These Companies Know Exactly When to Restock Shelves

Have you ever noticed that tag on the inside of your new jeans that looks like a little pouch?  It might say something like “remove before washing or wearing” and have a little dotted line with a pair of scissors going across the top? Well, that tag – which may have been nothing more than an afterthought to you – is the embodiment of logistics. It’s known as an RFID tag and it’s a tiny piece of technology that’s driving huge advancements in the retail industry.

RFID, or radio-frequency identification, chips are being implemented by retail companies to enhance visibility along the entire supply chain, more efficiently manage their inventories, and make the shopping experience more enjoyable for their customers. The radio chips, which can be as small as a grain of rice and easily embedded inside a clothing tag, store unique identification number codes and can be scanned remotely, granting retailers unprecedented tracking control of their products, from the time they begin on the assembly line until they’re resting, neatly folded, on store shelves.

As is so often the case, Wal-Mart (NYSE:WMT) is largely responsible for pioneering this latest retail innovation. While Walmart’s typical modus operandi has been squeezing costs out of operations wherever it can to offer customers prices so low the competition must adapt to stay relevant, this time Walmart took the opposite approach and poured investments into logistics. Now its effort, which began in 2010, to make the use of the comparatively expensive RFID tags an industry standard is gaining steam.

Why? Because the advantages of the new high-tech tags far outweigh the added costs. Unlike traditional barcodes, the RFID sensors eliminate the need to scan each item directly, as a handheld device within proper range can read hundreds of tags at once, even through packaging and shipping boxes. This enhances a company’s ability to accurately track shipments as products move through the supply chain, increasing efficiency and reducing labor costs and mistakes. It also allows for the retracing of any item back along the chain, a useful tool in the event of a recall.

“There are definitely costs. Some labels had to be modified,” said Mark Gatehouse, director of replenishment for the Wrangler Jeans brand, a major supplier to Walmart. “But we view this as an investment in where things are going. Everyone is watching closely because no one wants to be at a competitive disadvantage, and this could really lift sales.”

The tags also allow for superior inventory management: companies can get real-time counts of how much they have and how much more they need, helping to remove the guesswork associated with meeting always-changing consumer demand.

And when stores know the perfect amount of clothing to keep in stock, the customers stay happy. Accurate inventory means no more rifling through racks for that perfect size that always seems to be missing. Using RFID scanners, employees on the floor can be sure that all sizes, styles, cuts, and colors are always readily available for customers – something all shoppers can agree is a good thing.

But the improvements RFID tags have made in customer experience have only just begun. The future possibilities are exciting and many, and companies like J.C. Penney (NYSE:JCP) are leading the way towards realizing RFID potential. Chief Executive Ron Johnson has embraced the technology and plans to start testing in the spring of 2013 new RFID checkout processes that could phase out the familiar cash register altogether.

That’s right – no more checkout lines.

J.C. Penney has initiated an extensive overhaul with the aim of incorporating RFID chips into 100 percent of its products. This will open the door for checkout transactions that can be performed “anywhere, anytime, and [by] anyone” in the store using devices like Apple’s (NASDAQ:AAPL) iPhone or iPod. Such innovations could turn the traditional cashier into a thing of the past, and make the shopping experience easier, faster, and more enjoyable.

From the supply chain, to the inventory room, and all the way to checkout, RFID technology is improving business and changing the way we shop for the better. It’s just another example of how logistics serve companies and consumers alike, giving us all a little cause to rejoice.