The recent big news in supply chain information technology is the return of Walmart to industry leadership in retail RFID deployment. An article in the Wall Street Journal reports that Walmart is deploying RFID tags for individual clothing items at its US stores. Read the full story here.

To my knowledge, this is the first use of RFID technology for tagging individual pieces of mass market budget clothing. 

The RFID tags will be included on removable attachments (such as price or size tags) that the consumer can discard once the garment is purchased. This is in contrast to the practices of some high-end clothing retailers who sew RFID tags into the clothing as a means of protecting against counterfeit couture.

Walmart’s goal for this technology deployment is to increase sales by reducing out-of-stock conditions on the retail floor. That is, sales associates can use portable RFID readers to quickly scan an area to identify missing sizes or styles of clothing, and the missing SKUs can then be moved from backroom stock or ordered for replenishment from the warehouse. 

A secondary goal is to prevent “shrinkage” from the backroom stock; employees are less likely to steal from inventory if they know the items can be automatically tracked out the door. 

These goals are nothing new, of course. They have been part of the technology goals for RFID for years. 

Until Walmart’s announcement, the impediment to item-level RFID tagging has been the cost of the RFID tag. This has limited the use of RFID tags to case or pallet quantities – or to high-dollar-value individual items such as designer clothes and shoes. Therefore, from a technology and ROI perspective, the fact that Walmart is deploying item-level RFID tagging to low-cost clothing is big news. 

Speaking of ROI, I think the Wall Street Journal buried the lead in their article. They waited until the end of the article to note that Walmart is subsidizing the cost of the tagging program for their manufacturers, which means that we’ll have to wait for more data to decide if item-level tagging is economically justified when the full cost of each RFID tag is factored into the value proposition.

To give you an idea of the ROI that these types of projects could see, I would like to share with you some facts from a couple of articles that I have written over the past few years. In 2006, for example, the Mitsukoshi department store in Japan published the results of item-level tagging of high-end women’s shoes. The RFID tags allowed associates to accurately and quickly find the customer’s size (previously a problem in the stockroom), which resulted in a 10% increase in sales due to more accurate inventory data. (Read more in this IndustryWeek RFID Strategy Newsletter article.)

Likewise, the Walmart RFID pilot in 2007 reported a 13% reduction in out-of-stock conditions for the SKUs tracked. (Read more here.) So it is likely that the current RFID effort at Walmart will see improvements in the range of 10-15% prior to accounting for the cost of the tags.

Walmart has been a prominent pioneer in RFID technology. The company began to elicit interest in RFID several years ago by kicking off their retail pilot project, and this new development of item-tagging clothing is sure to lead to more interesting times in supply chain RFID.

-- Paul

 

 

Photo Credit: Myuibe