THE SUPPLY CHAIN ROI FOR APPAREL

MANUFACTURERS

CNRFID 2011

Who are we?

Purpose: to investigate the business value and implications

of RF technologies

Established in 2005

~ 15 faculty and ~100 students

15 center employees (students and full time staff)

Founding member of GRFLA

RFID Center

15,000 sq. ft. lab in Hanna’s Candle Co.

Replicates RFID in supply chain: dock doors, conveyor,

impact doors, forklifts, pallet wrappers, retail store, etc.

Serves as research and teaching facility

Provides services to the industry (tag type, tag placement,

reader/antenna testing)

Home of Arkansas Radio Compliance

The Three Current Markets of Retail

RFID

I. Retail Operations (established)

Retailer Hardware

Retailer Software

Retailer Integration

Data Analytics

II. Supplier Source Tagging (established)

Inlay Manufacture

Tag and Ticket Conversion

Printing and Encoding

Service Bureaus

Serialization Management

The Three Current Markets of Retail

RFID – Con’t

III. Supplier Operations (emerging)

Hardware for Data Capture

Management and Control Software

Supplier Focused Integration

Change Management and Process Improvements

Data Sharing and Management

Setting the Stage: Current State of

RFID in US Retail

Rapidly Expansion to Item Level Tagging

US – Walmart, Dillard’s, American Apparel, Macy’s, JC

Penney, Bloomingdale’s, Banana Republic, etc.

All denim and basics tagged in all Walmart stores

since July 2010

Recent Macy’s announcement- Tagging Q3 2012

Many-to-Many vs. Vertically Integrated

Various other retail expansions

Investigate - Worked with several retailers to

understand major use cases

Identify - Common use cases among retailers

Feasibility Testing - Evaluated RFID against use cases

in a controlled setting

Collect Field Data - Performed multiple RFID Studies in

real world settings (Walmart, Dillard’s, JC Penney’s,

Bloomingdale’s, etc.)

Validate – Analyzed data for business value, published

results

Business Case Study Process Retailer ROI

Published multiple RFID Studies

Walmart, Dillard’s, JC Penney’s, Bloomingdale’s, etc.

Freely Available on Website

Major Findings

Perpetual Inventory Accuracy (PI Accuracy) 20-30% improvement across multiple retailers

95%+ PI Accuracy in RFID enabled stores

In-Stock Replenishment improvements based on improved PI

Continued Benefits Store Item Location

Loss Prevention

Returns Management

Etc.

Retailer Study Success

Supplier/Brand Owner ROI Study

Q: Exactly what are we trying to do?

A: Find common use cases for RFID in supplier

operations. Investigate if suppliers can find a way to

leverage RFID to improve their operations and save

money without relying on retailer in-stock and sales

improvements

Supplier ROI Study – How?

Phased Approach – Sponsored by GS1 US and AAFA

Multiple phases of the study to allow suppliers to

increase their tagging

Supplier Study takes much more time

Retailers could perform controlled pilots

Suppliers are moving directly into large-scale source tagging

Suppliers focusing on Source Tagging – takes more time to

get to operations and supply chain use cases

Phase I – Released January 2011

Freely available on website

Phase II – Release January 2012

Investigate - Site visits to several suppliers to

understand major use cases

Identify - Common use cases among suppliers

Supply Chain Map – Following Slides

Feasibility Testing - Evaluated RFID against use cases

in a controlled setting

Collect Field Data - Examine RFID against use cases in

real settings (Phase II)

Validate - Understand Many to Many Relationship

(Phase III)

Supplier ROI – Phase I

Supplier ROI Supplier Investigation Oh, The Places You’ll Go

Supplier ROI Use cases

No. Apparel Use Cases No. Apparel Use Cases

1 Outbound automation 31 Plan-o-gram compliance

2 Inbound and outbound audit processes 32 Shelf replenishment

3 Electronic proof of delivery 33 EAS consolidation

4 Right tag on product 34 Reduce cycle count time

5 Supply chain data quality 35 Receiving accuracy

6 Could eliminate audits & manual inventory 36 Eliminate physical inventory counts

7 Smart Inspect 37 Carton accuracy

8 Country of origin 38 3rd party consolidation efficiency

9 FTZ (Free Trade) 39 Increased store PI accuracy

10 Trade agreements 40 Country specific shipping documentation

11 Traceability through supply chain 41 Country specific care lables and placement

12 Track deffectives & recalls 42 Inventory tracking within DC

13 Pick/ pack speed 43 Prodcut recall

14 Pick/pack accuracy 44 Electronic proof of delivery

15 Detail of available data 45 Counterfiet tracking

16 Item Level data 46 Inbound quality

17 Claims accuracy 47 Outbound quality

18 Potential to eliminate claims 48 PI accuracy

19 Brand visibility in store (integrated) 49 Shelf replenishment

20 Speed and accuracy 50 Dormant inventory reduction

21 Inbound quality 51 Reduce shrink

22 Outbound quality 52 Electronic proof of delivery

23 FTZ and first sale 53 Shopper item interest vs. purchase

24 Track returns 54 Density and space planning

25 Tracking through processing areas 55 Multi-channel inventory management

26 Drive accurate costing 56 Inventory tracking

27 Vendor pack accuracy 57 Security and shrink reduction

28 Case pack accuracy 58 Shrink due to employees

29 Source validation 59 Accurate export documentation

30 Shipping validation 60 Store to store transfers

Supplier ROI Use case process map

Supplier ROI Use case process map

Supplier ROI – Phase I Setting the Stage

Established baseline of supplier preparedness for

Phase II

How much are they really source tagging?

When are they at steady state source tagging?

Established common list of use cases

Increased Supplier confidence in investing in RFID

source tagging

Established protocols for working with suppliers

Retail Brand Owner Academic Study Workgroup

Investigate - Site visits to several suppliers to

understand major use cases

Identify - Common use cases among suppliers

Supply Chain Map

Feasibility Testing - Evaluated RFID against use cases

in a controlled setting

Collect Field Data - Examine RFID against use cases in

real settings

Validate - Understand Many to Many Relationship

(Phase III)

Supplier ROI – Phase II

Supplier ROI Phase II – Sneak Preview Narrowing the Focus

Inbound/Outbound Distribution Center Audit

#1 identified benefit across all participants

100% DC Inbound audit of source tagged items

Sometimes only takes 1 RFID reader

100% DC Outbound audit

Sometimes only takes 1 RFID reader

Validation of Pick/Pack process

Potential for massive impact on Retailer Claims

Claims can be in the millions of $

New data source to check retailer claims

Supplier ROI Phase II – Sneak Preview Narrowing the Focus

Inbound/Outbound Distribution Center Audit

Longer Term Benefits

Process Changes in Pick/Pack

Increased Pick/Pack Accuracy

Decrease labor cost for target Pick/Pack Accuracy

Data Exchange

Claims validation and outbound audit leads directly to data

exchange

Electronic Proof of Delivery – Outbound Audit and data

exchange lead directly to joint use cases such as EPOD

Supplier ROI Phase II – Sneak Preview Narrowing the Focus

Supplier Size Matters

Potentially less cost and shorter term ROI for small and

mid-tier apparel brand owners

Pushing Back Upstream

Customs Exchange and other upstream applications

Upstream International Supplier RFID Operations

Next Steps – 2012 and Phase III

Continued Expansion of Supplier Use Case and

Business Case investigation

Larger tagging volumes, larger percentages of

tagged product

Moving to a true Many-to-Many Environment

More and more retailer implementations

More and more suppliers tagging

Project Sponsors

GS1 US

American Apparel & Footwear Association

University of Arkansas RFID Research

Center Board Members

Special Thanks to the Participating Retail

Brand Owners and Suppliers

Thank You For Your Support

Justin Patton

jpatton@walton.uark.edu

479.236.5890

David Cromhout

cromhout@uark.edu

479.856.1120

For copies of white papers, visit

http://itri.uark.edu/research

Keyword: RFID