Can RFID save brick-and-mortar retailers after all?

Here is a brief article by Mary Catherine O’Connor for FORTUNE magazine. As she observes, It’s been more than a decade since Walmart shook the retail world with a bold plan to plaster its supply chain with RFID. It bombed — but rising from the ashes is a “barcode on steroids” that might just be a savior for Macy’s and other retailers. To read the complete article, check out others, and obtain subscription information, please click here.

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In June 2003, Linda Dillman, then CIO of Walmart, laid down the hammer. At a retail supply chain trade group meeting, she revealed that the retailer would require its suppliers to apply radio frequency identification, or RFID, tags to pallets and cases of goods sent to its distribution centers. Initially, the company would only require this of its top 100 suppliers, companies such as Procter & Gamble and Hewett-Packard. But by 2006, it wanted all suppliers to get on board.

By 2007, after various delays and slow starts — and with many suppliers balking at the high costs and meager benefits of their investments in the technology — Walmart changed its RFID strategy. Neither it nor many suppliers completely abandoned it, but the promise to foment the smartest darn supply chain in the world, with every product landing at the right place at the right time, did not materialize.

RFID lets retailers identify individual items, cases or pallets the same way bar codes do, but wirelessly, with richer data and without need for a line of sight. But it was a solution looking for a problem. Today, RFID has landed a high-demand job: Helping retailers become more competitive with online sellers, through “omnichannel” sales — closing a sale on the buyer’s terms, whether in the store, on the Web, using social media, or through some combination of those channels.

According to market research firm Monetate, one in five online purchases were made on a mobile device in 2012. That jumped nearly 50 percent, to one in three, in 2013. Knowing its customers will stand inside a Macy’s store and comparison shop, the company is making sure that what its website says is in the store is actually in the store.

“RFID enables frequent [inventory] counting, which enables inventory accuracy. You can’t be great at omnichannel without having high confidence at the store level, at the size and color level,” said Bill Connell, Macy’s senior VP of logistics and operations.

“Hindsight is always 20/20,” said Bill Hardgrave, dean of Auburn University’s College of Business. Hardgrave founded and directed the RFID Research Center at the University of Arkansas until 2010, where he led research into various RFID applications for Walmart and other retailers. “But when we look back, it almost seems silly that we started it as a supply chain tool. If you think about the way many manufacturing centers and distribution centers operate, for many retailers those were already Six Sigma. How much more efficiency or accuracy can you squeeze out of that? Well, by definition of Six Sigma, there’s not much left to squeeze out.”

Yet some retailers found RFID to be useful as they continued to tinker with it. In 2009, Macy’s started piloting the technology in its Bloomingdale SoHo location. “We tagged virtually everything in the store and began scanning and doing cycle counts,” Connell explained.

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Here is a direct link to the complete article.

2749f92-1Mary Catherine O’Connor has been an independent journalist based in the San Francisco Bay Area and currently serves as Editor of Internet of Things Journal, launched by RFID Journal.

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1 Comment

  1. […] RFID made retail headlines in 2003 when Walmart pioneered its adoption on the pallet and case level.  The technology held great promise, and Walmart’s mandate aimed at increasing supply chain efficiency. However, by 2007 the retailer had largely dialed back from this strategy, concluding that EDI and barcoding had created a streamlined receiving and distribution environment, and that RFID—at least in this context—was a ‘solution in search of a problem.’ […]

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