RFID boosts retailers’ confidence in on-hand inventory

by | Jul 30, 2015

The retail industry is going to experience some big changes in the next few years, as more retailers and suppliers adopt radio frequency identification (RFID) tags. Not only can distribution centers use them to monitor inventory, but stores can as well.

In a previous post, I discussed how retailers’ in-store SKU tracking is often only 60% accurate (compared to distribution centers, which have accuracy percentages in the high 90s).

That means the retailer doesn’t know how much stock is in the store, what to reorder, or what to actually put on sale. Stores that offer in-store pickup or provide real-time inventory counts can be hurt by those inaccuracies. RFID can change a lot of this, helping to increase sales and improve the customer experience.

Macy’s uses RFID to track their inventory, and they’ve improved processes across their organization, including at the store-level.

Like most retailers, Macy’s knew that store-level inventory was inaccurate. Approximately 20% of their inventory is in single quantities, the only item of its kind in the store. Often, single quantities weren’t salable online or via store pickup, because Macy’s lacked confidence in its store-level inventory counts and didn’t want to disappoint the customer if the product was unavailable. RFID has changed that. Macy’s is now able to circulate these single items with confidence, knowing the product is in inventory.

In brick-and-mortar stores, if you don’t have a SKU on the floor, you’re losing sales. It doesn’t matter if the item is out of stock, or just in the back. If it’s not on the floor, you can’t sell it. It’s the same with online sales: if the inventory isn’t accurate, the items may appear to be out of stock.

I’ve heard from several online retailers (including Macy’s) that when inventory levels are inaccurate or untrusted, they build buffers into their online inventory levels. For example, if an item has fewer than five units, it shows as “not available” online, even when it is. RFID can help close that gap.

The following are ways retailers are using RFID to bolster sales and become more efficient:

  • Tracking floor inventory. Rather than doing daily hand counts, or restocking in the middle of a shift, you can run a cycle count overnight and generate a report that shows what’s needed on the floor, saving time, energy, and money. It also boosts sales, because associates can focus on selling, rather than restocking during a peak traffic period.
  • Locating misplaced items. Sales associates can find products for customers, even if the item is located in a nearby storage area, has been misplaced in the store, or is simply lost behind a shelf or in the backroom. RFID data provides immediate location information so the retailer can quickly meet the consumer’s requests.
  • Automating how goods are received into inventory. You can scan the whole shipment via RFID with 100% accuracy.
  • Reducing shrinkage. By tracking when a tagged item is removed from the premises, retailers can understand whether it is a legitimate sale or theft.
  • Increasing the accuracy of point of sale (POS) data. How many times have you found missing price tags on items? The cashier may go to the rack and grab a different sized shirt to scan. Or they scan a second shirt of a differently color. Scanning two different items throws off the accuracy. When the data collected from RFID inventory cycle counts is used in unison with POS data, retailers have a more accurate inventory assessment.
  • Streamlining Vendor Managed Inventory (VMI). Instead of sending employees to a store to count inventory and replenish items, suppliers can implement an RFID system that gathers inventory counts by location each night. This data provides the details needed to replenish stock only where necessary, saving labor, time and fuel.

I’m looking forward to watching how RFID improves retailers’ efficiency and consumer satisfaction in the omnichannel era. Watch this blog for more ideas and examples of innovation in retail.

Ready to learn more about how SPS Commerce solutions can help with your inventory management? Contact an SPS Commerce representative to get started today.

Tony Thrasher

Group Product Manager at SPS Commerce
As an expert in retail fulfillment, Tony offers a unique viewpoint on using the latest retail technologies, including the SPS Commerce Retail Network, RFID and more to drive innovation and growth. At SPS, he is responsible for using graph-based architecture to drive meaningful insights and expand the value of the SPS Commerce Platform to customers and partners.
Tony Thrasher