Apparel Manufacturers' Supply Chain ROI

Results From the FieldJustin Patton

University of Arkansas

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)

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 ProcessRetailer 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 casesIdentify - Common use cases among suppliers

Supply Chain Map – Following SlidesFeasibility 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 ROIUse cases

No. Apparel Use Cases No. Apparel Use Cases1 Outbound automation 31 Plan-o-gram compliance2 Inbound and outbound audit processes 32 Shelf replenishment3 Electronic proof of delivery 33 EAS consolidation4 Right tag on product 34 Reduce cycle count time5 Supply chain data quality 35 Receiving accuracy6 Could eliminate audits & manual inventory 36 Eliminate physical inventory counts7 Smart Inspect 37 Carton accuracy8 Country of origin 38 3rd party consolidation efficiency9 FTZ (Free Trade) 39 Increased store PI accuracy10 Trade agreements 40 Country specific shipping documentation11 Traceability through supply chain 41 Country specific care lables and placement12 Track deffectives & recalls 42 Inventory tracking within DC13 Pick/ pack speed 43 Prodcut recall14 Pick/pack accuracy 44 Electronic proof of delivery15 Detail of available data 45 Counterfiet tracking16 Item Level data 46 Inbound quality17 Claims accuracy 47 Outbound quality18 Potential to eliminate claims 48 PI accuracy19 Brand visibility in store (integrated) 49 Shelf replenishment20 Speed and accuracy 50 Dormant inventory reduction21 Inbound quality 51 Reduce shrink22 Outbound quality 52 Electronic proof of delivery23 FTZ and first sale 53 Shopper item interest vs. purchase24 Track returns 54 Density and space planning25 Tracking through processing areas 55 Multi-channel inventory management26 Drive accurate costing 56 Inventory tracking27 Vendor pack accuracy 57 Security and shrink reduction28 Case pack accuracy 58 Shrink due to employees29 Source validation 59 Accurate export documentation30 Shipping validation 60 Store to store transfers

Supplier ROIUse case process map

Supplier ROIUse case process map

Supplier ROI – Phase ISetting 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 casesIdentify - Common use cases among suppliers

Supply Chain MapFeasibility Testing - Evaluated RFID against use cases in a controlled settingCollect 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 SponsorsGS1 USAmerican Apparel & Footwear Association

University of Arkansas RFID Research Center Board MembersSpecial Thanks to the Participating Retail Brand Owners and Suppliers

Thank You For Your Support

Contact UsJustin Pattonjpatton@walton.uark.edu479.236.5890

David Cromhout cromhout@uark.edu479.856.1120

For copies of white papers, visithttp://itri.uark.edu/researchKeyword: RFID