May 23, 2018The retail industry began testing RFID technology in supply chains and strategies more than a decade ago. Since then, the ecommerce and online retail sectors have experienced massive growth, and have begun to implement similar RFID strategies in their operations and supply chains as well.
Ecommerce giant Amazon has invested in Auburn University's RFID Lab to design and deploy such technology for its Prime Now delivery service, for example. There are many benefits and reasons for the uptake in RFID appearing in more ecommerce strategies.
Impact on the Supply Chain
Supply chains are the main way in which RFID technology is being used by many ecommerce companies in their overall business strategies. From the original source to the final delivery to a customer, taking in traveling to and from distribution centres, packaging and anywhere else in between, this allows for accurate tracking of all parts and products.
For an ecommerce business, RFID tags can help to create a smoother and more efficient supply chain. One of the main reasons these can break down is when there is a delay at a certain station, which has a knock-on effect and slows down the whole process, leading to greater costs and unhappy customers. RFID technology can inform each station in the chain about an item's location and condition, so that schedules can be adjusted accordingly.
The supply chain needs to be at its most efficient, especially for international deliveries and reaching globalization aims. Whether it's established or emerging markets, as defined by RSM, the use of RFID technology within strategies can help to metaphorically build such bridges.
Transparency is a highly valued asset by many consumers these days. When ecommerce customers reach the checkout counter, a big turn-off can be a lack of delivery options, with more and more expecting everything from next-day to time-specific and tracked delivery. That's why, as part of any ecommerce strategy, it's important to expand delivery options so that tracked delivery is an option for consumers. Plus, this will help you to stay ahead of, or at least compete with, competitors.
Compared to bar-code scanning, which is a manual process, using RFID tags will automate a lot of the delivery tracking for all sorts of products. RFID can be used for items as small as a single sheet document, or as huge as carrier freights and much more. Without the need for line-of-sight scanning, this saves time for the courier so that data about an item's current location can be automatically sent to the receiver and be tracked online by the customer and ecommerce company.
For an ecommerce business that uses an external courier company to take care of its deliveries, this can highlight any issues that need addressing (such as slow or late deliveries). If there is a problem, then this can also shift the accountability away from the ecommerce business and demonstrate to the customer that it is not wholly responsible for such issues. Late, damaged or non-arriving orders are some of the main factors that can have a negative impact on retention for ecommerce companies.
Not all industries have taken to utilizing RFID technology. Plus, there are businesses which have applied the technology in an inefficient manner, which has resulted in large cost deficits. However, for ecommerce it's much easier to justify RFID usage when needing to convince senior management to invest.
Understandably, there is a lot of crossover between the retail and ecommerce sectors. Therefore, many of the applications of RFID technology in traditional retail settings can be effectively adopted by ecommerce businesses as well, such as:
• Applying RFID tags to inventory in stockrooms and warehouses. This allows staff to quickly identify whether an item is available or not by simply turning on the reader, rather than having to scan numerous products manually. It enables stock checks to be made much more regularly, which is important for ecommerce, too, as 8.7 percent of sales are lost due to inaccurate inventories.
• Customers these days are impatient, and if a product is not in stock at one ecommerce or retail outlet, they will go to a competitor. RFID technology allows for a wider overview of the supply chain so that ecommerce companies can locate what's needed across this for fulfilling a customer's order.
• Future applications for RFID tags in store could be for payment and acting as security tags. This could be adopted by ecommerce companies to help ensure that items ordered arrive with the customer and do not go missing on route.
For mitigating risk and enabling rewards, reacting to new developments and challenges that the ecommerce world brings up RFID technology is useful for omnichannel fulfilment. Supply chains are now extended with ecommerce companies, to get products direct to a customer, rather than just to the store like with traditional retailers.
Omnichannel fulfilment is a key driver of growth, as it can be used to control sales, stock management, pricing and more across a variety of retail channels. For traditional retailers moving into ecommerce or SMEs looking to take on the markets by offering an innovative solution, RFID can prove to be an essential part of any strategy due to tracking, supply chain and cost-effective applications.
RFID Costs to a Business
It's important to be aware that the implementation of RFID technology into any ecommerce strategy will bring with it a range of costs. These can affect the budget significantly, so SME ecommerce firms especially will need to ensure that they have enough capital to cover them.
The price of RFID tags has fallen greatly in the past few years, as such technology has increased in popularity. However, for attaching to small packages and letters, there are many companies that still can't make it cost-effective. As RFID tags are usually priced based on the volume sold, it is worth investing in a lot at a time. Plus, even though the initial cost may eat into your budget or require some readjusting, the savings made overall with a more effective strategy can counterbalance this.
If you run an ecommerce company, whether a startup or an SME, it's worth considering integrating RFID technology into your strategy for a greater chance of success.
Luke Hatkinson-Kent worked as a financial analyst in London after graduating with a degree in economics from the University of Manchester. Taking this experience and mixing in his passion for journalism, Luke has gone on to work for himself, writing freelance financial news pieces. He has produced detailed reports on stock market movements, as well as financial current affairs articles for a number of high-profile online publications. You can contact Luke via email at Luke.HatkinsonKent1@gmail.com, on LinkedIn at linkedin.com/in/luke-hatkinson-kent-987a99140/, and on Facebook at facebook.com/luke.hatkinsonkent.