When building a business case for RFID pilots, most retailers focus on the technology’s unprecedented counting speed and its ability to deliver near perfect inventory accuracy. In my profession as a retail risk services professional consultant and former “big box” Director of LP & Risk, I am seeing more and more retailers discovering that RFID is a powerful ally in the fight to curtail retail theft and fraud while also supporting other business units.
Retail theft alone costs retailers billions each year and criminals are getting smarter. Employees, in 2011, statistically resulted that 1 in 36 employees were apprehended for stealing. Logically that tells us that the actual number of dishonest employees is greater.
External theft is also on the rise with ORC that is gaining strength in sophistication and resources outlets.
Retailers approach internal and external theft through various formats such as exception based reporting, audit compliance and physical labor through Agents to name a few. However, we also know that shrink is created by paperwork mistakes that occur at all points in the supply chain. And there is no solution for human error…. or is there?
What I like about RFID, is the fact that the technology can address all three shrink factors —internal theft, external theft and the paperwork accounting errors. RFID addresses all three simultaneously while also providing support to other critical business insights, including the all critical inventory management that is specifically for Planners and Allocators of an organization.
Paperwork errors are captured in real time as well, enabling the retail operation to pinpoint the source of the error, and to correct and adjust. In addition to reducing shrink and the related losses, the retailer now knows precisely what is on the sales floor vs. the backroom stock area. How significant would it be for business intelligence provided by RFID to know your number one selling product isn’t on the sales floor, and to have this intelligence on a global level at all locations managed by one central point? By recapturing these lost revenues, most retailers are experiencing ROI for RFID within one year or less.
I would recommend to any retailer building a business case for RFID as a loss control strategy to partner with other business units and share the knowledge and capabilities that RFID delivers. No other technology provides the granular level intelligence provided by RFID. At the same time, the price of RFID tags has dropped as much as 40 percent over the past 18 months, bringing the per tag price down to roughly 7 to 12 cents each or less, based on volumes and tag specifications. RFID hardware costs have also dropped over 30 percent within the last two years. There has never been a more opportune time to deploy RFID for strategic loss control and business intelligence. While it is not yet possible
to completely eliminate every possibility for theft, fraud and loss, with RFID, retailers have access to the most precise tools ever available for mitigating those events while moving the pendulum in the right direction, reducing loss and increasing sales.
With RFID, a store can capture shrink numbers immediately, rather than waiting for the results of the annual manual inventory. With the data from RFID, you can register the value of losses for cumulative totals to see how much shrink is really costing you, daily, monthly or yearly. This information is target specific by SKU, thus the day-to-day, real time loss intelligence provided by RFID lets you take action immediately to replenish, prevent and apprehend where the loss is being sustained in a responsible fiduciary manner with proper allocation of resources.
RJ Gebauer, VP Retail Risk Services, SilverStone Group
http://www.silverstonegroup.com/risk-management/industry-specialization/retail.html