Susan Lacefield has been working for supply chain publications since 1999. Before joining DC VELOCITY, she was an associate editor for Supply Chain Management Review and wrote for Logistics Management magazine. She holds a master's degree in English.
Driven by dreams of improving inventory accuracy at the store, more and more large retailers are experimenting with item-level RFID tagging: Macy's, Marks & Spencer, Bloomingdale's, Walmart ... the list goes on.
In many cases, those experiments have produced impressive results. Because RFID tags can be scanned more quickly than bar codes, they give retailers a much more accurate picture of what the store has in stock and where it is. This makes it easier for a sales associate to quickly find the size 8 tall boot-cut jeans a customer is looking for—and reduces the chance the customer will leave the store empty-handed. Some experts say item-level tagging can lead to a sales lift in the low double-digits for the affected items. "It's proven to be a strong business case," says Mark Wheeler, director of industry solutions at Motorola Solutions, which provides tags, readers, and antennas for the RFID market.
But almost all the activity around item-level tagging has been occurring in the store, not in the distribution center. "Where the scanning is happening is on the store floor," says Mike Liard, vice president of VDC Research's auto ID practice. "While that's great at giving you visibility into your current in-store inventory, we still need greater visibility back into the supply chain."
Leading-edge companies are very aware of this and are already looking to extend item-level tagging back through the supply chain, says Kurt Mensch, RFID product manager for Intermec, which offers RFID readers, printers, tags, labels, and inlays. So it follows that distribution centers might want to start thinking now about how the technology could affect their operations.
SLAP AND SHIP
For many DCs, their first involvement with item-level RFID comes when they're asked to start applying tags to a select group of stock-keeping units (SKUs) before shipping them out to stores: the old "slap and ship" model.
When a retailer is only tagging a few high-value items or those bound for a few select stores, it makes more sense to tag the items at the DC than at the garment factory or manufacturing plant. What usually happens is the DC sets up a value-added service line that will tag, say, 100 pairs of jeans going to the pilot stores, says Mark Hill of Avery Dennison, a supplier of RFID tags and printers.
Typically, this entails having workers scan the item's existing bar code with a handheld reader to get its UPC, or universal product code. The reader then connects with a system in the cloud that can assign a unique number to that particular item and send that information to a printer at the DC. The printer then spits out the RFID tag, which is slapped on the item before it's sent out to the store.
In most of these cases, the DCs are not using their RFID capabilities to improve their own operations. While a company could install fixed RFID scanners to, say, check outgoing shipments for accuracy, it wouldn't make financial sense if only a few pilot SKUs are tagged.
Things will start to change, however, as retailers start expanding their use of RFID technology beyond the pilot stage. When a greater percentage of the SKUs require tags—for example, all jeans bound for Macy's stores, not just a few pilot locations—it becomes more economical to move the tagging process out of the DC and back to the manufacturing plant or garment factory, says Hill. (For more information on how to decide when it's time to make the switch, see the sidebar "The tipping point.")
Once SKUs are coming into the DC with tags already applied, it begins to make sense for distribution centers to look at how they can use the tags to improve their internal operations, says Wheeler. Some DCs are looking at installing an RFID scanning tunnel—a fixed RFID scanner that's embedded into a tunnel positioned over a conveyor, for example. These scanning tunnels would then be used in the inspection of inbound shipments, says Hill. Instead of having employees open up 10 percent of the boxes in an inbound shipment to conduct a manual count, the scan tunnel can automatically do a count of 100 percent of the inbound cartons.
By automating the process, RFID makes these checks faster and more accurate, says Mensch. "Our customers that are deploying RFID are seeing direct improvement to their bottom line," he says.
Yet to get a return on investment for the hardware involved, companies must be tagging a high volume of items, with the tags applied at the source, says Bruce Stubbs, director of industry marketing for distribution center operations at Intermec.
Hill agrees. "We haven't seen anyone implementing item-level RFID just for improving incoming inspection at the DC," he says, noting that such a move simply wouldn't pay off. "But if the company has already made the investment in the tag to get the accuracy benefit in the store, the incremental investment in the scanning pOréal is not that much."
Scan tunnels and readers can also be used on the outbound side to ensure the accuracy of a DC's outgoing shipments. "DCs do a very good job of ensuring inventory accuracy of their shipments out to the stores, but quite often it's very labor intensive, involving multiple levels of checkers," says Hill. "But if I have RFID on all of the items, I can do all my picks and do an automatic scan of the carton label on the way out to make sure all the items are there."
As an example of how this might work, Hill cites a pilot the Department of Defense is conducting with vendors that assemble kits given to recruits heading out to basic training. The vendors are using RFID readers under packing tables to make sure the right items are placed in the kits.
WHERE DO WE GO FROM HERE?
While the use of item-level tags in stores has been heating up in the last three years, things have been moving more slowly at DCs. "It's great that RFID is being adopted in [the apparel] sector, but we need to look closer at how we can enable distribution organizations to tap into the technology and leverage it—to use it to do more data- or information-sharing throughout the supply chain," says Liard. "That's beginning to happen but not as fast as we'd like."
What may kick adoption rates up a notch is the growing trend toward omnichannel retailing—or the effort to provide a consistent retailing experience across all retail channels: brick-and-mortar stores, websites, catalogs, and mobile devices. According to Hill, accurate inventory is the foundation for omnichannel retailing. If you want to offer customers the option of ordering a product online and picking it up at the store or if you want to push a coupon to customers via their mobile devices, you need to make sure you actually have the item in stock.
Item-level tagging allows retailers to conduct inventory counts more easily and quickly than they can with bar codes alone. In fact, with item-level tagging, inventory accuracy levels typically jump to 95 percent, says Hill. This means retailers can confidently offer customers the option to pick up in the store, for example.
To make all this happen, Liard says that companies must start talking with their partners about how they're going to use the data they'll now have at their fingertips. "We know that RFID can help with better visibility, anti-counterfeiting, and theft protection," he says. "But how are we going to share that information? What information is important to me as a distribution center versus you as a manufacturer or you as a retailer? That's what DCs need to start being concerned about."
The tipping point
As item-level RFID tagging moves out of the pilot phase and into more widespread use, it makes sense to move the tagging process out of the DC and back to the manufacturing plant or garment factory. But how do you know whether you've reached that tipping point?
Some basic back-of-the-envelope calculations can help you make that call, says Mark Hill of Avery Dennison, a supplier of RFID tags and printers. Let's conservatively estimate that an RFID tag costs 15 cents per item, and, assuming the DC is in the U.S. or Europe, labor and overhead come to 30 cents per item. That means the total cost for tagging goods at the DC is 45 cents per item. If you're only tagging 10 percent of the items, the cost equals out to 4.5 cents per item, compared with 15 cents per item if all goods are tagged at the source (labor costs tend to be negligible at the factory because RFID chips can be incorporated into existing hang tags or care labels). This means it's worth the extra cost to tag at the DC during the pilot stage.
"In the U.S. and Europe, the cost of labor and overhead is probably more than the cost of tag," Hill says. "If 10 percent of my goods need an RFID tag, I'm just going to do a value-added service line. But if it's 60 percent, I could save money by having tags put on every item at the source and open up the opportunity to have visibility throughout my supply chain."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.