DC Velocity - June 2013

BY SUSAN K. LACEFIELD, ASSOCIATE MANAGING EDITOR

TRACK AND TRACE
technologyreview

Item-level
RFID reaches
into the DC

More and more companies are turning to item-level RFID tagging to boost inventory accuracy throughout the supply chain. How will this affect DCs?

DRIVEN BY DREAMS OF IMPROVING INVENTORY accuracy at the store, more and more large retailers are experimenting with item-level RFID tagging: Macy’s, Marks & Spencer, Bloomingdale’s, Walmart … the list goes on.

In many cases, those experiments have produced impressive results. Because RFID tags can be scanned more quickly than bar codes, they give retailers a much more accurate picture of what the store has in stock and where it is. This makes it easier for a sales associate to quickly find the size 8 tall boot-cut jeans a customer is looking for—and reduces the chance the customer will leave the store empty-handed. Some experts say item-level tagging can lead to a sales lift in the low double-digits for the affected items. “It’s proven to be a strong business case,” says Mark Wheeler, director of industry solutions at Motorola Solutions, which provides tags, readers, and antennas for the RFID market.

But almost all the activity around item-level tagging has
been occurring in the store, not in the distribution center.
“Where the scanning is happening is on the store floor,” says
Mike Liard, vice president of VDC Research’s auto ID prac-
tice. “While that’s great at giving you visibility into your
current in-store inventory, we still need greater visibility
back into the supply chain.”
Leading-edge companies are very aware of this and are
already looking to extend item-level tagging back through
the supply chain, says Kurt Mensch, RFID product manag-
er for Intermec, which offers RFID readers, printers, tags,
labels, and inlays. So it follows that distribution centers

might want to start thinking now about how the technology could affect their operations.

SLAP AND SHIP

For many DCs, their first involvement with item-level RFID comes when they’re asked to start applying tags to a select group of stock-keeping units (SKUs) before shipping them out to stores: the old “slap and ship” model.

When a retailer is only tagging a few high-value items or those bound for a few test stores, it makes more sense to tag the items at the DC than at the garment factory or manufacturing plant. What usually happens is the DC sets up a value-added service line that will tag, say, 100 pairs of jeans going to the pilot stores, says Mark Hill of Avery Dennison, a supplier of RFID tags and printers.

Typically, this entails having workers scan the item’s existing bar code with a handheld reader to get its UPC, or universal product code. The reader then connects with a system in the cloud that can assign a unique number to that particular item and send that information to a printer at the DC. The printer then spits out the RFID tag, which is slapped on the item before it’s sent out to the store.

In most of these cases, the DCs are not using their RFID capabilities to improve their own operations. While a company could install fixed RFID scanners to, say, check outgoing shipments for accuracy, it wouldn’t make financial sense if only a few pilot SKUs are tagged.