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RFID Study Quantifies ROI for Apparel Suppliers

University of Arkansas researchers find that by using item-level RFID tags to audit shipments, a garment manufacturer could dramatically improve shipment accuracy, as well as confidence in that accuracy, thereby reducing the incidence of retailer chargebacks.
By Claire Swedberg
The team focused on the auditing process, for it is at this point that shipment accuracy is ensured, or at which mistakes not caught (such as missing, excessive or incorrect items) can cost a supplier a great deal of money. If an order is incorrectly filled, retailers, in some instances, could charge a supplier not only for the wrong items, but also for the cost of the entire shipment. Repeated or severe mistakes could result in the loss of a contract or a customer.

Unexpectedly, the group found that shipping accuracy is, in fact, higher than the level of inventory accuracy usually found in the retail sector; however, a secondary factor was just as important: the confidence (or lack thereof) that a supplier has in its accuracy. Confidence in accuracy is critical, according to the research team, because even with a high degree of accuracy, suppliers are likely to be on the losing side in disputes if they lack sufficient confidence. Simply put, a supplier unsure of whether its shipment is accurate is less likely to defend itself against a customer's complaint. By deploying RFID, however, suppliers could raise their confidence in a given shipment's accuracy, based on RFID reads of the item-level tags within any particular order after it is packed.

Shawn Neville, group VP of Avery Dennison Retail Branding and Information Solutions
The study further found that suppliers use a variety of techniques to ensure high shipment accuracy, as well as confidence in that accuracy, during the audit process—often at multiple processes within a DC. Typically, a sample is taken from a batch of items, such as from a single carton, and each product from that sample is then checked for accuracy. If the number of errors within that sample exceeds the supplier's predetermined acceptability level, the batch is rejected and the shipment is halted. Otherwise, the batch is accepted and the distribution process continues.

Each participant in the program had at least one audit station for the manual counting of items packed within cartons. (Such a station might consist of nothing more than one or two employees walking along a conveyor belt on which packed cartons are placed, destined to be loaded onto pallets, and removing samples.) More typically, the DC maintains three auditing stations: one for auditing goods received from the manufacturing site, one in the pick/pack area (where cartons are first loaded for a shipment) and a third at the shipping point (before the goods are loaded onto a truck bound for a retailer).

Because two DCs already had RFID readers operating downstream from the pick/pack process, the researchers compared the RFID-derived quantity audit data from that process (as opposed to shipping or receiving) against non-RFID audits.

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