May 26, 2020Under normal circumstances, a supply chain pipeline in the European and North American apparel and footwear market carries approximately three billion garments and shoes between suppliers and stores each month. That's the estimate from RFID supply chain technology company SML Group, which has completed a survey of about 20 such retailers and brands regarding their reopening plans as pandemic quarantines lift throughout Asia, Europe and North American. SML's survey indicates that bringing visibility back to the supply chain is the companies' top priority.
When COVID-19 struck first China, and then Europe and North America, that three-billion-item pipeline emptied out, according to Dean Frew, SML's CTO and senior VP of RFID solutions. Stores sold many of the goods they had available as the factories in China closed. However, due to the hasty nature by which quarantining began, goods collected at stores and warehouses, while other products have simply run out and need to be reordered. Therefore, in returning to business after two months of quarantine, many retailers are facing an unprecedented task of sorting, rerouting or marking down inventory that had been intended for sale months prior.
SML interviewed around ten companies each from North America and Europe, some of which are SML customers and some that aren't, to understand what the apparel industry is most concerned about as it prepares for reopening. Inventory visibility isn't the only concern, though, as stores and factories must also identify ways to provide customer and worker safety as they reopen their businesses.
Understanding what stock is in store fronts, however, as well as which opened or unopened boxes are in stock rooms or distribution centers, feels out of reach for most companies, the survey indicated. SML found that whether or not stores had deployed RFID technology, they all faced the task of getting a grasp on their inventory levels. In fact, Frew says, at least one company reported that it had hundreds of shipping containers loaded with goods that it had not yet opened.
Additionally, the sales model is changing as consumers are increasingly shopping from home. That, more often, means placing orders online and picking up products in stores or having them shipped directly to homes. Without inventory visibility, such purchases can be difficult to guarantee. So now, with quarantines lifting by region, the pressure is on for retailers and brands to sort through the inventory they have onsite and decide whether to put it on the store floor for sale, mark it down or send it back.
SML sorted the survey respondents into three categories: those already using RFID in their stores or supply chain, those that have RFID tags on their products but are not using the technology, and a third category in which companies have no RFID technology in use at all. The system required would vary, Frew says, and SML is offering solutions and advice for each of these three categories.
The technology company experienced the same production slowdown that the apparel market faced, Frew says, because its own factories in China stopped manufacturing its passive UHF RFID tags when the garment factories did. SML's tag production has restarted in recent weeks, he reports, and the company has begun examining the challenges ahead for the apparel market. With that in mind, it launched the survey to understand what its existing and potential customers were facing. "We were trying to understand something that's unprecedented," he states. "That brought me to talk to these retailers."
Retailers with RFID technology already operational at their stores have an advantage, Frew argues, since they are already beginning to perform stock counts. Since goods are tagged, employees can carry a handheld RFID reader around a store, storage room or warehouse and capture a real-time view into what is on hand. The stores can then set up the appropriate markdowns for goods that may be out of season, while rerouting products that won't sell and ordering items not available for sale. With RFID, he notes, stores will be ready to quickly offer sales via "buy online, pickup in store" (BOPIS) or "ship from store" models.
For the second category, in which tags are in place but not being utilized, SML is offering a software-as-a-service (SaaS) version of its Clarity software, along with the rental of handheld RFID readers, to help these businesses get their inventory counted and managed. SML is partnering with Zebra Technologies and Microsoft to provide the necessary handheld RFID readers and software.
The third category of businesses in retail and manufacturing—those that have not yet implementing RFID—could still benefit from employing the technology now, Frew notes. For businesses that have no tags or readers at their site, he adds, "We're saying, 'Go ahead and start tagging.'" SML can provide onsite technology so that a retainer can apply the tags, or it can produce the tags in its service bureaus and deliver then to factories. Users can then take advantage of SML's temporary solution, he says, to more quickly leverage those tagged products in their inventory software.
After completing the survey, Frew recalls, SML's team was surprised at the "depth of the challenge" that the interviewees said they faced. For instance, distribution centers reported that 70 percent of the items they'd received at their sites, in unopened containers, still needed to be processed and diverted from the original plan. One company indicated its storage yard held hundreds of sealed containers that it will now need to process.
The challenge is being felt at the stores as well. Many of the retailers surveyed, SML found, believe their inventory accuracy is less than 50 percent. That, in part, is due to goods having been shipped but never received into the store. What's more, fewer than 10 percent of retailers replied that they were prepared to effectively provide BOPIS sales to customers.
Looking ahead, several retailers reported that less than five percent of their pre-quarantine orders are accurate reflections of the current consumer demand. "Demand will be less or different" for the near future, Frew predicts. For example, while marking down the prices of goods that have been waiting in storage, retailers are still unclear what the demand will be for new products. Without an automated system to track the movements of inventory, understanding such trends will be limited for many brands and retailers, he predicts.
Additionally, fewer than 10 percent of respondents thought they have technology in place that will assist them in the marking down of inventory prices. SML has offered a markdown solution with its Clarity software for the past six years, Frew says, which enables store associates to read or scan a product's tag and automatically update the pricing information for that stock-keeping unit (SKU).
According to Frew, SML plans to offer as much flexibility in its solutions as it can to meet the needs of those both with and without existing RFID solutions. "The feeling I got from this interview process," he states, "was just how laborious a task they have ahead in physically counting everything and deciding 'What do you hold onto?' and 'What do you send back to the warehouse?' It's a daunting task, especially when you add to that issues around safety."
For those already using RFID, Frew predicts, their transition into being open for business will be much faster than those manually counting their inventory. "We're thrilled for them," he states, "Their investments were wise. We hope there are great success stories for other companies as well." SML is currently in discussions with some of these businesses. In the meantime, he says, the firm has seen its RFID solution rollout continue during the pandemic, with more than 400 new stores going live since the start of 2020.
