RFID (radio frequency identification) technology was used as early as World War II to help the military determine whether aircraft was friend or foe. Today, the same transponder technology is making retail warehouses more efficient and competing against bar codes for the top AIDC (automatic identification and data collection) spot. An RFID system consists of three components: an antenna and transceiver (often combined into one reader) and a transponder (the tag). The antenna emits RF (radio frequency) waves to transmit a signal that activates the transponder. When activated, the tag transmits data back to the antenna. Daniel Nabarro, chairman of Figleaves.com, an online and catalog intimate apparel retailer, incorporated RFID tags onto its distribution center's picking totes when it installed a new WMS (warehouse management system). The company has increased its productivity and plans to expand the system to include its warehouse's storage bins. Bill Allen, e-marketing manager for Texas Instruments RFID systems, has seen Figleaves.com and other large retailers such as The Gap and UK retailer Marks & Spencer earn success with using RFID throughout their supply chains.
- Is RFID technology becoming a common technology in retail warehouses?
Bill Allen: RFID goes beyond bar codes because it contains data intelligence. An early application of RFID tags was for tracking livestock. Farmers tagged cattle, enabling them to store information on the heritage of the animal, immunizations, or sale records. Now other vertical markets have recognized the value of RFID. Companies realize that they can tag individual items and have item-level tracking through the entire supply chain rather than at the carton or pallet level.
- What problems were you facing and how did RFID help?
Daniel Nabarro: We were facing a productivity problem. Our original system required that we pick one order at a time to a paper pick note. As our orders grew, we needed a more sophisticated system that could support picking multiple orders simultaneously, while still maintaining high accuracy levels. When we worked with Microlise Systems Integration (Nottingham, England) to install our new WMS, the company suggested we also use RFID. The new system uses totes equipped with RFID transponders, which are read by RFID readers on our trolleys. Each tote is capable of holding eight orders, so we pick 24 orders on one trolley trip. A touch screen display with a keyboard is on the trolley and communicates with the inventory system wirelessly. When the pick is complete the totes are removed from the trolley and are put into a staging area. When a packer gets a new tote, the system alerts him if he loads the wrong one. If it's the right one, the touch screen again displays the eight orders to be placed in the tote as determined by the inventory system.
- What benefits does RFID technology provide?
Bill Allen: There is no line of sight required with RFID. A box of 24 shirts can pass through a reader antenna system that scans the contents without opening the box. Retailers can account for those 24 items in milliseconds because RFID can penetrate any material. Reading the entire contents of a box at once gives retailers labor savings. Another benefit is the guarantee of product authentication. For example, a high-end ski apparel manufacturer guaranteed the authentication of its merchandise by embedding an RFID tag into its garments during the manufacturing process. RFID tags are also durable in the harsh warehouse environment. If a bar code is bent or wrinkled it can't be read, whereas an RFID tag can be covered with dust and dirt and still communicate its information.
- What was the cost of the installation? How are you measuring payback on the system?
Daniel Nabarro: The RFID tags were a fraction of the cost of the installation. Our entire WMS upgrade was $450,000 for hardware and software. We expect the payback to be around 2.5 years. Our philosophy is that because we want the company to grow, we have to build scalable systems. In the last year, we have grown 2.8 times to a turnover of around $5 million. And next year we expect to do $15 million. If you don't make the investments, you don't get the growth. We are always investing on the basis of a payback that we will get in two to three years rather than one year.
- What results do you expect from the RFID tags?
Daniel Nabarro: We have already become 70% faster in our picking time. Our packing time was reduced by about 40% because now there are usually only two scans per item - once when it's picked and once when it's packed.
- How can retailers justify the cost of RFID tags?
Bill Allen: If retailers purchase the tags in large quantities, they range in price from $.50 to $1 each. At one single point in the supply chain, it might not look like a sound investment, but if you spread out the cost and look at the benefits that RFID provides throughout the supply chain, then retailers can see quantifiable ROI. The Gap tested the concept of tagging its denim items to track its inventory. During the pilot, The Gap store employees knew exactly what sizes and styles needed to go out on the sales floor and where. Unlike other auto ID technologies, RFID allows multiple tags to be read simultaneously. Each item of clothing is tracked in the same manner, regardless of where it is in the supply chain. As RFID industry volumes increase, smart label costs will continue to come down and we'll see wider use of RFID in a variety of retail applications.