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Staples Achieves Great ROI, Expands RFID Deployment

Staples Canada has announced success of the office supply retailer's five-store RFID pilot. Director of process engineering Joe Soares was extremely pleased by the pilot, which has yielded a "very, very satisfying return on investment." The company will now roll the pilot out to ten more stores in the hopes of achieving similarly positive results.
Oct 02, 2008This article was originally published by RFID Update.

October 2, 2008—RFID Update today spoke with Joe Soares, the director of process engineering at Staples Canada, about the success of the office supply retailer's five-store RFID pilot. Soares was extremely pleased by the pilot, which has yielded a "very, very satisfying return on investment." The company will now roll the pilot out to ten more stores in the hopes of achieving similarly positive results, and assuming that it does, will continue to expand the implementation more widely.

Staples is tagging about 2,000 of the 7,500 SKUs that each pilot store carries. Most of the items are high-value, high-theft products and capital goods like computers, MP3 players, and other electronics. The tags are fully active, which enables the system with real-time location capabilities. There are seven readers hung from the ceiling at points around the store, each of which designate a particular zone for locating products within their range. The deployment is purely in-store; there is no supply chain component. The tags are attached when items are received at the store, then removed when the product is purchased. The price of the tags "isn't cheap", said Soreas, but because they are used over and over, the per-use cost falls to 8 cents.

The solution is the intelliTRACKER inventory tracking system from Montreal-based AbsoluteSKY and was deployed by Fujitsu Transaction Solutions.

Among its many benefits, Soares indicated that the labor savings was paramount. Each store used to conduct cycle counts (inventory) once every two weeks, a laborious and time-consuming process. With the RFID system, all tagged items are constantly beaconing their presence, which enables the stores to monitor inventory in essentially real time. "Now the store managers can just go to the server, click a button, and all the inventory exceptions are on there. It takes only about 15 minutes."

The manual inventorying was also error-prone. "Very often inventory is wrong," Soares explained. "What happens when inventory is off or wrong is that you have to constantly make adjustments to it so that your replenishment system kicks in correctly." And now that the RFID system is in place? "What we're finding is that our inventory is 100% accurate."

Another major benefit Staples realized as a result of the system was increased gross margins. Thanks to the RTLS capabilities, staff can locate inventory throughout the store, inventory that might otherwise be difficult to find and therefore sit unsold. A common problem in retail, explained Soares, is that a store might have a single unit of a desired product in stock but because there is just one left it is difficult or impossible to find. The last computer of a certain model, for example, might be hidden behind the boxes of other computer models. That computer will eventually be found and more prominently displayed, but by that time it might have had its price reduced. The ability to locate all inventory solves this problem. "Because you can find the stuff, you can sell it sooner," said Soares. "We find and sell the product before markdowns are taken on it." The result is increased margins across the board.

There were even more benefits that Staples realized, including almost fully eradicated shrink and a drop in return-to-vendor dollars, but the labor savings and increased gross margins achieved ROI by themselves. "When you look at those two alone, the system pays for itself very quickly."

The strong results mean Staples will push ahead with deployment of RFID in other locations. "We've done five stores, and we're going to double that with another ten, and just keep seeing if the numbers prove out." Soares said that Staples US is watching very closely to see if the technology should also be adopted Stateside.

When asked how Staples was able to achieve such positive results and strong ROI, while other retailers struggle with gaining benefit from RFID, Soares answered that their approach had been to identify pain points first, then attack them with the technology. Soares identified cycle counting as just such a pain point. "Cycle counting is not productive; it's a waste of time and money," he said. "The approach I took is, 'How can I save the business some labor dollars?'" Does he think other retailers could see the same ROI? "For whomever does cycle counts, yes, there is no question about it."
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