winning in apparel retail with rfid: today and tomorrow
TRANSCRIPT
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Winning in Apparel Retail With RFID: Today and Tomorrow
SML Intelligent Inventory SolutionsMarch 19, 2015
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Today’s Speaker
Dean FrewPresident & FounderSML Intelligent Inventory Solutions (formerly Xterprise)
• 15 years of RFID industry experience• Numerous global deployments across
several industry verticals, with a focus on retail apparel
• Extensive knowledge of the technical and business side of item-level RFID
www.sml-iis.com
@SMLiis
Contents
• Part I: Crafting an RFID Program That Adds Value, Not Complexity
• Part II: Deploying the RFID Solution of Today and Tomorrow
• Part III: Characteristics of the Solution of Tomorrow
Part I: Crafting an RFID program that adds value, not complexity
Where does value come from in RFID?
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The major drivers of business value in RFID… …mapped to typical value creation
ROI breakout by componentTotal = 100%
Limited by tag costs and
overlaps with inventory benefits
Where is the value creation from customer experience, advanced
analytics, EAS?
The main value drivers of RFID still lie in inventory management. Most retailers have not captured this yet.
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Why aren’t companies capturing the low-hanging fruit?
RIPRFID
Program
“Who needs a pilot?”
Too few items tagged
Wrong categories
tagged Poor execution (especially
rollout)
Mis-prioritized use cases
Lack of internal support
Suboptimal technology
profile
Unjustifiable business case• Department store retailer deployed full
solution chain-wide, but did not tag high enough proportion of items; unable to realize & communicate meaningful results to senior leaders
Mis-prioritized use cases• Mid-size specialty apparel retailer insists on
smart dressing rooms as part of Phase I implementation
Lack of support• Mid-size specialty apparel retailer studied
RFID, justified business case, developed viable solution roadmap—but did not have senior enough sponsorship; project stalled for years
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The “Right” Use Case Varies By Entity, But Inventory Still Rules Them All
Use case
Retailer Type Inventory accuracy*
LP/shrink redux
Shipment audits
Brand authentication
Display compliance
Customer experience
Specialty retailer
Department store
Brand owner w/ retail
Brand owner
Accessories
*Includes omnichannel benefits, reduced overall inventory and related benefits accrued from highly accurate inventory
Value frontier
While business case varies by entity,
Inventory accuracy remains the key value driver across all types
The value frontier is pushing rightward over time, but the far left of the use case graph is still where retailers should attempt to maximize ROI
High impact Low impact
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How Are Different Retailers Employing RFID Today?
Retailer type Avg. % tagged items
Sales lift (% of tot.)
Shrink reduction pct.
(type)
Inventory reduction (%
of tot.)Primary use cases
Specialty apparel• Replenishment• Cycle counting
Department store• Display compliance• Replenishment
Brand owner• Replenishment• Cycle counting
Luxury• Loss prevention• Authentication
Jewelry• Loss prevention• Authentication
Good Poor
Benefit
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The Most Successful Retailers Understand the Relationship Between Solution Footprint and Value Created
Incremental value capture
Light (HH Only) Medium (HH+Fixed) Heavy (HH+Fixed/Overhead)
Use cases enabled
Footprint size (HW cost)
• Cycle counting• Replenishment• Out-of-stocks
• POS• Transfers• Receiving
• Continuous coverage• Display Compliance• Sales Conversion
Fixed readerHandheld reader
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RFID for Brand Owners (i.e., Suppliers) Has Shown Mixed Results
ScenarioBusiness case built on… ROI
Brand owner with no retail and no tagging mandate seeking to add supply chain value with RFID
Role of RFID
Reduction in misshipments
Cost center
Brand owner with no retail and tagging mandate
1st: Reduced TCO2nd: Increased sales in retail
Cost center with secondary benefits from retailers
Brand owner with significant retail presence
Retail benefits Value driver
+-
+-
+-
Brand owners that are mandated to tag or that own retail stores (and especially both) will find significant value from RFID
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Summary: Keys to a Value-Added RFID Program
Understand retailer-process fit... …to ensure critical business case elements are the focus…
…with the appropriate solution footprint.
What percent of my items are tagged (or taggable?
How many items do I carry? What is my SKU mix?
How much of my supply chain do I control?
How do I optimize my solution for the highest-value use cases?
Does my vision for RFID prioritize high-value use cases?
How will use case prioritization evolve in the future?
What minimal footprint is required to effectively achieve the desired business case?
What use cases do I anticipate in the future?
Does my solution spend reflect the highest priority use cases?
Part II: Deploying the RFID Solution For Today and Tomorrow
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Moving Beyond the First-Degree Use Cases
Customer experience
Advanced analytics
Real-time item tracking
IoT?
The promise
Affordable
Continuous
The challenge
Accurate
Pick two.Want all.
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The Horizon for Future RFID Use Cases
2nd-order analytics
Location-based event-driven reading
Real-time continuous coverage
Inventory Management (today)
Inventory focused, heavy integration w/ ERP, WMS, RMS, new inventory management processes, basic inventory-related analytics
Minimal integration w/ CMS, EAS, etc. to provide rudimentary customer analytics (e.g., conversion)
Expansion of strategically placed readers to interact w/ and record customer & product movement based on events (e.g., smart dressing room)
Extensive integration w/ multiple location-based technologies enabling real-time tracking of product & customer movement
Enhanced inventoryNow - 1 year
1-3 years
4 - ? years
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Retailers Must Leverage Today’s Solutions to Lay the Foundation for Tomorrow
Today’s considerations lead to tomorrow’s use cases
1. Will the solution scale as my enterprise scales? • New IT architecture• New locations• New lines of business
2. Will the solution integrate with my IT architecture and infrastructure of the future?
• Additional systems beyond ERP (e.g., CMS, web analytics, etc.)
• Dynamic scaling• APIs for easy integration with unforeseen
platforms3. Does the solution make it easy to create a flexible
RFID footprint?• Integration w/ multiple fixed & handheld
configurations• Ability to manage data across numerous
(different) devices
• A solution unable to scale or interact with emerging technologies cannot enable future use cases and will require overhaul/replacement w/in 5 years
• As IT infrastructure & architecture evolves, the solution must make it easy to manage data across systems. If a solution is beholden to a particular IT structure, the retailer’s flexibility is limited.
• Hardware and tag evolution is likely to drive use case innovation in the RFID world; if software does not easily interact with a variety of current and as-yet undeveloped hardware configurations, the retailer’s flexibility and speed-to-implementation is adversely impacted.
Solution considerations Implications on use cases1
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Summary: Building the Solution of Tomorrow, Today
Today difficult tradeoffs exist... …but future use cases are becoming rapidly viable…
…necessitating important considerations for deployment of an RFID solution.
Technology exists today for virtually any use case—but it is not always practical
Scaling of the RFID market as a whole will drive investment up and costs down
Today, the leading use cases for ROI are still inventory management-centric
“2nd generation” RFID solutions are quickly emerging, leaving retailers still waiting to capture “1st generation” benefits at risk for being left behind
RFID will move retailers even closer to the customer in conjunction w/ other technology
Inventory will only be enhanced as the cornerstone case for RFID
With a rapidly evolving market, retailers must choose best-in-class software that can win with today’s and tomorrow’s solutions
Better, cheaper hardware will drive use case innovation and require scalable, extensible software solutions
More sophisticated use cases mean reducing complexity of deployment is essential.
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Part III: Characteristics of the Solution of Tomorrow
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 -
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
Good Solutions Must Be Easily ScalableNear-simultaneous transactions (4 hr window)
Number of stores(hundreds)
A four-hour cycle count window across an enterprise can
produce hundreds of millions of transactions needing to be
processed within that window
• Can the solution handle transaction load (within a reasonable amount of time)?
• Can the solution scale across clustered servers & VMs?
• Does the solution enable the organization to scale systems via (e.g.) SOA?
Over 20,000 transactions per second
Example: SML IIS Clarity™ Software Architecture Was Engineered From Ground Floor with Scalability In Mind
• Highly scalable architecture, layered and decoupled to allow scaling points at each layer
• Web and applications, queues, caches and data layers are all independently scalable
• Event driven application architecture
• Inherently scalable
• Easily extended to support new features and functionality
• Domain driven design
• The system was designed from the ground up to enable serialized inventory visibility and operational control
• Latest technologies and practices
• Web API interfaces
Messaging, queuing and
caching
ETLData
warehousing, synchronization
ERP
WMS
RMS
Web
CMS
Load-balanced, dynamically-scaling application layer
Data management and warehousing
Enterprise systems integration
Data collection & input
• Worker processes• Applications• Presentation layer
• Worker processes• Applications• Presentation layer
• Worker processes• Applications• Presentation layer
Database (SQL, Oracle,
MongoDB, etc.)
• Worker processes• Applications• Presentation layer
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The RFID Solution of Tomorrow Is Extensible Across Numerous Integration Touchpoints
As an essential component of the retailer of the future, RFID systems will need to be fully integrated with numerous enterprise systems.
“Light touch” not an option for value creation
Extends value of existing systems
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The Solution of Tomorrow Must Accommodate a Variety of Hardware Configurations…
Fixed reading devices Automated reading devices
The lowly, lowly handheld
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…That Drive an Even More Complex Variety of Use Cases
Solutions today must support both the use cases of today and the use cases of tomorrow without the need to create separate, independent networks of functional relationships
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Summary: Characteristics of the Solution of Tomorrow
Today’s solutions must be massively scalable...
…as well as easy to integrate with existing and future technology…
…in order to full support the use cases of today and tomorrow.
How fast will your organization grow in the future?
What number of items will need to be tagged and counted to fully capture the ROI of RFID?
How will IT systems scale alongside organizational growth?
What hardware configuration today captures the most value for least cost?
What performance is required of hardware in order to deliver future desired use cases?
Will your existing software integrate with the types of hardware likely to drive emerging use cases?
How will your organization leverage nearly infinite possibilities RFID will bring to the table without breaking the bank?
How do you build a robust solution today that will deliver value tomorrow without becoming obsolete?
Key TakeawaysToday Tomorrow So what?• Today’s value is still driven
from inventory management-based use cases
• Value will increasingly be available from 2nd-order benefits like customer experience and analytics
• Build a solution extensible and flexible enough to bridge the gap between rapidly evolving solutions
• Retailers must tag more product, faster to capture RFID ROI
• Passive RFID will be ubiquitous across a range of use cases & applications
• Scalability and integrability of software and the ability to process millions of near-simultaneous transactions is critical
• Use cases typically hindered by accuracy, expense, or continuity
• Cheaper, better hardware makes many new use cases feasible
• Capturing current and future use cases will require value maximization without the complexity (more value add per vendor, etc.)
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Webinar Summary: RFID Has Already Changed the Way the Game is Played, and the Gulf Only Gets Bigger…
In stock!
• Increase sales 2-14%
• Cut out of stocks 50% or more
• Reduce inventory > 10%
• Reduce safety stocks
• Slash shrink >50% (especially internal)
• Eliminate expensive audits
• Enhance omnichannel
• Do ship-from-store and in-store pickup
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Q&A
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Appendix/unused/old
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…That Drive an Even More Complex Variety of Use Cases
Solutions today must support both the use cases of today and the use cases of tomorrow without the need to create separate, independent networks of functional relationships