does rfid improve inventory accuracy? bill hardgrave university of arkansas rfid research center...
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Does RFID Improve Inventory Accuracy?
Bill HardgraveUniversity of ArkansasRFID Research Center
Note: this document is copyrighted ( 2008) and confidential; do not distribute or cite without explicit permission.
Who are we?
• Purpose: to investigate the business value and implications of RF technologies
• ~ 15 faculty and ~100 students
• Privately funded: more than 50 companies provide funding and equipment for the Center
• Founding member of GRFLA
RFID Lab
• 10,000 sq. ft. lab in Hanna’s Candle Co.
• 4,500 sq. ft. lab in Zero Mountain (cold storage facility)
• Replicates RFID in supply chain: dock doors, conveyor, impact doors, forklifts, pallet wrappers, item level, etc.
• Serves as research and teaching facility
• Provides services to the industry (tag type, tag placement, reader/antenna type)
• EPCglobal Accredited Performance Test Center
RFID Lab
Lab simulates the complete retail supply chain from supplier’s shipping dock
to store shelf
RFID Lab
“The [University of Arkansas] RFID Lab is the most advanced of any owned by a university …” Mark Roberti, Editor of RFID Journal,
RFID Lab
In the past year, more than 1100 people from
500+ companies visited the lab
RFID Lab
Premise
Does RFID improve inventory accuracy?
• Huge problem– Forecasting, ordering, replenishment based on PI– PI is wrong 65% of the time– Estimated 10% reduction in profit due to inaccuracy
• What can be done?– Increase frequency (and accuracy) of physical counts– Identify and eliminate source of errors
Causes of Inventory Inaccuracy
PI inaccuracy causes
Results in overstated PI?
Results in understated PI?
Can case-level RFID reduce the error?
Incorrect manual adjustment
Yes Yes Yes
Theft Yes No Partial
Damaged/spoiled Yes No Partial
Improper returns Yes Yes No
Mis-shipment from DC
Yes Yes Yes
Cashier error Yes Yes No
Examples – Manual adjustment
PI = 12 Actual = 12 Casepack size = 12 Associate cannot locate case in backroom;
resets inventory count to 0 PI = 0, Actual = 12 (PI < Actual)
Unnecessary case ordered
Examples – Theft
PI = 20 Actual = 20 7 stolen
PI = 20, Actual = 13 (PI > Actual)
Sell 13 over the next week: PI = 7; Actual = 0
ROP = 6; thus, no order placed; no more sales
Examples – Cashier error
Product A Product B
PI 10 10
Actual 10 10
Sell 3 of A and 3 of B, but Cashier scans as 6 of A
PI = 4Actual = 7(PI < Actual)
PI = 10Actual = 7(PI > Actual)
The Study
• All products in air freshener category tagged at case level
• 23 weeks
• 16 stores (8 test, 8 control)– Mixture of Supercenter and Neighborhood Markets• PI accuracy determined each day: PI – actual• 10 weeks to determine baseline• Same time, same path each day
The Study
• Looked at understated PI only – i.e., where PI<actual
• Treatment:– Control stores: nothing; business as usual– Test stores: business as usual, PLUS used RFID
reads (from inbound door, sales floor door, box crusher) to determine count of items in backroom
• Auto-PI: adjustment made by system• For example: if PI = 0, but RFID indicates case (=12) in
backroom, then PI adjusted – NO HUMAN INTERVENTION
Results
Results
12%
-1%
12% - (-1%) = 13%Numbers are for illustration only; not actual
Results
Understated PI before auto-PI …
Understated PI after auto-PI …
Close (-1 or -2 units)
Inaccurate (> -2 units)
Perfect (PI = on-hand)
10% 30% 20%
Close (-1 or -2 units)
Inaccurate (> -2 units)
Perfect (PI = on-hand)
12% 17% 31%
Results
Implications
• What does it mean?– Inventory accuracy can be improved (with tagging at
the case level)– Is RFID needed? Could do physical counts – but at
what cost?– Improving understated means less inventory; less
uncertainty• Value to Wal-Mart and suppliers? In the millions!
– When used to improve overstated PI: reduce out of stocks even further
– Imaging inventory accuracy with item-level tagging …
Bill Hardgrave
479.575.6099
http://itri.uark.edu
For copies of white papers, visit
http://itri.uark.edu/research
Keyword: RFID