Is radio frequency identification (RFID) technology really practical? The tags are relatively expensive, especially at the item level, so companies keep testing various options to determine how it might be most effective. For example, Switzerland’s largest clothing retailer, the Charles Vogele Group, has decided to improve its supply chain so that it can employ item-level RFID tags and, ideally, enhance the shopping experience in its stores.

With 850 stores and five warehouses across nine European countries, as well as more than 400 suppliers, Charles Vogele sells approximately 70 million stockkeeping units annually. That makes for a lot of RFID tags. A pilot program therefore equipped four stores, a distribution center, a carrier, two suppliers, and twelve factories with RFID technology, while also considering two stores without RFID capabilities. The RFID readers followed the merchandise through the supply chain. At the store level, for example, RFID readers showed which merchandise were on the floor, in the backroom, or in the fitting rooms.

The pilot program revealed that 60 percent of the retailer’s logistics costs came from delivering products to the shop floor. Stores often appeared to be out of stock while an item sat in the backroom. At the distribution center, items got marked as received, but only 11 days after they actually arrived! With the RFID technology, the center could close this gap and thus move merchandise through the supply chain faster to reach customers more quickly. Such efficiency not only maximizes the amount of merchandise sold but also reduces inventory carrying costs.

Finally, by asking customers to hold another type of RFID reader, Charles Vogele determines how they navigate through the stores and where they spend the most time. As a result, it identified some store redesign options that would improve efficiency and ease of shopping. It thus appears that throughout the supply chain, item-level RFID technology may be worth the expense, at least for this retailer.

Discussion Questions:

  1. How has the RFID implementation been beneficial for this Swiss retailer’s supply chain? 
  2. How might RFID tags help customers?

Liz Parks, “Swiss Retailer Commits to Item-Level RFID Throughout the Supply Chain,” Stores, July 2009.