S1 Ep 16
RFID in the Retail Supply Chain
Exploring the role of RFID in the retail supply chain, especially for omni-channel retailers, has now become a priority for many retailers.
This week Colin Peacock is joined by Professor Adrian Beck to explore how retailers are leveraging RFID technology to improve supply chain operations. Including how using handheld RFID devices can lead to better inventory accuracy, reduced costs, and better inventory controls.
Podcast summary
RFID has long been used in grocery to boost inventory accuracy and on-shelf availability.
But what happens when retailers add RFID into the retail supply chain?
In this episode, Colin Peacock is joined by Professor Adrian Beck to explore what was shared at a recent working group session with over 40 retailers.
They discuss use cases for RFID in distribution and fulfilment centres, why adoption has been limited, and what it would take for supply chain RFID to become mainstream.
Technical issues, supplier compliance, ROI questions and organisational capacity all feature.
And there’s a healthy dose of perspective from those who’ve been waiting on this since 1999.
Cleaned transcript
COLIN:
Welcome to the ECR Retail Loss “Sell More and Lose Less” podcast series.
RFID in stores vs RFID in the retail supply chain
RFID has traditionally been used in retail in the store, both on the shop floor and in the back room.
It’s been used to improve accuracy, to increase awareness of items in the back room that could be on the shop floor, and, critically, to grow sales by improving choice for the consumer.
Recently, retailers have also been exploring the use of RFID in the retail supply chain.
I’m joined today by Professor Adrian Beck. We will discuss the findings and discussion points that came out of a recent meeting attended by over 100 retailers.
In that meeting, we were discussing the role of RFID in the retail supply chain and hearing about the use cases that retailers are looking to put in place to leverage the investment they’ve made in RFID.
We were particularly thinking about RFID in the supply chain for distribution centre operations and, critically, for fulfilment centre operations.
The recent RFID working group session
COLIN:
A week or two ago – time flies – we had a session of our RFID working group.
We’ve looked at various things during the year, and this one was focused on the use of RFID in the retail supply chain.
I think we had about 40 or 50 retailers join us.
As we’ll come on to later, we actually had some retailers write back to us and say, “This one’s not right for us, and we’re going to skip it.”
Even so, we had a good turnout, and we were discussing how retailers could extend the use of RFID into the supply chain.
We had two speakers who gave us some insights into their business and what they were doing.
Then we had a round‑the‑room, round‑the‑world discussion on what others were up to.
Adrian, I know you take laborious notes, always. What were your key takeaways from this session?
Early wins: RFID in bricks-and-mortar stores
ADRIAN:
We’ve been having these meetings for quite a while, looking at the progression of RFID within retail spaces.
For the most part, the largest number of retailers who are investing in this really start out their journey in their bricks‑and‑mortar stores, don’t they?
That’s where they see the real return on investment and business case.
It’s particularly around inventory accuracy and on‑shelf availability.
They’re the real winners for investing in RFID, because of the complexity of the stock‑keeping units that they have and how RFID can really speed it up, make it more accurate, more transparent.
Those are fantastic wins.
Looking for value beyond the store – RFID in the retail supply chain
As a group, we’re trying to understand how retailers are then moving away from their bricks‑and‑mortar environments to get additional value from their investment in RFID.
The supply chain is one place where you could do that.
You want to understand how products are moving through what can be quite a complicated, laborious process within their organisations.
So the session was very much focused on: how are people beginning to get value from the RFID investment in their supply chains?
Limited adoption so far in DCs
I think what we concluded was that, for the most part, not very much has happened thus far.
There are some who are taking some baby steps.
For example, using tunnels to try and measure what stock is coming into distribution centres and then what’s leaving out to the stores.
But there was a sense that this is a robust and hard environment to get RFID to work well and to get the value out of it.
Counting stock in distribution centres is notoriously difficult in big, complicated spaces.
So we heard that some were making progress, but as an industry, not a lot has been happening in the last year or so in terms of where people are moving with this.
There are obviously some retailers who’ve really invested heavily, and they’re getting value out of this.
They’ve made a commitment to understand the cradle‑to‑grave journey of their products and are using RFID to do it.
They’re great and really far ahead.
But my impression, from listening to the various retailers on the call, was that many are still trying to get the value out of their bricks‑and‑mortar investment.
They’re still looking to the horizon of using RFID in the retail supply chain, but for many, they’re still a way off before they can say they’ve maximised the capability of RFID in those spaces.
Technical challenges in distribution centres
COLIN:
You’re right. I don’t get the impression that it’s yet penetrated distribution centre operations.
As we heard, there are shielding issues around receiving, and the whole space is hard to read.
We know that retailers in the stores went to huge lengths to separate the back room from the shop floor.
They wanted to see where the items were so they didn’t leave the bikinis in the back room over the summer and then have to discount them heavily during the winter.
We saw a lot of that back‑room versus shop‑floor work, and then leading out of the store as well.
Apart from a few pioneers, the vast majority are still not using RFID in distribution centres, for the reasons we’ve just described.
It’s quite a difficult technology to make work in big spaces and to read items accurately.
I remember, back in the day, having to spin pallets to be able to read everything.
I’m not sure we’re still doing that, but the readers aren’t always 100%.
We had one of the speakers, from Australia, from Cherry Hill Farms.
I interviewed her for this.
She had some problems on the farm, with shielding being a real issue even there.
ROI questions for e‑commerce and DC‑focused operations
ADRIAN:
It is a problem.
For those who don’t have bricks and mortar – the pure e‑commerce retailers – they do have big distribution centres.
For them, it’s about working out to what extent RFID is solving a problem that they’ve actually got within those spaces.
Is the investment in putting a tag on every single product really going to fix that problem and give them a return on investment?
How much error is there coming into a DC, especially when you’re looking at very large volumes?
If you get that error rate from, say, 4% to 2%, does that add enough value to the whole operation to justify putting a tag on every single item?
Supplier compliance and alternative technologies
We also found that when you have a lot of suppliers coming into your distribution centres, making sure that every single one is using the right RFID tags, putting them in the right place on the right products, is a lot of management.
It’s a lot of investment in time and energy.
If it’s only going to be used within those distribution centres and fulfilment centres, is that value for money compared to other ways of identifying product in those spaces?
Perhaps just working at pallet level or case level.
Maybe using 2D barcodes and other technologies.
I think what we heard was that, at the moment, people feel the value is really in a different place than in distribution centres.
There are certainly people looking at it, but I came away thinking maybe in the next five years, Colin.
COLIN:
We say that a lot about RFID.
ADRIAN:
We said that before.
In 1999, we said: in the next five years, we’ll see the internet of RFID.
RFID in distribution centres.
I came away thinking there are some real pioneers out there, but from my perspective it’s not really mainstream at the moment in those spaces.
That’s not to say that RFID hasn’t got value to retail.
It’s just that, in distribution and fulfilment centres, people are struggling to persuade the business that there’s value in putting the infrastructure, time and energy into making it work.
Capacity and next steps for the working group
COLIN:
Yes, and capacity is limited in terms of how many people you’ve got to work on any one particular project.
So we’ll revisit RFID in the retail supply chain probably another 12 months.
I know there are some people out there – DHL and others – who have looked at this.
Chipotle have also looked at this.
It’ll be great to see where we can get some learnings from other retailers.
Our annual in‑person meeting is actually in the distribution centre at Desigual, on October 9th and 10th.
That will give us another chance to think more about what these supply chain use cases can be.
Adrian, I really appreciate your time and your thoughts, and we’ll see you next time.
ADRIAN:
Cheers, Colin. Take care, mate. Thanks very much. Bye‑bye.
