Macy’s Inc. to Begin Item-Level Tagging in 850 Stores

By Claire Swedberg

The company plans to RFID-enable its Macy's and Bloomingdale's stores in 2012, and will tag garments most often replenished—accounting for about 30 percent of the retailer's sales.

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By late 2012, all Macy’s and Bloomingdale’s locations will be equipped with radio frequency identification technology, in order to read item-level tags on garments and personal items sold at the stores. Macy’s Inc., the company that owns both brands, announced today that its rollout of item-level ultrahigh-frequency (UHF) Gen 2 RFID tags for inventory tracking was the result of successful pilots of the technology conducted over the past several years, at a handful of East Coast stores and furniture and bedding distribution centers. Macy’s Inc. operates 810 Macy’s department stores throughout 45 U.S. states, as well as in the District of Columbia, Guam and Puerto Rico, and 41 Bloomingdale’s stores across 12 states.

Since late 2008, the company has been testing RFID technology by reading tags on garments, according to Bill Connell, Macy’s Inc.’s senior VP of logistics and operations. Initially, he says, the technology was tested at a Bloomingdale’s location in New York City’s SoHo neighborhood, at which time the store’s inventory speed and accuracy were compared against those of another control store at which no RFID tags were applied (see Bloomingdale’s Tests Item-Level RFID). The pilot was then expanded to include seven additional stores and six distribution centers. According to the company, the testing found that inventory accuracy—knowing which goods were located at which specific spot—was raised to 97 percent thanks to the item-level application of RFID tags, as well as the reading of those tags for inventory cycle counts, both within stores and at DCs.

With the permanent rollout of RFID at all Macy’s and Bloomingdale’s stores, suppliers will be asked to apply passive UHF tags to “replenishment items”—products regularly stocked, and automatically resupplied when sold to customers, and accounting forapproximately 30 percent of Macy’s Inc.’s sales. The items to be tagged will consist of size-intensive replenishment categories, such as men’s and women’s undergarments, men’s slacks, denim apparel and women’s shoes.

The retailer predicts that RFID will enable employees at all of its stores to conduct inventory counts faster, thereby allowing for inventory to be carried out more frequently throughout the year. In the past, inventory counts were performed only once annually. The use of RFID within stores, Connell says, enables inventory counts for tagged items to be taken several times a month. With the more frequent counts, he explains, the company hopes that there will be fewer instances of out-of-stocks on store shelves, which should also lead to increased sales revenue.

The deployment will consist of handheld RFID readers for store workers to use in back rooms or on the sales floor, in order to periodically count inventory levels. Software will store data, including each tag’s Electronic Product Code (EPC) number, as well as the corresponding item’s stock-keeping unit (SKU) data. RFID handhelds could also be utilized at all store distribution centers.

To ensure that the replenishment items received at its DCs and stores are tagged, Macy’s Inc. is working with its suppliers to aid them in transitioning to applying RFID labels to products at the time that the goods are manufactured or packaged. According to Connell, the company advises that the best approach may involve applying an RFID tag in place of the current price label attached to each garments or its packaging. At present, he says, no suppliers are attaching RFID tags to products destined for Macy’s or Bloomingdale’s. However, most supplying the replenishment items, such as undergarments, will begin applying tags by the end of next year. Macy’s intends to assist with any issues that could arise for suppliers as they make that transition, Connell says.

The timing is right for the item-level tagging plan, Connell says, since the technology has been proven through his company’s testing, as well as during other case studies conducted by the University of Arkansas. “The technology is ready, the hardware is working well, the pilots have taken place,” he states.

The retailer has been working with the Voluntary Interindustry Commerce Solutions Association (VICS) since 2010 to develop the collaborative adoption of standard practices for item-level tagging (see VICS Item Level RFID Initiative Enters Phase II). Connell serves as a co-chair of VICS’ Item Level RFID Initiative (VILRI) communications and outreach committee.

With the use of RFID, Connell says, customers will also benefit by being able to purchase the particular size and color of a product that they seek. “When you’re in stock, the customer is better served,” he states, noting that suppliers will benefit as well, since they, too, will be able to ensure that their products are on the sales floor in the sizes and colors that shoppers need.

Macy’s Inc. reports that it is focusing on using RFID only for inventory cycle counts, and only on replenishment items, with no immediate plans to expand to other products or other applications the technology. That, Connell says, is necessary to ensure that RFID’s adoption is managed smoothly across the company’s enterprise.

Technology vendors—such as tag and hardware companies, as well as software providers—have yet to be determined, Connell says.