1. 2010
RFID IN RETAIL
KAPIL SHARMA
INTERNATIONAL SCHOOL OF MANAGEMENTEXELLENCE
2/26/2010 1

2. Contents
ABSTRACT ............................................................................................................................................. 3
INTRODUCTION: RADIO FREQUENCY IDENTIFICATON (RFID) IN RETAIL INDUSTRY..... 3
RADIO FREQUENCY IDENTIFICATION: INTRODUCTION .......................................................... 4
Common uses of RFID System............................................................................................................ 5
HOW RFID WORKS IN RETAIL .......................................................................................................... 5
Improves the level of customer service .................................................................................................... 6
Increases customer's loyalty ..................................................................................................................... 7
Better inventory management ................................................................................................................. 7
Item Level Tracking ................................................................................................................................... 8
Futuristic view ........................................................................................................................................... 8
Better production management ............................................................................................................... 8
REINVENTING THE BAR CODE ........................................................................................................ 9
COST REDUCTION IN RETAILING & PRODUCTS USING RFID .............................................. 10
ITEM LEVEL TRACKING IN INVENTORY ...................................................................................... 12
WAL-MART IS ONE OF THE LEADERS, USING RFID ................................................................ 13
LIMITATIONS WITH RFID TECHNOLOGY ..................................................................................... 14
WHAT’S NEXT? ................................................................................................................................... 15
BIBILIOGRAPHY .................................................................................................................................. 15
RFID IN RETAIL

3. ABSTRACT
Radio Frequency Identification (RFID) is a globally accepted technology, which has a
great success in the area of supply chain management and particularly inventory
management. Businesses benefit from this cost efficient opportunity to scan and track
inventories. The tracking of items with RFID devices is applied in a variety of areas,
such as retailing, healthcare and traffic management. The purpose of this article is to
study about how RFID system is used in the retail industry.
INTRODUCTION: RADIO FREQUENCY IDENTIFICATON
(RFID) IN RETAIL INDUSTRY
RFID is helping retailers around the world improve customer satisfaction and increase
sales. The technology is transforming the retail industry by offering retailers real-time
visibility into inventory and product movement to improve store productivity and loss
prevention. Many of the world's largest retailers have mandated RFID tagging. This
move affects more
than 200,000
manufacturers and
suppliers, driving the
worldwide market for
hardware and software
to support RFID. RFID
in Retail Industry is
one day workshop to
help explain retailers
and marketers best
RFID practices,
reducing out-of-stocks,
automating inventory
management, boosting
customer loyalty,
customer
personalization , presenting specific and proven retail applications through case studies
that help participants build their business cases and calculate their return on
investment.
In March 2007, Aberdeen research revealed that retailers are increasingly considering
RFID adoption to improve the customer experience and inventory visibility. As a follow-
up, Aberdeen surveyed over 150 companies in the retail industry throughout February
and March of 2008. This report analyzes those survey results and additional interviews
RFID IN RETAIL

4. to explain how RFID is currently being used to deliver increased customer satisfaction
and inventory accuracy, among other business improvements. Best-in-Class
respondents saw customer satisfaction rise by 12% during the past two years; 78%
increased inventory turns by an average of 5.4%. The study also explores which RFID
technology components are dominant in the retail industry, future RFID implementation
plans, general perceptions and best practices for RFID for in-store use. In this article,
we’ll learn about the types of RFID tags and how these tags can be tracked through the
entire Value chain.
RADIO FREQUENCY IDENTIFICATION: INTRODUCTION
RFID is a dedicated short range communication (DSRC) technology. The term RFID is
used to describe various technologies that use radio waves to automatically identify
people or objects. RFID technology is similar to the bar code Identification systems we
see in retail stores everyday; however one big difference between RFID and bar code
technology is that RFID does not rely on the line-of-sight reading that bar code scanning
requires to work.
With RFID, the
electromagnetic or
electrostatic coupling in the RF
radio frequency) portion of the
electromagnetic spectrum is
used to transmit signals. An
RFID system consists of an
antenna and a transceiver,
which read the radio frequency
and transfers the information
to a processing device
(reader) and a transponder RF
tag which contains the RF
circuitry and information to be
transmitted. The antenna provides the means for the integrated circuit to transmit its
information to the reader that converts the radio waves reflected back from the RFID tag
into digital information that can then be passed on to computers that can analyze the
data.
In RFID systems, the tags that hold the data are broken down into two different
types. Passive tags use the radio frequency from the reader to transmit their signal.
Passive tags will generally have their data permanently burned into the tag when it is
made, although some can be rewritten.
RFID IN RETAIL

5. Active tags are much more sophisticated and have on-board battery for power to
transmit their data signal over a greater distance and power random access memory
(RAM) giving them the ability to store up to 32,000 bytes of data.
Common uses of RFID System
RFID systems can be used just about anywhere, from clothing tags to missiles to pet
tags to food - anywhere that a unique identification system is needed. The tag can carry
information as simple as a pet owners name and address
or the cleaning instruction on a sweater to as complex as
instructions on how to assemble a car.
Here are a few examples of how RFID technology is
being used in everyday places:
 RFID systems are being used in some hospitals to
track a patient's location, and to provide real-time
tracking of the location of doctors and nurses in
the hospital. In addition, the system can be used
to track the whereabouts of expensive and critical
equipment, and even to control access to drugs,
pediatrics, and other areas of the hospital that are
considered "restricted access" areas.
 RFID chips for animals are extremely small devices injected via syringe under
skin. Under a government initiative to control rabies, all Portuguese dogs must be
RFID tagged by 2007. When scanned the tag can provide information relevant to
the dog's history and its owner's information.
 RFID in retail stores offer real-time inventory tracking that allows companies to
monitor and control inventory supply at all times.
 The Orlando/Orange County Expressway Authority (OOCEA) is using an RFID
based traffic-monitoring system, which uses roadside RFID readers to collect
signals from transponders that are installed in about 1 million E-Pass and
SunPass customer vehicles.
HOW RFID WORKS IN RETAIL
Long checkout lines at the grocery store are one of the biggest complaints about the
shopping experience. Soon, these lines could disappear when the ubiquitous Universal
Product Code (UPC) bar code is replaced by smart labels, also called radio frequency
identification (RFID) tags. RFID tags are intelligent bar codes that can talk to a
networked system to track every product that you put in your shopping cart.
Imagine going to the grocery store, filling up your cart and walking right out the door. No
longer will you have to wait as someone rings up each item in your cart one at a time.
RFID IN RETAIL

6. Instead, these RFID tags will
communicate with an
electronic reader that will
detect every item in the cart
and ring each up almost
instantly. The reader will be
connected to a large network
that will send information on
your products to the retailer
and product manufacturers.
Your bank will then be notified
and the amount of the bill will
be deducted from your
account. No lines, no waiting.
RFID tags, a technology once
limited to tracking cattle, are
tracking consumer products
worldwide. Many
manufacturers use the tags to
track the location of each
product they make from the time it's made until it's pulled off the shelf and tossed in a
shopping cart.
Outside the realm of retail merchandise, RFID tags are tracking vehicles, airline
passengers, Alzheimer's patients and pets. Soon, they may even track your preference
for chunky or creamy peanut butter. Some critics say RFID technology is becoming too
much a part of our lives -- that is, if we're even aware of all the parts of our lives that it
affects.
RFID in retail industry has solved major problems related to customer services.
Improved customer service would ultimately lead to increased sales. With the help of
RFID, it becomes easy for the sales staff to locate a particular item in the store and
check its availability in less time. It gives accessibility to the products from store to store
and also to the entire database.
Here are some key points that why retailers implement RFID in there system
Improves the level of customer service
The overall time spent by the customer in shopping is reduced as the desired item is
found in less time making shopping a better experience. Also while scanning of a
particular product is done this technology provides access to the information about the
product. It calculates the prices of the products kept in the shopping bag
simultaneously, so the shopper is aware of how much he/she is spending. As the total
of the shopping done is already calculated the customer has to just pay, thus waiting
time for billing is reduced.
RFID IN RETAIL

7. Increases customer's loyalty
The RFID tags attached to the items has the ability to provide feeling of a 'virtual
personalized shopper' to the customer. It also
facilitates in tracking down the shopping
preferences and habit of the customers and
thus helps in introducing right rewards
connected to it. The information about
customer's shopping style, their shopping
history, past purchases, etc can be tracked
down, thus value added services could be
provided to them giving the customer the feel
of personalized treatment. Even decision
regarding purchase of a product could be
made in fitting room, as the RFID readers in
fitting rooms that are connected to the
computer, provides all information regarding
the garment. Also the information related to
the item is confidential and not to be unveiled
to the customer, can be protected by your IT
department. Thus security is also ensured
from seller point of view also. These added
benefits lead to better shopping experience for the customer which ultimately leads to
customer loyalty towards your shopping hub.
Better inventory management
Scanning of bar code has become mandatory in inventory processing, but it has certain
drawbacks compared to RFID technology. The bar code stickers show human errors as
it has the capacity to encode limited and
stagnant information. Bar code is unable
to read or write multiple codes. RFID's
capacity to track the items efficiently and
encode multiple codes, resulting improved
inventory management. It provides better
safety in terms of fast recall of the stock
and minimizes the theft also. It helps the
supplier in maintaining the stock of goods
and keeping the shelf filled with goods
whenever needed. So the customers
would never face storage of a product
thus avoiding loss of sales and profit. The
RFID IN RETAIL

8. key element in today's market is to maintain appropriate in-stocks and not having too
much additional inventory.
To manage inventory is a costly affair for the retailer. The information accessed through
RFID helps in keeping a check on the inventory and its supply. Thus, maintaining the
right percentage of inventory. The ratio of demand and supply can be well maintained
as the items which has increased sales is tracked down and the stock is uploaded
likewise.
Item Level Tracking
Item level tracking is the most important objective of RFID system. This tracking gives a
personalized ID to every unit of inventory. This results in better tracking of the items. As
it saves time, the re-ordering of the items becomes easy and can be done in lesser
time. The percentage of shrinkage is reduced due to proper and timely shipments of the
items.
Futuristic view
Advanced technologies are being developed in the field of RFID tags that are more
advanced technologically and are of reduced costs. Generally the cost of RFID tags
range from twenty cents to one dollar which is not so reasonable cost. Therefore in
order to make it cheaper, the prices are
required to fall to five cents instead of
twenty cents. RFID tags are a part of RFID
system so in order to increase its usage,
and required to be cost effective. The
future of RFID is very bright in retail sector
as right from inventory management to
product manufacturing, this system
provides more efficient and advanced
retail experience to both customer and the
seller.
Better production management
Manufacturers can especially benefit from
RFID because the technology can make
internal processes more efficient and
improve supply chain responsiveness for example; early RFID adopters in the
consumer goods industry reduced supply chain costs between 3 and 5 percent and
grew revenue between 2 and 7 percent because
of the added visibility RFID provided, according to a study by AMR Research.
RFID IN RETAIL

9. REINVENTING THE BAR CODE
Almost everything that you buy from
retailers has a UPC code printed on it.
These bar codes help manufacturers and
retailers keep track of inventory. They also
give valuable information about the quantity
of products being bought and, to some
extent, by whom the products are being
bought. These codes serve as product
finger prints made of machine-readable
parallel bars that store binary code.
Created in the early 1970s to speed up the
check out process, bar codes have a few
disadvantages:
 In order to keep up with inventories,
companies must scan each bar code
on every box of a particular product.
 Going through the checkout line Barcodes, like this one found on a soda
involves the same process of can, are found on almost everything we
scanning each bar code on each buy.
item.
 Bar code is a read-only technology,
meaning that it cannot send out any information.
RFID tags are an improvement over bar codes because the tags have read and write
capabilities. Data stored on RFID tags can be changed, updated and locked. Some
stores that have begun using RFID tags have found that the technology offers a better
way to track merchandise for stocking and marketing purposes. Through RFID tags,
stores can see how quickly the products leave the shelves and who's buying them.
In addition to retail merchandise, RFID tags have also been added to transportation
devices like highway toll pass cards and subway pass. Because of their ability to store
data so efficiently, RFID tags can tabulate the cost of tolls and fares and deduct the cost
electronically from the amount of money that the user places on the card. Rather than
waiting to pay a toll at a tollbooth or shelling out coins at a token counter, passengers
use RFID chip-embedded passes like debit cards.
But would you entrust your medical history to an RFID tag? How about your home
address or your baby's safety? Let's look at two types of RFID tags and how they store
and transmit data before we move past grocery store purchase s to human lives.
RFID IN RETAIL

10. COST REDUCTION IN RETAILING & PRODUCTS USING RFID
Consumers usually welcome price reduction. For that to be enduring, the supplier and
retailer must reduce costs. RFID on trucks, pallets and cases is achieving this in many
ways but the tagging of individual items is revealing yet richer rewards, even though it is
at a much earlier stage. This article explains where we and retailers see RFID reducing
costs in retailing and on products.
Automation is the key, reducing excess stocks and work in progress and reducing the
time taken from raw materials to finished item on the retailer's shelf ("time to market")
and other
benefits that
directly impact
costs. Most
retailers involved
in RFID see
reducing stock
outs on high-
stock outs items
such as DVDs
and fashion
apparel as the
"quick win".
Studies cited by
DET show that
out-of-stocks are
worth between 3
and 4 per cent of
total store sales,
climbing to 11
per cent of the
top 2,000 items.
A study of over 600 store locations conducted by IRI and Procter & Gamble found that
over 2 per cent of high-volume stock keeping units (SKUs) are out-of-stock on the shelf
at any given time, contributing to revenue losses of 25 per cent and more in some
promoted categories. Furthermore, the study concluded that 15 per cent of the time,
when consumers encounter an out-of-stock in their chosen item, the sale is lost
altogether, and 50 per cent of the time consumers purchase a competing brand.
Retailers already reaping benefits for consumers
RFID IN RETAIL

11. Customer service is increased when store associates have better knowledge of product
whereabouts. With item level RFID, staff knows instantly if a particular item is in the
store, and can track it down immediately. When an item becomes out of stock, the staff
member can simply scan the EPC tag on the shelf, access the planogram, and calculate
the next best item to place in that open spot. With "smart shelves" where the electronics
in the shelf scans the RFID tags on the items it supports, even that can be automated.
Security, environmental monitoring, traffic pattern monitoring, consumer behaviour,
even ingredient-level tracking are all potential in-store uses for RFID. Most players
agree it is not the ability to do these things that is revolutionary but rather the efficiency
with which these tasks can be performed that makes RFID technology pay back rapidly.
MANAGING AN ENTIRE RETAIL SUPPLY CHAIN
RFID tracking systems are finding their way into cross-dock and warehousing
applications first. But as they stretch further throughout a retail supply chain, they will
require close cooperation between suppliers and retailers. As RFID systems are
adopted, manufacturers
will tag goods during
production so everyone
along the way, from
supplier to manufacturer
to logistics teams and
end customers, benefits
from the increased
information that RFID
systems provide. For
this to happen,
however, the cost of the
system must drop to the
point that its cost can be
justified by the savings
a company will reap
from improved inventory
management. Once that
is the case, large global
retailers will begin to
demand that suppliers
provide RFID-tagged
packaging at the overpack/case level. That likely will happen first at the inventory
control and pallet tracking level, followed next by high-ticket item goods such as
electronics, then by other product groups as total system costs come down.
RFID IN RETAIL

12. Examples of adoption into other areas of the supply chain provide a preview of RFID’s
potential to impact retail systems. CHEP, the global leader in pallet and container
pooling services, and Georgia- Pacific, one of the world’s leading manufacturers and
distributors of tissue, pulp, paper, packaging, building products and related chemicals,
are using Intermec’s Intellitag® RFID technology on recyclable plastic containers
(RPCs).
RPCs are used to package and transport produce. A grower packs and ships fruits and
vegetables in RPCs for travel through distribution to a store’s produce department.
There, store associates simply lift the container onto the shelf for an instant display.
That means no more manual unloading of cartons or disposal of used or soiled
packaging. When the produce container is empty, it is returned for cleaning and reuse.
The RFID tag is used not only to keep track of the location of the RPC, but also to
document its cleaning history, from the date and temperature of the washing to the
chemicals used. Each RPC’s RFID tag incorporates a unique identification that can be
read from 3 to 5 meters (9.8 – 16.4 feet) away as the RPC moves along high speed
conveyors, passes through doorways, rests in fields, is loaded on a truck or is stacked
on a pallet, even in groups of 100 or more. By adding tag interrogators, a grower can
track loads of produce to a specific retailer to help speed payment, or a retailer can
make sure the first produce into the system is the first to go on the shelves.
ITEM LEVEL TRACKING IN INVENTORY
The ultimate goal in retail is to create RFID systems that provide the benefits of the
technology at a cost that supports item-level tracking. Such item-level tracking would
provide each unit of inventory with a unique ID.
When this occurs, the inventory accuracy and improved goods tracking will rise
exponentially. Physical inventories and product re-ordering will be done in a fraction of
time it now takes and retailers will be able to take inventory much more frequently. Truly
automated checkout will become viable as RF interrogators list the contents of a
shopping cart without moving any of the items. And truly accurate and timely
reconciliation of shipments will cut down on shrinkage. New manufacturing technologies
already promise automated, high-speed RFID tag production that will reduce tag costs,
a major step in making these benefits possible. Although tags are only one part of a
complete RFID system, industry experts now predict tag prices that may reach five
cents per tag or less in the next few years. As item-level RFID systems move from
inventory tracking to item manufacturing, perhaps spurred by large retailer demands for
tagged merchandise, companies will begin to experience more of the efficiencies of a
well-integrated RFID technology system.
RFID IN RETAIL

13. WAL-MART IS ONE OF THE LEADERS, USING RFID
Wal-Mart, the world’s largest mass-market retailer, announced in June 2003 that it
would require its top 100 suppliers to RFID-tag all cases and pallets shipped to three
major distribution
centers in Texas by
January 1, 2005. Each
tag would transmit a
unique electronic
product code (EPC)
containing identifying
information, including
the manufacturer and
specific product
identifier, such as to
facilitate receiving and
processing of inbound
goods.
Wal-Mart receives
roughly one billion
cases per year from its
top 100 suppliers,
which include
companies such as
Proctor & Gamble,
Johnson & Johnson,
Kimberly-Clark and Kraft Foods.
In addition to the top 100 suppliers, 37 more suppliers signed on to participate in the
initial program. Wal-Mart subsequently announced that all shipments from all suppliers
must be RFID-enabled by the end of 2006, making it conceivable to track the more than
100,000 products that pass through a typical Wal-Mart retail outlet.
Wal-Mart's president and CEO Lee Scott said: "We expect we will reduce mark downs,
drive down inventory and improve stock turn as it helps to track product through the
supply chain."
Indeed, by improving supply chain traceability, it would take $1bn out of Wal-Mart's
inventory," he predicted.
The analysts go further, suggesting that RFID could slash 15% or $6.7bn from Wal-
Mart's labour costs because the need for employees to scan barcodes on pallets and
cases in the supply chain would be eliminated. Indeed, Erwin De Spielgelere of EAN
estimates this as $8.35 billion yearly, broken down as shown
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14. The estimated savings of Wal-Mart
Source: EAN
Simon Langford, manager of RFID Strategy at Wal-Mart says," Given that it costs the
company five cents every time a member of staff scans a barcode on a pallet in one
of our warehouses, automating that process will save millions before we even begin
counting benefits".
LIMITATIONS WITH RFID TECHNOLOGY
Limitations with RFID technology are:
 No RFID standard has been set yet. (The Auto-ID center has worked with
standard bodies Uniform Code Council and EAN International to come up with
electronic product code, but it is not yet considered a standard).
 The demand should also drive down the price. (Wal-Mart says that a need for
one billion RFID tags should drive down the price to five cents each.)
The other major limitations are:
 The smart tag technology is yet to be perfected , today on an average 20% of
the tags do not function properly
 Physical limitations like reading through liquid or metals still exist
 Accurate read rates on some items can be very low
 Nylon conveyor belts and other RFs can disrupt the tag transmissions in
warehouses
 Increase in expenses - the suppliers will have to equip their warehouses and
transport vehicles with readers. These readers have to be connected to the
computer networks for exchange of information. All these mean additional costs
related to hiring technical consultants and additional hardware.
 Wal-Mart inventory networks are burdened with the task of handling data of
billions of their products. The company has to hence invest in extremely
sophisticated system to process the data properly.
RFID IN RETAIL

15. WHAT’S NEXT?
An effective and efficient distribution system is the key to retailer success. Major
retailers and consumer goods companies already are conducting RFID pilot
projects. Now is the time to learn more. Companies remain reluctant to publicly
discuss ROI, but as roll out of inventory and pallet tracking applications continue,
the efficiencies will become clear and implementation of an RFID system will
become a competitive advantage.
BIBILIOGRAPHY
http://standards.ieee.org
http://www.technovelgy.com
http://electronics.howstuffworks.com
http://www.aberdeen.com
http://www.idtechex.com
http://www.youtube.com.
http://rtvs.wordpress.com
RFID IN RETAIL