When Macy’s first started experimenting with radio frequency identification (RFID) tags, way back in 2010, vendors powerfully resisted its attempts to force them to tag all their merchandise before sending it to the retailer. The tags were expensive, and few manufacturers had the capacity to tag each item. The best many of them would do was to tag a pallet or carton. But how things have changed in the past few years. Today, Macy’s is insisting that all vendors tag each product, and the vendors mostly are complying, convinced by not only the proven benefits of the sophisticated inventory management options but also the lowered prices associated with RFID tags today. In particular, Macy’s cites its enhanced ability to meet customers’ demands in an omnichannel retailing environment, due to RFID tags. These shoppers want to know exactly where and when they can find the merchandise they seek, and the only way to guarantee that ability is to track the location of each piece, at every stage of the supply chain. Furthermore, omnichannel retailing depends critically on accurate, well-analyzed data, and RFID technology provides Macy’s with sufficient confidence in its own data that it can make promises to its customers, and then keep them. Industry-wide data indicate that the use of RFID technology in stores increases inventory accuracy to 95 percent, which then lowers stockouts by about half and accordingly increases sales. Finally, the costs of RFID tags have diminished, and they are more than accounted for by the decrease in inventory holding costs. Because retailers can stock precisely what they need, they require less safety stock in their supply chain, such that they can serve consumers far more efficiently and effectively.
Source: George Anderson, Retail Wire, October 21, 2016