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Global Logistics Focus Sept.21, 2015

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10A THE JOURNAL OF COMMERCE SEPTEMBER 21.2015 SPECIAL REPORT GLOBAL LOGISTICS FOCUS 2015 LESSONS IN IMPLEMENTATION OVER THE PAST few years, American Apparel has implemented item-level RFID in all of its 250 stores. The results have been so significant that the company cited RFID technology in its 2012 10-K financial report as a "key factor in their financial health," according to Dean Frew, president of SML Intelligent Inventory Systems. Frew cited the following lessons the retailer learned from the implementation: l Focus on the functionality of processes, rather than hype about the technology. After testing such hyped products as RFID- enabled point-of-sale kiosks, ceiling readers that replace RFID handheld terminals, and ceiling-mounted readers, American Apparel found they "were fantastic in theory and impractical in reality," Frew said. Instead, the retailer focused most on "where maximum value will be created for the least amount of cost." l Clean the data in your system. Like many retailers, American Apparel found inventory replenishment was "limited by algorithms based on averages and predictions, and fed by inaccurate data," Frew said. The retailer found it could simplify its inventory replenishment and increase confidence in that process by using software that made it easier to cleanse the system of inaccurate data. l Properly implemented, RFID doesn't just increase sales, but also dramatically reduces shrink, especially internal shrink associated with item-level inventory accountability. The fact that employees knew RFID was operating led to reduction in shrink of more than 50 percent. l Third-party audits of inventory accuracy were eliminated — saving even more money — after inventory accuracy exceeded 98 percent, and complete store-cycle counts could be made as often as desired. Once American Apparel achieved RFID deploy- ment in 150 stores, it began to use the inventory scan results provided by RFID as the source of input for its balance sheet calculation. l American Apparel was able to accelerate implementation and minimize its deploy- ment time for RFID systems by leveraging the existing teams of employees on hand, training them in RFID and tapping into their skills. "Retailers tend to envision a long, expensive and highly disruptive process for deploying RFID," Frew said, adding that, as American Apparel has shown, the full impact of deployment can be achieved with- out such disruption when retailers focus on choosing the right technology and train their employees properly. — Alan M. Field Tupungato / apparel supply chain entails tracking a huge number of variations on each item, including different colors and sizes and subtle changes in the look of items that are made nearly side by side with each other. In contrast, he noted, a can of peas is just a can of peas. It will never go out of style. Apparel and footwear products also change from season to season, unlike canned vegetables and boxed cereals. And, with the advent of so-called fast fashion, some retailers are changing their apparel lineups more often than ever. In its early years, RFID was deployed only by visionary apparel retailers — so-called early adopters, to use the expression pioneered by G eof f rey Moore's book, "Crossing the Chasm" in 1991. But since 2007 or so, RFID has become a standard practice among a category of companies Moore called the "early majority," those pragmatists willing to give a chance to advanced technologies that have proved their value when implemented by the capable early adopters. RFID still has a long way to go before winning over "late adopters," laggards at employing advanced technologies, Frew acknowledged. Only three or four retailers worldwide have put RFID tags on every product they sell: American Apparel, Marks & Spencer, Decathlon (France) and Zara. Several other major retailers are using RFID to track a sig - nificant portion of the inventory in their supply chains, however, including Macy's, Kohl's, J.C. Penney and Wal- ONLY THREE OR FOUR RETAILERS WORLDWIDE HAVE PUT RFID TAGS ON EVERY PRODUCT THEY SELL.

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