rfid supply chain case study

RFID’s renaissance in retail

Retail is once again entering new territory as the COVID-19 pandemic changes the game. Retailers now have near-term, immediate decisions to make, including how to bring back and redeploy the workforce and how to protect the health and safety of shoppers and employees. Beyond these immediate concerns, retailers have an unprecedented opportunity to reimagine store operations. Con­sumers are more receptive than ever to changes that can make the in-store experience safer, more accessible, and more convenient.

Responding to shifts in consumer behavior, retail supply chains and stores have produced a flurry of curbside operations, “dark stores”—physical locations that are closed to customers and serve as fulfillment centers or distribution points—remote-selling options, and other innovations. Stores will inevitably serve new roles in the “next normal” shopping journey, and retailers will be (and already are) looking for ways to improve operations and reduce costs. In this new era, we believe radio-frequency identification (RFID) has the power to unlock up to 5 percent top-line growth from better stockout management and shrinkage reduction as well as to achieve a 10–15 percent reduction in inventory-related labor hours.

A new era revives a familiar technology

Stores no longer play an occasional supporting role in the omnichannel shopping journey. As retailers try to shift more omnichannel fulfillment to offline channels—often the most feasible and profitable last-mile fulfillment option (Exhibit 1)—stores and their supply-chain tethers are retaking center stage in the evolving customer journey.

These new demands inevitably challenge retailers to rethink store priorities, processes, and systems. To make room for new omnichannel activities, traditional in-store tasks must be endlessly reprioritized and simplified, without compromising on the in-person customer experience. And to provide a flawless yet profitable clicks-to-bricks experience, retail inventory and systems need to become more sophisticated, precise, and unified from end to end.

Together, these changes have brought a familiar technology—RFID—back to the forefront for many retailers. After a nearly 20-year “incubation,” with advances in readability, range, and cost, RFID stands poised to address precisely the use cases that stand at the center of today’s need for more omnichannel, more data-driven, more accurate, and more customer-driven shopping experiences.

In this article, we focus on nongrocery retailers to discuss the extraordinary value of the technology; how nongrocery retailers can harness it now; and what retailers, technologists, and manufacturers will need to do to advance RFID into future generations of brick and mortar.

RFID: How it works

At the highest level, RFID ecosystems and compo­nentry involve four main elements (Exhibit 2):

• RFID tags store and transmit encoded information about individual products.
• Reader hardware (fixed or mobile) sends and receives signals allowing it to “read” and interpret data transmitted from a tag, and antenna hardware converts signals between readers and tags, effectively enabling the reader to identify a tag’s presence, ID, and location. An antenna can be integrated into a reader, or several can be connected to increase coverage.
• Supporting software or services encode tags and process RFID data for end use.
• Testing and certification test and certify tag inlays for retail uses and materials for retailer and supplier assurance.

Putting these components together requires finesse for every retailer’s product and box design—it takes time, commitment, and collaboration. However, the benefits have evolved over recent years to prove the business case for many large retailers.

The ongoing evolution

One of the largest unlocks of RFID in recent years lies in the business case. The average cost of an RFID tag has fallen by 80 percent to about four cents 1 Cost for an average ultra-high frequency RFID tag; actual price points can vary based on specifications and purchase details, including the size of the order and how many tag deliveries a customer takes. in the last decade, while read accuracy has doubled and range more than quintupled (which allows for fewer devices and better reads). Even the prices of RFID readers have dropped by nearly 50 percent.

Modern RFID solutions can reset store economics, lowering costs and boosting revenue. Our research shows that demonstrated benefits include more than 25.0 percent improvements in inventory accuracy, 1.0–3.5 percent increases in full-price sell-through tied to better management and lower stockouts, 10.0–15.0 percent reductions in inventory-related labor hours, and reductions in shrinkage and theft that can raise revenue by up to 1.5 percent.

With recent progress as fuel, the pace of experimen­tation and progress is accelerating. For example, the CHain Integration Project (CHIP), spearheaded by Auburn University’s RFID Lab, seeks to create a secure and common framework to share RFID data across multistakeholder supply chains—thereby attacking costly sources of friction such as visibility, shrink, claims, and damage.

The technology has evolved enough to become essential in today’s rapidly changing marketplace. It can help retailers speed the transition to becoming fully omnichannel, for example, by providing in-store inventory numbers accurate enough to power buy online, pick up in store, and curbside pickup and to boost agility in responding to supply-chain shocks. It can power contactless-checkout capabilities and unlock new customer experiences to create cross-sell opportunities.

Use cases for RFID fall into three main categories

As technology vendors proliferate and offer an ever-expanding array of products and services, we urge retail leaders to stay focused on end-to-end experiences and the underlying use cases required to support those experiences. We also recommend selecting interoperable tools, which connect seamlessly with other technology and may even help users achieve multiple strategic goals.

Indeed, versatile technology can unlock value across a range of use cases in three main categories: inventory tracking, store operations, and customer experience (Exhibit 3).

Inventory tracking

Inventory tracking is the most well-understood and widely used RFID application in retail. Accurate product-location information can lower the cost and complexity of managing inventory, speed picking, and packing and delivery and can boost customer satisfaction. Therefore, tracking should be the starting point for many retailers, with the important benefit of unit-level tagging that lays the foundation for other use cases.

An example of more accurate product-location information

Out of the box, RFID can provide highly accurate information about where an item is in the supply chain, such as on a truck or in a specific store, and where to find it in the store. This helps store managers plan and adjust staffing based on quantities and the timing of truck arrivals and improve pick timing for online orders, store replenishment, and customer requests. While RFID can also provide microlocation information at the shelf level, this typically requires larger investments that may not pay off except in high-volume or high-value environments.

Out of the box, RFID can provide highly accurate information about where an item is in the supply chain, such as on a truck or in a specific store, and where to find it in the store.

Athletic-apparel retailer lululemon athletica uses product-location information to deliver a more flexible, omnichannel fulfillment model. The retailer uses RFID tags throughout its network of nearly 500 stores and boasts a resulting 98 percent inventory accuracy and a payback period of one year or less. During the COVID-19 pandemic, lululemon used this location information to manage inventory levels as customer demands shifted. CEO Calvin McDonald explained that by using RFID, “we can access product at any point across our network, not just distribution centers but at our stores as well [as] from ship from store.”

Some retailers are better positioned to capitalize on these capabilities more quickly than others. Those who have benefited most from inventory are either vertically integrated, which smooths the path to upstream product tagging, or predominantly sell soft goods, such as apparel, that offer the most favorable physical characteristics for RFID tags. We believe broad expansion to multibranded and mixed retailers is possible and well within reach—but successful implementation in these formats requires even closer collaboration and creativity among retailers, product manufacturers, RFID experts, and integrators.

Store operations

Once products are RFID tagged, retailers should pursue additional use cases in stores to boost cost savings, productivity, and revenue. New opera­tional use cases are keys to more efficient store processes that better meet customer needs and shift associate priorities as omnichannel’s role and margin structure evolve.

An example of efficient and accurate checkout

Shoppers are increasingly willing to scan universal product codes (UPC) in self-checkout systems, and RFID tags can make self-checkout even faster and more accurate. Decathlon, a sports-equipment retailer with over 1,600 stores in more than 50 countries, tags more than 85.0 percent of items, tripling labor productivity and cutting stockouts to raise revenue by 2.5 percent. The retailer is also testing several RFID-based checkout solutions. For example, its scan-and-go solution in Europe allows shoppers to scan and pay for items with their smartphones, automatically disabling RFID tags and avoiding checkout lines altogether. In an era of physical distancing, helping shoppers avoid close contact with checkout staff could be a competitive advantage.

Checkout’s not-so-distant cousin—the return—is becoming a more important ingredient in customer satisfaction. With e-commerce activity on the rise and about 20 percent of orders being returned, quick, accurate, and efficient processing, which includes a return in the salable-inventory pool, reduces costly margin erosion on items otherwise lost in the reverse supply chain.

Customer experience

While the most valuable RFID use cases today are in inventory tracking and store operations, several “last mile” advances can attract customers looking for dynamic new experiences, drive revenue, and yield valuable behavioral insights.

An example of customer-centric digital activations

RFID-enabled activation can take a variety of forms. Some retailers now provide “smart” fitting rooms, where shoppers get customized information about other sizes and colors in stock, learn how to style a garment, and receive personalized recommendations for items that will complete a look. Chanel’s collaboration with Farfetch does exactly that. The high-tech, RFID-enabled fitting rooms take the shopper on a digital journey of new styles, product details, and the Chanel lifestyle all without leaving the room. In return, retailers can gather high-level data, such as how many items customers try on and conversion and abandon rates by product.

Other retailers use RFID to trigger experiences for customers and provide them with information. For example, Kendra Scott trialed an RFID-enabled activation in its Color Bar in stores. Customers could select jewels from a display to trigger a customization experience. Engagement doubled and customers relied more on self service, which will likely become more important.

Players across the RFID ecosystem will need to work together

The retail value chain depends on the many players who move products from their point of manufacture to their final destinations: in customers’ hands. No single actor in that chain can dictate which RFID systems will be adopted or how they will be used across the ecosystem. Collaboration among the following leaders throughout the industry will be required for smooth, successful implementation: retailers, factories and manufacturers, integrators, and device and technology providers—a group that can fittingly be abbreviated as R-F-I-D.

• Retailers can lead the way by committing to adopt RFID. New-format adoptions improve processes, standards, and economies in upstream manufacturing and tagging, which in turn improve the ROI and scalability for others.
• Factories and manufacturers help by tagging products at the source, where process and labor efficiencies are far greater than in distribution centers—and exponentially greater than in stores. They help improve upstream supply-chain visibility so retailers can improve receiving plans and manufacturers have more accurate ledgers of shipping and receiving activities. That can significantly reduce the cost and work associated with chargebacks (which can represent 1 percent of total retail sales 2 CHIP proof-of-concept whitepaper , Auburn University RFID Lab, March 2020, info.rfid.auburn.edu ) and shrink and allow for better detection of counterfeits.
• Integrators —including strategic and systems integrators—are vital. RFID implementations typically span several months and require careful planning and coordination across retailers, suppliers, distributors, and providers of tech­nology that includes tags, hardware, software, and analytics. A strategic integrator provides end-to-end expertise, vendor- and technology-agnostic advice, and “air traffic control” in the ecosystem, bringing solutions and economics together in ways that work for retailers. Strategic integrators can also help create data and analytics roadmaps that systems integrators can use to ensure that data are usable across the value chain. With RFID’s abundance of technology choices, category and product nuances, and inevitable prioritization efforts, each of these roles can be essential.
• Device and technology providers are the pillars of every RFID system, of course. They provide the tags, readers, and antennae to make the system work and are at the forefront of innova­tion and related business-case attractiveness, including readability, read ranges, tag sizes and properties, product extensibility, and data collection and use.

Retailers worldwide are struggling with slowdowns, lockdowns, and sharp declines in consumer confidence and spending power, even as next-gen products proliferate and tech vendors clamor for attention.

While RFID holds the potential to tremendously impact a retailer’s profit and loss and alleviate pressure in our current environment, capturing the value can be complex. Success goes far beyond technological expertise and reaches into functions across the entire retail business.

To ensure success, retailers will need to take the following actions:

• Make cross-functional changes. These changes range from product design and merchandising to store and supply-chain processes, to name a few.
• Have an agile mindset and a team ready to rapidly test and learn. Some retailers may find that testing in a dark store before rolling out helps to iterate and refine the solution quickly. RFID will not work flawlessly from day one and requires a commitment to iteration.
• Adopt a holistic, end-to-end approach. To extract the maximum value and reach the best ROI, retailers should consider multiple end-to-end use cases for the technology.
• Ensure commitment from cross-functional leaders. While RFID is a technology solution, it requires buy-in from the top-most leaders in the organization to ensure that merchandising, design, operations, and technology decisions are aligned to ensure success.

In today’s retail environment, RFID’s applications have never been more important. With lowering costs, the technology is also now more accessible than before. However, implementing RFID is not for the faint of heart, and requires a clear focus on the use case at hand as well as a commitment to making the cross-functional changes required for success.

Praveen Adhi is a partner in McKinsey’s Chicago office, where Gerry Hough is an associate partner; Tyler Harris is an associate partner in the New Jersey office.

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10 RFID Case Study Companies and Lessons Learned

GS1 and the ECR Community Shrinkage and On-shelf Availability Group commissioned an RFID case study based on the experiences of 10 retail companies.

Since the term radio frequency identification (RFID) came into common usage within the retail environment, around the end of the 1990s, it has in many respects been an idea driven more by hope and hype than practical realization.

For retailers, it promised a world where supply chains would become fully transparent, with all products identifiable in real time, bringing an end to oversupply and out-of-stocks-the ultimate optimization tool, allowing retailers to truly deliver “just in time” supply chains tailored precisely to the needs of their customers.

In addition, RFID offered other “game-changing” benefits, such as the end of traditional checkouts and associated queuing for the consumer—products would automatically “checkout” as they left the store with the consumer’s credit card being billed accordingly. (Sound familiar?)

Within the realm of loss prevention , the RFID “revolution” offered much promise, with shop theft becoming a thing of the past. Thieves would be automatically identified as they tried to leave the store without paying. Similarly, problems such as returns fraud would be eliminated as the previous ambiguity around whether a particular item had actually been purchased would no longer exist—the product would “tell” the retailer its current status (bought or not bought).

Back in the early 2000s, it seemed RFID was going to totally transform the retail world. Indeed, it was described by one of its earliest advocates in the following glowing terms: “as significant a technology as certainly the Internet and possibly the invention of the computer itself.”

If we skip forward a decade or two, it becomes quickly apparent that RFID, as yet, cannot be remotely put in the same category as the Internet in terms of its impact upon the world or more specifically retailing.

Arguably, it is a technology that has seriously struggled to match up to the hype heaped upon it at the end of the 1990s and into the early 2000s. It continually floundered on the rocks of physics and economics, with the “Faraday Cage” in many respects proving to be the prison “cell” from which RFID has struggled to escape. As such, many of those long in the tooth in retailing have become familiar with the sentence that starts, “In the next five years, RFID will….”

However, the outlook now appears to be changing fast for RFID. What has been seen in the past few years is a much more enlightened, less evangelistic, and more realistic approach to how RFID may be able to play a role within retailing, one that recognizes its limitations and plays to its identifiable strengths.

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The technology has also had the opportunity to gradually mature, away from the spotlight of unrealistic expectations, and begin to show how it can be used to help retailers resolve some of their ongoing and growing concerns.

This can be seen particularly in parts of retailing that do not have a concentration of products largely made up of metals and viscous fluids, which have traditionally proved highly challenging for RFID to cope with.

Retailers focused on apparel and footwear in particular have begun to use this technology to help them manage their supply chains more efficiently, using RFID’s capacity to bring transparency and ease of audit into the retail space. As pressures within retailing concerning competition and growing consumer demands for greater and more accurate availability have increased (particularly with the growth of omni-channel), then some companies have begun to invest in RFID to help them respond.

While we are still some way from RFID becoming “bigger than the Internet,” it would seem that a more gradual and incremental introduction into retailing is underway, one that recognizes its weaknesses but at the same time is beginning to take advantage of developments in the technology.

It is within this context that GS1 and the ECR Community Shrinkage and On-shelf Availability Group commissioned a piece of research to better understand about how this technology is now being used and what lessons can be drawn from its development, its implementation, and its impact on retail businesses. Based upon the detailed experiences of ten companies that have invested in RFID, the study set out to answer the following questions:

• What is the business context within which some retailers decide to invest in RFID?
• How do these companies begin their RFID journey?
• What steps do they follow when undertaking a trial?
• In what ways do they measure the impact of RFID, and what have they found?
• How do they begin to roll it out to the rest of the business?
• How have they dealt with the key challenge of integration?
• What role, if any, can RFID play in managing loss prevention?
• What lessons have these companies learned on their RFID journeys?
• How might they be planning to use this technology in the future?

This research adopted a case-study methodology with data being collected via requests for various types of quantitative data relating to the use and performance of RFID, together with primarily face-to-face interviews with company representatives from the following companies:

• MARC O’POLO
• Marks & Spencer
• River Island

Collectively, these companies have total sales in the region of €94 billion (~$106 billion) a year and purchase at least 1.87 billion RFID tags a year, equivalent to the use of about sixty tags per second.

As with any research, there are limitations in what can be achieved and presented. While this research attempted to offer an independent and critical review of the use of RFID in the retail sector, the case-study selection process needs to be taken into account when reviewing the findings. Because of the chosen selection criteria and the challenge of obtaining retailer support, no companies are represented that have trialled RFID and decided against rolling it out-the views of these types of companies are absent from this research.

In addition, there are some companies that have adopted a different approach to using RFID than those represented in this research, namely using a hard tag variant applied either at the point of manufacture or later in the supply chain. While one of these companies was approached to take part in the research, they declined, so it is not possible to include their experiences and views of using RFID. As such, it is important to recognize that the general approach adopted by these ten companies is not necessarily representative of all retail companies that are now using RFID.

RFID Case Study: Summary Findings

Presented below are the headline results from the research. For a more detailed review of the findings, a free report is available (details of how to receive this can be found in the full version of this post at “ RFID and Retailing “).

The Business Context for Investment

Driving Sales. The primary goal of investing in RFID was to deliver improvements in inventory visibility and accuracy, which in turn would grow sales.

Optimizing Stock Holding. Respondents also recognized the potential of RFID to enable them to optimize their stock holdings, reducing capital outlay and improving staff productivity.

Fewer Markdowns. Most case-study companies regarded RFID as a key tool in helping to reduce the amount of stock they offered at discounted prices.

Helping to Drive Innovation and Business Efficiencies. RFID was frequently viewed as part of a broader organizational change project focused on putting enabling technologies in place to drive transformational change to achieve future success.

Recognizing the Omni-channel Imperative. This technology was viewed as a key driver in developing the capacity to deliver a profitable omni-channel consumer experience-in effect the organizational “glue” that will hold together much of the architecture of 21st-century retailing.

Measures of Success Increase in Sales. Seven of the ten case studies shared data showing a sales improvement in the range of 1.5 to 5.5 percent. For SKUs identified as being out-of-stock by RFID systems, the growth was even higher. Based upon this data, the ten companies taking part in the study may have realized an RFID-driven sales uplift of between €1.4 and €5.2 billion.

Improved Inventory Accuracy. Companies typically had an improvement from 65-75 percent to 93-99 percent.

Stock Availability. Some of the companies taking part were now finding SKU availability in the high 90 percent region.

Reduced Stock Holding. One-half of the case-study companies shared data on this measure, indicating a stock reduction of between 2 and 13 percent.

Lower Stock Loss. One company suggested that their shrinkage losses had been reduced by 15 percent.

Reduced Staff Costs. One company had measured a saving equivalent to 4 percent of their store staffing costs, which if rolled out across the case-study companies would be in the region of €378 million.

Return on Investment. All ten companies were unequivocal in their assertion that the ROI had been achieved, and based upon their trial experiences, further rollout across the business was fully justified and embraced by the rest of the business, often with considerable enthusiasm and optimism.

Check out the full article, “ RFID in Retailing ,” to discover lessons learned from the research and instructions on how to access a free copy of the comprehensive report.

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Radio Frequency Identification (RFID) and Supply Chain Management

• Living reference work entry
• First Online: 18 March 2023
• Cite this living reference work entry

• Pedro M. Reyes 2  

2 Citations

Supply chain management environments have always been information-intense for collecting and processing data to determine its capabilities, productivities, delivery performance, and overall competitiveness. This chapter is targeted to the academic and business community and aims to inform and enlighten managers about the use of RFID in the supply chain. The work presented in this chapter is a collection of the past two decades that was sparked by the “ big bang ” of RFID. The recent RFID research overlaps with the Industry 4.0 technologies in the supply chain. We are at the gates of another technological explosion that will revolutionize the way we manage supply chains. RFID and the convergence of those Industry 4.0 technologies will soon change the landscape of supply chain management. Early RFID Academic interest in RFID generated a fast-growing body of literature. General research topics include RFID technology and applications, benefits, and business value. General research also suggests managerial guidelines and examines implementation challenges. Academic studies of RFID systems are dominated by case studies of big retailers and the path RFID-tagged products follow from distribution center to store shelf. The cases discussed grocery industry use, retail supply chains, and retailer RFID benefits and challenges. Other RFID applications for improving efficiency and effectiveness focused on retail product misplacement, shrinkage control, pull-based replenishment, vendor-managed inventory, and mapping supply networks. The chapter concludes with current concerns regarding RFID in the supply chain, research needs, and a look ahead to where RFID in the supply chain appears to be heading.

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Acknowledgments

I would also like to acknowledge the Sloan Foundation and the Sloan Industry Studies that funded and supported my early years in my RFID in the supply chain studies.

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Pedro M. Reyes

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Reyes, P.M. (2023). Radio Frequency Identification (RFID) and Supply Chain Management. In: Sarkis, J. (eds) The Palgrave Handbook of Supply Chain Management. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-89822-9_109-1

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Please note you do not have access to teaching notes, driving competitiveness with rfid-enabled digital twin: case study from a global manufacturing firm’s supply chain.

Measuring Business Excellence

ISSN : 1368-3047

Article publication date: 31 January 2022

Issue publication date: 15 March 2023

The digital twin (DT) has become a heated topic among supply chain and information technology practitioners. While many papers in this area focus on technical tactics and learnings, this research paper aims to evaluate its business implications. According to literature, it has also been a weakly covered topic.

Design/methodology/approach

The research was conducted as a single case study, in which the impact of radio-frequency identification–enabled DT was quantified from the business benefits perspective. The evaluation was carried out using a framework model developed for the assessment identifying key contribution areas and the dynamics explaining how the benefits are expected to land on a business level.

Implementation of the DT was calculated to provide a significant supply chain performance improvement. The main contributor in the immediate benefits was the reduction in supply chain costs, in person-hours. However, the product availability improvement was conservatively considered in the evaluation, and thus, this paper estimates that it, together with higher cognition tools, constitutes the main financial return in the long run showing in the topline improvement. This paper suggests that the shift to DT can be generally limited by the cost savings perspective.

Originality/value

To the best of the authors’ knowledge, this is one of the first studies released on the business impact of the cutting-edge technical solution area of the DT in supply chain management. In practice, businesses require an understanding of the business implications to decide on the investments in this area; thus, it is a critical part of the discussion.

• Digital twin
• Supply chain
• Manufacturing
• Radio-frequency identification
• Industry 4.0
• Business value

Voipio, V. , Elfvengren, K. , Korpela, J. and Vilko, J. (2023), "Driving competitiveness with RFID-enabled digital twin: case study from a global manufacturing firm’s supply chain", Measuring Business Excellence , Vol. 27 No. 1, pp. 40-53. https://doi.org/10.1108/MBE-06-2021-0084

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HOW RFID TECHNOLOGY BOOSTS WALMART'S SUPPLY CHAIN MANAGEMENT

Purpose – The role of RFID technologies in supply chain management have gained significant interest in researchers and academics in recent years. Yet, very few studies conductedonhow this technologycould boost supply chains. So this study was to scrutinize how RFID technology boosts Wal-Mart's supply chain management. Design/methodology/approach – Exploratory research approachwas adopted to obtain an in-depth understanding of RFID technology andsupply chain through related journals and literatures.Then the research was conducted in the form of case studies on RFID technology and Wal-Mart's supply chain management practices. In general, the research is more descriptive and interpretive in nature. Findings –Wal-Mart succeeded in adopting the RFID technology, reduced out-of-stocks and the bullwhip effect, reduction in manual orders resulting in a reduction of excess inventory, improved service levels and reduced administration costs. Originality/value – The paper is original that provides empirical supportto RFID and SCM implementation, and creates value for retail stores on managing inventory.

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Avery Dennison helps EY capture the advantages of RFID for Grupo Boticário

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Accelerating tetxtile recycling with digital IDs

Every year, Europe generates around seven million tonnes of textile waste. Only around 35% of this waste is separately collected and less than 1% recycled into new material. In response, the European Union is rolling up its sleeves and preparing legislation for a drastic overhaul. The vision is to curb overproduction and overconsumption of textiles, discourage the unnecessary destruction of unsold or returned goods, and limit the export of textile waste.

Promoting conscious retail

Brands are becoming more aware of their impact on the environment, so they are working to  achieve  more sustainable, conscious and responsible practices towards the environment and society. Algramo has been working since 2013 on implementing a new business model capable of creating circular supply chains The partnership with Avery Dennison has allowed Algramo to achieve an innovative and circular consumer interface by implementing Digital ID technologies in their products.

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