Item-Level RFID is an Essential Part of an AI Ecosystem for Retailers

According to Statista, 73 percent of retailers are already using artificial intelligence, and a further 15 percent are planning to implement the technology over the next 12 months. AI is proving to be a valuable tool within the retail sector, from delivering personalized product recommendations for customers to enhancing inventory-based decision-making and predicting demand, among other things. This has caused many retailers to take note of AI's potential, especially with the extraordinary hype around generative AI and large language models (LLMs) in 2023.

However, retailers need to consider several factors before investing in AI deployment. Accurate inventory visibility is critical to the success of AI inventory-related operations, which is where the transformation of item-level RFID technology comes into play. Combining the two technologies can generate significant value in inventory management and operational efficiencies, ultimately enhancing the return on investment anticipated from AI investments. RFID solutions provide real-time identification and location tracking of items in retail stores, distribution centers and factories. Ultimately, the disruption that comes from combining item-level RFID and AI investments into a more comprehensive enterprise intelligence strategy will enable retailers to create a competitive advantage.

Challenges of Successful Deployment

Despite AI’s promise to unlock new efficiencies, success is often restricted due to inaccurate inventory visibility when it comes to inventory-related operations. Typically, retailers operate at an inventory accuracy of less than 70 percent, and if AI analyzes these inaccurate datasets it will provide unreliable outputs and actions. Maximizing inventory accuracy is crucial, as it provides a foundation for retailers to deploy other technologies, particularly AI. In addition, the enhanced fidelity that item-level RFID brings to a retailer when combined with AI technology is extremely disruptive. For instance, knowing when a particular item has arrived in-store and what its history looked like opens up a fascinating number of possibilities.

Deloitte’s 2024 U.S. Retail Industry Outlook further revealed that only 50 percent of retail executives are confident in their company’s ability to use AI effectively. This is due to a lack of understanding of the technology itself and the best ways to maximize its value. To harness AI’s potential, retailers need to implement item-level RFID, specifically to optimize their inventory management and operations.

Enhancing Customer Engagement

Item-level RFID technology can help retailers gain an accurate view of their inventory by taking it on a more regular basis. When combined with AI capabilities, the technology becomes even more effective. With RFID in place, retailers can gain over 98 percent inventory, combined with AI capabilities to make smarter, more refined decisions.

Item-level RFID technology can provide detailed information on inventory movement in real time, such as which items are selling the quickest and which ones aren’t. AI can analyze these datasets almost instantly to identify patterns or trends in product demand, allowing retailers to accurately predict when they need to replenish their best-selling products, minimizing lost sales and increasing revenue.

Through the data provided by item-level RFID, AI can analyze customer behaviors such as purchase history and preferences to provide highly personalized recommendations. This customer-centric approach is pivotal for retailers as three-in-four customers are more loyal to retailers that show consistent customer experiences.

Efficient Supply Chains

Along with AI’s ability to enhance the customer experience, the technology can also improve a retailer’s supply chain operations when combined with item-level RFID. From manufacturing to shop floor, RFID technology can gain vast amounts of data on a product’s lifecycle. When this information is fed into an AI platform, it can suggest more efficient processes to optimize supply chain operations, including route optimization.

By combining both item-level RFID and AI, retailers can optimize stock management. Data from RFID, such as historical sales, canceled orders, and regional differences in performance can be analyzed by AI to balance inventory by accurately predicting when retailers need to replenish their stock levels. The effects of this are felt throughout every step of the supply chain, where there are fewer deliveries, reducing waste and costs.

The Perfect Match

As we look to the future of retail, it's apparent that AI will play an increasingly important role. Retailers are beginning to realize the potential of this technology to revolutionize the customer experience by enabling faster decision-making and truly personalized interactions. However, retailers must deploy AI correctly to achieve meaningful results. With its ability to provide crucial inventory information, item-level RFID  technology lays the groundwork for AI to deliver on its promise of transforming retail operations for good.

Dean Frew is President of RFID Solutions Division at SML Group, the leading RFID solutions provider.