When the Auto-ID Center first talked about the adoption of Electronic Product Code technology in the global supply chain, many people predicted that companies would start by tracking pallets, then cases, and years later—when tag prices came way down—items. It hasn’t quite worked out that way. Many companies are moving directly to item-level tagging, because that’s where they see the biggest return on investment.
Item-level tagging has the most appeal in industries where the average item costs $30 or more, such as apparel, footwear and pharmaceutical drugs. But some companies are starting to look at tagging lower-cost items.
The pharmaceutical sector was the first to examine RFID’s item-level benefits. For the past three years, drug makers have been exploring RFID’s ability to reduce counterfeiting by enabling companies to track individual bottles of drugs as they move through the supply chain and collect the data needed to create electronic pedigrees—secure documents that verify the history of a drug from the time it is created until it reaches the customer.
Purdue Pharma is tagging each bottle of the painkiller Oxycontin that is shipped to Wal-Mart pharmacies, and Pfizer has been tagging individual bottles of Viagra shipped to the United States.
In other industries, companies see the benefits of item-level tagging within their own operations or with a limited number of partners. The benefits differ from industry to industry. In the apparel sector, a big driver is the ability to better manage the many sizes, colors and styles of clothes in inventory, so they can be shipped to the right store on time. Lemmi Fashion, a supplier of children’s clothing, has been using RFID to track inventory being shipped from Asia to its warehouse in Germany. RFID has enabled it to increase the number of items it can handle in its warehouse from 5,000 to 15,000.
The Council of Supply Chain Management Professionals (CSMCP) and the Voluntary Interindustry Commerce Solutions Association (better known as VICS) have provided funding for the University of Arkansas’ RFID Research Center and an apparel retailer to study the benefits of item-level tagging and how it might solve problems apparel retailers struggle with, including inventory management.
Retailers are also looking to use item-level RFID to improve on-shelf availability, which leads to increased sales. U.K. retailer Tesco and U.S. consumer electronics store chain Best Buy have tested RFID’s ability to track DVDs on store shelves. Sony plans to tag individual copies of its Spider-Man 3 DVD, which will be released Oct. 30. Given that the vast majority of new titles sell within the first two weeks of their release, Sony wants to ensure that the discs get to the stores on time and are put out on the retail floor quickly.
Last year, Boekhandels Groep Nederland (BGN), the Netherlands’ largest bookseller, introduced an RFID system to track individual books arriving at a store in the city of Almere. When a shipment leaves a warehouse run by Central Bookhaus, a major book distributor, Central Bookhaus electronically sends BGN an advance shipping notice with the unique serial numbers stored in the books’ RFID tags. On arrival at the store, the reads from the tags automatically identify the books.
In May, BGN took the next step in its deployment of item-level RFID tagging. The retail chain installed RFID interrogator antennas on shelves in its two stores that are currently RFID-enabled. The shelf-edge antennas and readers, provided by Vue Technology, allow BGN to capture the location of each specially ordered book stored on an RFID-enabled shelf.
A study by R4 Global Solutions, a San Francisco-based systems integrator, indicates that item-level tagging has the potential to reduce inventory shrinkage—which includes lost and stolen merchandise—by as much as 40 percent in retail stores. The study also shows an eight-fold improvement in employee productivity in areas attributed to inventory management. Non-RFID-enabled inventory tasks—including replacing misshelved items, counting stock and running reports—that would take an employee four hours, took only a half hour. This eight-fold reduction matches the time reduction achieved by British retailer Marks & Spencer through its item-level deployment.
Retailers are also examining the possibility of using item-level RFID tagging to reduce lines at cash registers. FamilyMart, a Japanese convenience chain owned by corporate giant Itochu, has completed a two-phase pilot of an item-level RFID system at two of its busiest Tokyo stores. The project included tagging popular items to demonstrate how item-level tagging could speed the point-of-sale process and reduce queues during the busy early morning and lunch rush hours. The trial showed that item-level tagging and RFID-enabled payment cards allowed the merchant to double the number of customers it could serve per hour.
Some retailers are experimenting with self-service kiosks or interactive mirrors that use RFID to allow customers to call up information on specific items. These applications, which enable the customer to see additional sizes and colors that are available in inventory, have enabled retailers to increase sales without hiring additional staff. The benefit of improving sales through better on-shelf availability and customer services is proving very attractive, and industry observers believe that more retailers will turn to item-level RFID within the next 12 to 18 months.
Hot News Items
Here’s a look at some recent item-level RFID projects:
Handleman Deploys RFID for Supply-Chain, Internal Benefits
The entertainment CD and DVD distributor is building item-level RFID functionality into its operations, so it can provide faster, more transparent and more intelligent supply-chain services to its customers and suppliers.
Throttleman Adopts Item-Level Tagging
The Portuguese fashion retailer has its manufacturer apply RFID tags to every item it sells, automating the shipment and receiving processes.
Dillard’s Gears Up for Item-Level Pilot
The retailer is working with a jeans manufacturer that will apply tags to individual garments and ship them to a store in Dallas.
Rite Aid Embarks on Item-Level Tracking Pilot
The U.S. drugstore chain is reading tagged bottles of Viagra received at its distribution center in Perryman, Md., and plans to equip two of its stores with handheld RFID interrogators so pharmacists can track incoming tagged bottles.
Cardinal Health Readies Item-Level Pilot
The drug manufacturer, packager and distributor will test an RFID system that could help verify the authenticity of products moving through the supply chain.