RFID Inventory Management

Thanks to the contributing writer:
John-Pierre Kamel, Managing Director at RFID Sherpas

Definition: RFID inventory management is a system that utilizes radio frequency identification) as a wireless form of communication.

Nike, Lululemon, Adidas, Decathlon, Zara, Uniqlo, Target, Walmart. These retailers all share one key thing in common, other than the continued market leadership and excellent financial results: the recognition of the importance of inventory accuracy in delivering on the commitment to seamless commerce. They are not alone.

Billions of RFID-tagged products flow through tens of thousands of retail stores around the world, supporting the mission of taking the guesswork out of retail store inventory. It has become clearly evident to see the advantages of RFID inventory management.

These leading retailers have come to understand that inventory accuracy and availability are a form of customer service, operational excellence, and profit protection. Inventory accuracy empowers retailers to build trust with customers by ensuring they have the right products, in the right place, at the right time.

Implementing retail RFID inventory management programs is challenging due to their complexity and far-reaching impacts.  A successful RFID program has wide-ranging effects on various groups and functions within every retail organization, necessitating careful planning and execution to ensure a seamless and effective implementation.

At RFID Sherpas, we have had the privilege of collaborating with many of the world’s leading brands and retailers, supporting their deployments of RAIN RFID in thousands of stores and distribution centers across North America, Europe, and Asia.

Our experiences have not only taught us the recipe for success in retail RFID deployments but have also highlighted the pitfalls to avoid. Guiding our clients through these project challenges and obstacles has become one of our central missions.

With this need in mind, we wanted to share some of the valuable insights we’ve gained and key factors  that we consider essential. This article is the first in a series focused on helping retailers understand the key project enablers and approaches we recommend. 

Understanding the Imperative for Inventory Accuracy

Independent research studies by Harvard Business School, The University of Chicago, Auburn University, The University of Arkansas, The Pratt Institute, and McKenzie have all reported a positive ROI for retailers who can improve their inventory accuracy.   

The University of Leicester examined the use of RFID at ten retailers and found clear evidence of RFID’s positive impact on revenue and inventory accuracy. All ten companies experienced a positive ROI. Inventory accuracy was elevated to 93 – 99% (from starting points of 65 – 75%).

Revenue lift averaged between 1.5 – 5.5%. On the cost side, five of the ten retailers reported a reduction in their inventory levels, and the reductions ranged from 2 – 13%.  

Other studies have shown how RFID-enabled inventory accuracy positivity impacts the profitability of retail Omni programs, by reducing split shipments and increasing store fulfillment rates. These benefits alone can fund an entire RFID initiative.

Additionally, RFID inventory management and RFID-enabled inventory accuracy is enabling retailers to:

• Maintain an accurate view of each store’s stock;
• Maximize a product’s On-Floor Availability (i.e. Reduction in Out of Shelf);
• Ensure that a store is not Out Of Stock on key items (i.e. Reduction in Out of Stock);
• Expose more Store Inventory for Omnichannel;
• Control spending on Inventory, Labor, and Last-Mile Delivery;
• Simplify store processes for employees;
• Deliver online orders more quickly and efficiently; 
• Build new and proactive Loss Prevention tools to combat ORC; and
• Detect packing errors sooner and more accurately;

The advent of RFID inventory management and accuracy has brought about a quiet and transformative revolution in retail. Major brands and retailers have embraced these solutions to fulfill their commitment to unified commerce.

RFID-enabled inventory accuracy is quickly transitioning from a competitive edge to becoming an essential tool for thriving in the contemporary retail landscape.

Setting The Stage for a Successful RFID Inventory Management Program

As stated above, in this initial article, we will be examining the most effective strategies for structuring your RFID inventory accuracy program. 

#1: Harnessing the Power of a Cross-Functional Team

Creating a cross-functional team of stakeholders, led by an executive sponsor, is key to the success of a retail RFID project. RFID inventory management implementations impact almost every function across a retailer.

By bringing together representatives from different departments such as store operations, IT, supply chain, merchandising, planning and allocations, sourcing, omnichannel, and loss prevention, a diverse range of perspectives and expertise can be leveraged.

This cross-functional team ensures that all relevant stakeholders are actively involved throughout the RFID project lifecycle, from planning to execution and beyond.

Collaboration among these stakeholders facilitates a comprehensive understanding of the project’s goals, aligns business objectives, and helps overcome potential challenges.

It fosters effective communication, fosters shared ownership and enhances the likelihood of successful RFID deployment by promoting a holistic approach that considers all aspects of the retail business. Ultimately, a cross-functional team enables better decision-making, smoother implementation, and the realization of the full potential of RFID technology in retail.

#2: Shifting Pilot Focus from Value Validation to Value Maximization

RFID inventory management has proven to be a transformative technology, driving significant value, and delivering a wide range of benefits.

The world’s largest brands and retailers have established the value proposition of RFID, rendering the need for pilots or proof-of-concept (POC) to prove its worth unnecessary.

In fact, retailers who can not find value in RFID inventory management are the outliers. Rather than wasting cycles on determining if there is value, retailers should shift their focus to how RFID can be harnessed to maximize value within their retail operations. 

Today, retailers should view pilots as opportunities to test and optimize their processes, leveraging RFID to refine implementation strategies and identify areas for improvement.

With the proven benefits of RFID, retailers no longer need to question its impact on inventory accuracy, operational efficiency, omnichannel, and customer experience.

By embracing phase one rollouts, rather than ROI-proving pilots, retailers can actively seek ways to maximize value while discovering ways to integrate RFID seamlessly into their operations. This approach helps retailers unlock the full potential of these programs and put them on the fast track to delivering exceptional results that exceed customer expectations.

The era of proving the value of inventory accuracy is behind us, and now is the time to leverage its power to propel retail businesses forward.

#3: Harnessing the Power of a Phased Approach

Adopting a phased and balanced approach to RFID inventory management deployments not only drives operational efficiencies but also significantly impacts change management. Trying to “boil the ocean” and tackle everything at once is a recipe for complexity and inefficiency.

Instead, it is important to start with a laser focus on core use cases, embracing simplicity and practicality.

Perfection should never hinder progress; the key is to make steady strides forward without getting caught up in the pursuit of flawlessness. Increasing your store inventory accuracy from 65% to 95% brings about a transformative shift in the way you run your business.

Rather than fixating on achieving the last 5%, it is important to focus on the substantial benefits that come with this improvement.

Starting with a proven and simple approach, focusing on your core use cases, and building a roadmap to more complex functionality is key. This crawl, walk, run, fly mentality allows retailers to gradually build momentum, refine processes based on real-world feedback, and avoid overwhelming themselves.

For example, some retailers think they should start with hands-free RFID inventory management solutions or with supply chain use cases as part of their initial deployments.

We believe that scope decisions such as this overcomplicate the initial program and take away the focus on the primary goal of improving inventory accuracy. There is a time and place for all these use cases, they just don’t have to be part of the initial launch.

By embracing a phased approach, retailers strike a balance between ambition and practicality. Starting with core use cases provides the opportunity to gain valuable insights and learn from initial deployments. It allows retailers to refine their strategies, identify potential challenges, and make informed decisions for subsequent phases.

By focusing on what matters most and prioritizing achievable goals, retailers can allocate their resources effectively and avoid spreading themselves too thin. This balanced approach ensures that the deployment remains manageable, risks are minimized, and the entire organization can rally around incremental progress.

With each step, retailers can build confidence, refine their processes, and unleash the full potential of RFID to drive meaningful value and transformative growth.

#4: Maximizing Value Through Effective Change Management

We have often heard the expression “the soft stuff is the hard stuff”. This is most definitely true with RFID-enabled inventory accuracy deployments. On these Retail Transformation projects, it is paramount to appreciate the intricate nature of change management.

While the technological aspect may appear straightforward, the real challenges lie within the people and processes surrounding its implementation. By acknowledging this reality, retailers can devote the necessary attention and resources to effectively address the human side of the transformation.

A successful change management strategy necessitates a deep understanding of how the RFID deployment will impact employees, their roles, and their daily routines. It entails proactive communication that offers clarity on the purpose and benefits of RFID while addressing any concerns or resistance that may emerge.

Employing a phased approach allows for a gradual introduction of the changes, enabling individuals and teams to adapt at a manageable pace.

Moreover, change management should be an ongoing effort throughout the entire RFID inventory management deployment journey. Retailers must continuously engage with employees, actively seeking their input and addressing their needs. This collaborative approach fosters a sense of ownership and empowers employees to embrace the changes wholeheartedly.

By prioritizing the people and processes involved, retailers can overcome resistance, drive employee engagement, and ultimately extract the maximum value from RFID technology.

The Key Change Management Principles that Should be Considered For Implementing RFID Inventory Management

Leadership and Vision: Effective change management requires strong leadership and a clear vision for the desired outcomes of the RFID deployment. Leaders must communicate the rationale behind the change, inspire others to embrace it, and provide guidance throughout the process.

This MUST be a top-down push. Store Associates prioritize what their Store Managers tell them to do.

Store managers will prioritize what their District Manager wants. District Managers Prioritize what their Regional Managers want, etc. The vision and change need to be pushed from the top, down to the stores, by a supportive executive team, ideally whose title starts with a “C”.

Stakeholder Engagement: Engaging stakeholders at all levels of the organization is crucial for ensuring a successful change. This involves actively involving employees, managers, and key decision-makers in the planning and decision-making process, as well as listening to and addressing their concerns and feedback.

By including them in the process, they will feel heard and become more committed to the change.

Communication and Transparency: Open and transparent communication is vital to manage expectations and build trust. Regularly sharing updates, progress, and successes related to the RFID deployment helps to alleviate resistance and keep everyone informed and engaged.

Training and Support: Providing adequate training and support is essential to help employees adapt to the changes brought about by RFID technology. Investing in training programs, District Champions, and resources ensures that employees have the necessary skills and knowledge to effectively use RFID inventory management systems and tools.

Having an IT support organization prepared to keep the program ‘firing on all cylinders” is key. Ramping up the call center and break-fix organization is a critical part of this process.

Continuous Improvement: Change management is an iterative process that requires continuous evaluation and improvement. Encouraging a culture of learning and adaptation allows for ongoing refinement of processes, identification of challenges, and the implementation of corrective actions to enhance the overall RFID deployment.

Dashboards and Execution Management visibility are also critical to successful continuous improvement. These reports can show progress against organizational KPI’s like out of stocks, inventory accuracy, and cancelled omnichannel orders are important, especially at the store, district, and regional levels.

By incorporating these principles into their Inventory Visibility programs, retailers can navigate the complexities of change, maximize employee engagement, and achieve the desired outcomes of their RFID initiatives.

Now more than ever, business owners must be aware of how the future of retail is taking shape along with current retail trends as they are happening. And RFID inventory management will help take them there.