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*In recent years, inventory tracking has become increasingly sophisticated and popular. In that regard, RFID (radio frequency identification) is being used to provide real-time location tracking of inventory items. In 2021, a study conducted by Accenture revealed that the use of RFID in North American retail was booming with 93% of store chains saying that they are using RFID, especially as e-commerce grew so quickly with Covid. In addition, RFID can be coupled with endless other technologies, such as the Internet of Things (physical devices embedded with technology and connected), to offer customers more unique experiences.

Also according to Accenture, information captured from RFID technology can be used in collaboration with blockchain, supply chain analytics, self-checkout, supporting omnichannel fulfilment, reducing stockouts and improving customer engagement.

In addition to more efficient inventory management, RFID can help reduce supply chain waste and help businesses to grow more sustainably at a time when consumers are increasingly asking retailers for more responsible operations.

So, what’s not to love about RFID? It happens that successful case studies are plenty, but as discussed during the IADS Supply Chain Meeting held in June 2023, there is no consensus about RFID among IADS members. Let’s understand why.*

How RFID can help reduce the cost of supply chain waste

Avery Dennison came as a guest speaker for the Supply Chain Meeting to explain the benefits of RFID technology in reducing supply chain waste. To measure the real cost of supply chain waste, they conducted 2 global surveys covering 5 markets (UK, US, France, China and Japan) and 5 industries (apparel, food, beauty, pharmaceuticals and automotive): no less than a total of USD 163bn worth of revenue is lost every year in discarded inventory. In the apparel industry alone, 6% goes to waste due to overproduction and damage, representing USD 15.3bn worth of inventory. In the beauty and personal care industry, waste represents over 10% of products.

More in detail, RFID provides solutions to the challenges arising from supply chain waste:

• There is a disconnect between sustainability concerns and supply chain initiatives: 58% of businesses surveyed are actively tracking supply chain waste but not aligning sustainability with supply chain initiatives. Efficient inventory handling is a solution as it reduces overproduction and therefore cuts down on CO2 emissions and packaging waste, allowing companies to reach ESG targets more quickly and efficiently.
• Overproduction is a major issue as companies are investing in additional inventory to avoid product shortage and consumer dissatisfaction. Overproduction occurs due to a lack of clarity on the amount of stock already being produced, distributed and purchased. Inventory visibility is a solution: item-level end-to-end visibility of inventory negates the need for safety stocks and companies can better implement FIFO (First-In, First-Out) policies.
• Damage is triggering inventory waste: 4.3% of inventory is wasted globally due to the accidental damage or destruction of goods, representing a total of USD 81.6 billion of global inventory value wasted across the five sectors. Data can pinpoint where damage occurs and by knowing exactly where and how damage occurs, supply chain teams can work with suppliers to solve issues.

Companies recognize these problems, and those surveyed said their use of key technologies such as blockchain, RFID, AI, robotics and drones will at least double in the next two years (54% currently track unique items within their supply chain, but this will rise to 100% in future, which could help to reduce waste). According to Auburn University, apparel retailers currently have 65% inventory accuracy but with RFID, the rate improves up to 99%. On its side, McKinsey identified ‘more than’ a 25% improvement in inventory accuracy by using RFID in retail.

Case studies: from back-of-house technology to customer-facing enhanced experience

There are several ways to use RFID. Uniqlo has extensive technologies in place from item tracking to ultra-fast stock take (they can inventory a pile of clothes in seconds) and seamless self-checkout. French sports retailer Decathlon also took advantage of RFID, and the company is said to have profitable operations. They started RFID implementation with one product category and then, step by step expanded to additional ones. The process was successful, and this is also the method Avery Dennison would recommend. Implementing RFID depends on volumes: it usually requires a 3-month pilot to implement, test and adjust. Depending on volumes, implementing RFID on one product range per year could be a safe and efficient pace.

Grupo Boticario, a beauty brand in Brazil, uses on-metal RFID tags as they seek end-to-end traceability across its increasingly complex supply chain. Thanks to these tags purpose-built for beauty, stockouts were reduced by as much as 97% and the identification of hidden stockouts increased by more than half. For the company, a key use for RFID is FEFO (First-Expired, First-Out), which eliminates most product expiration and allows them to balance inventories between the front and back-of-house.

Adidas is using RFID for its Infinite Play circular programme in the UK. The solution allowed them to deal with reverse logistics, scale their ability to buy back products and give them a second life. RFID also allowed Adidas to be certain of the product’s authenticity.

Etam (French lingerie brand) adopted digital ID technologies to drive omnichannel innovation and transparency. The brand’s ‘Try @ Home’ initiative leverages RFID as a way to increase consumer convenience. Also, clients can scan the QR code on product labels to get instant access to short videos that provide insights into the actual factory where the item was produced.

As explained during the Shoptalk retail conference held in May 2023, H&M’s COS smart store’s ambition (currently in a testing phase) is to serve both the staff and the customers as well as to connect the digital and physical worlds using RFID technology. Overhead RFID readers are set up in the store, fitting and stock rooms allowing the store staff to have a constant view of where products are on their mobile app. On top of showing a map of the store to see where the item they are looking for is located, the mobile app also provides style suggestions able to help sales associates increase turnover. The RFID technology also helps with store replenishing and merchandising. For COS, it represents a true competitive advantage as new employees can be very productive in a reduced amount of time. On the customer side, once the item is brought to the fitting room, the RFID tag automatically connects to the screen in the fitting room: style suggestions are proposed, as well as additional products. Using the screen, shoppers can also request different sizes and access mobile checkout. Overall, according to COS management, their smart store based on RFID technology is said to significantly elevate the customer experience and increase sales.

IADS members’ experience with RFID technology

Why is there no consensus about the technology? It seems the potential provided by RFID is not used to its maximum, proving that efficiency is limited. Also, as mentioned by members, the technology has been here for a while now and many retailers have not yet embraced it. Besides, many questions need to be answered, such as at which stage of the operations should RFID tags be added to the product. It seems ideal to have suppliers putting them on products but in case it’s not negotiable, is it still beneficial and efficient enough to add them to goods at the department store’s DC? Besides, RFID implementation is in essence more challenging for a retailer than for a brand. Let’s also remember when Walmart announced that all of its suppliers needed to have their pallets tagged with RFID in under two years. This forced adoption ended up leading to RFID’s demise when the project resulted in the realisation that the costs, at the time, outweighed the benefits. Then the project was deemed a failure in the retail industry.

One IADS member has been using RFID quite extensively for 7 years (especially with their Private Labels). Digital IDs are put at the suppliers’ facilities. The department store convinced some external brands to include RFID in their products, but it can sometimes come with insoluble problems:

If a brand is only doing it for a single retailer and not implementing the technology as a strategic move, the quality of information can be very poor.

So far it has been impossible to put RFID on very small items, FMCG and bulk items.

Companies, such as luxury brands which are essential to many department stores, are refusing to invest in RFID technologies.

Also, and out of security reasons, this IADS member decided not to use the technology in payment processes and as an anti-theft device. Tags can be too easily removed compared to hard EAS anti-theft tags. While they are reviewing the possibility of mixing both technologies in soft tags, their security department feels that these tags can be cut or damaged very easily.

RFID costs can be an issue: they are difficult to evaluate as they depend on volumes. Still, Avery Dennison estimates that RFID tags are roughly USD 50 per 1,000 whereas fabric tags are USD 20 per 1,000 and paper tags are USD 30 per 1,000. RFID technology can be put inside the price label, so retailers can optimise the cost of the tag. Also, the information embedded in the RFID tag can include any information such as product composition, traceability facts and instructions for use, showing multiple ways of optimising product tagging. In the end, retailers could only have one tag including all related product information from the origin of materials to the price tag for customers.

Ultimately, the technology is pricey, but the ROI could be fast and straightforward. The IADS member using it identified the main RFID benefits:

The cost and productivity of the physical stocktake management. With RFID, it’s possible to inventory 5,000 tags in one minute. Since it’s so much faster, it reduces the in-store inventory cost and labour management. Stores can easily run weekly stocktakes whereas they could only do 3 per year previously. Some retailers see QR codes as a cheaper, yet efficient alternative to digital IDs, but QR codes don’t give the possibility to scan multiple products at the same time.

It is also critical to omnichannel business growth: with quick commerce delivery options, a very accurate inventory is much needed.

There are benefits on lost products as RFID technology works better than any relevant IT system. Sales also increased since the stock is more accurate and products are easy to locate and retrieve.

|  |  |  |

| --- | --- | --- |

| Pros of RFID | Cons of RFID | RFID benefits acknowledged by IADS members |

| Reduce disconnection between sustainability concerns and supply chain initiatives | Lack of security as tags can be too easily removed compared to hard EAS anti-theft tags | Item tracking allows frequent ultra-fast stock take |

| Reduce overproduction | Time-consuming implementation process | Accurate stock, needed in quick commerce |

| Reduce damage to products | Onboard suppliers and brands | Increase in sales |

| Item tracking for ultra-fast stock take | Cost |  |

| Increase stock accuracy, needed in quick commerce | More challenging for a retailer than for a brand |  |

| Increase sales |  |  |

| Efficient store replenishing and merchandising |  |  |

| Seamless self-checkout |  |  |

| Reduce waste thanks to FEFO (First-Expired, First-Out) and FIFO (First-In, First-Out) policies |  |  |

| Helps with reverse logistics for returns and buying back products |  |  |

| Increase customer convenience with product suggestions and information |  |  |

| New store employees are quickly productive |  |  |

Pros and cons of RFID and what IADS members think about the technology

*Whether it’s at the DC or in-store, having an accurate inventory is an obvious RFID’s ROI. The technology can also be used to source products for delivery or for stores from the best places depending on factors such as time, location, or sustainability. At the store level, faster and more frequent stocktakes, more proper replenishments and the easy localisation of products can automatically increase sales but also give more time for sales associates to take care of customers and sell.

Finally, at a time when crises are coming more often, RFID technology allows users to support the many disruptions in the supply chain by providing visibility and efficiency. For example during Covid, many shipping containers were backed up with lots of products in them. With RFID-enabled products, retailers could scan the container to prioritize the ones to unload and the ones that could wait without disrupting the business even further.

Despite such benefits, retailers are tiptoeing when it comes to extensively using RFID technology. Costs, long implementation process, collaboration with brands on the topic and in-store security issues seem to represent obstacles.*

Credits: IADS (Christine Montard)