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RFID Earns a Second Chance

Apparel retailers are using the technology to improve inventory management, which increases sales and reduces working capital.
By Susan Flake
Oct 01, 2011—Early adopters in the retail apparel industry became disenchanted with RFID. At the time, it was a supply chain-focused technology. The business plan called for manufacturers to tag pallets and cases, which would be read at retailers' distribution centers. But the solution didn't deliver a clear return on investment for suppliers. Since the end game was always to use RFID to reduce the age-old out-of-stock problem, RFID technology providers, research organizations and retailers developed a strong justification for item-level tagging in stores, to improve inventory management. And RFID vendors produced handheld readers to support this application.

So, whether you're a disillusioned early adopter or an observer deterred by others' attempts to employ the technology, it's time to take a fresh look at RFID. Real-world deployments prove that RFID can deliver a significant ROI to apparel retailers, starting by improving inventory accuracy. Typically, inventory accuracy ranges from 65 percent to 85 percent. With RFID, it reaches 99 percent—and that translates into reduced stockouts, leaner inventory, increased revenue and less guesswork.

How is that possible? Most apparel retailers take inventory annually or semiannually, because it's time-consuming, disruptive and expensive. With RFID handheld readers, stores can conduct daily or weekly inventory counts. Last year, for example, a major American retailer began RFID-tagging men's jeans in several stores. Before deploying the RFID system, the retailer only took inventory once yearly. Now, sales associates use handheld RFID readers to take inventory more than once a week; before the stores open, they check inventory on the sales floor and in the back room, in 30 minutes or less. The system generates a replenishment report, so store managers know immediately which items need to be moved from back to front or reordered.

Technology advances have improved read rates on items, including those that are folded and stacked on shelves, where tags could be oriented in a variety of ways. Until recently, the antennas in RFID handheld devices used either "linear polarization" for a longer read range or "circular polarization" for wider coverage. Now, these devices have an omni-directional antenna that provides a longer and broader read range.

Another reason to reconsider RFID is that it's no longer a daunting, prohibitively expensive process. Providers offer complete packages—including tags, readers and software—that make it relatively easy and cost-effective to launch an inventory-management solution That way, you can ensure the right products are in the correct place when customers want to purchase them.

Once you see the benefits of in-store inventory management, you'll likely want to consider other RFID applications, such as planogram compliance and loss prevention. But for now, the bottom line is that RFID provides visibility to improve in-store inventory management.

Susan Flake is director of retail business development at Motorola Solutions.
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