New Guidelines Announced for EPC-enabled RFID Tags

Stephen DeAngelis

April 11, 2012

The staff at Modern Materials Handling writes, “Suppliers, retailers and solution providers seeking help on efficient identification, serialization and placement of Electronic Product Code (EPC)-enabled RFID tags should benefit from new guidelines that were announced … by the Board of Directors of the Voluntary Interindustry Commerce Solutions Association (VICS).” [“New RFID guidelines for retailers and suppliers unveiled by VICS Board,” 5 April 2012] The article continues:

“The new guidelines, developed by the VICS Item Level RFID Initiative (VILRI) on RFID tag placement and performance, cover how the industry should cooperate to ensure reliable tag performance and data capture deployment. The guideline for tag placement uses the UPC tag placement guideline as a starting point and requires bi-directional communication between supplier and retailer during EPC implementation in order to determine optimal EPC type and placement. The goal is to minimize work effort and keep implementation costs low. The guidelines for tag performance inform the business user community about the factors that influence use-case fitness of RFID tags, and how the industry can and should cooperate now and in the future to ensure reliable deployments from a tag performance and data capture perspective.”

The article explains that “the VICS Item Level RFID Initiative (VILRI) is an inter-industry group of the country’s leading retailers, suppliers, industry associations, academics and solution providers dedicated to quantifying the benefits of item level RFID and exploring how it can improve business processes throughout the retail value chain.” It continues:

“VILRI foresees the evolution of global supply chain efficiency through the adoption of item level EPC-enabled RFID technology, which will foster innovation, improve business processes and enhance consumer experiences. VILRI is open to members and affiliates interested in becoming involved in this exciting and strategic juncture in retail history. The initiative is supported by American Apparel & Footwear Association, Council of Supply Chain Management Professionals, GS1 Canada, GS1 US, National Retail Federation, Retail Council of Canada, Retail Industry Leaders Association and Voluntary Interindustry Commerce Solutions Association.”

Obviously VICS, tag manufacturers, retailers, and other stakeholders hope that the announced standards improve RFID effectiveness. There has been a growing interest in item-level tagging because it holds the promise of increasing inventory accuracy and decreasing theft. Dr. Bill Hardgrave, Dean of the business school at Auburn University, told the editorial staff at Supply Chain Digest “that without RFID, ‘it takes extraordinary effort’ to get accuracy levels over 70%, and the highest he has ever seen is 80%.” [“Dr. Bill Hardgrave on Keys to Item-Level RFID Pilot Success,” 28 March 2012] Barney Jopson reported, “US retailers lost $15bn-$30bn of merchandise to theft and fraud [in 2010] as a record number were hit by criminal gangs that are growing in scope and sophistication, according to the National Retail Federation. Organised crime affected 94.5 per cent of retailers questioned by the federation, the highest percentage in the seven-year history of its annual crime survey and a rise from 89 per cent last year.” [“US retailers lose billions to fraud and theft,” Financial Times, 8 June 2011] It is not difficult to see why supply chain professionals would like to increase inventory accuracy and decrease theft.

The Supply Chain Digest article asserts that “soft goods such as apparel and shoes are especially attractive opportunities because for each SKU there are a number of colors and styles. That makes inventory management in-store especially challenging, which leads to lost sales as inventory counts get off and items aren’t replenished, items are in the wrong location on the floor, and/or items that should be on the floor are in the backroom, among other issues.” The article continues:

“RFID can be used to rapidly take cycle counts of store-level inventory at the item level, dramatically improving accuracy while reducing the time it takes to conduct the counts by many hours. These cycle counts can also identify when a product is in the wrong location, or in the back room when it should be on the shelf or floor.”

The article notes that Dean Hardgrave, who was mentioned earlier, “made a name for himself in the RFID industry in the latter half of the 2000s with some excellent research on RFID at the University of Arkansas’s RFID center.” It continues:

“Hardgrave noted that the real inventory management challenges, especially in apparel, are in the store, not the DC, and that this is probably where the industry needed to start, not at the case/pallet level as it did with the Walmart program. He also noted that in his work with retailers, RFID data always shows ‘there is a lot of difference between what retail executives think is happening at the store versus what is really happening.’ He said that using his definition that an accurate inventory count is one where the true on-hand inventory level exactly equals the count in the store’s perpetual inventory system, most retailers have accuracy levels of only 50-60%. He said he recently worked with one 600-store chain that thought it had accuracy levels of about 80%. It turned out to be 28%. ‘Virtually all retailers overestimate their accuracy levels,’ Hardgrave said.”

Because RFID tags can provide lots of valuable information (beyond just inventory levels and location), they are a perfect complement for Big Data analytics. Such analytics can tell executives “what is really happening” in their stores. The article continues:

“Hardgrave added that RFID can have a major impact on the ‘big four’ retail in-store inventory challenges:

• Inventory accuracy

• Out-of-stocks

• Product location

• Loss prevention

“He said that today, in reasonable quantities, RFID ‘inlays’ – the basic tags themselves which can sometimes be used as is but in soft goods are more likely to be embedded in a paper tag or label construction – can be had for about 6 cents apiece. While at that level ROI for items level programs can often be easily justified for soft goods and other more expensive items, it isn’t going to work for a can of soup.”

Returning to new standards, the Modern Materials Handling staff writes:

“The VICS Board of Directors also endorsed the GS1 US Serialization Management Working Group approach to re-enforce the GS1 General Specification where brand owners are the sole owners of the serial number for their products. ‘The VICS board’s decision to adopt the guidelines for tag placement and performance and serialization gives a strong signal to the industry that all trading partners need to move beyond limited trials and consider full fledged rollouts of RFID systems at the item level. The improvement in inventory accuracy alone has proven to deliver more than enough to pay for the investment. Now that we have a growing number of standards to guide companies through the process, the initial outlay for these systems is likely to decrease,’ said Joe Andraski, President and CEO of VICS.”

Although Andraski recommends that companies move beyond limited RFID system trials, Dean Hardgrave suspects that pilot programs will continue to be tested ahead of full-fledged rollouts. Hardgrave offers some thoughts on how to make pilot programs more effective:

“• Store-level RFID projects have to start with inventory accuracy. ‘Nothing else matters if inventory accuracy in store is poor,’ Hardgrave said. The point was the team and executives need to have this firmly grounded before any real effort begins. RFID can easily get accuracy levels even under his strict definition to over 90%, Hardgrave said.

“• Don’t get bogged down in spending too much time testing to see if the technology works, Hardgrave said. ‘It works,’ he stated, saying that 5-6 years ago such basic technology tests were probably needed, but not anymore. Spending a lot of time there will just needless slow efforts down, he noted, saying he is aware of a retailer that is getting reads rates in store of about 1000 per minute.

“• It is important to well think through your pilot strategy. For example, is it going to be just a few items/categories across several stores, or more items in a single stores? He also suggested that tagging related categories often make sense, so that the data isn’t confounded by links between the two. Regardless, it is essential to use similar control stores for any RFID pilots, so that real improvements in performance specific to RFID can be measured.

“• Also with regard to pilots, he said usually there will have to be in-store ‘tagging parties,’ because even if the plan is for vendor tagging for the pilot, it will usually take months for that inventory to cycle through, too long of a delay to be practical. He said companies usually use mobile printers on the store floor to get the tagging done. Many have their tagging parties in overnight hours. If the chain itself is going to do the tagging rather than the vendors, it is usually much more effective to do it at the DC than in-store, he said, after the tagging party is finished for current stock.”

One thing that Andraski and Hardgrave clearly agree on is that the technology is proven and it shouldn’t be the hold up in implementing an RFID solution. The Modern Materials Handling article concludes:

“The VICS board previously endorsed the GS1 EPC standards, which enable companies to identify, capture and share information to deliver real time visibility into inventory and business processes. GS1 EPC standards increase visibility and efficiency throughout the supply chain and improve quality information flow between companies and their key trading partners. VICS has also endorsed the use of GS1 Keys, Barcode Data Capture standards and other GS1 technical standards, including VICS EDI. ‘The people leading the VICS Item Level RFID Initiative will do for the EPC what forward-looking people did for the UPC barcode in the 1970s,’ said Bob Carpenter, President and CEO of GS1 US. ‘Their consensus on using a standards-based approach to RFID will dramatically accelerate widespread adoption of the technology. Their companies will be more efficient, and as a result their customers will be happier and more loyal.’ The new guidelines are specific to replenishable merchandise in apparel and footwear. VILRI anticipates that they will include other consumer goods in the future as determined by the Advisory Board and approved by the VICS Board of Directors.”

The adoption of standards is generally a good thing for the supply chain. Standardization aids collaboration and helps reduce costs. The continued advancement of RFID systems is also a good thing since it is coming at the same time that advances in Big Data analysis are being made. Hand-in-hand RFID technology and Big Data analytics should be able to provide new and better insights for manufacturers, distributors, and retailers.