Oct 14, 2011RFID Journal recently posted an article in which Stacey Shulman, American Apparel's VP of technology, said that within the 50 or so of its stores that have deployed a radio frequency identification technology system for managing inventory, internal shrinkage has declined by an average of 55 percent, and that at some stores, it has fallen by as much as 75 percent (see RFID Delivers Unexpected Benefits at American Apparel). She attributed this decrease to a reduction in process errors, as well as a change in American Apparel's culture.
Frank Hayes, a senior editor for StorefrontBacktalk, recently posted a short article about our story, in which he described the reduction in shrinkage as "something of an accounting trick" (see Can Item-Level RFID Pay For Itself By Cutting Theft? Well, Sort Of).
Hayes wrote, "Deploy any surveillance technology in a store with lots of employee theft and some thieves will get nervous and stop stealing—for a while. Shrinkage drops, and IT can declare that RFID's ROI is 100 percent." Hayes suggested that theft rates will increase, but by that time, the CFO who funded the project will have moved on and "you'll likely never get dinged if the reductions were short-lived."
But here's the rather obvious point—it was in our title—that Hayes completely missed: RFID was not deployed as a surveillance or antitheft technology. The decline in shrinkage was an unexpected benefit. The RFID project was funded on the basis that it would deliver a return on investment through improved inventory accuracy, and the benefits that accrue from that.
So will the reduction in shrinkage be short-lived? It's difficult to say—but there is reason to believe that it won't be. Yes, unscrupulous employees will be able to find ways to defeat the system. That would be true of any technology designed to stop them from stealing. But there are some other factors at play here.
First, RFID is more than just a technology that beeps when something goes out the door. It contains serialized data. That means you know precisely what was stolen—and by conducting frequent inventory counts, you can determine when that occurred. So if a particular employee is always working when items end up missing, you can dismiss that worker to serve as a warning to others who might steal.
If theft is a serious issue, companies can deploy closed-circuit television (CCTV) cameras linked to RFID systems, so when a specific item with a particular serial number is missing, you can search the appropriate camera for the last time that product was captured by an RFID reader, and then review the video clip. Sony Europe has used this concept to great effect at a warehouse in Europe (see Sony Europe Implements Video-RFID Tracking System).
Here's another important point. Shulman suggested that RFID changed the culture in the stores in which it was deployed. In the past, each item was not tracked individually. When individual tracking was introduced, perception changed. The perceived value of each product increased, and employees handled items with more care, reducing process errors, which contribute to shrinkage.
Honest employees who previously might have considered stealing an item left lying around since they didn't perceive that it had much value to their company might now think twice about doing so, according to Shulman. That change in attitude might well be permanent, though it certainly doesn't guarantee that all employees will stop stealing.
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, the Editor's Note archive or RFID Connect.