Supply Chain LEAD Vodcast | RFID with Sensormatic (Part 1)
Mike Graen: Hello, my name is Mike Graen. Welcome to another Conversations on Retail and the University of Arkansas Supply Chain Management Research Council focusing on on shelf availability. Today, we are joined by a couple of experts from the Sensormatic company. When we think about radiofrequency identification to get inventory accurate and products on the shelf, we typically think of three components, hardware, certainly the tags that are actually on the product and the software. Sensormatic provides a great
solution and we're about to hear a lot more about it. So please join me as we join the conversation in progress. Well, good morning, good afternoon, and good evening, wherever you might be around the world where you're listening to this podcast. My name is Mike Graen and I welcome you to another Conversations on Retail and the University of Arkansas supply chain organization to another discussion around on shelf availability and retail. We'll start with Jamie. Both of these folks are with the Sensormatic/JCI company. Jamie,
we'll start with you. Go ahead and unmute and kind of introduce yourself to the audience. Jamie Kress: Great. Thanks, Mike. Thanks for having us as well. So I'm Jamie Kress, I'm responsible for the RFID business for North America for Sensormatic. Been in the RFID
business now for just about 20 years. 15 of that has been with Sensormatic over the years. Prior to that I was with the company that Sensormatic acquired with the RFID software.
So I've been a part of this group since really the inception of RFID, been involved with programs all over North America and some in Europe as well. So excited to talk to you and the group about it today. Mike Graen: Well if you've been doing for 20 years, we should be done by now, right? We can just all retire and go sit on the beach somewhere, right? Jamie Kress: Wouldn't that be great, right? Exactly.
Mike Graen: All right and my good friend, Umesh. You've been in this industry a long time as well, but I believe you're fairly new to JCI and Sensormatic. Why don't you go ahead and introduce yourself for us. Umesh Cooduvalli: Globally. I've done pilots and rollouts in the US and Europe and also in Asia, including China and Japan. So
I've been in the RFID space for over a decade and I know a lot of people. And thank you all for attending this session and look forward to our conversation today. Mike Graen: Got it. Well and again, I appreciate you guys
spending the time for sure going through going through this. There's a lot of confusion out in the industry. And Jamie, I was kidding you about doing this for 20 years, we should be done because I think if anything has gotten more complicated than it's gotten simpler. Even though the technology has gotten better, it's it certainly works better, but it's all delivered on kind of that focus on on shelf availability for customers. That's where we always start. So tell us a little bit about Sensormatic and JCI. An interesting relationship
with the two companies, you know, kind of tell us a little bit about you know, what, what do they do beyond RFID, and then specifically, what are they doing in the RFID space? Jamie Kress: Yeah, certainly, I think we might have a slide to show that but I can certainly speak to it. So Sensormatic is a part of the the Johnson Controls family. We are the Sensormatic brand is the retail brand for for Johnson Controls. We really have three primary pieces of our business, which you can see there on the screen. We have our our heritage, which is in loss prevention. So that's how most people know us in the industry.
That's where we have a lot of representation across retailers all over the globe, with our loss prevention business. Next is our traffic or our stopper track business. Again, it's a global business for us, but yet, somewhat separate from the RFID business. And lastly, what we call inventory intelligence or our RFID business and that's what we're here to talk about today. What's interesting what's happened over the years where those three divisions used to be kind of separate groups for Sensormatic, we found out probably three or four years ago is that there's so many great insights that you can get across those areas when you look at combining traffic level insights with RFID, and especially looking at the loss prevention insights. You know, I think we'll talk a little bit about
that as we go on today. But with the rise in ROC and the challenges we have and the smart exit solutions we've deployed, the connection to the LP side of the business and RFID has really grown over the years. Mike Graen: Yeah, and just to build on that, I'm sure we've all seen it at number of times the video when Doug McMillon was part of the Squawk Box thing where he said, you know, if we don't figure out how to get this under control, we'll either raise prices or shut down stores and now they're shutting down stores in Portland. They haven't exactly attributed to those but I think doesn't take a genius to figure out those are probably connected for sure. Jamie Kress: Yeah, absolutely. Couldn't agree more. Mike Graen: Yep. Well, let's, let's start. I love to start
each one of these out with, you're not only a retail executive in this space, specifically on things like inventory intelligence and loss prevention, etc, but you're also a customer. Each one of us go and buy things from stores. Whether we walk in a store and buy it, and through the traditional brick and mortar or we buy it online and pick it up in store, whatever we happen to do. But tell us about a time from a customer perspective that you were disappointed. You thought you had the track on getting some product in the store, only to find out they didn't have it. So I'll put you guys on the spot and see if you got a couple of examples because we all have them.
Jamie Kress: Ya no, we talk a lot about this. I'll jump in first Umesh. So you know, we've all been there, we walk into the store, we're looking for the size we're trying to get, we're searching through a stack trying to find that specific size. Most
customers don't want to ask for help and have the associated kind of dig. So we've experienced that. I was gonna you know what I was thinking about this this morning, it's with the rise in omni channel, we all are shopping online first, before we go to the store. There's nothing more frustrating than when you you look online for something, you want to go to your nearby store that you prefer to shop at, they don't have it. You happen to be there later that day or the next
day, and you see what you were searching for on the shelf. So it's a little bit of a twist on your question, which is I was disappointed online. I find a customer has it in the store, which is frustrating for the retailer because they could have sold that to me with my online purchase the day before. And I think it just begins to erode the customer confidence in the brand. And I think that's what we see as a consumer. I know that happens to me and that those those are some of the challenges that we're trying to solve and you're addressing with this podcast. Mike Graen: Yeah, awesome.
Umesh Cooduvalli: I had an experience, you know, went to a cell phone store to buy a case for my phone and this is a major cell phone retailer. And they didn't they don't have the proper pairing of inventory. You know, for all the right sizes of the phones, they don't have the right chargers, or the cell phone cases, etc. So they could easily do it with RFID
solutions. And also they didn't know they told me to go to a nearby store and they didn't even know if they would have it or not. So this is something that we easily do, we do it today in sports and fashion. We can show what you have you in that particular store and what you have in a nearby store as well. So I thought that was interesting, I think, you know, with electronics, that's another, you know, a tangential market that's going to grow as as more awareness happens with what are the possibilities.
Mike Graen: Yeah. There was a recent article by IHC group that said that 24% of Amazon's revenue started because somebody tried to buy something in store and then couldn't find it. So they use the retailer's Wi Fi to order it from Amazon. How about that for a slap on the face? So Jamie Kress: Awful. Mike Graen: That's awful. That's awful. Thank you very much for
giving me the free Wi Fi to order the product I was here to get from you but I went and bought it from Amazon because they had it and they'll deliver it in three days. Fascinating. Mike Graen: Right. Fascinating. Mike Graen: All right. Well, that very good very, very good Jamie Kress: Yeah. Jamie Kress: Yeah examples, etc, etc. So talk a little bit about the retail
industry itself. I mean, we've already talked about the disappointment of a customer perspective that we didn't actually understand exactly how products are in the store. And we got we end up pushing people to competitors, because unfortunately, we didn't have what we wanted. Sensormatic has played a role in that either from a loss prevention standpoint or inventory management standpoint. And so
there's all this excitement, all of these big right retailers, Walmart, Target, Macy's, Nordstroms Dick's Sporting Goods, Dillards. Everybody's kind of excited about RFID and that's become the new platform for how you do work, especially if you're an apparel retailer. So how does Sensormatic fit into that? Jamie Kress: Yeah, just a question, you know, years ago Mike when you and I would be talking about this we would be talking about what does RFID do for in store execution? How does it allow an associate in the store to know what's in the back room that needs to be brought to the to the front of the store? A lot of retailers do a fantastic job with making their store look perfect, it looks beautiful. All the shelves are full. But what's really hiding behind those full shelves are you know they're the wrong sizes. You have a shelf full of smalls or a shelf full
of mediums, or a footwear display wall that is missing several colors that you know the customer is not going to buy it if they don't know that color is available. What we've seen change with the onset of omni channel, and a lot of times I'll go talk to a customer and they'll say, Well, tell me the connection between RFID and omni channel because omnichannel's online. And I you always give the example of, you know, if your inventory accuracy in that store with the stores where you're looking for the inventory for your customers, if your inventory accuracy at 60%, 70%, on a good day, maybe it's 80% in a traditional world, if your OMS system is looking for that inventory in the store, and it thinks it's there, but it's not.
So now you have store associates who are searching for items in that store for that for that omni order, and they have to decline that order, and then it goes to the next store, then it goes to the next store. So you'd have huge impacts on labor, you've got huge impacts on your shipping and, and put them in situations. Back to your previous question as consumers, you know, several of us will place an order online, and then we wait for the order to kind of come in, you get three or four different boxes, and you always think I just placed one order, why am I getting these boxes at different times in different boxes. So I think that's where we've seen as Sensormatic, we've seen a tremendous change in the industry as we've gone just from in store execution, now we're looking at omni channel. And
then where we're seeing it now is, you know, everyone at NRF, for example, was talking about self checkout, you know that that becomes the big conversation, how do you make it as frictionless as possible? And RFID has a tremendous role in that space as well. How can RFID if you're putting the tag on the product, you as a retailer are making the investment in that tag, it is to your benefit as a retailer to figure out how many use cases can I support and grow with that initial investment? First, I'll fix my inventory accuracy, then I'll improve my omni channel program, then I'll be able to look at self checkout, then I can understand my my shrink at the exit. All those things tie together and that's what's fun about it, because the use cases just keep growing and growing. Umesh Cooduvalli: Yeah, and I talk to a lot of people also at, you know, NRF. And what's happened there, you know, they talk about endless isle right. So, and the velocity of artist has increased tremendously. I mean, you know, just look at how
many people order right from their phone. And also the increase in DTC direct to consumer business has, you know, probably tripled, is the and, the retailers can make more money with DTC right. So that that portion of the business has significantly increase what that means is the DC use cases. So we'll talk about that in a little bit. Of course.
Jamie Kress: Yeah. Mike Graen: Yep. Well, and what's what's been interesting about this is you mentioned this the DC work, Umesh. I think that's right, because what's interesting about RFID when you look at and Jamie you and I've been working on this for a long time, we started out in the 2000s thinking about it as a supply chain from manufacturer to the distribution center to the store, etc. We all go well wait a minute, the real value proposition here is at the store making sure you know exactly what you have and where it's located. Well, now fast forward 20 years now inventory accuracy at the store is better much better for those retailers that are using it. And they're
starting to think well what can we do this from a supply chain perspective? How do I eliminate claims because of they said I didn't ship them enough stuff, but I can tell you I did ship them stuff and I've got proof because it left our dock here's what we've here's what we actually had. To me it's actually reversing back to where we were back in 2005 and starting to think about the supply chain opportunities now that we got the stores taken care of. So Umesh any any thoughts on other other kinds of opportunities that you see? Umesh Cooduvalli: Oh, absolutely. And Jamie already
talked about self checkout, you know those types of customer experience use cases. Those are important and also in the DC, I don't know if we are talking about now or later there's so many use cases you know about reducing chargebacks to everything and what I see is that is incoming receiving you know, receiving audit, but more and more retailers are doing outbound outbound verification and I don't know if you all saw this on the internet UPS announced a huge program, that is that is a game changer. You know they announced $140 million dollars investment for this year in 2023 just for the RFID program. That is phenomenal. They are they're looking at you know, missed loads reducing the you know, one in 400 to one in 800, that is phenomenal, you know, it's a 10x improvement and all the you know, the errors you see in cross docking and everything else will go away. Mike Graen: So I got a chat question from Ursula, I think it's a really good question. Do you have some examples outside
of apparel? Everybody's heard the apparel success stories, and someone mentioned Sam's. I think it was a different conversations regarding Sam's, I think I mentioned that. But But do you, do you see it starting to expand outside just an apparel play? Jamie Kress: Absolutely. Yeah, sorry, Umesh. We are seeing tremendous, you know, growth outside of apparel, you know, largely due to the Walmart, with the their requirement for tags on new categories. But you know, those those categories make so
much sense. You know, when I gave the example earlier of the denim wall, you know, someone trying to find a pair of pants, they all look the same, the same can be true of a wall full of tires, a wall full of car batteries, Umesh's example, a wall of accessories for iPhones. You know, all of those things still suffer from the same core problem, which is it's a dense SKU environment, it visibly looks the same to the customer, and how can we provide tools to them, to help the associates to make sure the stores are fully stocked, but also help the consumer. We're seeing benefits for using an EPC tag to not only identify that item, but maybe tying it to the IMEI number on that particular phone so that you're now looking at managing the serialization of those phones. So we are seeing, I would say to that question, that's where all the growth is that we're seeing in the market right now. And I'll say one more
thing. What is fun about RFID and Mike and Umesh, I'm sure you've seen it is you go into a retail environment, you're trying to solve one, two or three primary problems. And invariably in the pilot, or the first year of that program, you find a problem and a solution with RFID that you never expected as part of the original program. Macy's did that early on years ago with their footwear compliance solution. RFID solved that for them. And that's what's fun and I think we've uncovered
a lot of those in apparel and footwear. But we're just scratching the surface on those similar use cases that probably someone hasn't even thought of yet, in hard goods and electronics, in automotive, in sporting goods, not just the apparel, on sporting goods, but also, you know, all those other golf clubs and the bat and the hockey skates. I think that was interesting for all of us who are in the industry is we're about to uncover some really interesting use cases that no one's ever thought of. And as a friend of mine says in the industry, what's great about RFID is it shines a light on a problem that you never really knew how to solve, or maybe you didn't even know it existed. I think that's what that we're all kind of looking forward to.
Umesh Cooduvalli: Health and Beauty. You know, we we just did a rollout for Renner in Brazil, 400 store roll out health and beauty products. You know, small items, they have a lot of inventory issues that were solved and we have a case study on our website for people to download. Mike Graen: Awesome. Yeah, clearly, I got a great opportunity to be part of Walmart when we rolled out the automotive tire and automotive battery that Jamie mentioned. And everyone's like, how do you lose a tire? Happens all the time, right? We think we have four we tell the customer we have four they drive in we go try and get four we only have three. Now what do I do?
Mike Graen: I didn't lose one sale, I lost four sales because Jamie Kress: Right nobody's gonna put three tires on right? Printer, printer cartridges, you got 100 printer cartridges, 1000s of printer cartridges in the store at a Best Buy or Walmart. But you're missing the black cartridge for the my HP printer. I'm not going to switch, I'm not going to switch. And I think the only other one that I would tell you that some of the big CPG suppliers are starting to get pulled into RFID because of Walmart's direction on things like automotive and hardware. Well guess what? P&Gs of the world says sell air fresheners for automotive, so they're gonna get introduced to that business. And, you know, Kimberly Clark probably makes paper towels or industrial paper towels for you know, hardware department, so they're gonna start getting introduced to this concept. The
only other thing I'll tell you is RFID in food right now is exploding, right? Because not only it's the on hand accuracy, but I actually am when I apply the product, for example, to a to a package of lettuce, I know exactly how many days it's been on the shelf. So I could potentially mark it down for reduced sale rather than throwing away the food. So there's a whole dating process. That sounds bad, but you get the point. Ageing of product and making sure that you are keeping the freshest product available for the customers. Jamie Kress: And what I love about that example is, you know, there's certainly the corporate view or the business view of having that freshness view. I also love the store associate
view of it, right. The store associate, they're tasked with making sure that they have the items on the store shelves that you want to sell first and that you're not putting you know the newest items and that they're aging in the back. To give them the tools that makes that job for them easier to be able to identify the lettuce in your example that's going to expire earlier and make sure that's on the shelf, so that you're not mixing up what's on the shelf. I love the examples of the store associates are the ones saying, hey, thank you for deploying this, it makes my life so much easier. Mike Graen: Absolutely.
Umesh Cooduvalli: Just to add to that, you know, I mean, this is first in first out, you know. You're in fast food, McDonald's and Chipotle, there's a great case study, you know, online, you can find the, you know, really good use cases and recall management, right. So, you know, in food supply chain, something always happens, right, you know, so you can pinpoint where it went bad instead of the entire country shutting down. You know, like what happened with Chipotles. There's a lot of use cases. Yeah. Mike Graen: So hopefully that answers the question around category expansion. Are we tagging watermelon yet? I don't
think so. Will we ever? I'm not sure that we will, in my lifetime. There's certain products that just don't make sense, because of RF challenges. Frankly, because of price points. I don't even know if there'll be a day where we'll
put it on cereal. Because if I'm, if I'm looking for this particular cereal, and you don't have it, I'm leaving with cereal, right? I'm not I'm not I may switch, I may not be happy, but I don't know that I have to RFID tag cereal, I could be wrong, but clearly cut Umesh Cooduvalli: It's not about the price point, but it's about how much profit you make on that item. You know, it's all about that. You know, like, I know, some retailers like you know, some of our customers who are fully tagging the entire store, they actually tag a water bottle, you know, a plastic water bottle that's selling for like, $3.99 they're tagging them because their margins they're, like nearly 80 or 90% profit.
And, and managing the inventory accuracy in those high dollar profit SKUs is important to them. Mike Graen: Yeah. So I think what you're gonna hear is RFID number one, nobody needs to do a pilot to see if RFID works. That's over. Everybody knows it works. To me, number two, and I think that was a very, very important question. It is no longer just an apparel play. It's an electronics play, it's a
hardware play, it's a food play. You're gonna see people reapplying this for different uses. And I think you're McDonald's and Chipotle examples are really good. Matter of fact a shameless plug for RFID journal, I think McDonald's is going to be presenting at RFID journal, talking about the success story that they've done with their quick service, restaurants, things. So it's going to continue to expand categorically. I want to switch this thing to the reason we actually did this was just to get the inventory accurate in store, but now that we've got things tagged, and they're typically tagged at store, what are the kinds of use cases are available other than just getting your inventory right. So
we're going to turn this over big broad question. But what else are retailers and suppliers using this RFID technology for beyond just getting the inventory right at store level? Jamie Kress: Yeah, so I think there's there's a lot of use cases that people look at, and I think, and some require fixed infrastructure in the store to kind of enable and others don't. Let me use an example of fitting rooms. People have and again, going back to the apparel example, but it's people have talked a lot about and we have tested over the years and have partners in the space of how can we get the most out of our fitting room? How can we get the data out of the fitting room? In previous years, you know, you didn't know why an item wasn't selling. And so you just continued to mark that, that item down until you had to get it out of the stores. To know
within a matter of days, that certain items are going into the fitting rooms multiple times a day and then not being sold. You know, that's phenomenal information. So I think you know, that's an example of a use case in addition to inventory accuracy. But then you then you begin to look at okay, loss prevention, how do I how do I get better control over my loss prevention? So certainly, you're going to have an eye on strength always. You can, let's use the same example. How do I know if I put a if I put a smart exit, which we have a significant number of Macy's today, if I put an exit so I know exactly what left the store, tie that to video, know the exact items that went out the store and know those price points. And if I know the last read of some of those in certain stores are the you know, when it's going through a fitting room, if you have readers around the fitting room, you know where that source of theft is taking place. You don't always know that, but I
think that's an example. So I think the biggest use case with the biggest return, Mike, that we're seeing right now is all around ORC it's all around shrink management and all the tools that RFID can give you in that space. Umesh Cooduvalli: Yeah, I will talk about, you know, I'll mention three use cases replenishment key use case, you know, so how do you replenish to the sales floor, so you don't have, you know, zero on the sales floor, you know, it's about planogram management, right. So what you don't show, you don't sell. So you got to replenish, replenish intelligently, you know, the high dollar value items, high profit items, make sure they're represented on the sales floor at all times, right? In today replenishment, even within the same day, you know, like outlet malls, like Orlando, places like that, by the time you open the store at 10am, by noon, you're already sold out on a lot of things. So you have to replenish
three, four times within the same day. Everything is real time with API's that we do. So it's a fantastic. Other second use case I want to talk about store to store transfers. Our store back to DC transfers, what happens in different seasons, you know, what do you do with the items you have? So, you know, the store in Orlando is not the same as a store in Alaska, right. So Mike Graen: I didn't know that.
Umesh Cooduvalli: And receiving receiving is a great use case, you know, with RFID. Receiving, you know, in my I have done my own studies, it's about six times more efficient. That means, you know, six times more cost savings than how you normally do receiving. And if you're replenishing, typically most retailers replenish about four to five times per week in each store. So that is a significant personal cost
savings, which basically pays for the entire program. Mike Graen: So in many retailers, there are two ways to sell things. One is we call it on the shelf or on the side counter. One is display, end of aisle display or actionality Walmart calls it actionality etcetera. Ursula, just ask a
question around, can you use RFID technology to leverage whether display got set or not? And if so, how do you do that? Jamie Kress: Yeah, we've we've tackled that a couple different ways in a couple of different environments. So we run programs or evaluated tagging the actual floor to floor display in Well, I hope you enjoyed part one of our discussion with the totality. So if you have a shrink wrap display that you want to move from back to front, like in a Walmart example, you can certainly know that that was supposed to hit the hit the sales floor on March 1, or you know what the director from corporate, you can know via RFID that that item has actually moved from back to front. You know, when you get into zone
level accuracy on the sales floor, it becomes a little bit more challenging with an RFID environment to know where something is on end cap versus an aisle. But I would say micro location is another of the use cases and capabilities that really all of the all of the players in the market are looking at and I think it has tremendous value. So eventually, with micro location, you can begin to apply a value associated to different locations in the store, you certainly think the end cap is the most valuable location. But
how can you apply it to the front table to the end cap to various locations in stores so using micro location will certainly enable that as well. folks from Sensormatic. Join us next time as we continue our conversation with them talking about the future capabilities of RFID. Thanks.
2023-04-26 22:35
