A new report has offered a critical insight into the value of RFID, finding the emerging technology can offer near 100 per cent supply chain accuracy, compared to traditional barcode accuracy of 31 per cent.
And that’s just one of the benefits outlined in the report by Auburn University.
Here’s an insight into their findings regarding RFID and why every retailer should be taking note.
Between June 2017 and July 2018, US-based Auburn University investigated the accuracy of RFID tagging in the supply chain compared to using traditional barcodes.
The study saw researchers examine data from eight brand owners and five retailers, looking at order accuracy as items traveled from the point of manufacture to the brand owner’s distribution centre and then onto the retailer’s fulfillment centre.
More specifically, it looked at Universal Product Code (UPC) scans at the brand owners’ distribution centres, and UPC data at the retailers’ distribution centres, and compared that to the data captured via RFID tags.
The results they recorded were fascinating to say the least. The study found that:
- “Brand owners and retailers who used RFID technology to optimise inventory management and reconcile product shipments were capable of achieving 99.9 per cent order accuracy.
- “Retailers who do not validate 100 per cent of inbound shipments are susceptible to greater inventory inaccuracy.
- “When RFID was not implemented, 69 per cent of inbound orders (shipped from brands and received by their retailer partners) contained errors.”
The old way
Barcodes have been a feature of retail since the 1970s, with retailers relying on a simple system for ordering and fulfillment.
A retailer generates a purchase order, the brand owner receives and fulfills it, an advance shipping notice is sent, the items are dispatched, and the retailer cross checks stock received against the purchase order.
Yet according to the Auburn University study, this system is fraught with errors…lots of them…errors in 69 per cent of orders to be precise.
“These errors were revealed in picking, shipping, and receiving, resulting in inventory inaccuracies, at best, and claims (i.e. chargebacks) from the retailers to the brand owners, at worst,” the report notes.
Meanwhile, Auburn University RFID Labs director Justin Patton noted the statistic came as a surprise.
“We assumed given the longevity of use and the stability of the UPC ASN process, that errors would be few. On the contrary, using UPC data – currently the primary form of data capture and sharing – almost 70 per cent of the orders contained an error somewhere in the process.”
And rather than fixing the problem at its root cause, many retailers simply anticipate inaccuracy and create a workaround.
“Industry as a whole has taken a blind eye to the error and built workarounds or tolerances into their systems and planning to ‘accept the error’ when it is even acknowledged at all,” Mr Patton stated.
But in an era where time is of the essence and the customer experience is the key to retail survival, workarounds will no longer suffice.
The new way
With its ability to contain detailed item information and offer up-to-the minute inventory counting, RFID has been rolled out by a number of large retailers since it first entered the retail space in about 2004.
Many recognised the potential that RFID would offer in improving the customer experience and store efficiencies. Yet few have studied the impact throughout the supply chain.
Auburn University explains during their research, in contrast to the high inaccuracy of UPC, they only found one order with an error of a single item when using RFID.
“During this study, those using RFID and reconciling any errors they noted, saw retailer claims completely eliminated. This study, using real world source-to-consumer fulfillment, clearly demonstrated that RFID eliminates the data errors in the supply chain process, ensuring the accurate flow of information and products,” the report states.
The study further found:
- Inventory accuracy was raised from an average of 63 per cent to 95 per cent
- Retail out of stocks were reduced by 50 per cent
- Cycle count times were cut by 96 per cent
Brand owner benefits
For the brand owner, the study concluded RFID offered a solution that was:
- Proving its value in helping reduce operating expenses and improve margins.
- Streamlining the pack-out process and reducing inventory errors with instantaneous counting.
- Reducing labour costs, handling errors, and improving productivity via automation of current manual inventory tracking tasks.
- Lowering required inventory levels, increasing working capital savings, and lowering associated carry-cost expenses by optimising inventory levels and reducing safety stock.
- Reducing obsolete inventory write-downs through better planning and visibility.
- Improving production asset visibility, helping to track inventory locations, and reducing maintenance issues.
- Reducing claims and returns by assuring the right goods are sent where they should be.
- Enabling better audit and asset control, lowering inventory shrinkage as well as helping to eliminate losses and theft by keeping better track of goods.
For the retailer, they concluded: “RFID is driving visibility and efficiency as well as playing a critical role in helping retailers create a seamless omni-channel customer experience”.
They noted, RFID enabled systems help retailers:
- Achieve unprecedented levels of inventory accuracy, which further assists retailers with “last item” sales opportunities, fewer markdowns, and customer loyalty (sales associates never have to say, “I don’t know if we have it.”)
- Decrease out-of-stocks and even eliminate the need for safety stocks or over-ordering of inventory to meet demand.
- Improve loss detection with increased visibility and knowing exactly what is on hand and what has been sold.
- Expedite the costly returns process by being able to trace products at the item level.
“Item level RFID tagging can help retail operations run smoother, faster, and with more agility. Retailers are maximising the benefits of item level RFID to generate new levels of customer satisfaction. In addition, major retailers are attributing cost savings and increased sales to RFID technology; the numbers simply don’t lie.
“From display audit compliance, to multi-location customer order fulfillment flexibility, to improved replenishment execution—these use cases have shown the tangible results of item level RFID technology, proving its value in improving item-level inventory accuracy and availability,” the report concluded.