The RFID Tipping Point

The
RFID
Tipping
Point

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Today’s
Panelists

Brian Hume
President
Martec International, Inc.
MODERATOR
Alicia Fiorletta
Associate Editor
Retail TouchPoints

MARTEC International
RFID and Its Potential Impact On
Inventory Management and
Merchandising
Brian Hume
22nd May 2013
+44 1823 333469
www.martec-international.com

MARTEC International©
Helping retailers do business more effectively. Helping vendors sell to and partner with retailers.
•  To give an overview of merchandise and inventory
management in an omni-channel world
•  To show the potential for RFID to help improve
inventory management and sales success
•  To examine where RFID makes the most sense in
retail today
Objectives of This Session

•  How many of you have an RFID project and would you
classify it as either:
•  A live project progressing to full implementation?
•  A pilot or test project?
•  No project yet?
Poll Question 1

Category
Management
v
Merchandise
Management

Category
Management
Merchandise
Management

•  Most
products
sell
year
round

•  Change
perhaps
10%
of
the
product

range
a
year

•  Low
risk
merchandise

•  Typically,
low
markdown
%
sales

•  Large
part
of
product
range
changes
every

season
(70%)

•  Seasons
may
be
long
(26
weeks)
or
short

(6-‐8
weeks)

•  Risk
merchandise

•  High
markdown
%
sales

•  Grocery
(Supermarket,
Convenience,

Hypermarket)

•  DIY

•  Chain
drug
stores

•  Electrical

•  Department
stores

•  Fashion
retailers
(Not
just
apparel)

•  Forecas]ng
based
on
]me
series

•  Replenishment
for
year
round
goods

•  Alloca]on
for
new
items
and
promo]onal

li^s

•  Forecas]ng
based
on
par]cipa]on
and

seasonal
proﬁles
derived
from
plan
or
LY

•  Mostly
100%
alloca]on
for
short
seasons

•  Depending
on
country,
heavier
use
of
pre-‐
alloca]on
and
cross-‐docking

•  May
use
replenishment
for,
say,
ﬁrst
16

weeks
of
long
seasons

Summary
of
the
Merchandise
Management
Process

PRE-‐SEASON
IN-‐SEASON

Planning
(Merchandise and
Assortment)
Initial
Allocations
Performance
Review
Post-Season
Summary
Replenishment
Revised
Sales
Forecast
Clearance
POST-‐SEASON

•  Stock counting
•  Inventory location – where is it?
•  Inventory data accuracy, receiving
•  Store replenishment
•  Loss prevention
•  Planogram compliance
•  Omni-channel, especially click and collect
Merchandising Areas Where RFID Can Make An Impact

Inventory Accuracy – Stock Counting
Inventory counting is as exciting as watching paint dry
Counting often introduces as many errors as it fixes
Where multiple locations are involved they may not all get counted
The potential for RFID is to reduce count time and substantially increase count
accuracy
Also it’s easier to recode incorrectly coded product
•  Is product unfamiliar to associates incorrectly identified?
•  Is product in multiple locations in the warehouse all counted?
•  Is product in multiple locations on the sales floor? Do all locations get
counted?
•  What happens if items arrive at the warehouse incorrectly coded?

Inventory Accuracy – Where Is It?
54% of out of stock issues on the store sales floor are due to store operational
problems
Many sales are lost because inventory is in the stock room not on the floor
The potential for RFID is to have greater visibility of exactly where in the supply
chain the inventory really is, thereby enabling expediting
No sales recorded in store when buyers expected sales:
•  Did the warehouse dispatch it?
•  Did the store physically receive it or is it still in transit?
•  Did the store do the receiving process?
•  Is the item on the sales floor or on the dock/in the store stock room?

Inventory Accuracy – Receiving and Cross Docking
Auto-scanning warehouse receipts (and perhaps store receipts too) can identify
supplier size/color mix errors much more quickly, potentially allowing more
rectification time.
If you 100% pre-allocate you may be incurring avoidable markdowns if you don’t
detect and rectify at receiving time.
•  Is what you ordered what arrived in the DC?
•  Supplier accuracy is generally much worse on products involving size/
color/fit, especially fashion
•  Receipts can be 100% pre-allocated for cross docking, partially pre-
allocated or post allocated.
•  Depending on supply chain speed, pre-allocations may get
dispatched to stores before errors are identified

Issue
When a shelf is empty, do you let the
store associates zero the store’s
system inventory?
What’s the risk that they didn’t check
back areas accurately or check other
locations in store?
If your daily or weekly sales history is
5,4,6,5,3,0,0,0 at what point do you
physically check inventory?
If the store has book stock, it may now
be shrink
At an annual physical inventory, how
many times did a zero stock on a
seasonal item get increased?
A good guide to weaknesses in store
procedures
Store Replenishment
RFID potentially makes re-counting and checking other locations such as stock
rooms much easier and more likely to happen
Lost sales in grocery is about 8-9% sales. In fashion, it’s more like 20%. The
avoidable lost sales potential can be very significant.

Loss Prevention
•  Many retailers protect high value items with security tags of
various sorts
•  Invest in sensors to check that tags have been de-activated
before shoppers leave the store
•  Cost means these tags have to be recycled continuously and
they are fitted and removed by hand in store
Use of RFID built into a seamless process can use
the same tag for loss prevention and inventory
management purposes, saving cost and reducing
the store labor burden.
This approach can then be extended into customer
service applications after sale, e.g. keeping the
service history of an item in the item itself.

Planogram Compliance
Did the planogram get set correctly?

•  A Martec study in the UK found the equivalent of 40 to 50 specialty stores
closing per week due to the way that online sales are cannibalizing stores
•  The same study found that total online sales could grow to be 20% to 40% of
chain sales depending on sector and that at least half of this would be click
and collect
•  These factors mean that some consumers will have to go further to get to a
store
•  Consumers, when they place a click and collect order, need to be really sure
that the item will be there when they get there. In other words, inventory
accuracy will be paramount, especially if the store on hand for an item is in
low single figures.
•  As online sales share grows, this will become more critical.
Omni-Channel Considerations

•  Historically well known applications in pallet
and container tracking, asset management,
e.g. food trays, pallets, shop fixtures
Moving to item level product tagging:
•  Higher value items, e.g. shoes, suits, where
size, color and fit are key dimensions
•  Items where the value of individual loss is high
•  Macy’s, Wal-Mart, Zara in fashion/apparel or
shoes
•  M&S in UK rolled out across clothing
•  C&A Germany just gone from 6 to 25 stores
for fashion
RFID Deployment in Retail

•  How many of you have managed to justify an RFID
project with an acceptable return on investment?
•  Yes
•  No
•  Have not had the opportunity
Poll Question 2

Effective use of RFID has the potential to:
•  Reduce labor costs or release labor to improve customer service
•  Improve sales (or reduce lost sales):
•  Use all the inventory you have all the time
•  Reduce out of stocks through data accuracy, ability to expedite because
of supply chain visibility – you know where inventory is at a more granular
level
•  Improve allocations and send the right inventory to the right store more
often (very important if you cross-dock in volume)
•  Improve replenishment through improved visibility
•  Get the inventory on the sales floor faster
•  Improve sales through improved planogram compliance
•  Reduce inventory losses or at least the cost of loss prevention
•  Reduced markdowns through more accurate allocations, more time in
store, less time in transit (waiting)
Where’s the Payback?

Martec’s Retail Focus
Process
Develop
best practice retail
processes
People
Equip your
people with the skills
they need
Technology
Select and implement
retail technology

•  This session focused on merchandising and inventory management
considerations and largely ignored RFID technology and the technical
aspects.
•  You can learn the basics of RFID technology, and how to take
advantage of it in operations like the supply chain, asset tracking, and
access control, in our Retail Development Academy’s RFID
Essentials interactive e-learning course. To find out more about this
online training, go here:
Learn More?
http://www.martec-international.com/products/187/rfid-essentials
Or for questions contact Brian Hume at:
brian_hume@martec-international.com

#CCSeries13
Q&A

//

Panelists

Brian Hume
President
Martec International, Inc.
MODERATOR
Alicia Fiorletta
Associate Editor
Retail TouchPoints

#CCSeries13
Cabela's:
Adding
Context
To

Next
GeneraDon
MarkeDng

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The next Connected Consumer Series session…

The RFID Tipping Point

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