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2012 seen as pivotal year for RFID; retail rollouts and source tagging expected to soar

RFID in retail is getting closer to becoming ubiquitous, and 2012 is expected to represent a watershed year for the technology. A new survey reveals that 80 percent of retailers have initiated pilots or deployed RFID at the store level.

Aside from confirming that item-level adoption is rapidly gaining traction, the report also indicates that item-level RFID is likely creating a competitive advantage for early adopters by giving them better inventory accuracy, visibility and insight, enabling them to improve in-stock positions and increase sales.

“RFID will be a competitive advantage in the beginning, but ultimately, like bar codes, it will depend on who uses the technology better,” Macy’s chief administrative offer Tom Cole said during NRF. “Whoever puts it to the best use will win.”

The survey, conducted by the VICS Item-Level RFID Initiative (VILRI) — a group of advocates for the use of EPC-enabled RFID in the retail supply chain — surveyed 56 retailers and 58 suppliers in North America. Co-produced by Accenture, the survey results reveal that the technology can now drive improvements several orders of magnitude better than current standard methods. For example, completing a store inventory, once a project of days or weeks, can now be tallied lightning-fast and almost error free.

The report also noted that the costs of RFID tags are falling, and will continue to fall as the rate of adoption increases. (Click here to see how pricing will shape up for 2012).

Additionally, most major apparel and footwear retailers will adopt RFID technology in some part of their business within the next three to five years if recent momentum continues.

During his presentation at NRF’s Big Show, Cole said that it is only a matter of time before RFID tags are on every item and become as common as bar codes.

“What’s important is that we move this forward as an industry,” Cole said.

Macys’ logistics executives Pam Sweeney and Peter Longo have done a fabulous job of spreading Macy’s message on its RFID rollout at various industry events over the past year. It was great, however, to hear a new voice speak about the Macy’s deployment, especially one from the C-level. Cole brought a passion and a fresh voice to the Macy’s RFID initiative.

“Right now our focus for the next two years is just to put enough scanners in stores to take inventory, and then we’ll learn from that and we’ll figure out how to do things like loss prevention and item location,” he said.

“We know our competitors are involved with RFID and they all have different approaches, but at the end of the day we’ll all meet in the middle and ultimately I think almost all products will have an RFID tag.”

In addition, RFID 24-7 learned some exciting news about the role RFID will play in the $400 million redesign of the Macy’s NYC flagship store in Herald Square. We can’t disclose those details yet, but will bring them to you soon.

Some exhibitors at NRF are predicting a surge in apparel source tagging by the end of the year. One major apparel brand is expected to announce that it will source tag all of its garments by year-end. Current estimates have about 20 percent of all garments carrying RFID tags being source tagged. That could likely reach 50 percent saturation by the end of the year.

We’re definitely seeing more tagging at the source,” says Tommy Lui, senior vice president at Li & Fung Logistics in Hong Long. “Tagging is only meaningful when you tag at the source. Tagging at the destination just is not going to make it.”

There was a strong emphasis being placed on the supplier benefits when it comes to retail RFID apparel tagging.

The topic was the subject of an educational session, during which Cole told suppliers that the first suppliers to adopt RFID will benefit most by selling more product to Macy’s.

“What we are counting on happening is that the vendors that are first will get a competitive advantage — they will sell us more,” Cole said during a seminar at NRF in New York. “If you’d like to continue to grow your business with us, especially in replenishment categories, then you should be very supportive of RFID.”

The University of Arkansas released a new white paper that examines the benefits of RFID for apparel manufacturers, including one use case that resulted in a return-on-investment in less than a year.

During the 12-month research project, sponsored by GS1 US and the American Apparel & Footwear Association, researchers from the University of Arkansas unveiled the potential for suppliers to realize both top- and bottom-line improvements from increased inventory accuracy, cycle count reductions and minimized chargebacks.

“The simple concept behind the study is to answer the question, What happens when suppliers move beyond EPC tagging just for their retail partner’s sake, and begin to internally capture and use EPC data from their tagged items?” said Patrick Javick, vice president, industry engagement, GS1 US. “Retailers use standardized RFID technology to improve inventory accuracy, and now with EPC, suppliers can also feel confident of the high level of accuracy in their shipments.”

Researchers measured the benefits that apparel suppliers can achieve by adopting RFID based on GS1 EPC standards.  They quantified the effects of EPC-based tracking on improving the suppliers’ inventory accuracy, along with the effects on their productivity, costs, and revenues.

When it comes to inventory accuracy, researchers discovered that suppliers’ estimates for their outbound shipments were much higher than they actually were, in part because the companies were auditing very small percentages of those shipments. The cost of incorrect shipments, including chargebacks, can be staggering. However, since RFID enables audits on 100 percent of shipments, the frequency of incorrect shipments can drop to zero, a cost savings that pays for the entire deployment of the RFID system.

Keep in mind that University of Arkansas researchers identified dozens of use cases for apparel manufacturers, meaning even more potential for a stronger ROI equation.

“The research captures the first efforts of retail suppliers to shift their focus from just playing ‘catch up’ to retailer source tagging requirements, but to truly leverage the full value item level tags by discovering the benefit and the value in their own supplier operations,” said Justin Patton, Managing Director, ITRI/RFID Research Center, University of Arkansas.

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