Apr 26, 2011American Apparel, a vertically integrated clothing manufacturer and retailer based in Los Angeles, is ramping up its item-level RFID tagging initiative, having just signed an agreement to deploy Xterprise's Clarity Advanced Retail System (ARS) software at 50 of its retail locations—25 of which will be located in the United States, the remainder overseas—by the end of this year. This will bring the total number of RFID-enabled stores operated by the company up to 100. The firm, which attributes improved stock levels and store performance to the technology, has already deployed radio frequency identification at 50 of its retail stores, most located in the United States.
"I make decisions based on numbers," says Stacey Shulman, American Apparel's VP of technology, explaining her company's aggressive RFID rollout. "And the ROI on RFID-enabled stores is no more than six months. Stores that are using the RFID system have proven to reduce shrink, improve stock levels and reduce [employee] turnover." After a careful analysis of these results, American Apparel's management team decided that pursuing RFID technology on a broad scale will help it manage its stores more proactively.
Shulman attributes the improvements in RFID-enabled stores to inventory management and reduced shrinkage at those locations. "Sales floors are better stocked because we can police it better," she explains. "It's hard to know, in a non-RFID store, if the stock levels are off on the sales floor. With RFID, we know we don't need to do an audit to find out." However, she notes, it's not just about having the proper range of colors and sizes available on the sales floor—it's also about items being in the correct place, and stores with RFID technology being more organized overall.
The Clarity ARS software is built on a Microsoft platform and, for in-store retail applications, contains five item-level modules: a module used for shipment verification, receiving and transfers of merchandise from one store to another; a module for counting inventory and searching out individual RFID tags using handheld readers; a module that generates fulfillment lists, showing a retailer which items it needs to pull from back stock and move onto the sales floor; an integrated point-of-sale (POS) module enabling a retailer to utilize the unique ID number encoded to each tag, in order to conduct transactions and reconcile inventory levels based on sales; and a module used to commission unique IDs and encode these to tags. American Apparel employs all of these modules to receive RFID-tagged items into store inventory, and to maintain and update inventory databases. If an item is transferred from a non-RFID retail store to one of the RFID-enabled locations using the ARS software, employees can utilize the software to generate a serial number and encode it to an RFID inlay that an employee can then attach to each item.
The ARS software is integrated with American Apparel's retail-management software, as well as to its point-of-sale software. This enables the company to compare items received at the store with advance shipment notices provided by the factory, while also allowing the firm to update the store's inventory database based on the orders received, as well as on items sold, as listed in the POS data.
At its clothing factory in Los Angeles, American Apparel applies hangtags embedded with passive ultrahigh-frequency (UHF) EPC Gen 2 inlays to all items headed for an RFID-enabled store. Once these stores receive the shipments, employees use RFID readers to capture each tag's unique ID number, which is linked to the garment's stock-keeping unit (SKU). The RFID software then reconciles each number against the store's order information, in order to ensure that the shipment is complete.
Based on the information collected, the inventory software then informs the workers regarding which items need to be moved to the sales floor for shelf restocking, and which should be put into storage. Employees then use a fixed interrogator to read the RFID tags once more as garments leave the store's back room, to confirm that the items are, indeed, being brought out to the sales floor. (Each RFID-enabled store keeps bifurcated inventory for its back stock and its sales floor, so that at all times, it knows the stock levels in the back stock versus on the sales floor.) If this reader collects the RFID tag number of any item that should not be brought to the sales floor, or if it fails to collect the tag ID of a garment that is supposed to go to the floor, the software triggers an alert, thereby showing which items are missing or superfluous. Employees also perform regular inventory counts on the sales floor, using handheld readers. This information is compared with the POS data, and the software generates a list of any discrepancies that may exist between the two databases.
"There are about 35,000 items in each store," Shulman says, "and we generally don't have a discrepancy of more than 100 items between the inventory and sales data." Stores must reconcile and account for the differences, which are often just a matter of a delay in the software systems updating the latest data. An item might have been sold, for instance, between the time that the POS data was collected and when that information was compared with the inventory data.
American Apparel has also tested the use of RFID tags for electronic article surveillance (EAS). According to Shulman, a pilot project performed last year—in which RFID readers were erected at store exits to test whether the EPC Gen 2 tags attached to items could be used to trigger security alerts when unsold items left the store—failed. The interrogators installed at the exits could not reliably detect the tags, she says, and the company determined that it would simply be too easy for thieves to prevent the tags from being read, by doing things such as holding them in their hands to block them from being read. So instead, she says, American Apparel has deployed a traditional EAS system at select stores, using EAS hard tags that are removed from items at the point of sale. In some locations at which the company has deployed both the item-level RFID system and the EAS solution, shrinkage has been reduced by as much as 75 percent, she says, attributing a reduction in external theft to the EAS system and a decrease in internal theft to radio frequency identification.
Per the 50-store agreement, Xterprise will supply each retail location with its ARS software, as well as fixed-position and handheld RFID readers from Motorola Solutions and RFID tags made by Avery Dennison and LS Industrial Systems. American Apparel will use an internal team to install and test the system at each store, says Shulman.
In addition to the Xterprise software, which is currently utilized at 27 American Apparel locations, the retailer employs RFID software supplied by Vue Technology (now owned by Tyco Retail Solutions) at 23 stores (see American Apparel Makes a Bold Fashion Statement With RFID).
Shulman says there's no single factor determining which software the company deploys at any given store—it's often a matter of which vendor can provide its product in the timeframe and at the price point that the retailer requests. She does note, however, that over the last two years, Xterprise's ARS software has proven to be easy to deploy, maintain and integrate with its existing systems.
"We are thrilled with the statement of confidence from American Apparel with this 50-store award," says Dean Frew, Xterprise's CEO. "After we finish deploying by year end, American Apparel will represent the second largest item-level retail deployment in North America, behind Wal-Mart."
