RFID

CONTENTS

Contents
CONTENTS..................................................................................................................................................... 1
INTRODUCTION............................................................................................................................................. 2
Technology of RFID system ........................................................................................................................... 3
HOW COMPPONENTS WORKS .................................................................................................................. 3
Applications of RFID in fashion industry ....................................................................................................... 4
Production control .................................................................................................................................... 4
Retail management................................................................................................................................... 5
RFID used in fitting room .............................................................................................................................. 6
RFID tags for care labelling ....................................................................................................................... 6
HOW SYSTEM WORKS IN APPAREL MANUFACTURING ................................................................................ 7
Large Apparel Retailers, Wholesalers See Sharp Rise in RFID Adoption, ROI............................................... 7
Technical problems with RFID....................................................................................................................... 8
Problems with RFID Standards.................................................................................................................. 8
RFID systems can be easily disrupted ....................................................................................................... 9
RFID Reader Collision ................................................................................................................................ 9
RFID Tag Collision...................................................................................................................................... 9
RFID Versus Barcodes................................................................................................................................... 9
APPENDIXES & CASE STUDIES .....................................................................................................................11
CASE STUDY 1.............................................................................................................................................. 12
INTRODUCTION
Radio frequency identification is an automatic identification technology that is used to describe a
system that transmits the identity (in the form of a unique serial number) of an object wirelessly, using
radio waves.

In the fast-paced world of fashion, success for retailers was by being able to put the right item in
the right style or size in the customers hand at the right time a simple concept that is difficult
to execute for a number of reasons. Fashion is a perishable commodity where
trendschangeovernight, making it difficult to ultimately predict duration and demand. Ordering
too much product translates into increased capital expenses that can erode a retailers bottom
line, while ordering too little can lead to missed opportunities and lost sales. Unlike other retail
segments where item shave a set location on the shelves, items do notstay in one spot.
Inventory is constantly on the move between the rack and the dressing room throughout the
day, often causing a false out- of-stock situation and a lost sale when the size a customer may
need is in the dressing room
waiting to be re-stocked. And keeping an accurate inventory is difficult and costly further
compounding the ability to ensure the right item is available for your customers at the point of
decision.

Research has shown 65% of the traditional inventories give the wrong figures due to inaccurate
methods used. And the very nature of high value merchandise that is openly accessible to
customers increases the opportunities for theft. Goods are often produced thousands of miles
from their eventual point of sale. Accurate, up-to-date information is therefore crucial to manage
worldwide supply chains successfully. In order to increase sales and reduce out of stock
situations, the supply chain, from the manufacturers through distributors to retailers, has to be
transparent and well managed.

RFID provides manufacturers with the ability to accurately track and safeguard goods
throughout
the entire supply chain to improve operating costs.
Apparel retailers benefiting from RFID receive real-time visibility into inventory and product
movement to reduce loss prevention, improve
store productivity and boost brand loyalty. High
levels of safety stock
excess inventory ordered to protect against
out-of-stocks
can be reduced.

Unlike bar-code technology, RFID technology does not

require contact or line of sight for communication.

A basic RFID system consists of three components:

An antenna
A transceiver (with decoder)
A transponder (RF tag) electronically
programmed with unique information
Technology of RFID system

Radio frequency identification is an automatic identification method consisting of several components

such as tags, tag readers, edge servers, middleware, and application software. Among these the three
important components are RFID tag (also known as transponder), RFID reader (also known as
transceiver or interrogator) and software for data processing. An RFID tag is a small object that can be
attached to or embedded into a product, animal, or person. It consists of a tiny chip where the data is
stored and an antenna to enable it to receive and respond to radio-frequency queries from an RFID
transceiver. The tags contain electronic product code (EPC) and the information related to the product
like the name of the company, batch and year of manufacturing, price etc.

(REF: http://link.springer.com/article/10.1186/s40691-015-0034-9)

HOW COMPPONENTS WORKS

The antenna emits radio signals to activate the tag and to read and write data to it.
The reader emits radio waves in ranges of anywhere from one inch to 100 feet or more,
depending upon its power output and the radio frequency used. When an RFID tag passes
through the electromagnetic zone, it detects the reader's activation signal.
The reader decodes the data encoded in the tag's integrated circuit (silicon chip) and the data is
passed to the host computer for processing.
Applications of RFID in fashion industry

.A range of problems unique to fashion industry can be solved by installing the RFID system in various
processes involved in fashion supply chain. Fashion industry can be divided into four sectors such as
manufacturing, overseas transportation, distribution and retailing. In manufacturing RFID can be used to
avoid product and component mixing, and mixing of different accessories. In overseas transportation
RFID can be used to track and trace the consignment before and after Free on Board, if product is
outsourced. RFID primarily can solve the issue of sorting and tracking the product very quickly, thus
reducing the lead time during distribution. In majority of the retail shops, the space is a constraint,
which needs to be used efficiently. RFID is used to manage the stock to identify the item quickly and
correctly so as to avoid search regret, and thus help to solve the problem.

Inventory management
The use of RFID system assists in better inventory management and enhances customer shopping
experience. The RFID system can indicate the type of clothing selling faster or slower, which provide
customized advertisement on picked clothes according to the RFID tags. The RFID use also helps in
reducing labour. For example, American Apparel applied RFID system in eight of their stores, which
saved about 6080 h per week in labor and reduced out-of-stock products owing to unawareness.
Similarly, the Japanese apparel manufacturer Sankei is using a RFID system in manufacturing to track
clothes during the manufacturing process in addition to the online sales.

A successful case study has been conducted by Kaufhaulf departmental store in Europe on the impact of
RFID on their processes and supply chain. They have concluded that RFID can be used in warehousing to
track the goods and assist in cross docking operation as the goods received are not segregated in the
warehouse but stored as they are received from the manufacturer. In the distribution centers
receivable area RFID readers can be implemented to track the goods as they come in. The received
goods are registered and the data stored on RFID transponders can be read for each good though
received in pallets or individual fashion item on hanger. In this the task of counting hangers, items and
pallets can be eliminated and quantity can be controlled up to 100% satisfaction level.

Production control
Inside the stores of the production department the stock level can be quickly monitored which helps in a
real-time and efficient inventory management. The location and movement of the components, semi-
finished and the finished products can be detected by the RFID system, which helps in production
monitoring and control. The performance of departments and the individuals can be evaluated by the
rate of movement of the garment components from the departments or individuals. This helps in
improving the productivity and the quality. In the packing floor the mixing of different styles and sizes
can be avoided by RFID tags. Also the number of pieces in packed cartons can be counted without
opening, which saves the time and labour.
Retail management
It can be used in retail to monitor and control the floor level out-of-stocks (OOS). It is mostly required
where there is high product display density, low staffing level and chances of mishandling is very high.
The stock level of the items is properly maintained and the items can be grouped according to their
demand. Similarly, while receiving the goods at the store the accuracy of the deliveries can be ensured
quickly with less labour. This can improve the inventory accuracy and automatic replenishment of stock.
Mostly the retailers verify the accuracy and integrity of the shipment by open-box audit prior to stocking
or storing of goods. But now it is possible to read all the items packed inside the carton without opening,
which saves time and labour cost. So the RFID provides a new horizon to the retailers in receiving of
materials, which eliminates the invoice disputes, mixing of different quality products etc.

The RFID has been used by number of major retailers in Europe and USA. Walmart is among the early
adopters of RFID throughout their supply chain and the suppliers working with Walmart had been under
pressure to implement RFID in their supply chain component as well. The reason of implementing RFID
is line with Walmarts corporate strategy of being cost competitiveness and faster response. After
successfully implementation and use of RFID by Walmart, other big retailers like Marks and Spencer and
Tesco in UK are adopting it, Coles group in Australia have given a thought of embracing this technology.
Fashion industry is always regarded as the late adopter of new technology than others, but in adopting
RFID it is not lagging behind.

The theft of garments from the fitting room can be prevented by mounting a small reader at the entry
point of the room. The tag information of the garment is captured when the customer takes the
garment to the fitting room. The items that are taken to the fitting room but not come out are reported
as potential loss items. So the RFID can be used to identify the missing merchandise and prosecution of
the shoplifters. In addition, the dislocation of the clothes is automatically detected and customers can
be given advice on the fitting of the clothes they are trying on. The later task can be achieved by the use
of smart try-out cabins and smart mirrors. The smart mirror can advise on additional clothing and
fashion accessories. Companies such as Marks and Spencer, Levi Strauss & Co. are installing RFID to
acquire data on the amount of stocks every day so that the stock can be replenished. However,
significant difference was observed between the data received from the RFID systems and the actual
inventory levels.

The store merchandise recovery and replenishment process presently used is completely manual,
unsystematic and ineffective. Also it requires a very long time and high labour force and some popular
items are not replenished for weeks. This can be overcome by RFID technology. The tags help to
estimate the stock level frequently and there is an in-stock position improvement up to 30%. This has a
positive impact on sales and customer satisfaction. It prevents the fashion or the seasonal merchandise
to lie undetected in the back room and to be sold at significant markdowns thus improving the profit
margin.

Also at the point of sales the RFID tag can be read quickly and it avoids the physical handling of the
product as in barcode system. The RFID tags can be placed at the side seams or hem or in a paper
cartoon label without affecting the aesthetic appeal of the garment. The number of items sold is
automatically adjusted from the amount of stock. Hence, the customers can be informed about the
status/stock of merchandise by interactive display screens. The use of RFID tags has helped to reduce
the out of stock rate of Wal-mart by 16% and RFID enabled stores were 63% more effective in
replenishing out-of-stocks than control stores.
RFID used in fitting room
Radio frequency identification technology is used in the fitting room in a new approach by a German
departmental store Galeria Kaufhof in Essen, (part of the Metro retailing group). Automatic
suggestions are provided to men buying clothes in the store when they go to a dressing room to try a
suit. A smart mirror informs them what kind of suit or accessories will be appropriate. An RFID reader
on the smart mirror in the fitting room determines which clothing has been brought into the room from
the RFID tag attached to the apparel. The appropriate accessories are then displayed on a suitable
interface. This system is used in combination with smart shelves, which can read what merchandise is
currently in stock, so that customers can be shown various styles and sizes that are available.

RFID tags for care labelling

The recent care labels are printed or woven labels storing a limited information. The electronic labels
use RFID tags for storing information electronically on a garment. The same RFID tag used for containing
the product details at the point of sale cannot be used for storing the wash care instructions, due to the
privacy concerns. Hence, additional tags are needed for the wash care instructions, which will increase
the cost of the garment. In addition, the consumers need special readers to extract the information
stored in the RFID tag. Hence, they will prefer the physical label instead of an electronic label.
Furthermore, the use of RFID tags in the garment, may pose health risks to the consumers due to the
exposure to radiation.

The other concern related to the use of RFID tag is the electronic waste. An appropriate method should
be devised to recycle or reuse the RFID tags, if they are removed at the point of sale. Similarly, if
customers remove the chip at some point, proper disposal of the tags is essential, which causes
additional worries to the companies. In addition, the other issues related to RFID are the lack of
standardisation and high cost. Standardising the technology, design and use of the tags can solve the
issues related to lack of standardisation, whereas the technological developments can help to overcome
the cost related issues.
HOW SYSTEM WORKS IN APPAREL MANUFACTURING

Large Apparel Retailers, Wholesalers See Sharp Rise in RFID Adoption, ROI

The rate of adoption for radio frequency identification in the retail apparel, footwear and accessories market
has more than doubled during the past two years, according to a survey of 60 European and U.S. retailers and
wholesalers, conducted by management and strategy consulting firm Kurt Salmon. The company's first large
retail study, carried out in 2014, found that 34 percent of respondents had either implemented or were
currently implementing or piloting RFID. When Kurt Salmon conducted a similar survey two years later, in
May 2016, that rate grew to 73 percent. Of the 16 respondents not using RFID, 86 percent indicated that
management at their company was focused on other priorities, while only 2 percent felt that RFID would not
provide substantial benefits.

Technical problems with RFID

Problems with RFID Standards

RFID has been implemented in different ways by different manufacturers; global standards are still being
worked on. It should be noted that some RFID devices are never meant to leave their network (as in the
case of RFID tags used for inventory control within a company). This can cause problems for companies.
Consumers may also have problems with RFID standards. For example, ExxonMobil's SpeedPass system
is a proprietary RFID system; if another company wanted to use the convenient SpeedPass (say, at the
drive-in window of your favourite fast food restaurant) they would have to pay to access it - an unlikely
scenario. On the other hand, if every company had their own "SpeedPass" system, a consumer would
need to carry many different devices with them.

RFID systems can be easily disrupted

Since RFID systems make use of the electromagnetic spectrum (like WiFi networks or cellphones), they
are relatively easy to jam using energy at the right frequency. Although this would only be an
inconvenience for consumers in stores (longer waits at the checkout), it could be disastrous in other
environments where RFID is increasingly used, like hospitals or in the military in the field.
Also, active RFID tags (those that use a battery to increase the range of the system) can be repeatedly
interrogated to wear the battery down, disrupting the system.

RFID Reader Collision

Reader collision occurs when the signals from two or more readers overlap. The tag is unable to respond
to simultaneous queries. Systems must be carefully set up to avoid this problem; many systems use an
anti-collision protocol (also called a singleton protocol. Anti-collision protocols enable the tags to take
turns in transmitting to a reader. (Learn more about RFID reader collision.)

RFID Tag Collision

Tag collision occurs when many tags are present in a small area; but since the read time is very fast, it is
easier for vendors to develop systems that ensure that tags respond one at a time.
Security, privacy and ethics problems with RFID

(REF: http://www.technovelgy.com/ct/Technology-Article.asp?ArtNum=20)

RFID Versus Barcodes

APPENDIXES & CASE STUDIES
CASE STUDY 1
 Item-Level RFID for
Apparel: The JCPenney
RFID Initiative

Bill C. Hardgrave, Rebecca S. Miles, and Yana Mitchell

Information Technology Research Institute
Sam M. Walton College of Business
University of Arkansas

Inform ation Technology VOLUNTARY INTERINDUSTRY

C OMMERCE S OLUTION S The Worlds Leading Source for the Supply Chain Profession.
Research Institute
 INFORMATION TECHNOLOGY RESEARCH INSTITUTE

Item-Level RFID for

Apparel/Footwear:
The JCPenney RFID
Initiative

RFID Research Center:

A sub-unit of the
Information Technology Research Institute
Sam M. Walton College of Business
University of Arkansas
Fayetteville, Arkansas 72701
http://itrc.uark.edu

Note: distribution in any form (electronic, hardcopy, other) is strictly prohibited.

An electronic copy of the paper may be downloaded legally at http://itri.uark.edu
ITEM-LEVEL RFID FOR APPAREL/FOOTWEAR: THE JCPENNEY RFID
INITIATIVE

Rebecca S. Miles
Yana Mitchell
Bill C. Hardgrave

Information Technology Research Institute

Sam M. Walton College of Business
University of Arkansas
Fayetteville, Arkansas

Contact:

Dr. Bill Hardgrave

Edwin & Karlee Bradberry Chair in Information Systems
Executive Director, Information Technology Research Institute
Director, RFID Research Center

Address:
Information Systems Department
Sam M. Walton College of Business
University of Arkansas
Fayetteville, AR 72701

(479) 575-6099
bhardgrave@walton.uark.edu

February 2010

Funding for this research provided by:

ADT Security Services, Inc.

JCPenney
Voluntary Interindustry Commerce Solutions (VICS) Association
 EXECUTIVE SUMMARY

It has been proven that item-level RFID can improve many in-store processes for

retailers. In particular, the business case for RFID for retailers looks promising. Previous

studies have shown the benefits of RFID at the pallet and case level, such as reducing out of

stocks and improving inventory count accuracy. Therefore, it seems logical that item-level RFID

would provide even more benefits. In this study, we examine the use of item-level RFID at a

major apparel and home retailer, JCPenney. Specifically, the use cases of inventory accuracy

and inventory management using RFID replenishment reports are investigated, with incidental

attention to cycle counting. This pilots results support previous research, demonstrating the

tendency for inventory accuracy to diminish over time, as well as the potential for improvement

in inventory accuracy due to RFID. Improved inventory accuracy leads to fewer out of stocks,

less safety stock, and better ordering and forecasting, among others.

As seen in previous item-level RFID whitepapers1, RFID has the ability to quickly and

accurately conduct cycle counting, rather than doing large scale inventories once or twice per

year, thereby offering the advantage of keeping inventory accuracy high. Additionally, in pilots

where RFID was used to evaluate loss prevention, RFID provides the advantage of knowing

exactly what was stolen, when it was stolen, and from where it was stolen. Knowing exactly

what was stolen allows the retailer to adjust inventory counts accordingly and order more

product, as needed.

Page 1
1
A more extensive discussion of loss-prevention and cycle counting benefits offered by item-
level RFID, as well as links to previous papers, is available in the appendix.

Page 2
 ITEM-LEVEL RFID FOR APPAREL/FOOTWEAR: THE JCPENNEY RFID
INITIATIVE

INTRODUCTION

In previous item-level RFID for apparel pilots (first generation RFID pilots), we

examined the benefits of item-level tagging and reviewed the data to see what benefits a retailer

can realize from implementing RFID technology. Findings showed that RFID greatly improves

inventory accuracy through reduction in cycle-counting time, thereby reducing out of stocks and

instances of frozen inventory (see Hardgrave, 2009, for more detail).

In the JCPenney pilot instead of focusing strictly on the improvements RFID offers in

the areas of inventory management and accuracy the intention was to evaluate how the

improvements that RFID can help attain are changing the way retailers approach the introduction

of RFID into their existing businesses.

Rather than launching a traditional pilot to determine whether RFID improves inventory

accuracy and decreases out of stock situations, retailers are now more likely to use a second

generation RFID pilot to obtain the internal data needed to:

1. Determine the best approach to using RFID in their particular business;

2. Provide senior management with quantifiable data about how RFID works in their

particular business;

3. Determine the retailer-specific hardware and software needs.

Retailers already know that RFID works. What needs to be examined now is how this

technology can be embedded into an existing business in the most efficient and non-disruptive

manner. The RFID pilot at JCPenney is an example of how retailers are introducing RFID into

their existing business.

Page 3
Company Overview & RFID Use Cases

JCPenney is one of America's leading retailers, operating more than 1,100 stores

throughout the United States and Puerto Rico, with an annual revenue of nearly $18.5 billion in

2008 (About JCPenney, 2010).

The primary use for RFID examined at JCPenney was inventory accuracy. In this

particular study, item-level RFID tagging and physical inventory counting was investigated in

situ, primarily to determine the effect of item-level tagging on inventory accuracy, which is

known to cause other problems, such as out of stocks. Overall, the results can be used to provide

guidance to companies as they investigate whether, and to what extent, to implement RFID.

Research Methodology

To investigate item-level RFID use cases, five stores were chosen: two RFID-enabled

stores and three control stores. Two departments bras (national and private brands) and shoes

(womens, mens, childrens, and athletic) were examined in this study. Each test stores bra

and shoe department was analyzed against a control department that was selected from one of the

control stores. Table 1 illustrates the agreed upon matches between the test and control stores

departments.

Bras Shoes
Test Store Control Store Control Store
1 A B
2 B C

Table 1: Matching Test Stores Departments to Control Stores Departments

Page 4
 For the control and test stores, inventory was hand-counted by a professional inventory

services firm (using barcode scanners) three times during the study: at the beginning of the study,

at the beginning of week six, and at the end of week 15. Week 6 signified the beginning of the

Page 5
use of RFID in the test stores; week 15 indicated the end of the pilot. Weeks 1 through 5,

therefore, served as the baseline period for the study. In the test stores, inventory was also

counted two times per week (Monday and Thursday) by store associates using RFID. The

Thursday count was used to update the stock ledger.

Initially, the stores were equipped with hand-held readers only. Portal readers were

added at a later date to the stores backroom to indicate arrival of product at the store. Cycle

counting (i.e., physical inventory counting) was conducted with handheld RFID readers in the

test stores and with barcode scanners, used by the professional inventory service, in both the test

and control stores.

There were between 10,000 and 16,000 SKU-level items included in this study. In the

initial stages of the pilot, items were RFID-tagged at the distribution center that supported both

test stores. From there, merchandise was taken to the two test stores.

The baseline portion of the study was used to determine actual physical inventory counts

at both the test and control stores. These inventory accuracy numbers (actual inventory) were

compared to JCPenneys Stock Ledger (Perpetual Inventory or PI) for both the test and the

control stores throughout the 15-week study. Once RFID was in place, the RFID inventory

numbers were used at the test store for comparison to both PI and barcode inventory figures.

Changes to PI were made weekly in the test stores during the study. During the course of the

study, extensive metrics were gathered on inventory accuracy (what the system shows versus

what was counted by hand or by RFID) and examined both to reaffirm the benefits RFID offers

to a stores inventory accuracy (through frequent cycle counting) and the benefits of weekly PI

updates using replenishment reports.

Page 6
RESULTS

Inventory Accuracy

The baseline data for JCPenney had unusually high inventory accuracy percentages (far

above the industrys average of 65%). Because of the high initial accuracy, drastic improvements

to accuracy were not expected. However, at the conclusion of the pilot, it became clear that even

retailers with high starting inventory accuracy numbers can stand to gain from implementation of

RFID.

The results from examining inventory accuracy over time have been categorized into

three areas: perfect inventory (physical inventory count = PI), understated inventory (PI <

physical inventory count), and overstated inventory (PI > physical inventory count).

As expected, and typically seen in previous pilots, without using RFID or making

adjustments to PI, the perfect category in the control stores declined over the duration of the pilot

while both the understated and the overstated categories saw increases (as shown in Table 2).

Perfect inventory is agreement between the inventory counted (using either barcode or RFID)

and the inventory record. Any difference between the two numbers (e.g., the count and the

record) is an inventory inaccuracy, either more actual inventory in stock than recorded by the

system (understated inventory record) or less inventory in stock than recorded by the system

(overstated inventory record). In both situations, where there is an understated or overstated

inventory record, inventory is not managed to its full potential. Additional discussion of the

implications of understated and overstated inventory can be found in the appendix.

Control Stores Pre-RFID Post-RFID

Perfect Baseline -4.48%
Understated Baseline +1.67%
Overstated Baseline +2.81%

Page 7
Table 2: Control Store Inventory Accuracy

Page 8
 By contrast, in the Test Stores (see Table 3), inventory accuracy improved during the

course of the study (i.e., the perfect category). Although the perfect category in the test stores

increased by 2.62% over the course of the pilot, the real gains to accuracy are measured by

considering the improvement in the test stores to the deterioration of accuracy in the control

stores. When examining the decrease of 4.48% (perfect category in control stores) and the 2.62%

improvement (perfect category in test stores), it can be concluded that the real benefit of RFID is

approximately 7.10% (4.48% + 2.62%) improvement in the perfect category. Similarly, the real

improvement to understated inventory is 1.77% (1.67% + 0.10%). Although the measured

improvement in overstated inventory at the test stores was 2.52%, the real improvement is

approximately 5.33% (2.81% + 2.52%). The improvement to inventory accuracy at JCPenney

can be attributed to both the implementation of RFID technology and to the weekly use of RFID

replenishment reports to make in-store decisions.

Test Stores Pre-RFID Post-RFID

Perfect Baseline +2.62%
Understated Baseline -0.10%
Overstated Baseline -2.52%

Table 3: Test Store Inventory Accuracy

The changes and deterioration to inventory accuracy are most pronounced when

examining them on a timeline. Figures 1 and 2 compare inventory accuracy in control stores to

inventory accuracy in test stores for the duration of the pilot. The shaded area represents data

collected to establish baseline, the non-shaded area represents the time when Stock Ledger was

updated and when RFID replenishment reports were used.

Page 9
 Figure 1: Perfect Inventory Trends over Time

Figure 2: Understated and Overstated Trends over Time

Page 10
 Similar results are seen when examining the two departments (shoes and bras) separately,

rather than as an aggregate. Figures 3 and 4 demonstrate the impact RFID and weekly updates to

stock ledger (in the test stores) had on the bra and shoe departments (respectively).

Figure 3: Bra Departments Before and After SL Updates

Figure 4: Shoe Departments Before and After SL Updates

Page 11
Second Generation RFID Pilots

As previously established, RFID is known to make counting inventory easier and faster,

which allows for more frequent counts and a more accurate (up-to-date) reflection of inventory

on hand. The research conducted to date (first generation RFID pilots), by the University of

Arkansas IT Research Institute and others, demonstrates that RFID at the item-level improves

inventory accuracy and decreases out-of-stock situations. Knowing which improvements RFID

can help attain is changing how retailers approach the introduction of RFID into their existing

businesses, creating second generation RFID pilots. This second generation of research has less

focus on the efficacy of RFID and more on the questions and issues that have been identified in

previous RFID pilots, including:

What is the best approach to using RFID in our business? Issues range from which

items to tag, which tags to use, where and when (in the supply chain) to apply tags, where

and when (in the sales process) to remove tags, and how to make the use of RFID tags

consistent with our corporate brand and image, to questions about existing inventory-of-

record systems and how to integrate new RFID processes.

What data will our executives need to make a decision about moving ahead with

RFID in our business? Beyond the obvious questions to be answered about the costs (of

hardware, software, and tags), more retailer-specific questions arise around quantifying

the benefits to the business.

What are the unique needs of our business and our operating model when selecting

hardware and software? Once the broader issues of approach and executive support are

recognized, attention shifts quickly and dramatically to the detailsand the learning

opportunitiesassociated with an RFID pilot.

Page 12
The Best Approach

Tagging

Tagging-related decisions like the need for tags, which items to inventory (high cost,

low volume), where in the supply chain should tagging take place, and the impact tag design and

aesthetics potentially have on corporate brand and image play an ever-increasing obstacle in

efficient and smooth implementation of RFID technology.

a. Selection of items

The initial decision about which items to use for the RFID pilot is made long before the

pilot begins and is most often a factor of retail cost (high), inventory volume (usually high), and,

sometimes, speed of turnover (also high). Once the initial decision is made, the lurking details

remain to be addressed in the pilot. Using footwear as an example, one lurking detail is whether

to tag only the boxed shoes or to include shoes that have a hang display (e.g., casual sandals); the

decision has repercussions for inventory management on multiple levels. Inventory is often

managed in broad categories, such as footwear, which encompass one-off items ranging from

shoe polish to shoe laces; those are the types of details to be addressed (or tabled) during an

RFID pilotand the decisions will be business-specific.

b. Where (in the supply chain) to tag

The quickest approach to an RFID pilot is to put the tags on the individual items at the

test store locationsit involves fewer parts of the supply chain and will, in theory, limit the

impact to business operations of the RFID pilot. Most retailers start with stores and quickly

realize the need to move to application of the tags upstream to the distribution center, even for

the purpose of the RFID pilot.

Page 13
 It has been found that a large scale operation, such as integrating RFID within a retail

supply chain, requires a large number of RFID tags, and the cooperation of all the entities in the

Page 14
value chain (Huber, et al., 2007). Although the benefits of source-tagging are known, many

retailers that embark on a pilot or a study of RFID try to minimize costs by focusing on specific

departments or a specific line of products which forces the retailer to maintain both the legacy

system and the new RFID system The RFID pilot is the best way to make the determination of

the proper place (in the supply chain) to do the tagging based on the unique needs of a specific

business model. No two retailers are alike at the detail level of their supply chain and how to

integrate the use of RFID tagging at the item level should be a key finding of an RFID pilot.

Generally, though, the further up the supply chain tagging occurs, the greater the benefits for all

supply chain participants.

c. Aesthetics of tagging

The use of RFID at the item level in retail apparel is both a technical challenge and a tag

design issue, sometimes to the surprise of RFID project managers. One of the biggest challenges

to surface when RFID is examined as a retail solution is that of aesthetics and how to use RFID

tags consistently with the corporate brand or corporate image. Womens lingerie, for example,

does not lend itself well to brightly colored tags that may be efficient for managing an RFID

project (highly visible tags make it easier for project teams to see where tagging is complete); the

same is true for high-end merchandise where aesthetics are integral to store design and appeal.

Retailers need to determine whether hanging RFID tags (used for apparel items where a

tag cannot be embedded into the item or a box) need to be redesigned to complement corporate

image and identity. The RFID pilot is the first place where tag aesthetics are addressed, usually

after the first round (or more) of proposed tag designs are deemed unacceptable.

Existing Inventory-of-Record System and Changes Required to Use RFID

Page 15
 Stand-alone RFID pilots are, in theory, the least disruptive to existing business practices

and legacy systems, thus, most retail RFID pilots begin as stand-alone initiatives. The Catch-

Page 16
22 in this approach is that the RFID data must, at some point, be compared to existing

inventory-of-record data, which may be gathered and/or reported using processes that have

embedded (e.g., process) errors related to timing of shipments, method of receipt, and when

inventory is considered sold. This makes apple-to-apple comparisons difficult. One key finding

of most RFID pilots is that, whether intended or not, the existing processes around inventory

management (including supply chain, when and how legacy systems are updated, and reporting

requirements) must be documented and understood before progress can be made toward a

sustainable RFID initiative.

Unexpected learning opportunities can be identified during the RFID pilot, including the

extent to which business practices work around (rather than eliminate) cumbersome legacy and

process issues. The cleaner and neater the RFID pilot, the less likely it has uncovered the issues

that will plague expanding the use of RFID across the enterprise, including the need to educate

employees on the use of data that is more accurate and more timely.

What Executives Need

In order to gain the support for integrating RFID into the business practices across the

enterprise, executives need to be given adequate information to make informed decisions about

how RFID will benefit their specific business. Quantifiable data about how RFID can improve

the bottom line is necessary, though not always sufficient, to gain support for an enterprise-wide

RFID solution. The RFID pilot can identify and address (or table for later discussion) the issues,

questions, and opportunities that generated initial interest in a large-scale implementation of

RFID technology. At a minimum, an RFID pilot should provide parameters about cost for

hardware, software, tags, changes to legacy systems, labor reallocation, and changes to business

processes (where identified). Increased sales and customer satisfaction are more difficult to
Page 12
assess directly, but directional improvement in a positive direction should be associated with a

successful RFID pilot.

Detailed Business Needs

Although every retailer of apparel has similarities in processes, business models, and

needs, the differences are more relevant when considering the use of an RFID solution. Deriving

success through competitive advantage suggests that each successful retail enterprise strives to

be unique in one or more waysand the use of RFID must accommodate. Once the decision

and investment of an RFID pilot are made, the challenge remains in determining the unique

needs of hardware (does it fit with our existing store designs? our legacy systems?), software

(does it give us the data we need to maintain our competitive advantage?), and tags (do they

reflect our corporate image?).

These specific challenges involve hardware and software providers who seek to offer

value to businesses in the retail industry. While apparel retailers desire hardware and software

that fits seamlessly with (in) their business, the providers of the hardware and software are

disadvantaged by the afore-mentioned need for unique competitive advantage in each retail

apparel business. The RFID pilot is the source of much learningand, sometimes, frustration

as the needs of the retail apparel business are metor notby the hardware and software used

for the pilot. The search remains for The Little Black Dress of RFID software that allows each

retailer to accessorize as needed, to reflect the uniqueness of customer-driven competitive

advantage(s).

Page 13
CONCLUSION

Inventory accuracy remains key to an effective and efficient supply chain, providing

critical information about what to order and when. Despite the key role of inventory accuracy,

past studies suggests it continues to be inaccurate about 65% of the time (Raman, et al., 2001).

Previous studies have provided insight into RFID technologys ability to improve inventory

accuracy, depending upon how the technology is used. This 15-week study investigated the use

of item-level RFID to improve inventory accuracy in the shoes and bras departments at five

JCPenney stores (two test stores and three control stores). Weekly updates to the Stock Ledger

using RFID replenishment reports indicate that even in departments with already high inventory

accuracy, dramatic improvement can be gained by conducting weekly cycle-counts using RFID

and then using the gathered data on the in-store inventory to update Stock Ledger.

The growing body of research related to RFID and the subsequent improvements in

inventory accuracy, out of stock, cycle counting, and loss prevention provides a solid foundation

upon which specific actions can be identified and implemented to increase financial

performance. Supply chain considerations (e.g., where in the supply chain to implement item-

level tagging) have been resolved by some retailers and are still being addressed by others. The

impact of process changes are becoming more apparent, as retailers are able to quantify the

financial implications of more frequent cycle counts, more accurate identification of inventory

location (stock room versus retail floor, for example), and process execution opportunities.

Specific questions which can be addressed by the use of RFID inventory data include: Who

moves the product from the stock room to the retail floor? How often? Using what set of

information? How many items are in a frozen OOS condition? What is the cost of our frozen

OOS? How much hidden excess inventory do we carry? At what cost?

Page 14
 The use of RFID in the retail space has potential benefits for customer service. Accurate

and timely information about product order, delivery, location, and stock level allow retailers to

have the products their customers want to purchase. Having what the customer wants when the

customer wants it is critical to success in retailing.

As with all good research, the outcome generates additional questions, which retailers are

addressing through second generation RFID pilots. The clarity of the questions being generated

by RFID research into the retail space determine how well the benefits can be realized along the

supply chain, up to and including the sales floor. Retailers who apply unique knowledge of their

operating model to RFID inventory data will be able to develop and use models to assess,

monitor, and improve financial performance. Gathering the RFID inventory data is quickly

becoming the easier part of the equation.

Page 15
REFERENCES

Hardgrave, B., Item-Level RFID for Apparel: The Dillards RFID Initiative, Information
Technology Research Institute Working Paper; 2009, available online at:
http://itri.uark.edu/91.asp?code=&article=ITRI-WP146-0409.

Huber, N., Michael, K., McCathie, L. (2007). Barriers to RFID Adoption in the Supply Chain.
http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1560&context=infopapers

About JCPenney; available at http://www.jcpenney.net/about/

Raman, A., DeHoratius, N., and Ton, Z., Execution: The Missing Link in Retail Operations,
California Management Review, 43 (3), 2001, 136-152.

Page 16
APPENDIX

This section includes the applications of previous research to the JCPenney pilot.

Introduction

RFID in the apparel retail value chain is an item-level proposition, and the place to

begin is in the store (Kurt Salmon Associates). Our previous research on RFID in the supply

chain and in the retail space supports the assertion that benefits can be found for both the retailer

and supplier at the store level. While tagging pallets and cases as a stand-in for item-level

tagging has demonstrated benefit, actually tagging at the item level within the retail environment

can now be demonstrated to provide greater opportunities both for retailers and for their

suppliers.

Item-level tagging is at the heart of nested visibility (see Figure A), described as the

ability to track and identify products at various levels from production through sale. In the

consumer packaged goods industry, the current state of product visibility is generally pallet and

case level; therefore, product visibility is lost once case- or pallet-level product leaves the

backroom for the sales floor and is removed from the case. By starting the investigation at the

item-level, one is able to investigate the usefulness of the tagging for visibility at other levels

(such as using the item tagging as surrogates for case and pallet tagging).

Item
Case

Pallet
Container
Transportation medium

Figure A: Nested Visibility

Page 17
 Research into item-level tagging demonstrated that RFID benefits do not end at the store.

If we begin the investigation of RFID benefits at the store, then both the taggingand the

benefitscan be pushed up the supply chain. Ultimately, the maximum value for RFID is

realized when it is used throughout the supply chain in the places where it provides the most

benefit for one or more specific business processes.

The research conducted at JCPenney is part of a larger research effort to demonstrate and

quantify the business value of using RFID item-level tagging as part of the ongoing day-to-day

business operations within a retail environment. JCPenneys leadership in the retail industry and

their willingness to incorporate RFID item-level tagging into their existing business processes

provided a unique and valuable research opportunity.

Inventory Accuracy: The Root of all Problems?

The amount of product retailers think they have on hand (also referred to as perpetual

inventory or PI) is usually wrong. Many previous studies have shown the inaccuracy of a typical

retail stores perpetual inventory count, for example 51% inaccuracy (Kang and Gershwin,

2007); 65% inaccuracy (Raman, DeHoratius, and Ton, 2001); and 55% inaccuracy (Gruen and

Corsten, 2007). Subsequently, many decisions, such as ordering, forecasting, and replenishment

are based on a number that most studies find is wrong more often than it is right!

When evaluating inventory accuracy, there are two basic categories of inaccuracy:

overstated and understated. Research has found that about half of the time, PI is overstated (i.e.,

PI shows more inventory than is actually in the store, also known as phantom inventory), and

about half the time PI is understated (i.e., PI shows less than what is in the store, also known as

hidden inventory) (Gruen and Corsten, 2007). Both types of PI can have a detrimental effect on

the retailer. For overstated, the most serious and directly related problem is out of stock; the
Page 18
system thinks it has inventory on hand (i.e., phantom inventory), thus, fails to order new

inventory. For understated, the most pressing problem is excess inventory (i.e., hidden

inventory) because the system thinks it does not have as much as it really does, thus ordering

unnecessary inventory. This unnecessary inventory potentially results in excess holding costs,

excessive markdowns which impact margin, reduced turns, and breakdowns in store execution

(which can lead to execution-related errors such as out of stocks) due to the inefficiencies created

by the extra inventory.

There are several known causes of inventory inaccuracy (Gruen and Corsten, 2007; Kang

and Gershwin, 2007; Waller, Nachtmann, and Hunter, 2006). Among the most common causes

are theft, cashier errors, and incorrect manual adjustments. Theft leads to overstated PI. For

example, the system thinks there are 10 items on hand, but three were stolen leaving a true on

hand of only seven. Left alone, this error will grow over time as more items are stolen. Cashier

errors can result in both understated and overstated PI. For example, if a customer is purchasing

three items of product A and three items of product B, but the cashier mistakenly enters six items

of product A, then the PI for product A will be understated by three units and the PI for product

B will be overstated by three units. Finally, physical inventory counts can be incorrectly

manually adjusted by employees. For example, when an employee believes the product to be out

of stock, physical inventory count may be mistakenly set to zero when, in reality, product is in

the backroom. Although there are other things that cause inventory inaccuracy, such as mis-

shipments, improper returns, and damaged/spoiled products, the aforementioned account for

most of the problems.

Companies can address inventory accuracy problems or errors in a variety of ways, as

presented in Table A. First, companies can conduct physical counts frequently and adjust PI

accordingly. Unfortunately, this strategy is very expensive and is less than perfect. Manual
Page 19
inventory counts are rarely, if ever, perfect. Second, companies can let the system adjust PI

automatically based on an estimated error rate. For example, if the company estimates that 2%

of the items are stolen per month, then the system could make a 2% adjustment each month. The

problem with this strategy is that the adjustment factor is difficult, if not impossible, to

determine. Finally, the company can try to eliminate the source of errors by better inventory

management, reducing theft, etc. Kang and Gershwin (2007) suggest auto-ID (RFID) as one

method to help companies eliminate the source of errors.

Sources of Error Results in Results in Solutions Available

in PI Overstated PI? Understated PI?
Incorrect manual Yes Yes Manual adjustments restricted
adjustment and based on cycle count
Theft Yes No Identify what leaves the store and
where
Damaged Yes No RFID identification allows
segregation and subsequent
removal from inventory
Improper returns Yes Yes Handled automatically if RFID-
enabled point of sale
Mis-shipment Yes Yes RFID receipt or cycle counting
from DC will modify PI accordingly based
on actual
Cashier error Yes Yes Handled automatically if RFID-
enabled point of sale
Table A: Sources or Error in Inventory Accuracy

Page 20
REFERENCES (for appendix)

Gruen, T.W., and Corsten, D., A Comprehensive Guide to Retail Out-of-Stock Reduction in the
Fast-Moving Consumer Goods Industry, 2007, available at:
http://www.gmabrands.com/publications/docs/2007/OOS_fullreport.pdf

Kang, Y., and Gershwin, S.B., Information Inaccuracy in Inventory Systems: Stock Loss and
Stockout, IIE Transactions, 37, 2007, 843-859.

Kurt Salmon Associates, RFID Well Within Reach: Retailers Who Delay Their Adoption of
RFID are Leaving Millions of Dollars on the Table, Apparel, October 1, 2006.

Raman, A., DeHoratius, N., and Ton, Z., Execution: The Missing Link in Retail Operations,
California Management Review, 43 (3), 2001, 136-152.

Waller, M.A., Nachtmann, H., and Hunter, J., Measuring the Impact of Inaccurate Inventory
Information on a Retail Outlet, The International Journal of Logistics Management, 17 (3),
2006, 355-376.

Links to Previous Whitepapers

Does RFID Improve Inventory Accuracy? A Preliminary Analysis

(http://itri.uark.edu/91.asp?code=&article=ITRI-WP107-0311)

RFID Item-Level Tagging for Apparel/Footwear: Feasibility Study

(http://itri.uark.edu/91.asp?code=&article=ITRI-WP112-0608)

Item-Level RFID for Apparel: The Dillard's RFID Initiative

(http://itri.uark.edu/91.asp?code=&article=ITRI-WP146-0409)

Item-Level RFID for Apparel: The Bloomingdale's RFID Initiative

(http://itri.uark.edu/91.asp?code=&article=ITRI-WP147-0809)

For additional information please visit the following:

JCPenney (http://jcpenney.com/jcp/default.aspx)

Information Technology Research Institute (http://itri.uark.edu)

Page 21
CASE STUDY 2
 Retail Industry Case Study

Retailer Boosts Sales 14%, Cuts Inventory

Management Costs 35% with RFID Solution

Overview RFID is the future of retail because its a better way of

Country or Region: United States
Industry: Retail counting inventory, period. Every retailer can make
more money by making replenishment more efficient.
Customer Profile
American Apparel, based in Los Angeles, Zander Livingston, Director of RFID, American Apparel
California, makes, distributes, and retails
basic fashion apparel for men, women,
and children. It has 260 stores in North Like virtually all retailers and all businesses, American Apparel
America, Europe, and Asia, and 10,000
employees.
wanted to do more with less at its retail locationsspecifically,
it wanted to boost store sales while reducing the cost of
Business Situation
American Apparel wanted to boost its in-
generating those sales. It met that goal with a solution provided
store sales, while reducing the costs by Xterprise, a Microsoft Gold Certified Partner, and based on
required to generate those sales.
Microsoft BizTalk Server RFID. Radio frequency ID (RFID) tags
Solution and readers help employees to get needed merchandise on the
The company adopted Clarity ARS from
Xterprise, based on Microsoft BizTalk
retail floor faster than before. As a result, store sales are up 14
Server RFID and Microsoft SQL Server. percent, margins are up to 65.9 percent, and the labor time and
The end-to-end solution covers the
tagging of merchandise at the factory
costs spent on handling inventory are down by 35 percent,
through the analysis of store sales. resulting in better-organized backroom management. American
Benefits
Apparel sees the technology as the first step in an integrated
Store sales up 14 percent solution that slashes shrinkage and increases customer service,
Profit margins increased to 65.9
percent
and it is already using the solution to make better decisions in
System can extend to other solutions real time.
Business intelligence enables better
decision making
[American Apparel CEO]
Dov [Charney] could
walk through one of our
stores and immediately
spot 50 or 100 items that
needed replenishment.
We needed a technology
solution that replicated
his eye for the
merchandise.
Zander Livingston, Director of RFID,
American Apparel
Situation
If you like to dress casuallysay, a T-shirt
and jeanstheres a good chance youre
already an American Apparel customer. The
company made and sold more than
U.S.$545 million worth of casual apparel in
2008. The manufacturing is done at the
companys Los Angeles, California, facility.
The sales are conducted through indepen-
dent retailers, online, and, increasingly,
through the companys own network of 260
stores throughout the United States,
Canada, Mexico, Europe, and Asia.
In those stores, American Apparel experi-
ences the same concerns that trouble other
retailers, from pharmacies and super-
markets to department stores and super-
stores. Shrinkagethat is, lost, misplaced,
or stolen goodseats into profit margins
and is often difficult to quantify. That
typifies a larger problem that American
Apparel, like other retailers, had in lacking
sufficient visibility into inventory to under-
stand its shrinkage rates and other inven-
tory issues. It struggled to determine what
was on the retail floor, what needed to be
replenished on the retail floor, and where
and whethermerchandise was in the back
of the store, ready to move to the retail
floor. The lack of sufficient visibility is a very
down-to-earth problem: Any item that is
not where it needs to be does not get sold
and means revenue lost to the store.
In the case of American Apparel, those
challenges were highlighted by a boutique
retail model that called for one item in each
size, color, and style to be available in the
store at all timesa total of 12,000 differ-
ent items on the selling floor. To make this
model work, American Apparel first con-
ducted manual cycle counts of its entire
store-floor inventory twice a week. The
process took 20 to 30 hours of personnel
time and typically uncovered 100 to 300
items that needed to be replaced. But cycle
counts could undercount missing items,
and there was no guarantee that replace-
ment items would make it quickly to the
sales floor or even that the needed items
were in stock at all.
[American Apparel CEO] Dov [Charney]
could walk through one of our stores and
immediately spot 50 or 100 items that
needed replenishment, says Zander
Livingston, Director of RFID for American
Apparel. But we couldnt send him from
store to store to do this. We needed a
technology solution that replicated his eye
for the merchandise.
Livingston and his colleagues thought that
they had the solution using an Auto-ID
radio frequency identification (RFID) system
that tagged each item in a store, read the
item as it was received into the backroom
inventory, and read it again at the point of
sale. But there were problems with that
system. It didnt integrate with the stores
other systems, such as its retail-specific
enterprise resource planning (ERP) system,
so merchandise had to be entered redun-
dantly in both systems. The RFID system
wasnt scaling cost-effectively to support
the companys growth, and there was no
easy way to generate business intelligence
data from within or across stores.
With an economic downturn looming and
retail sales poised for declines throughout
the industry, American Apparel needed a
solution that would immediately cut
inventory levels and boost store sales.
Solution
The company decided that its choice of
RFID technology was sound; the tech-
nology didnt require a direct optical read
by a scanner, so store employees could use
the technology both in the backroom
inventory and at the point of sale (POS).
But its choice of RFID platformon the

The Clarity ARS system, based
on BizTalk Server RFID, provides
an end-to-end solution that
extends from the moment
merchandise is tagged to the
analysis of store sales.
basis of cost, integration, and business
intelligence capabilitieswas not.
At that point, the company turned to
Microsoft BizTalk Server RFID and the
Clarity ARS Advanced Retail System from
Xterprise, a Microsoft Gold Certified
Partner. We were interested in the BizTalk
RFID platform because it offered low total
cost of ownership and the ability to
integrate both into our current systems
and into systems we are likely to adopt in
the future. It also gave us maximum
flexibility in our choice of hardware
such as RFID handheld and stationary
scannersto use with the solution, says
Kris Doane, Technical Lead, American
Apparel. We chose Xterprise and the
Clarity ARS solution because, in our
research, Xterprise kept coming up as the
best BizTalk RFID provider.
The planned deployment of BizTalk Server
RFID and Clarity ARS will stretch from
California to Manhattan, from the
companys manufacturing facility to all 31
of its retail locations in North America. The
solution consists of four RFID reading
stations at each of the stores using the
Xterprise Clarity ARS application, along
with hardware including Motorola
handheld RFID scanners and Motorola
XR440 and Alien Technologys ALR-9650
fixed scanners.
1. The first step in the process is to tag
every piece of merchandise with an
RFID tag. This is done at the com-
panys California factory.
2. The tagged merchandise is read by the
scanners at the in-store receiving sta-
tion when it arrives from the factory, a
distribution center, or another store.
3. A fill station in the stores backroom
serves a dual function. First, its screen
constantly informs store personnel
what merchandise needs to be
brought up to the sales floor (based
on readings from the point-of-sale
scanner; see step 5). Second, em-
ployees use the station to inform the
system what merchandise they are in
fact bringing to the sales floor, by
holding the merchandise near the fill
stations reader.
4. A validation point between the
backroom and the retail floor provides
a checkpoint to ensure that the proper
merchandise is being brought to the
floor. If its not, employees have the
opportunity to make corrections
without having first to bring merchan-
dise all the way to its position on the
sales floor.
The business
intelligence portion of
the Xterprise solution
makes it possible for us
to check, in real time, on
the heartbeat of each
store using the system.
Zander Livingston, Director of RFID,
American Apparel
5. The point-of-sale RFID reader likewise
serves a dual function. It not only ties
to the retail ERP system and imple-
ments the transaction, but also sends
to the fill station information about
replacement merchandise to be
brought to the retail floor.
The servers hosting the solution in each of
the stores communicate with a central
server at American Apparel headquarters,
where data on store sales and other opera-
tional data is fed into a business intelli-
gence application from Xterprise. Managers
and executives use the dashboard to
receive overview as well as detailed infor-
mation about how long it takes to get
items onto the sales floor, what merchan-
dise is out of stock at a given store, top
sellers, incoming shipments, how long it
takes to scan merchandise, and more.
The business intelligence portion of the
Xterprise solution makes it possible for
us to check, in real time, on the heartbeat
of each store using the system, says
Livingston.
Benefits
The Xterprise solution, based on Microsoft
BizTalk Server RFID, cuts costs, boosts sales,
serves as a foundation for an extensible
solution, and provides managers with real-
time performance data that they can act on
in real time.
Store Sales Up 14 Percent
Doing more with less is the maxim of
business, especially during tough economic
times. The BizTalk Server RFID solution has
turned that philosophy into reality for
American Apparel, which now really is
doing more with lessincreasing profits
while reducing the money that it spends to
generate those profits. The company
estimates that sales in the RFID-equipped
stores are up 14 percent, for an average
increase in net income of $126,900 per
store. Factoring in its investment in the
Xterprise and Microsoft solution, American
Apparel expects each store to achieve
payback in an average of just 4.5 months.
The system also helps reduce costs because
conducting cycle counts and replenishing
merchandise are far more cost-effective
than before. Cycle counts that formerly
took 20 to 30 hours twice a week are now
accomplished in about 3 hoursa time
savings of 90 percent. The time spent on
handling inventory and thus the associated
costs are down by 35 percent.
That means that stockroom personnel who
were spending half their time on cycle
counts now can spend 75 percent of their
time on more value-added functions, such
as replenishment and customer service.
Meanwhile, sales are up because replenish-
ment takes place far more quicklyneeded
merchandise is generally replaced within a
minute of being soldso American Apparel
doesnt lose sales because customers cant
find the merchandise they want. Moreover,
employees who spend less time on inven-
tory replenishment have more time to
spend on customer service, including cross-
selling and selling more valuable merchan-
dise, further driving up revenues.
If Im at an American Apparel store and Im
looking for a specific item, its going to be
on the sales floor, says Livingston. At the
same time were selling more, we have
more satisfied customers.
RFID is the future of retail because its a
better way of counting inventory, period,
continues Livingston. Working with a 65
percent or 75 percent inventory accuracy is
a thing of the past. Every retailer can make
more money by making replenishment
Theres an almost more efficient, and thats only the start of intelligence benefits that are now possible
what RFID does for us. with the solution.
limitless range of ways
System Supports Extensible Solutions The reporting tools we use with the
we can take advantage For example, Livingston and his colleagues Xterprise solution give us visibility into the
of RFID in retail. are now looking at extending the BizTalk health of the store and are useful in dif-
Server RFIDbased system to achieve two ferent ways to the in-store manager, the
Zander Livingston, Director of RFID, additional goals: reduce shrinkage and district manager, and corporate executives,
American Apparel
increase in-store sales. says Livingston. Store operational intel-
ligence gives them a true sense of how a
As a result of deploying the solution, store or a set of stores is performing in real
American Apparel discovered that its time. And that provides a level of account-
shrinkage rate was 20 percenttwice the ability we never had before.
rate it had estimated. Having an accurate
view of shrinkage is the first step in For example, Livingston points to the ability
reducing that shrinkage. The company to determine manager performance very
could add RFID scanners specifically to quickly. We can retrain managers if
monitor and address shrinkage at the needed, he says. In extreme cases, we can
entrance and in the fitting roomkey sites make a change in store management.
for shrinkage problems. Either way, we can take action much faster
than before because we can spot problems
RFID scanners in the fitting room could also much faster than before.
boost customer service and sales. Custom-
ers could request additional merchandise
say, a sweater in another color or size
while theyre in the fitting room trying on
the first sweater. Store personnel, now
freed from much of their inventory-
processing chores, could bring the addi-
tional merchandise to them without
requiring the customers to first leave the
fitting room to request it. All this makes it
more likely that customers will leave having
made a purchase.

Theres an almost limitless range of ways

we can take advantage of RFID in retail,
says Livingston. The fact that this is based
on Microsoft BizTalk Server RFID means
that integration capability is built into the
system, making these possibilities that
much more practical.

Business Intelligence Enables Real-Time

Decision Making
Identifying the companys true shrinkage
rate is just one example of the business
Conclusion and future trends of RFID in apparel industry

The use of RFID systems in textiles is rapidly increasing. In future almost all the manufacturers,
distributors and retailers in textile business will be using the RFID system. Although, RFID systems cannot
completely replace the barcode technology, due to higher cost but the accuracy, speed and the return
on investment is high in RFID system. RFID system is a promising technology, which will become
ubiquitous in the future helping organisations to solve problems in supply chain management, security,
personal identification and object tracking.

The retailers, manufacturers and consumer goods companies like CVS, Tesco, Prada, Benetten, Wal-mart
and Procter & Gamble now implementing the technology and exploring the impact of the technology on
their business. Others can take the advantages of RFID. The basic of success lies in understanding the
technology and other features to minimise the potential problems. It is high-time that the apparel
industries should start utilising the new RFID technology in various applications such as manufacturing,
storing purposes.

There is a great potential of RFID in various applications relater to clothing and textiles, manufacturing,
retailing and inventory management. The direct benefits have been shown by the companies such as
GAP, the US apparel company, who increased their sales by 2% by using RFID to reduce stock-outs.
Another well-known US apparel company, J Crew, increased the speed of inventory keeping time five to
eight times by the use of RFID.

The apparel industry is characterised by short product life cycle, frequent style changes, a wide range of
product designs and hence input materials; variable production volumes; high competitiveness and
often high demand on product quality. In addition to these challenges, the use of RFID increases the cost
and maintaining privacy creates extra challenges. The organisations dealing with textile and apparel
products should start with the tracking of expensive goods as the reduction in the labor and theft of
these items can compensate the cost of these items. RFID has advantages in speed, accuracy and
convenient over traditional barcode systems. Therefore, in the future, RFID tagging will gradually replace
traditional barcode systems and facilitate supply chain and inventory management.

Important technical challenges still need to be resolved for fully successful operation of RFID in textile
and apparel manufacturing. It will take some years may be a decade or so, before the full benefits of
RFID technology is realised. We will increasingly see how RFID technology can extend the ability of
computers in combination with internet to sense and respond to the physical world. In future, RFID will
make computing an unobtrusive, intuitive part of everyday life, as refreshing as a walk through the
nature.

The largest challenge to the widespread use of RFID is the cost in textile and apparel manufacturing.
These challenges can be reduced by increasing the volume of usage. In addition standardisation and
technological developments can help in reducing the cost. RFID chips can be developed, which can work
in different places for different applications. These ideal RFID chips will require a frequency independent
capability and would be integrated with read/write memory. In addition, the software needs to be
customised to accommodate the number of different uses. Recently, all the merchandise uses the
barcodes for identification and at the point of sale, which are easily printed and attached to the products
within a very short period. However, finalisation of the design and preparation of RFID tags is time
consuming process.

The issues related to standardisation can be resolved by the effort of governing bodies to develop
various standards related to their use, manufacture and technical specification. Technological
developments will also assist in this direction to achieve wide adoptability of RFID tags. In addition,
throughout a supply chain RFID-friendly infrastructure development is a time consuming process.

From the above discussions, it is clear that RFID technology has a very bright future in the textile and
clothing industry. New areas of applications will emerge by the technical advancements and we will see
more RFID applications in departments where they are currently not being used. This paper will be a
good resource for those interested in RFID research, including academic researchers and industry
practitioners, and will provide guideline to stimulate further interest in this area.

(REF: http://link.springer.com/article/10.1186/s40691-015-0034-9)