RETAIL APPLICATION

 

BENEFITS

 

    Early movers in RFID systems are realizing tangible benefits.  Estimates are that Wal*Mart will  save $6.7 billion a year in reduced labor costs,  $600 million in out-of-stock supply chain cost reductions, $575 million in theft reduction, $300 million in improved tracking throughout warehouse and distribution centers, and $180 million in reduced inventory and holding and carrying costs.  Other large early movers, such as Procter and Gamble, expect to save $200 million per year in inventory carrying cost.5  The Retail Industry Leaders Association estimates between 6 to 10% of the $3 trillion in annual supply chain spending in lost due to poor visibility.  This equates to $180 to $300 billion of waste RFID can assist in preventing.6 

  

Labor productivity: 

 

    Labor productivity is increased and cost reduced by eliminating manual reading of bar codes.  Additionally, return of damaged goods, minimization in storage mistakes caused by employees and improving quality control in processing shipment orders results in cost savings to the firm.    This results more efficient storage and processing.  RFID systems also improve the receiving and shipment areas of warehouses.  Additionally, RFID systems reduce employee theft by automatically scanning all products as it exits the warehouse.  Overall, estimates are for between 5 and 7.5% annual reduction in store and warehouse labor expenses. 1,7    

 

Equipment and Facility productivity: 

 

    RFID systems ability to interface real-time with Warehouse Management Systems allow for greater optimization of equipment and facilities.  Assets can be assigned to ship the highest priority product first.  Additionally, by eliminating the requirement for line-of-sight reading of bar codes, conveyers can be loaded and operated more rapidly.  The net result is cost saving in equipment and facilities.1

 

Inventory reduction: 

 

    The greater visibility on all inventory afforded by RFID systems reduces the minimum amount of stock required to maintain stock outs at acceptable levels.  This is accomplished through a reduction in misplaced or inaccurate inventories.  RFID systems are estimated to reduce required on hand inventory by 5%, freeing up this capital for other uses within the organization,1,7  additionally, “pick list” (the method most stores use to restock shelves) is improved. 

 

      Combining RFID system overview of product and location in the warehouse with point of sale information, pick lists are produced automatically with detailed information.  This eliminates employee labor to build the pick list and improves its accuracy, reducing wasted time searching for product in the warehouse.  A 2005 study conducted by the University of Arkansas in 24 Wal*Mart stores over 29 weeks showed a reduction of 16% in out of stock occurrences.  For retailers realizing reduction in out-of-stock items from RFID systems, estimated savings are $700,000 per $1 billion in annual sales. 7