Using merchandise visibility to gain operational insight from source to store

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Several studies show that retailers inventory numbers are accurate only 35 - 45% of the time. This means that retailers manage their inventory based on data that is wrong far more often than it is right. At a time when retailers are struggling through a difficult economy, they face a myriad of costs resulting from inaccurate inventory data that can significantly reduce their margins. Among these are lost sales due to out-of-stocks, lost sales of ancillary items and markdowns on overstocks at the end of the season.

Fortunately, new approaches such as RFID-based merchandise visibility solutions enable retailers to gain accurate insight into their inventory movement and operations, helping to reduce out-of-stocks, control shrink, and improve revenue and profits in the process.

Why merchandise visibility is especially critical now

Declining consumer spending: As discretionary spending declines, when consumers walk into a store, retailers have only one chance to make the sale. And with retail sales in a slump, there are serious consequences when desired products (correct style, colour and size) are not in stock. In the short term, a retailer may lose a sale on these and ancillary items. Longer term, consumers may choose to shop elsewhere rather than risking another out-of-stock experience.

Increasing cost of capital: With the rising cost of capital, retailers are increasingly cutting inventory to control costs and maintain margins. At the same time, they must ensure the right inventory is on the shelf whilst managing inventory with greater accuracy.

Reducing investment in staff: To cope with the declining profits, retailers have been slashing labour costs by reducing and eliminating store employees and distribution centre staff. This in turn results in fewer resources to monitor and manage inventory levels and replenishment, leading to increased inaccuracies in the supply chain.

Increasing incidence of theft: With fewer employees and increasing economic pressures on consumers in a challenging economy, theft rates tend to rise.

Need to differentiate: With limited sales and increased competition, retailers need to change the way they do business to differentiate themselves from the competition. One of the best ways to achieve this is to deploy new technologies to increase process efficiencies.

Benefits of real-time visibility

Leveraging technology-based solutions such as RFID to gain real-time visibility into operations is a cost-effective way for retailers to address these issues. With enhanced merchandise visibility, retailers can:

Gain visibility into merchandise location and movement to improve margins and sales by reducing out-of-stocks and improving merchandise replenishment based on real-time, accurate data.

Reduce store operations costs by improving operational and labour efficiencies, decreasing non-working inventory and improving on-hand data to reduce safety stock and working capital.

Enhance customers shopping experiences by better understanding their buying patterns and ensuring that the right merchandise is available for purchase at the right place, at the right time.

Improve the customers shopping experience by enabling store staff to better assist customers rather than spending time with inventory issues.

Reduce the risk of theft by gaining a better understanding of operations and potential sources of loss.

Improve accountability for outsourced operations by providing insight into business operations outside of the retailers stores.

  • Streamline operations by reducing the number of garments per delivery, speeding re-orders of fast moving items and automating many shipping and receiving operations at factories, distribution centres and stores.

Implementing a new approach

RFID tags are applied directly to merchandise at the point of manufacture. These tags are read throughout the supply chain, as merchandise moves from manufacturing facility to distribution centre to store.

As tagged merchandise passes through a portal or is scanned by a hand-held reader, information about the garments location is captured by RFID software, verified against expected quantities and descriptions, and fed into a retailers inventory management system for real-time insight and action.

All of this information is then used to error-proof the supply chain, optimize inventory levels, alert store personnel when merchandise must be re-stocked, and automatically reorder when in-store quantities are too low. As a result, retailers can better manage inventory to meet customer demand, ensuring adequate stock levels without excessive inventory.

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