Retailers Buy into Item-Level Tagging

By  Carolyn Ricci, Zebra Technologies — October 12, 2010

The trend to implement item-level tagging to track and manage inventory is becoming increasingly popular with retailers as large retailers such as Wal-Mart take the first step in rolling out radio frequency identification (RFID) tags to track individual items in order to better control inventory.

A recent report by Baird had originally projected growth of radio frequency identification (RFID) in the apparel industry at 40 percent this year, however, with recent pushes in RFID adoption that number has more than tripled to between 125 percent and 150 percent growth. One of the main drivers for this growth is the increased use of RFID in item-level tagging, which provides retailers with the ability to tag individual items on the retail floor. Benefits to item-level tagging include better visibility and control of inventory and an expansion of customer experience capabilities.

Currently, retailers are expected to purchase a total of 300 million RFID labels this year, which can be attributed to a market shift from compliance-based tracking to item-level tagging, and the fact that both tags and readers have become more affordable. For apparel retailers, this is critical in order to determine how much inventory is on the floor, what sizes and colors need to be restocked and what inventory is available in stock rooms. Now, a single scan of an RFID tag can bring them all of this information in seconds, providing retailers with enormous time and cost savings.

Why make the move?
Previously, RFID tags were used to track pallets of merchandise, rather than individual items, through the supply chain. With the use of printed RFID tags, retailers are now able to track inventory at the item level, scan the tag and know the location. Item-level RFID tagging provides a glass pipe view into an end user environment such as a supply chain or store floor, affording companies much more granular visibility. This level of visibility is particularly useful for high-value goods since there is a greater risk of theft and diversion.

One of the greatest benefits of item-level tagging for the retail industry is uninterrupted inventory management. With the increased visibility into inventory provided by the tagging, retailers have greater efficiency and accuracy in order processing based on an increased knowledge of what is in stock. Additional benefits include the ability to keep a fully stocked floor, increased time and labor savings, increased accuracy in taking inventory and reduction in the amount of clearance items due to incorrect inventory and excess ordering.

Item-level tagging also provides retailers with increased customer relationship management opportunities. By reducing the amount of time salespeople spend taking inventory or looking for items in the stock room, the technology frees them to spend that time working with customers to understand and pinpoint the exact location of a product that the customer wants, generating more sales. Customer satisfaction is the key to success for companies emerging from the recession, which is especially important for high-volume retailers.

Taking the steps to get there
In implementing item-level tagging, companies must take into consideration that there isn't one cohesive approach for every company. As a result, it is critical to evaluate whether or not item-level tagging or simple bar coding applications make the most business sense. For example, American Apparel owns everything from the retail store to the distribution channels, which allows them the freedom to do the tagging themselves. However, for a retailer such as Wal-Mart to implement item-level tagging, all of its suppliers must also be on board. In light of this, it's important for retailers to evaluate how appropriate the transition from bar coding to item-level tagging is for their business.

For retailers evaluating item-level tagging solutions, below are a few tips to help assess your options:
*What are the critical business processes you need visibility into that bar codes are not able to address?
*How can RFID and item-level tagging complement your current AutoID technologies?
*Are the items you want to tag high value goods that are easily counterfeited or purchased somewhere else?
*Are your current inventory management systems taking more time and manpower than item-level tagging?
*For your specific store or chain, what would the ROI be in implementing this solution?

While use of RFID is growing in the retail industry, it's critical to note that RFID is not replacing bar codes. Retailers do not need RFID for merchandise visibility -- they just need the manpower to barcode and scan every product without it. As the RFID market continues to undergo a shift from compliance-based tracking to more item-level tracking, retailers will have a unique opportunity to take advantage of a technology that can save them time, money and provide enhanced visibility into their inventory.

Carolyn Ricci is product manager, RFID, of Zebra Technologies. Zebra Technologies Corporation (Nasdaq: ZBRA) provides the broadest range of innovative technology solutions to identify, track, and manage the deployment of critical assets for improved business efficiency. Zebra's core technologies include reliable on-demand printer and state-of-the- art software and hardware solutions. By enabling improvements in sourcing, visibility, security and accuracy, Zebra helps its customers to put the right asset in the right place at the right time. Zebra serves more than 90 percent of Fortune 500 companies worldwide.

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