RFID: The Omnichannel Enabler. Bill Hardgrave Auburn University

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2 RFID: The Omnichannel Enabler Bill Hardgrave Auburn University

3 A Short History of RFID in Retail : pallet & case Issue: inventory management in the supply chain; unprecedented affordable visibility Epiphany: most problems at the store Result: shift to store-level visibility and item-level 2008 present: item-level apparel/footwear Issue: inventory accuracy, loss prevention, etc. Epiphany: multi-use technology, start at the store and go up supply chain Result: more adopters, broader adoption

4 Primary Use Cases for RFID Inventory accuracy Out of stocks / replenishment Locating production Loss detection

5 Second-order Use Cases Cycle counting strategies Loss prevention (beyond loss detection) Point of sale Conversion Enhance the customer experience (e.g., dressing room) Omnichannel

6 The Urgency of Omnichannel Urgency: retail is changing and online has been winning Why are online retailers winning? They brought retail to the masses. Those far from retail outlets, busy with work, not capable of travel, etc. They created a new basis for competition. A basis formed on variety, price, and availability.

7 The Urgency of Omnichannel Online retailers Lower overhead Aggressive on price Easy to scale High inventory accuracy Lower out of stock Six Sigma Traditional retailers Higher overhead Aggressive on price (?) Difficult to scale Low inventory accuracy Higher out of stock No Sigma

8 The Urgency of Omnichannel Traditional retail is hurting Purchases attributable to online Media, sporting, and hobby goods: ~45% Electronics: ~35% Apparel: ~15% In-store sales growth is shrinking (major retailers) More people shopped online during black Friday than in the stores 1 in 20 retail dollars were spent online 52% of all U.S. retail sales were online influenced

9 Traditional Retailer Response SKU Mix Multi- Channel Fulfillment Methods

10 The Urgency of Omnichannel While the efforts have helped, they are losing ground. Being multi-channel is not sufficient. The answer: omnichannel! We are at Retail 3.0 The customer is in charge Anywhere, anytime, any product But, how does a traditional retailer make the transition to an omnichannel retailer?

11 Omnichannel Enabler Omnichannel demands inventory accuracy Inventory accuracy allows a retailer to know what they have and where they have it something most cannot answer today. How does a retailer efficiently and effectively have high inventory accuracy? Answer: RFID Current omnichannel efforts are not efficient, effective, or sustainable without RFID

12 Omnichannel Enabler Key elements of omnichannel success Visibility to the single unit A local store s inventory becomes globally accessible Buy Online Pickup In Store (BOPIS) Distributed order management Ship from store: e.g., in the U.S., Walmart s stores are within 5 miles of 2/3 of U.S. population Forces you to shop your own stores Other channels : shop online in store, etc.

13 BOPIS possible? If your inventory accuracy is this: 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Accuracy And the customer wants to pick up in the store a fairly high turns product that shows 2 on hand in the store What would you do?

14 BOPIS Impact Lost sale when not available in their local store Alternatives: Ship from another store, same day Ship from another store / DC, next day (with discount?) 25%+ make unplanned purchases when picking up in store The cost of an out of stock increases substantially in omnichannel environment: loss of sale, loss of unplanned purchases, potential loss of customer Traditional substitution rules do not hold

15 Ship from Stores Stores serve as mini-dcs A single store becomes global Issues: Finding product: shopping your own stores How much time do you spend looking for the product? Mis-picked product (human error)

16 Ship from Stores What is your pick success rate? Typically see 35-60% At 35%, it takes 3 days to hit 99% service level At 60%, it takes 2 days. Shipping costs go up if Ship from Store not optimized Labor costs go up with time spent looking for item

17 Ship from Stores Simple example Assume an order for 3 items With RFID Margin (all three) $24 $24 Cost to pick (assume 5 minutes per item) 3 x 5 min x $10/hr = $2.50 Without RFID 1 st item: $ nd item: $ rd item: $0.85 Total = $5.00 Cost to ship $10 (for all three) 1 st item = $7 2 nd item = $7 3 rd item = $7 Remaining margin $11.50 $-2.00 Days to fulfill 1 3

18 Inventory Accuracy Required For BOPIS, all inventory must be exposed to the single unit Buffers are built because of low inventory accuracy For SfS, high inventory accuracy is required to optimize shipping and minimize labor

19 So, how do you go from here Based on multiple studies (without RFID)

20 To here? Based on multiple studies (with RFID)

21 High Inventory Accuracy Handheld / mobile readers

Person hours High Inventory Accuracy 70 60 Barcode Barcode 50 40 30 Barcode = 200-500

22 Person hours High Inventory Accuracy Barcode Barcode Barcode = items per hour RFID = items per hour RFID Units

23 High Inventory Accuracy Handheld / mobile readers Chokepoint portals Zonal monitoring Autonomous (or nearautonomous) units

24 Beware! Using RFID does not make you omnichannel Is it too late?

25 RFID Adoption June % Full deployment 32% Phased deployment Feasibility Assessment Proof of concept Pilot 19% 3%

26 Considerations Adopting Run proof of concept (1 or 2 stores) to understand How it works for you How your stores execute Run a pilot (multiple stores, multiple categories) Uncover scale issues Phased deployment Software considerations UPC vs. EPC Let the use cases determine the technology portfolio approach

27 Deploying - Portfolio Approach High Handheld Human interaction Low Fixed/ discrete Portals Asset-based readers Counting intervals Wearables Robots/drones Zonal monitoring Continuous

28 Considerations Adopting Run proof of concept (1 or 2 stores) to understand How it works for you How your stores execute Run a pilot (multiple stores, multiple categories) Uncover scale issues Phased deployment Software considerations UPC vs. EPC Let the use cases determine the technology portfolio approach Be aware of fail points

29 Considerations

30 Social Q&A

31 Complete the session survey! Scroll down to find the survey button on the session s page Answer the survey questions and submit!

32 Bill Hardgrave

EPC/RFID in Action at Best Buy

EPC/RFID in Action at Best Buy Paul Freeman RFID Director, Best Buy April 11, 2005 April 15, 2005 1 About Best Buy Best Buy Co., Inc. (NYSE: BBY) Fortune 100 growth company $27 Billion in sales revenue