also provided an efficiency measure of RFID over bar code." While the accuracy of RFID compared with bar code was not made public in this particular study, other studies have shown the RFID 95 to 100 percent accurate, while bar code is 80 to 85 percent accurate.

In addition, RFID readers were mounted at all employee and customer exits and entrances in the test store, in order to monitor whether tagged merchandise was leaving or entering the store.

The researchers found that when the data in Bloomingdale's inventory management software was not adjusted by actual counts done with the RFID readers, the accuracy of the inventory levels declined over the 13-week period, as would be expected. However, once the inventory management system was adjusted for the actual counts done with the RFID readers, the inventory accuracy improved by 27 percent. Specifically, overstocks (meaning the inventory management software indicated fewer of a particular item than there physically was in the store) were decreased by 6 percent, while understocks (meaning the inventory management software showed a greater quantity of a particular item than was physically in the store) decreased by 21 percent.

The amount of time it took to conduct physical inventory counts using RFID was compared with the time it took to count using bar code scanners, and Hardgrave found that on average, 209 items could be counted per hour via bar code, whereas 4,767 items could be counted per hour via RFID. Overall, the net result is a 96 percent reduction in cycle-counting time by using RFID rather than bar code. His finding is that if Bloomingdale's devoted the same amount of time and resources doing physical counts using RFID technology, it could perform those inventory-counting events 26 times per year. Currently, the stores take physical inventory counts (using bar code scanners) only once or twice a year. "Certainly, inventory accuracy is higher when taking and updating inventory counts bi-weekly than it is when taking inventory counts annually," says the report.

While loss prevention was not a focus of the study, it did provide anecdotal evidence that RFID can be used as an effective means of tracking inventory that is stolen. Hardgrave and his team compared all of the RFID tag reads collected by the RFID readers mounted at the store entrance and exits points with the bar code data collected at the points of sale in the test store. This way they could account for the RFID-tagged items that were sold but from which the sales clerk forgot to remove the RFID tag. Once these items were removed from the list of tags collected at these readers at the entrance and exit points, it was determined that several RFID-tagged items were, indeed, stolen during the course of the study. In two cases, the thieves were apprehended.

Based on this finding, the report notes that even if it were not tied into a security application, the use of RFID readers at store exits and entrances would help retailers understand which products are being stolen and this would help them further refine the accuracy of inventory levels, since perpetual inventory records currently do not account for stolen items.

This 13-week study is part of a larger research effort that Hardgrave and his team is undertaking, in order to demonstrate and quantify the business value of RFID in retail environments (see Dillard's, U. of Ark. Study Quantifies RFID's Superiority to Manual Inventory Counts , Cold Chain and Item-Level Tracking Will Drive RFID Adoption, University of Arkansas Kicks Off Apparel and Footwear RFID Study. A copy of the study is available for download at ITRI's Web site (enter "RFID" as the keyword).

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