Retail EDI

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(From front page) 

Retail spending is still not what it could be…still.  Yes, consumers are still spending, but taking more time to make decisions and shopping more to find better deals.  This means Retailers have to work harder to a.) Attract/keep customers and b.) Maintain margin.  There are many ways this could be achieved: including RFID (Radio Frequency Identification).  For many in the industry, maintaining margin means finding efficiencies everywhere and anywhere.  Attracting new and existing customers is another issue – and very much related depending on the process efficiencies Retailers look to for relief. 

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Let me illustrate:  I was at a “XYZ Home Store” recently looking for tile… a specific SKU they supposedly had in stock.  I looked for 5 minutes going through boxes, enlisted the help of a XYZ Home Store employee who assured me inventory had been done recently and the system said they had 80-odd packages.  He helped for 30 minutes before finally getting his manager.  Ultimately, everyone quit saying: “We can order it for you and put it on a Will Call”.  I went in a week later and inventory again claimed they were in stock.  Still couldn’t find the blasted things after more searching.  I went to another XYZ Home Store.  They had what I wanted and I was off to go do my project after a significant amount of my time and theirs wasted.  The point is: the Inventory system said the tiles were on the floor – were they?  Who knows?  If XYZ Home Store was running an RFID system they would have known – and been able to locate them if misplaced.  This could have saved me time and kept me as a satisfied customer.  I would have also saved a few of their employees over 1.5 hours (Easily all their margin X2 at least on this several hundred dollar order).

My experience with XYZ Home Store is not a unique story for consumers.  It made me wonder what could have prevented the problem.  RFID was the only thing that came to mind.  For days afterwards I was busy looking for RFID innovators and came up with a list: S3Edge, Checkpoint/Oat Systems, Tego, IBM, BizTalk RFID and many others.  Lots of e-mails and phone calls later - RFID proponents say RFID could save relationships and improve sales (By removing out-stocks) as well as saving people time (Consumers and retail employees).  Not to mention errors and time in data entry.  It is being looked at very hard and could be the next wave of enterprise wide systems brought to bear in Retail.  It’s an option in a fairly large arsenal of potential solutions to help usher in improved margins for retailers and better service for consumers.   

How could it have helped in my case?  Simple process:
  1. At the Tile factory (Could be Jeans, TVs, Ipod, etc.), product has an RFID tag attached
  2. As it is being packed for shipment, EPC is added to the ASN (No data entry)
  3. ASN data is transmitter to Retailer – now the retailer knows it’s coming
  4. Shipment arrives and is scanned (RFID circuit is scanned – not GS1-128) each item is added to inventory.  If this is a DC (Cross-Dock or not), it will   be scanned into inventory or X-docked to the appropriate store.
  5. Store receives shipment, scans product into inventory.
  6. Customer can’t find something – clerk uses interface to determine inventory and locate missing inventory.

Because tags are continually being looked at by readers (Stationary readers) their location can be identified immediately.  Even if there are only a few stationary readers, when looking for a particular SKU in a pile of similar (Jeans for example) the mobile reader can identify if the one you need is in the pile. 

  7. Once the customer has what they want the product is scanned (Tag removed or not) and product is deducted from inventory.

Huge efficiency.  What we need to watch out for is that RFID doesn’t become (In any scenarios) a standalone system, but rather one which augments and compliments existing systems.

One of the reasons I chose both S3Edge and Checkpoint/Oat Systems is because of their differing views on adoption and deployment.  Both have well thought out solutions, but are radically different in their approach. 

S3Edge was founded by ex principals of the Microsoft BizTalk RFID team.  Their philosophy is each company should adopt RFID internally (As a Closed Loop system).  Once there is a comfort level reached they should look up and downstream to trading partners to open up to when there can be mutual benefit.  Their core focus is on providing packaged software for a new category of applications called Real-Time Visibility Systems (or RTVS) targeted at vertically integrated companies in order to help them reduce costs by eliminating errors and improving labor productivity in day-day operations – there is an overview deck on the S3Edge blog (S3Edge RTVS Software Explained) which provides a solid overview of their approach to enabling scalable RFID systems.   

Checkpoint/Oat Systems has a much different focus.  Checkpoint acquired Oat Systems not long ago, but Checkpoint has been a long time player in the Retail Industry providing integrated tagging (tags + EAS + barcode) as well as many other solutions for Retail.  “Source Tagging” is what it is because of Checkpoint Systems and is one of the few mandate methodologies in which a Retailer ‘could’ mandate an RFID rollout without massive pushback from their vendor community. 

Source tagging is a simple process – but it is typically a rollout to a retailer’s vendor community.  In very simple terms the retailer determines which categories will have EAS (Would be RFID) circuits integrated into packaging, works with Checkpoint who sets up the system.  Checkpoint works with the vendors, integrates massive amounts of base stock in central locations then prints to order (At satellite service bureaus) for each supplier – or suppliers may order base stock to be printed out on their own printers.  The purchase of the RFID tags would (OR COULD) be made by the retailer ‘en masse and distributed from that point.  By doing this, it obviously reduces the manufacturer’s exposure and greatly improves economy of scale.  Checkpoint maintains a hosted infrastructure to called CheckNet which helps facilitate the ordering, tracking and distribution of these tags.  From the people I have spoken with it seems that while it would be one of the simplest to implement (They won an award, click here), the problem with the system is CheckNet does not integrate with traditional EDI.  This means if you are a manufacturer with an RFID system you could be put in a situation where you have your RFID interface all set and be required to use an additional system for a client who also requires RFID tagging.  This isn’t to say the system can’t or won’t be changed.

That’s an important consideration.  There is an opportunity in RFID to dramatically reduce problems like concealed shortages, ASN accuracy, pack-n-ship speed, and pick-accuracy and so on.  It [RFID] can do all of this while doing the job of EAS and a host of other functions.  From the manufacturers perspective this alone in many cases justifies the adoption internally.  Those improvements in the supply chain can be reduced significantly if benefits are one-sided or rather retailers don’t stop to realize that their vendors have other vendors and their own systems as well. 

Everyone in EDI and supply chain technology is familiar with the concept of “one-to-many” and “any-to-any”.  Implementation of an RFID system has a similar concept termed: ‘Open’ or ‘Closed’ loop systems.  The first: “Closed Loop” which means the system is implemented for internal company systems but can be opened later to include other trading partners.  The second type is of course called, “Open Loop” which means the system is set up to work for two or more companies only.  The problem (One of several) in implementing a system which is designed as an open loop is it is one-one rather than one-many. 

Historically the Open Systems efforts have been dominated by inter-company supply chain coordination applications such as the RFID enablement programs initiated by Wal-Mart over the past few years.  The key driver of this category of application is ubiquitous adoption of standards at all levels (RF technology, tags, inter-company information transmission, etc.).  As a result, these initiatives span multiple companies and therefore require extensive cross-company coordination.  It has also been found that the return on investment is not equal for all parties in the chain - to some the system it is just an “investment” they see little or no “return”.  

Speaking with Anush Kumar, the CTO of S3Edge, Anush commented “With regard to EDI, we are firmly behind the “embrace and extend” philosophy in that the electronic systems of record as they exist today are not likely to be replaced, but rather augmented with real-time ‘operational responsiveness’ data to track material movements in real-time. In essence, the real-time data from RFID is usually used to focus on exception handling w/o any disruption to the back-end system while existing EDI notifications still continue to the electronic system of record as used today, perhaps embellished with RFID data where appropriate.”

What you are looking at when considering RFID systems is really a series of things.  First, people have to look at Open vs. Closed Loop systems.  Checkpoint/Oat is an example of a deployed, Open loop while S3Edge is set up as a Closed loop system.  Second, while both are pre-packaged systems, you have to look at extensibility.  There are lots of providers on the market which provide “Pre-packaged”.  Some questions to be asked of each:
• Is it architected to be easily extended to collaborators outside of their 4 falls?
• Is it designed as a service oriented solution which is web services based (rich set of core ‘out of box capabilities’ with quick and easy customization using standard tools)? 
• Is it implemented to make an internal ROI case?

Retailers who come to the table with poor architecture could easily get much worse push back than experienced in early EDI adoption.  This could be equally true, I think if hardware on the procurement side is not considered adequately.  Tags are often sold at rates of less than $0.10/each in volume, but if the benefit is only meant for the retailer it will be a heavy burden for manufacturers to bear.    

In summary, with RFID, Retailers and manufacturers have the opportunity to improve labor productivity, eliminate errors and improve overall operational efficiency while providing enhanced customer service (Fewer incorrect orders, fewer out of stocks, real-time inventory on sales floor etc).   However, implementation needs to be (In my view) set up within four walls – then opened to one or many as benefit is proven and opportunity makes sense (Don’t think RFID is the silver bullet).  Also, not demonstrating the ability to bridge RFID to EDI or other retail systems is going to be a clear indication of failure or at least extreme shortsightedness.   Since costs for hardware and software have plummeted and GS1 (EPC Global) has done a great job with standards, there is ample technology and reasonable pricing to demonstrate ROI.  The questions are: when the mandates come (And they will): how will they be deployed, by whom and will you be ready?

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