Sexy sells, does RFID?

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Written on Saturday, April 19, 2008 by Gemini

American Apparel makes RFID sexy...


Retailer American Apparel Inc., known for its risqué ads and "Made in Downtown LA" label, is putting radio frequency identification tags (RFID) on every Boy Beater tank, Baby Rib brief, Cross-Back bra and Sleeve Ringer T-Shirt in its 17 New York metropolitan area stores. That's 40,000 items per store, each tagged with a high-tech chip, starting with the Columbia University location in Manhattan. The company is using Vue Technology's TrueVue software to manage the RFID data, Motorola Inc. RFID readers and antennae to capture the data and Avery Dennison Corp. tags to locate and store that data at the item level. Los Angeles-based American Apparel is on an aggressive timetable to roll out the sophisticated inventory tracking system to an additional 120 stores in North America.

The question is why. RFID tagging on crates -- never mind individual pieces -- is currently on the radar for only a handful of retailers, mainly behemoths like Wal-Mart Stores Inc. and its legions of suppliers now under orders to adopt transponder tags or else.

RFID is tricky, said John Fontanella, an analyst at AMR Research Inc. in Boston. "The use cases for RFID are not as obvious as some proponents would have you believe," he said. Automating a process like taking inventory changes the way people work, and that "requires a significant amount of re-engineering," Fontanella said, and up-front labor. There's little doubt of that, said Zander Livingston, RFID technology director at American Apparel. The manual tagging for a single store alone required multiple employees working three full days. But for American Apparel, with its numerous, nearly identical styles in a rainbow of colors, the technology makes a lot of sense.

"The No. 1 reason is inventory accuracy," Livingston said.

American Apparel differs from a lot of other apparel companies, Livingston said, in that it displays one -- and one only -- of each size, style and color of a particular item on its sales floor. Each item in each of its color and size variations has a place on the salesroom floor, but the company does not load up the racks with multiples of the same kind. "So basically, as soon as an item has been taken off the rack to be tried on, or purchased or just carried around the store as the customer is browsing, the item is no longer available. We also have a lot of items that look similar to each other, and because of that a lot of items get misplaced," Livingston said. The high sales volume often means that more than 1,000 items a day are moving back and forth between stockrooms and salesrooms.

"We'd have 10% of the items lost in the stock room that needed to be on the sales floor. Part of my goal was to make sure that we had a perfectly fitted sales floor, at 100% capacity," said Livingston, an old classmate of American Apparel CEO Dov Charney from their prep school days at the elite Choate Rosemary Hall, who was recruited by Charney to put RFID to work. Accuracy was a big problem. Taking manual count of 10,000 items on the sales floor and the 30,000 stocked in the basement means having to ask employees to come early or stay late. Fatigued employees might glance at the tag in the collar, but because of the similarity in styles, misidentify the item. RFID accuracy is 100%.

Tom Racette, director of RFID market development for Mortorola's Enterprise Mobility Division, said RFID is becoming easier to implement. "A couple of years ago, this was all about the big challenging implementation, putting RFID across the supply chain. We are seeing more and more retailers, and businesses of all kinds, who are finding creative ways of implementing RFID in ways that are providing value," Racette said. Dr. Bill Hardgrave, professor of information systems and executive director of the Information Technology Research Institute at the University of Arkansas, said in a statement, "We've noticed an increasing trend among retailers that are implementing RFID at the item level, and American Apparel is a prime example of a retailer on the forefront of this trend."

By deploying the technology in additional stores, American Apparel expects to increase sales and customer service by having real-time visibility into products at nearby stores, enhancing the intrastore transfer process to balance stock, Racette said. Furthermore, the retailer will be able to respond more efficiently to market behavior by using RFID to record and report on purchases, not only within one location, but also across a region of stores.

For CIOs, they are looking at RFID and seeing that inventory accuracy is going from 80% to 99%, as it did in the American Apparel pilot, and that RFID is reducing the cost of managing inventory substantially, said Chris Schaeffer, director of RFID product marketing at Motorola. "CIOs are tasked with figuring out how to utilize the IT infrastucture to bring business value, and this can improve processes and efficiencies. It's good for a CIO to be able to say, 'See how this technology investment helped me do that,'" Schaeffer said.

Livingston did not give out a dollar figure for the investment, except to say the cost was about equivalent to the salaries of two full-time sales employees per store. The project is not without challenges, he cautioned. The deployment takes a "little more human interaction" than perhaps initially anticipated to verify everything being transported from the stockroom to the sales floor. He had to re-evaluate certain work movements so RFID readers were not blocked. It can be difficult to read tags around metal, for example. Down the road, he wants to design portals to capture theft -- people walking out the door with stuff -- but the "gates" have to be "aesthetically pleasing" so they are not in odds with American Apparel's meticulous stores. Livingston said the next step is to cut down on the manual labor by tagging items at the manufacturing plant. "I'm not going to tag another item in New York until there is source-level tagging."

Source: SearchCIO article

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