Oct 04, 2010When Wal-Mart Stores initially requested that its top 100 suppliers tag pallets and cases being shipped to the retailer, consumer packaged goods (CPG) companies struggled to find a return on their investment in tags, because many of them sold products that were rarely stolen or out of stock. Visibility into the location of goods in the supply chain, therefore, was not deemed critical. The same, however, is not true for apparel suppliers.
There are vast differences between the CPG and apparel supply chains that suggest clothing suppliers will achieve a significant ROI from tagging garments. First, most CPG companies make their own products, while most apparel suppliers outsource manufacturing to countries where production costs are lower, including China, Vietnam and Mexico. That means suppliers do not have the same level of visibility and control of what is being produced and shipped. When a third-party manufacturer ships the wrong goods, a apparel supplier does not find out until those items arrive at a warehouse in Europe or North America. To meet a retailer's order, a supplier sometimes must currier the correct items from Asia at great expense.
Another big difference between the CPG and apparel supply chains is the complexity of inventory. A store might stock, say, 20 flavors of Campbell's Soup and 10 styles of jeans. But the soup might come in one or sizes, whereas the jeans might come in 20 sizes—which means the jeans supplier would need to manage 200 stock keeping units (SKUs), while Campbell's would need only manage 20 or 40. Managing a greater number of SKUs requires additional labor to count inventory and pick orders.
Apparel items are generally more expensive than consumer packaged goods, and are stolen more often. When shipments arrive at a distribution center (DC) and are counted, some items are stolen by employees. Apparel can also be taken while sitting in a warehouse and waiting to be shipped, or they can be stolen during picking and shipping operations, or when they arrive at a store, are sitting in a back room or are being marked down.
RFID can provide far greater visibility and control than bar codes, because items can be counted automatically at each step along the supply chain. Lemmi Fashion, a German manufacturer of children's clothing, had issues with suppliers in Asia shipping the wrong goods, which led to problems fulfilling orders by retail customers, as well as lost sales. Lemmi deployed a high-frequency (HF) system a few years ago, and then an ultrahigh-frequency (UHF) solution. The firm achieved a return on each system, since the technology enabled it to ensure that the proper items were being shipped, and to react earlier if that wasn't the case. Another big benefit for Lemmi is a reduction in time and labor needed to count goods arriving at its German DC. Instead of hand-counting each garment, an entire rack can be read as it is pushed through a portal.
I don't know if Lemmi had a problem with theft—or, if it did, whether RFID had an impact. But several companies have told me that the technology can reduce theft just by virtue of the greater visibility it provides. When employees know that items are being tracked when they arrive at and leave a facility, they are a little less casual about tossing something into a bag and walking out with it. RFID also enables businesses to analyze data, which allows them to determine, for instance, that a particular employee always seems to be working when items end up missing.
Companies that have a big theft problem can also install security cameras and link these to their RFID system. That way, when tags are read, they are linked to searchable recordings. If an item goes missing, it is possible to search a digital recording and determine who the last person was to handle that product.
When you add up the savings from not having to courier items from Asia due to mis-shipments, labor savings during picking and shipping at a DC, and theft reduction, RFID will almost certainly deliver an ROI for apparel suppliers within a year.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog or the Editor's Note archive.