Supply Chain RFID Tagging: Tackling the Challenges

By George Hoffman, CEO, FineLine Technologies — January 21, 2015

Successful RFID cases are proliferating in the retail industry, with more fashion and apparel retailers adopting and expanding technology rollouts. As their RFID tagging volume grows, these retailers are beginning to push the tagging function back to their suppliers. This trend greatly increases the potential for non-reading or underperforming tags to enter the supply chain.

There are immediate technical solutions to this challenge, and industry standards are being developed to deliver RFID source tagging best practices to retailers, brands, global producers and RFID tag and service providers. To move forward confidently with source tagging, it's important to consider the risks and rewards from a variety of angles.

Abundant benefits, amazing growth
Just how rapidly is RFID use growing? Market research firm IDTechEx estimates the market for RFID tags, solutions and services reached $9.2 billion in 2014 and double to approximately $18 billion by 2018. In the global apparel industry alone, that translates into about 3 billion RFID tags being applied to garments right now. IDTechEx estimates there are 40 billion apparel items produced each year that have the potential to be tagged.

The drivers and returns are clear. Retailers that have implemented RFID tagging have seen sales increases of 3 percent to 10 percent, according to consulting firm Kurt Salmon. When University of Arkansas researchers conducted a survey about RFID's greatest uses, retailers pointed to the prospect of improved inventory accuracy, fewer out-of-stock problems, stronger loss prevention and greater ease of locating products.

There also are major wins for apparel brands and their suppliers, particularly when RFID tags are applied at the source within the global supply chain. In a research project commissioned by the standards organization GS1 US and the American Apparel and Footwear Association, the University of Arkansas explored RFID's use in the apparel supply chain. Researchers found that chargeback costs can be reduced by millions of dollars following the implementation of RFID. They also found that apparel brands' auditing procedures can be significantly streamlined in U.S. distribution centers.

Despite these benefits, until recently RFID source tagging has been slow to catch on. Retailers have been eager to maintain quality control over their RFID tagging processes. Yet it is much more cost effective and efficient to tag apparel goods upstream in the supply chain. Labor is less expensive, and RFID tracking capabilities can be leveraged at many more points in the product's lifecycle. These factors are turning the tide toward increased item-level tagging at the source.

RFID source tagging challenges
As with any fast-growing technology that shifts paradigms, RFID has raised some new issues as more tagging is done at suppliers' factories. There is growing awareness that all RFID tags are not created equally. An RFID tag inlay, which is a combination of an antenna and chip, is either laminated to a sticker or embedded into a paper tag. Today there are approximately 80 different types of RFID inlays with varying performance characteristics.

For example, there are specific RFID inlays that should be used in tags applied to denim wear. These inlays are designed to function properly in proximity to the thick denim material, metal zippers and rivets. If the wrong inlay is used, it will decrease the tag's read performance and the retailer's ability to successfully scan the tag in the store and accurately account for the inventory.

Industry organizations have devoted considerable resources to identifying which inlays work best with different products, and most retailers specify which type of inlay should be used for each apparel category. Yet the risk for error remains.

There are other factors that can degrade the quality of RFID data for apparel brands and retailers. A supplier might forget to apply the tag, in which case the item will not appear in the store's inventory. Or the supplier might attach the wrong tag to a particular garment, which will cause an incorrect SKU to show as being in stock. RFID tags also can be damaged at the factory or on their supply chain journey. A garment bearing a damaged tag might not be recognized and thus not be properly received into available inventory.

A key characteristic of RFID tags is that they provide a unique identification number for each individual piece of apparel — an identifier that can be read without line of sight to the tag. The tag's signal can be picked up through cartons, boxes and other packaging. While this core benefit of RFID streamlines and enhances accuracy of many processes, it also can create complexities for the supply chain.

Tags can be improperly encoded or numbered by the RFID tag supplier. For example, a supplier might use improper serialization techniques resulting in duplicate tag identification numbers. These identification numbers often are referred to as serialized global trade item numbers (SGTINs). Serialization poses challenges for the apparel manufacturer, which must maintain individual serialized records for every garment produced. This approach is very different from the traditional process of assigning a single barcode identification number to multiple garments of the same SKU. If a batch of tags bearing the same SGTIN is attached to a shipment of shirts, the RFID reader might recognize only a single unit. In this case, a pallet of 5,000 shirts could be "read" as only one shirt.

"It's a big change in how apparel manufacturers manage their inventory," says Justin Patton, director of the RFID Laboratory at Auburn University.

Industry working to implement solutions
GS1 US, a standards organization that brings together the supplier, retailer and technology provider communities, has a GS1 US Item Level RFID Workgroup active as part of its Apparel and General Merchandise Initiative. Specifically with regard to RFID quality control, the workgroup has developed guidelines for managing serialization, tagged item performance and tag placement. In 2015, GS1 US plans an increased focus on compliance and quality upstream. "The workgroup will determine if there is a need for an industry guideline that addresses some common, but not insurmountable, issues such as tag encoding and proper serialization, tagged item grade compliance and placement," says Melanie Nuce, vice president of apparel and general merchandise, GS1 US.

"Our goal is to help provide more flexibility in how suppliers meet the expectations of multiple retailers," Nuce says. "We know RFID performance is pivotal in any successful rollout. There are a number of variables that should be considered when evaluating performance, including environment, tagged-item materials and some implementation use cases, such as whether scanning is done using a handheld reader vs. a fixed-infrastructure reader. These efforts and others underway can help to define what success looks like and should clear the way for tremendous innovation in the future."

Torsten Strauch, retail segment senior vice president for RFID inlay maker Smartrac Technology Group, is among industry executives who have been involved in GS1 US's work. Strauch says that retailers should follow a four-step approach to ensure highest performance level of RFID tagged merchandise:

  • 1) Defining the environment and requirements of RFID tagged merchandise;
  • 2) certifying RFID tagged items to ensure they will meet the defined requirements by ARC standards;
  • 3) proving RFID components and tags are manufactured to top quality standards; and
  • 4) controlling how RFID tags are performing in their supply chains and store environments.
To execute this approach, these retailers are demanding proof from inlay and tag makers that all RFID components are 100 percent compliant with their standards, including proper encoding and functioning of the inlay's radio transmitter. To help control performance, some are using new web-based applications to audit RFID tag quality in real time.

For example, there is an iPhone-compatible app that enables apparel retailers, brands, producers or third-party auditors to read and decode RFID tags. The app feeds data from the tags to the RFID technology supplier's web platform. During a quick reconciliation process, this solution will reveal if the tags are compliant with the retailer's requirements or if there are problems such as defective tags, improperly encoded inlays or labels applied to the wrong products. This real-time auditing process can take place anywhere along the supply chain or in the retailer's DC or store. If there is a problem, this quality control process can provide critical information regarding where and when the problem occurred.

"In the end, this comprehensive possibility will help to provide a very high level of enhanced data accuracy and it's a proven formula that 3 percent higher merchandise visibility drives 1 percent higher merchandise sales. So that's a massive impact," says Strauch.



George Hoffman is CEO of FineLine Technologies. He can be reached at ghoffman@finelinetech.com.

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