5 Ways that RFID and Automated Real Time Inventories Dramatically Cut Costs for Retailers

What is RFID and how does it create a real-time inventory?

“The vast majority (87%) of Corporate Retail Professionals report inaccurate inventories are to blame for more lost revenue than theft (13%), and the breadth of the problem is apparent: nearly all (99%) survey respondents admit to some kind of constant inventory problem.”

Source: Bossa Nova Survey, February 2019

This technology is rapidly replacing traditional barcode as an item tracking system because it is so much faster and more accurate. According to research from the University of Auburn, 96% of retailers were planning to implement RFID tags on their apparel. There’s no doubt that RFID is on the rise, and this article is about the practical ways in which RFID creates real-time inventories that can help businesses to save time and money.
New call-to-action

A basic explanation of RFID

When you use RAIN RFID in your business, every item in your stock or asset pool has a tiny physical tag that works using radio frequency.

The tag stores all the information that you need to know about each product. It can tell you exactly where it the item is, who has it and it can even give you an entire production or maintenance history. You can read the tags from a distance and instantly get an accurate count or learn anything about the items in an area. Major pros include the fact that you don’t need a line of site, and you can read hundreds of tags at once.

The good news is that RFID is easier and less expensive to install than ever before, and the studies are out to show how it cuts costs in retail. This article will introduce you to the practical cost-cutting benefits that RFID introduces to the retail industry.

Automated inventories (real-time inventory)

With RFID, inventories can be 99% accurate and happen in a fraction of the time. In the past, inventories were done item by item. If you work in retail you know how grueling that can be. Barcode inventories lack accuracy and can take large amounts of employee time.

Historically, retailers conduct stock evaluations twice annually. But accuracy of stock records declines 2% to 3% weekly, and after a month or two, merchandising decisions are made based on ineffective data. 

Major fashion retailer Zara implemented RFID in hopes of streamlining their considerable inventory process. Here’s what store manager, Graciela Martin, had to say about doing inventory at one of the retailer’s largest stores in Madrid,

“Before the chips were introduced, employees had to scan barcodes one at a time, and these storewide inventories were performed once every six months. Because the chips save time, Zara carries out the inventories every six weeks, getting a more accurate picture of what fashions are selling well and any styles that are languishing.”

With RFID technology, you can scan the inventory in an entire store in a fraction of the time and have an exact count on every item. For instance, barcode scanning of 10,000 items takes 53 hours and only two hours with RFID. 

With RFID, your staff is now freed up to help customers as your store gains countless benefits from knowing what is in stock.

Sell to the last unit 

With traditional barcode, you receive a delivery from a distribution center along with information that tells you exactly what’s in the shipment. It’s common that the reported contents aren’t completely accurate.

While a few mistakes in a shipment may not be a big deal, this adds up over time and ultimately your POS balance doesn’t reflect your actual balance. Inventory accuracy is everything, and that’s why 40% of retailers rank inventory management as the top in-store technology investment. 

The main problem is that you can’t replenish orders at the right time, and you lose out on sales. You’ll begin running out of items that customers want to buy, and because your POS isn’t accurate, you don’t know when it happens and can’t prepare for it. If people can’t get something from you, they will generally go somewhere else.

The potential loss due to out of stock situations is 3.4% for retailers and 2.6% for suppliers. For example, a one billion dollar retailer could lose 34 million dollars annually due to out of stock situations alone.

With an RFID system, you have a constant real-time overview of what’s in stock, so you can now confidently sell to the last item and accurately predict when to reorder.

No more overstock

With a 99% accurate inventory count, you can also reduce the existing stockpile. You know that with barcode your POS is always a bit off, so you aren’t only running out of items, but you’re also overstocking the things that aren’t selling.

With RFID you can bring down inventory value by roughly 15-20 percent, for larger companies this can literally add up to millions of dollars every year. 


One inventory for separate channels


In the past, because you couldn’t know exactly how many items you had in stock, you would have to put a safety margin on the stock that was available. This leads to the issue of needing separate inventory channels. 

Take the example of a retailer that has an online store and a traditional brick and mortar shop. Let’s say that something sells on the physical shop floor, and the company is also trying to sell that same item online. With barcode, the online and brick and mortar inventories are separate and unsynced.

Without RFID, the sale of that item wouldn’t automatically register in the system and the item would still be for sale online until someone eventually does a manual inventory. 

You essentially have two complicated inventory setups, and you’re still running out of stock and overstocking all the time. Research shows that 75% of US adults have run into an in-store out of stock situation in the last year, and that 1 in 3 of them blames the retailer and buys the item somewhere else.    

You can avoid situations like this when your inventories are synched into one RFID system. With RFID, all inventories from different locations are synched real time.

When something sells off the physical shop shelf, you would be automatically notified and the online inventory would reflect that sale. Instant picklist can go out to your employees so you are always on top of things.

Meanwhile, customers can also “Click and collect” where they conveniently buy online and pick up at a brick and mortar location.

Source goods directly from factories

This is particularly relevant for brand owners who are traditionally dependent on distribution centers. If this is your line of work, you are all too familiar with the fact that traditional shipments tend to back up and queue in distribution centers, and you know how much time and money this wastes.

With RFID, you can now influence exactly how many goods are being produced in the factory. Items can be brought directly from the assembly line and brought to a specific point of sale. Since every item and shipment has an RFID tag, Items can also be automatically re-routed through a distribution center, so you no longer need to worry about wasted resources due to lag times.

You can now see some of the practical ways in which RFID directly saves time and cost in retail.

The bottom line is that because you can now instantly know where everything is and how much of it there is, you have considerably more control over every inventory related process.

This opens an entire world to not only cutting costs, but to serving your customers better and selling more.

To learn more about how RFID can help your ROI and help you to make better customer experiences, read our article “How RFID Improves Customer Experiences and Engagement”!