Evolving Inventory Management Through Item-Level Tagging

A report from Baird originally projected growth of radio frequency identification (RFID) in the apparel industry at 40 percent this year. 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 of this evolution is the increased use of RFID in item-level tagging. With this type of RFID tagging and scanning, retailers can tag individual items on their retail floors — instead of just in the supply chain — to gain better visibility and control of their inventory and expand their customer experience capabilities.

Retailers are currently expected to purchase a total of 300 million RFID labels in 2010. This can be attributed to a market shift from more compliance-based tracking to item-level tagging, as well as more affordable tag and reader costs. For apparel retailers, this is critical in order to ascertain how much inventory is available on the floor. For example, what sizes and colors need to be restocked, and what inventory is available in stock rooms with a simple scan of a RFID tag?

One of the greatest benefits of item-level tagging for retailers is perpetual inventory management. With the increased visibility into inventory afforded by tagging, retailers have greater efficiency and accuracy in order processing based on an increased knowledge of what's in stock. Additional benefits include:

• ability to keep a fully stocked sale 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 improved customer relationship management. By reducing the amount of time salespeople spend in a stock room or taking inventory, the result is employees are able to spend that time working with shoppers to generate more sales.

Companies must realize that there isn’t a one-size-fits-all approach when it comes to implementing item-level tagging. Therefore, it's crticial to evaluate whether item-level tagging or simple barcoding applications make the most business sense. For example, cross-channel apparel retailer American Apparel owns everything from the retail store to the distribution channels, which allows it the freedom to do item-level tagging itself.

However, a retailer like Wal-Mart must get its suppliers on board in order to tag every item. In light of this, it’s important for retailers to evaluate how appropriate the transition from barcoding to item-level tagging is for their business. To determine this, they should be able to answer the following questions:

• What are your critical business processes that need to be transparent that barcodes aren't able to address?
• How can RFID and item-level tagging complement current AutoID technologies?
• Are tagged items 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?
• What would the return on investment from implementing an item-level tagging solution be?

RFID isn't replacing barcodes by any means. It’s critical to note that retailers don't 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 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 at Zebra Technologies, a specialty printing and automatic identification solutions provider. Carolyn can be reached at cricci@zebra.com.