On July 21, Tyco Retail Solutions announced that they have been awarded a chain-wide contract for RFID-based Inventory Intelligence by Inditex Group. Inditex is the world’s largest fashion group, with about 6,400 stores worldwide, including famous chains such as Zara. They are using Tyco’s dual technology RFID/Acousto-Magnetic (RFID/AM) hard tags and detachers at the point-of-sale (POS), as well as leveraging Tyco’s tag recirculation service. Zara has deployed the solution in 700 stores across 22 countries and will be rolling out to all Zara stores by the end of 2016.1 Inditex plans a gradual rollout to the rest of their chains after that. The dual-technology RFID tags and readers are already deployed and in use in all of Zara’s DCs.
From EAS to RFID
The significance of this deal is not just about the size of the retailer. It is about a question that has been hanging over both major suppliers of EAS2 systems. As their customer base starts adopting RFID, it potentially opens the door to other vendors to supply the RFID solution. In the past, there was a question of whether the EAS vendors would be ready to ride the wave of RFID adoption. In Tyco’s case, the Inditex deal is one more validation point, and a significant one, that their EAS customers are entrusting Tyco to be their RFID supplier/partner as well.
Building on a Long-standing Relationship
Inditex’s relationship with Tyco goes back decades when Zara started using Sensormatic’s AM-based3 EAS system for loss prevention. Zara started with store tagging and evolved into using Tyco’s tag recirculation program, which demonstrated Tyco’s ability to provide that recirculation service on a large scale. Several years ago, Zara started talking about how to leverage RFID, and what item-level meant for them. They wanted to gain the value of RFID without losing any of the benefits of their LP solution. From these goals, they evolved their existing RFID program.
How it works
Tags are shipped by Tyco to Zara’s manufacturers, where they are applied to the garments. Once garments are received at Zara’s DCs, the tags are encoded with the item identification and processed through the DC. Within the DC the tags are read by readers on the conveyors to track movement of items, as well as at the shipping station to ensure correct items are being sent to the correct store. Tags are read again at store receiving to know exactly what is coming into each store. Regular inventory is taken using handheld readers. When a purchase is made, the tag is removed, disarmed, and the RFID information read, all in the same operation (thus saving time at checkout). Consequently a very accurate picture emerges of exactly what items are in the store and where they are. (Note: Inditex’s own announcement of its RFID deployment includes a very well done video that illustrates the story nicely without a single spoken word.)
Omni-channel, Customer Service, OOS reduction
This highly accurate inventory information has helped Zara provide reliable order promising, both in the store and on the web. For example, they have created a smartphone application that allows a store associate to read the barcode on an item and know exactly where they could find that same item in different sizes or colors. They also have reduced out-of-stocks by alerting store associates when restocking is needed.
Economies of Tag Reuse
The recirculation program makes economic and environmental sense. The tags are designed to be re-used over and over. With each recirculation cycle, Tyco cleans the tag data and retests each tag for reliable operation before it is resent to the manufacturer for source tagging again. Tyco said they run the program very precisely. Even though they have over a billion of these tags in circulation, they are able to account for virtually every tag.
According to Tyco, Inditex said this was the most significant operational program in the group’s history and they have seen tremendous results.Though Inditex isn’t releasing numbers, Tyco said this program has provided Inditex with greatly increased inventory accuracy, item level visibility, the ability to better allocate labor, and operational efficiencies, which improves the customer service and the shopping experience. As a result of better inventory accuracy, there has been a sales uplift from the reduced out-of-stock rates. An unexpected benefit was the big improvements to omni-channel execution and customer experience, primarily due to higher inventory accuracy and visibility. It has also helped their loss prevention program, because they know not only that something was taken, but exactly which items were taken. This allows those items to be restocked and helps store management to know where to focus prevention efforts.
Challenges of Major Deployments
Rollouts on this scale have an enormous number of different moving pieces. Tyco needed to understand how all the pieces come together, how different stores will behave and deploy differently.As a fashion retailer, Zara depends on high velocity for success. Tyco worked hand-in-hand with Zara to ensure that their stores did not slow down in any way throughout the process.
It is a big challenge to Integrate and configure all the technology components — the tags, readers, network, software — to meet the customers’ specific needs, and ensure that the RFID works reliably in the customers’ various stores and DCs. Tyco’s decades of experience with providing LP at Zara’s stores, their intimate involvement with Zara’s store operations, combined with Tyco’s broad, integrated RFID platform and technology footprint were all big advantages in helping the rollout ultimately succeed.
The changes to store and DC processes and the human change management challenges are even more daunting. In fact, one of the single biggest determinants to success and failure in these kinds of projects is how well trained and how diligent the store staff is in correctly, accurately, and reliably taking inventory. Thus store associate training was a key component for Zara.
Tyco’s Diverse Customer Base
The success of this program reveals a couple of things about Tyco. First is their flexibility to work within different scenarios. Case in point is Tyco’s Macy’s implementation vs. their Zara implementation. Essentially two very different types of retailers — a department store vs. a “fast fashion” specialty apparel chain; an open supply chain vs. a closed ‘private’ supply chain; a North America-focused chain vs. a truly global one. For Macy’s, inventory accuracy was the critical driver. For Zara it was about moving inventory efficiently. Their approach to loss prevention differs. Tyco has proven that they are able to handle a variety of very different requirements and deployment scenarios.
A Significant Proof Point
For any who doubted whether Tyco could succeed in RFID, the Zara announcement provides a dramatic exclamation point, punctuating all of Tyco’s other successful major RFID rollouts, including Macy’s, Saks Fifth Avenue, Chico’s and others. Zara has evolved from being Tyco’s EAS customer into having full inventory visibility through a single RFID/EAS hard tag. They have gained near-real-time insights into inventory availability and loss prevention detail for improved accuracy, customer service and shortage reduction. Their use of Tyco’s hard tag recirculation program reduces costs and promotes ‘green’ environmentally friendly processes.
Tyco has been able to parlay their decades-long existing EAS relationships, their comprehensive knowledge of customers’ store operations, experience with large-scale deployments, and broad integrated platform into repeated successful RFID deployments at major retailers. The naysayers are a lot quieter now.
1 Zara has been rolling out the RFID program with Tyco for some time, but they weren’t ready to publically announce until now. — Return to article text above
2 EAS = Electronic Article Surveillance. These are the systems used in many stores to detect theft of items. Tyco/Sensormatic and Checkpoint are the two very dominant players in EAS systems. — Return to article text above
3 AM = Acousto-Magnetic, which is the technology Tyco Sensormatic uses in their EAS tags. It has some advantages over RF tags for loss prevention. — Return to article text above
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