Central American department store Siman Group has deployed an automated solution from radio frequency identification (RFID) technology company SML Group. The company’s goal was to improve in-store inventory management with tags attached by suppliers or printed at Siman’s distribution centers throughout Guatemala, El Salvador, Nicaragua and Costa Rica.
Since the company began rolling out the system at its stores last year, Siman reports item-level stock accuracy has grown from 65 or 70 percent to 95 percent. Workers are now able to perform weekly stock counts of more than 250,000 items per store, Siman indicates, compared to the labor-intensive manual counts that were previously conducted twice annually. The passive UHF RFID solution includes SML’s Clarity software, printers and Inspire RFID tags, as well as handheld readers from Zebra Technologies.
Siman is based in El Salvador, with 15 stores throughout El Salvador, Costa Rica, Guatemala and Nicaragua. The retailer initially reached out to SML in 2020, seeking a new approach to its inventory-management process as it continued to expand throughout the Central American market. The company worked with SML to identify challenges and built a solution, then a pilot was launched in 2021 at Siman’s El Salvador department store. Since then, the retailer has been rolling out the solution to all of its 15 stores across those countries.
Although Siman Group knew that its counts were not ideal, the company had an inflated view of its inventory levels, according to Alejandro Choussy, Siman’s regional logistics manager. Customers and staff members expressed frustration when products were not available, he recalls, and so Siman began talking about RFID around 2019. The company was selling products from some brands that were applying RFID tags to their price labels, and the retailer opted to test the technology to determine whether it could gain its own benefits related to inventory management.
Understanding Actual Inventory Levels
Work with SML was delayed in June 2020 during the height of the COVID-19 pandemic, Choussy says, but RFID planning resumed around November of that year as stores started to open up again. The companies launched a pilot in January 2021 at a single store in El Salvador’s capital city, San Salvador. Piloting commenced with three types of merchandise, he notes, and tagging began at a distribution center that sends products to that store. “That was when we saw the benefits firsthand,” he recalls.
According to Choussy, adding RFID tracking to its inventory-management process helped Siman to bring products to light that might have been missed with the manual method. “We were able to quantify our previous inventory,” he says. “That’s something we’ve never had.” The early RFID tag reads confirmed the 65 percent inventory accuracy, he adds. “Basically, we saw that [the count] was worse than we thought.”
The company opted to deploy the technology for nearly 95 percent of its merchandise, which consisted of adding RFID tags to every product, ranging from shoes or small household good to large appliances, like microwaves. The last goods to be tagged are cosmetics and fragrances, Choussy says, as these have proven to be the most challenging as far as tag application goes. In June 2021, the company launched its first deployment at a store in San Jose, Costa Rica, which went live that September. This was followed by another store in the same city, as well as its Costa Rican distribution center.
Tracking from the Distribution Center
In most cases, tags are applied at the factory. Once applied, the tags remain on garments or other products until they are sold. Many tags already arrive at the DC with products from a variety of suppliers. Siman receives approximately 15 percent of its goods from local brands, and the company is printing labels that can be applied at the point of manufacture.
In that way, products are already in SML’s Clarity software by the time they reach the distribution center and are thus ready to be interrogated via RFID readers. However, the tags are not currently read at the DC. By next year, Choussy says, the company hopes to deploy RFID readers there so the tags can be read as products are received from suppliers and are then shipped to stores. Those devices could consist of tunnel or workstation readers.
Alejandro Choussy
Tags are first read when they are received at a store. Employees use a Zebra terminal and handheld reader, loaded with the Clarity Store application, to capture the tags’ ID numbers when the boxes arrive, without requiring goods to be unpacked before being scanned. The Clarity software captures each tag’s unique ID, which is linked to the product’s stock-keeping unit, then updates that item’s status as received at that specific store. The system updates the inventory count to reflect the newly received merchandise, and the software shares that data with the store’s management software.
As goods are transferred from the back room to the sales floor, store associates read the tags again using a handheld reader, thereby updating each product’s status in the software as on display. Workers can conduct weekly inventory counts, at which time they use their handheld reader, running the Clarity app, to identify all tags on site, and to detect whether anything is missing or if there are other inventory discrepancies. The handheld readers can also be used for omnichannel sales, such as “buy online, pickup in store” (BOPIS).
If a customer has purchased an item online, the software identifies that the product is available at the specific store, and employees at that location receive the order. The workers use the handheld reader to input the products they seek, using Geiger counter mode to locate those goods and pack them up for the customer. The software again updates the inventory status to indicate those items have been sold.
The Clarity software is hosted on the Clarity Core cloud-based platform, using Microsoft Azure, and is integrated with the store’s Oracle-based enterprise resource planning system. So when a product is sold at the point of sale, that data is linked directly to the RFID inventory count.
Saving Labor Hours with Inventory Counts
Siman previously offered omnichannel services, including BOPIS sales, but the process was time-consuming and took workers away from other tasks as they went about looking for products, packing them for orders and scanning barcodes. When it came to carrying out inventory counts, the process used to require around 80 to 85 employees for a single count, which lasted more than 24 hours. “It was messy and time-consuming,” Choussy says, “and we sometimes couldn’t finish it even in 24 hours.”
With RFID technology, the same counts can be completed within a matter of hours, once weekly, by only about four employees. Each store location has six Zebra TC21 RFID readers with connections to smartphones or tablets running the Clarity app. By improving inventory accuracy, the company has successfully identified goods missed in the back room that should have been put on display in the storefront.
“We were surprised by the amount of inventory we had that was not available, not shown to the customer,” Choussy says. “In fact, we were under the assumption that everything that came to the store had been received and put onto the sales floor.” Instead, Siman discovered, some goods had been overlooked in the back area, “so the customers had no exposure to that inventory.” While the company expects to see an increase in revenue based on its higher inventory accuracy, he adds, it is too early to measure the results. “There are a lot of things that affect revenue, so [it can be hard] to isolate that specific attribute.”
In adopting RFID technology, Siman Group is among the first retailers in Central America to gain automated inventory data. “We were one of the first, aside from the Inditex brand [a Latin American clothing company], especially in the magnitude that we’ve done,” Choussy says. Siman plans to conduct a pilot this year of a self-checkout station, he adds, using RFID to enable customers to make purchases without having to wait in line for a store clerk.
Changing Buyer and Seller Behaviors
The retailer’s technology adoption has been unique in several ways, according to Dean Frew, SML Group’s CTO and senior VP of RFID solutions. For one thing, he says, the tagging strategy is centered around self-printing. “The printing and encoding is being accomplished onsite,” Frew explains, rather than through a service bureau. In that way, Siman was able to continue with its existing process of shipping printed labels to suppliers as they placed their orders. “So what we did is just basically overlaid that process with an RFID printing solution. We would just print and encode labels, and so the vendor didn’t really experience any difference.”
Dean Frew
Frew says the Siman team adopted an ambitious plan to tag all of its products, despite the inherent challenges with a wide variety of goods sold in a multi-floor department store. “They looked at the problem the right way,” he states, with a holistic approach to include all merchandise. “In my opinion, based on good inventory data, that is going to change the way they do business.” Once Siman Group saw the pilot results, its focus was on adopting quickly. “Since then, we’ve just been working on getting Costa Rica, El Salvador, Guatemala and Nicaragua live.”
The pandemic has created a change in buying behavior, Choussy says, which has boosted the value of RFID technology-based visibility. For instance, while BOPIS purchasing was already taking place by early 2020, it expanded dramatically once the outbreak began. “When we first started talking [with SML], which was pre-COVID,” he states, “BOPIS was important, but it just blew up [in subsequent years]. Luckily, we were already starting the discussion, so when COVID kind of eased up and we got out of the initial wave of shutdowns, we were able to pick the ball up and start moving again [quickly].”
Due to its high inventory accuracy, Siman Group is now less likely to cancel online orders due to out-of-stock incidents. Its fast and aggressive approach to RFID technology adoption has resulted in faster benefits, Choussy says, but also numerous challenges along the way. “When we started delving into this world,” he recalls, “we knew it was going to be complicated. We have been able to surpass all the complications and hurdles that we had, and we are just reaping the benefits… so it’s been really challenging and rewarding as well.”
Key Takeaways:
- El Salvador-based Siman Group has raised its inventory accuracy to 95 percent with a comprehensive RFID solution.
- The system has gone live at stores and distribution centers throughout three countries, with RFID tags applied to 90 percent of merchandise ranging from small housewares and apparel to appliances.