Study shows increase in employee productivity and reduced out-of-stocks among benefits of technology
San Francisco and New York March 29, 2005 Item-level radio frequency identification (RFID) technology used in managing retail inventory delivered an eight-fold increase in employee productivity, streamlined inventory management systems, reduced out-of-stocks by nearly 60 percent and significantly reduced shrinkage, according to a recent study conducted by Intelligent Systems and R4 Global Solutions.
Intelligent Systems, a provider of electronic product code (EPC)-compliant item-level inventory management solutions, and R4 Global Solutions, a provider of RFID-enabled technology and services, said the study focused on the use of item-level RFID technology in the retail receiving, stock room and store floor environments. It was conducted as part of an alliance agreement between the companies aimed a solving two of the retail industry's largest problems: out-of-stocks, which cost U.S. retailers an estimated $50 billion annually, and shrinkage, which costs an additional $31 billion annually.
The study highlighted the potential benefits of item-level technology for use in managing inventory within the retail storefront. These included:
* An eight-time improvement in employee productivity in areas attributed to inventory management. For many retailers labor is a "top three" cost center, and improvements in this area can mean hundreds of millions of dollars annually.
* A reduction in out-of-stocks by 50 to 60 percent. Out-of-stocks cost retailers billions of dollars annually, with large retailers averaging out-of-stocks of 8 percent or more of inventory.
* A reduction in shrinkage by as much as 40 percent. U.S. retailers lose more than $31 billion annually (1.7 percent of annual sales) to shrinkage, according to the University of Florida Retail Security Survey.
"R4 has been working with leading retailers since 2003 to evaluate the potential of item-level RFID technology in the retail environment," said Jeff Richards, CEO of R4 Global Solutions. "We are starting to see an increase in item-level pilot activity due to two primary factors: the overwhelming economic business case and the introduction of operationally viable technology."
The two companies said they have begun incorporating the item-level/RFID technology into Intelligent Systems' and R4's client applications in the United States and abroad, and are continuing further item-level research among leading retail and consumer packaged goods companies. Results from the next phase of research will be issued in mid-2005.
"The results of our pilot at [the United Kingdom-based retailer] Tesco and elsewhere are beginning to shine a light on the real potential for item-level RFID technology in the retail storefront," said Robert Locke, president of Intelligent Systems. "Our technology has been in development for several years, and we're happy to be working with R4 to take these solutions to market. There are a number of 'experimental' item-level systems being publicized, but our solutions have been operational for over a year now."
R4 and Intelligent Systems said they are collaborating on a number of item-level initiatives with Fortune 500 retail and consumer packaged goods (CPG) companies, and are using the results from the Q1 2005 item-level study in these engagements.
For a contrary view of the future of the RFID market, see the article "The O'RFID Factor: A 'No Spin' Look at Where Radio Frequency Identification Is Headed," in the October/November 2004 issue of Supply & Demand Chain Executive.
For more information on trends relating to radio frequency identification, follow this link for an extensive listing of SDCExec.com articles, featuring the latest research findings on the RFID, including adoption, return on investment and barriers to implementation.
