A few years ago, Best Buy ran several radio frequency identification pilots (see Best Buy to Deploy RFID, Best Buy Aims for Item-Level Tagging, Best Buy Eager to Use RFID to Eliminate Checkout Lines and Wal-Mart, Best Buy Spearhead DVD-Tagging Pilot). Managing CDs in smart shelves showed promise, but the retailer was unable to get many other companies—competitors or suppliers—interested in using the technology to better manage items as they moved through the supply chain. That might be about to change.
Last week, I wrote about how apparel companies are beginning to employ RFID at the item level to address a number of problems (see RFID in the U.S. Retail Sector). Electronics firms face many of the same issues, and could also benefit from tracking items with RFID. Let’s take a look at some of these issues.
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Managing complex inventories: The single biggest benefit apparel companies can achieve from using RFID at the item level is being able to manage complex inventories. It’s difficult to make sure the right number of stone-washed denim jeans—which come in several styles and 20 different sizes—are shipped to the warehouse, picked, shipped to the store and put on the shelf when they need to be replenished. Similarly, managing inventories of 20 types of Dell laptops—with different processors, hard drives, video cards and RAM—is a challenge. Looking at boxes in the back room doesn’t immediately tell you which specific configurations are missing.
Out-of-stocks: Unlike apparel retailers, electronics retailers do not usually stock a lot of goods on shelves—rather, most display samples and keep stock in the back room to reduce theft. But they do have some out-of-stock issues. Just as apparel-store employees can’t look at a wall unit filled with jeans and know which particular styles and sizes are missing, electronic store associates can not view a rack of music CDs or movie DVDs, or a shelf of toner cartridges, and know which items are missing. When customers enter a store seeking a specific item and fail to find it, the result is often a lost sale.
Seasonality: Related to out-of-stocks and managing complex inventory is the issue of seasonality. Consumer electronics, like clothing, have a limited shelf life. Order too many of the new iPod introduced for the holiday season, for example, and you’ll wind up with excess inventory that then has to be sold at a steep discount, or written off entirely. Order too few of the hottest electronics products, on the other hand, and you’ll miss out on sales. RFID can help manage inventory more efficiently, so that companies can better match supply to demand. For example, knowing exactly what you have on the shelves, in the back of the store and in the warehouse means you can reduce safety stocks, thereby decreasing the likelihood of being caught with overstocks.
Theft: Just as apparel items are often stolen by employees, electronics items frequently disappear before ever getting to consumers. RFID can not eliminate that problem, but apparel companies are finding that better tracking of goods reduces theft, because employees know those items are being tracked. In some cases, retailers utilize data analysis to determine which employees were working when the stolen goods disappeared, and can then take appropriate action.
Fraudulent returns: One common strategy by criminals (at least in the United States) is to steal items and then return them for cash (a few years ago, a White House employee was fired after being accused of doing that, for instance). A retailer often does not know if a pair of jeans or a digital camera was sold in one of its stores, or if it was stolen from a competitor’s location. Regardless, however, many businesses will offer a refund in an effort not to lose a customer. With an RFID system in place, an electronics retailer would know whether it had, in fact, sold a specific item.
Counterfeiting: RFID can not eliminate the counterfeiting of electronics or apparel, but it can certainly help. If all items are tagged and information is stored in a manufacturer’s database, retailers would be less likely to accept counterfeit or diverted goods from disreputable distributors. Law-enforcement and customs officials could quickly determine if shipments were legitimate, and electronics firms would not be responsible for the warrantees on extra items manufactured by third parties (companies in low-wage countries sometimes run off, say, an extra 100,000 items, in order to sell them illegally).
Many electronics manufacturers have not embraced RFID, deeming the technology too expensive. But now that apparel companies are showing there are significant benefits to managing goods with the technology, it’s likely there will be greater interest in the future. Moreover, RFID technology providers, including Impinj, Murata Manufacturing Co. and NXP Semiconductors, are working on creating RFID transponders that can be embedded in printed circuit boards, which makes using the technology less expensive (there is no cost for a label, or for applying a label externally). At RFID Journal LIVE! Europe 2010, held last week in Darmstadt, Germany, Schneider Electric discussed a project in which the company is trialing Murata’s RFID transponders in printed circuit boards.
When Wal-Mart Stores first announced its item-level tagging initiative (see Wal-Mart Relaunches EPC RFID Effort, Starting With Men’s Jeans and Basics), Myron Burke, the leader of that effort, told me it was not just about apparel, but any area in which there are complex inventories. He specifically mentioned electronics as an area in which RFID could provide benefits at the item level. While he didn’t say Walmart had any specific plans to track electronics, it seems that the benefits retailers are seeing in apparel apply to electronics products as well. Other retailers are likely thinking along the same lines, so this could become a hot area for RFID in 2011.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark’s opinions, visit the RFID Journal Blog or the Editor’s Note archive.