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RFID: The Comeback Kid

BY CSA STAFF

By Randy Dunn, Director of Global Sales & Professional Services, Tyco Retail Solutions

During the last decade, RFID has been pronounced dead several times. It’s been mocked and criticized. It’s been shelved and tabled. Yet, there has been no substitute technology offering the same unparalleled benefits.

Combined with the fact that omni-channel retailing is placing enormous pressure on retailers’ quality of inventory information, this means that RFID has finally found its rightful place in the retail ecosystem and is poised to become the most critical retail technology of our time.

RFID has been pointed at a number of retail business problems during the past 10 years with varying, but disappointing, degrees of success. Whether it was supply chain efficiency, loss prevention intelligence or customer experience enhancement, RFID never seemed to fully live up to its promise. Until now.

RFID helps retailers meet modern customer expectations
To be successful in the game of omni-channel retailing, a retailer must have the capability to enable the customer to shop however she wants, to buy whatever she wants, and to take delivery wherever she wants for all of the merchandise within the enterprise. This expectation puts tremendous pressure on retailers to be much more precise about knowing what they have to sell and where it is located. The shorter the time period between promising her she can have it and when she can take delivery significantly increases the degree of difficulty associated with this task.

RFID, with its ability to count items 50 times faster than the barcode, allows retailers to sustain accurate in-store inventory positions in their systems of record through regular cycle counting and system of record updates. This is an essential capability if a retailer plans to leverage the inventory merchandised in its stores, and still allow the store shoppers to interact with the merchandise consistent with a traditional shopping experience.

Eliminating inventory distortion
The traditional shopping environment has been shown to produce a 2 to 3% monthly level of unpredictability in a retailer’s inventory data. Distortion, that drift between what a retailer’s system of record says is in inventory and what is actually in inventory, becomes a huge problem when a customer wants to know with a high degree of certainty if an item she is looking for is in stock. If distortion rates reach 25-30%, it becomes very difficult to use that information to make any meaningful customer-facing promises.

RFID effectively addresses that challenge. By cycle counting on a regular basis (because it now happens 50 times faster!) retailers can true up their in-store inventory position and be confident that the data they are relying on to satisfy a customer in fact has that effect.

RFID – today and tomorrow
Today, the primary use cases for RFID are associated with the benefits of having more accurate inventory information. However, as stores become more saturated with RFID-tagged inventory, second order use cases like loss prevention and work force execution become viable. Supply chain execution and customer experience innovation are also ripe areas of opportunity for creating value. In addition to these areas of value, a considerable amount of work has gone into making RFID handheld devices more intelligent, which helps minimize the per store cost associated with deploying RFID.

Admittedly, weaving RFID into the fabric of how stores operate is a much bigger challenge that it appears to be on the surface. Changing core business process and educating store employees on the technology is a significant change management issue.

However, as retailers come to realize the significant value of RFID to effectively compete in today’s omni-channel world, there are opportunities to test the RFID waters without making a huge investment in time or resources. For example, many retailers start with a specific category of merchandise such as denim or women’s intimate apparel. A RFID pilot will be focused on this subset of merchandise where it may be easily and frequently counted daily or every few days to maintain an accurate inventory count and enable needed replenishment. This type of pilot will immediately provide increased store process efficiency and selling floor availability, all resulting in reduced out-of-stocks and increased sales.

Another entry point for an RFID pilot is shoe display compliance, ensuring all back stock shoes are represented on the shoe display floor. This business case requires a limited amount of initial RFID tagging and provides immediate process efficiency and increased compliance. These examples offer immediate ROI at a relatively limited initial cost upfront.

Once deemed disappointing, RFID has finally coming into its own. Fueled by a demanding and savvy consumer market, retailers have come to understand, with great certainty, that RFID is the cornerstone of omni-channel retailing success. And while the immediate need is to meet the demands of an omni-channel strategy, the long term benefits of RFID extend well beyond the current trend. RFID will prove to be one of the greatest enabling technologies of its time.


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Shop Your Way unveils Adam Levine menswear collection

BY CSA STAFF

HOFFMAN ESTATES, Ill. — Sears Holdings is launching a menswear collection by Grammy Award-winning recording artist Adam Levine, exclusively at Kmart and ShopYourWay.com beginning Oct. 1.

Levine’s collection includes premium denim washes, outerwear, wovens, knits and accessories.

"With this collection I tried to create designs that I would actually have in my closet,” said Levine. “If you don’t feel good about what you’re wearing, then you shouldn’t be wearing it so my goal is to have everything feel good. This was an exciting opportunity for me and I am thrilled by how the line has come together.”

The collection ranges in price from $14.99 to $69.99 for apparel and from $9.99 to $16.99 for accessories, and will launch in 500 Kmart locations nationwide. Select styles will debut in weekly flash sales beginning this month.

"We’re thrilled to have worked with Adam Levine on his fall 2013 collection for Shop Your Way and Kmart," said Bernt Ullmann, president of Sears Holdings Shop Your Way brands. "The exclusive collection emulates Adam’s simple yet sophisticated sense of style and allows shoppers to dress like a star, at affordable prices."

Levine will host a series of Style Chats which will be featured on Shop Your Way, allowing fans to ask him questions about his personal style and the development of the line. Additional opportunities to participate in sweepstakes will also be featured on the site.

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Lessons Learned for Retailers Following Bangladesh Tragedy

BY CSA STAFF

By Tracy Knippenburg Gillis, [email protected]

The Rana Plaza building collapse in Savar, Bangladesh on April 24 that killed roughly 1,000 garment workers exposed a serious risk to the safety of workers in low-wage countries and to the reputations and bottom lines of retailers dependent on outsourced global supply chains.

Retailers and their suppliers should seize this event as a catalyst to more fully identify and understand their risk exposures, reform and strengthen workforce safety practices, and improve supply chain and reputational resiliency.

Bangladeshi labor conditions
With one of the lowest minimum hourly wages, outsourcing to Bangladesh is affordable and attractive to retailers facing tight margins and heavy competition. However, the potential risks associated with poor working conditions and workplace accidents, which have persisted in Bangladesh even after 20 years of reform actions, is significant. Bangladesh ranked as the world’s eighth-worst country for industrial working conditions in 2012.

International standards, protocols, and regulations have focused on awareness and oversight to improve garment manufacturing working conditions. However, in the aftermath of Rana Plaza, new measures have been advocated.

European retailers and labor unions reached a formal accord on July 8, pledging $60 million over five years to conduct more rigorous safety inspections, become more transparent in disclosing poor working conditions, and pay for regular upkeep at factory sites. Shortly thereafter, a group of North American retailers committed $42 million for worker safety, including inspections, an anonymous reporting hotline for workers, and more than $100 million in loans and other financing to help correct safety problems. While there are differences in approach and the level of binding authority, these initiatives could help retailers meet stakeholder expectations and provide greater protections for Bangladeshi workers.

Understanding the risk
The Rana Plaza tragedy highlighted three categories of risk for retailers and their suppliers: reputational, compliance, and supply chain/business continuity risk.

1. Reputational risk
Brand damage is a serious reputational risk given the fickle and highly competitive apparel market. Younger customers typically are more sensitive to social responsibility issues. They also have many options and few barriers to changing brand loyalty.

Following the tragedy, despite not outsourcing directly to the Rana Plaza factory, many of the world’s largest retailers and suppliers experienced widespread negative attention regarding their sourcing of textile goods from Bangladesh.

With the increasing complexity and layers of today’s supply chains, retailers need to carefully consider potential risks, particularly where they may have little direct control, before they arise. Contemplating them for the first time when a problem arises may be too late in customers’ eyes.

2. Compliance risk
Compliance programs have been an important part of the retail industry’s response to safety concerns in Bangladesh, The Rana Plaza tragedy, however, suggests that a major overhaul is needed.

At-risk facilities have often been overlooked by standardized audits such as the Business Social Compliance Initiative (BSCI) system. In addition, factory owners’ can easily skew the results as they are often aware of impending audits and provide key inputs for auditors’ assessments. As such, worker safety benchmarks are often misreported or ignored.

Retailers are advised to introduce a more standardized, meaningful audit process less prone to manipulation. This could include an expanded audit checklist, more frequent unannounced inspections, a detailed factory rating system, and greater worker engagement.

Retailers also may want to consider establishing a baseline requirement assessment that can be applied when evaluating existing or new operations – their own or their suppliers. This assessment should focus on life and fire safety standards and building codes, an area where emerging markets have lagged behind more mature markets.

3. Supply chain risk
As a primary apparel supplier, Bangladesh is the central sourcing location for the retail industry’s largest consumer markets. The long and complex supply chains leading there and back are susceptible to oversight-related human tragedies and natural hazard-related production and logistics disruptions, which can increase business costs and affect corporate social responsibility perceptions.

Retailers should seek to engender a universal culture of safety throughout their supply chains in order to maintain an ethical working environment. This can be accomplished through well-written contracts with non-compliance penalties and formal, multi-step signing processes to ensure that relevant standards are sufficiently met.

Managing the risk
In the aftermath of Rana Plaza, retailers and suppliers still face serious reputation and supply chain risks and therefore should consider the following:

Make an informed risk decision: Although the moral aspects are straightforward, the decision to keep sourcing from Bangladesh is more nuanced and complicated. Retailers should take a broad view of their risks, including reputational, supply chain, political, and workforce health and safety. Active monitoring and data analysis with a strong methodology should factor significantly in creating the business case for any risk decision.

Work to improve working conditions in Bangladesh: Retailers, as well as the Bangladeshi government, can regain consumer and international stakeholder trust by improving working conditions through regulatory reform and industry initiatives as well as renewed audit processes.

Improve crisis response and compliance frameworks: As a matter of reputational and supplier resiliency, retailers must enhance their response and resiliency programs and capabilities, and should reform and strengthen audit processes and procedures. They should also collect and analyze data about corporate compliance, regulatory compliance, supply chain risk, corporate response readiness programs, and reputational risk so that their risk profile is clearly understood and the information acted on appropriately to prevent, manage, or respond to a significant labor/safety issue.

Respond timely and appropriately during a crisis: Today’s interconnected marketplace enables crises to emerge and grow very quickly, or happen suddenly and catastrophically. Retailers must gain visibility and understand causes and impacts quickly or face serious reputational damage. Even those not immediately impacted can suffer by virtue of being associated with an affected supplier or the environment.

Conclusion
Improving supply chain and reputational risk resiliency in Bangladesh and other supplier countries should be a top priority for retail organizations. Solutions should be based on an understanding of the multidisciplinary risks that emerge from sourcing in a low-wage country. The cost of not taking action or of failing to conduct the appropriate risk due diligence is too great.

Tracy Knippenburg Gillis, global reputational risk and crisis management leader, Marsh Risk Consulting, a global leader in insurance broking and risk management, teams with its clients to define, design, and deliver innovative industry-specific solutions that help them protect their future and thrive. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies. Tracy can be contacted at [email protected].


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