Unlike its parent company, Framingham, Mass.-based Staples, Inc., Staples Business Depot does not operate warehouses in Canada. The company’s 285 units replenish store shelves through direct store delivery (DSD) vendor shipments.
“However, we could spend up to 16 or 20 hours a week physically counting our inventory, making receiving and inventory-management operations very manual and tedious,” said Joe Soares, the company’s director, process engineering.
Three years ago, the office-supplies retailer embarked on a supply chain network initiative that used RFID to streamline this process. “By using a network, including passive RFID tags, to monitor what merchandise was arriving at the store, we were able to improve the accuracy of our on-hand merchandise and improve our replenishment operation,” he said. “We knew the scientific aspect of RFID technology held a lot of promise, so we began considering other initiatives that could improve manual processes that we did daily within the store’s four walls.”
The chain quickly began evaluating how to apply RFID in a loss-prevention setting. “Many of our high-ticket items are also high-shrink items,” he explained. “Manually counting classes of items did not give us a clear picture of on-hand inventory, and we often realized lost-merchandise trends too late.”
That’s when the chain began exploring the value of an item-level program. Bringing RFID down to an item level did have different requirements than its vendor-based program.
Besides wanting a cost-effective solution, “We wanted 100% read rates,” Soares said. “This is unattainable in a passive RFID project, but we knew this was a ‘must-have’ for item level.”
By tapping long-time technology provider Fujitsu Transaction Solutions, Frisco, Texas, Staples was able to find a solution that fit its criteria. Fujitsu, which knew Staples from an infrastructure and store-installation standpoint, introduced the retailer to its strategic partner, AbsoluteSKY, Inc. (The Montreal-based company designs, develops and implements RFID technology to support real-time item-level inventory tracking.)
Staples agreed to test AbsoluteSKY’s RFID-based intelli-TRACKER product suite in one 37,000-sq.-ft. store last May. Once the platform was installed, Staples added active RFID tags to 1,500 SKUs (stock-keeping units) across 13 classes of the its capital-goods category. Items included electronics, computer monitors, MP3 players, memory chips and calculators.
Next, the retailer installed small long-range readers to the store’s ceiling, and created a SKU hierarchy file that was downloaded to a Web server on a daily basis. As tagged merchandise is checked out at point of sale, the tag’s beacon transmits each individual item’s identity through the antenna to the server.
Here, the retailer’s inventory-management system electronically matches the POS’ transaction file with available inventory and instantly removes the purchased item from the on-hand merchandise. Exception reports are generated and managers can view discrepancies via a Web portal.
“Once the tagged merchandise is sold, the cashier removes the item’s tag and deactivates it,” Soares said. “We gained a closed-loop operation that informs us how long merchandise stays inside the store and what the velocity of sales are.”
Secondarily, the Web server also tracked the location of tagged merchandise in real time. “We are alerted to where merchandise moves across the store,” he said. “If a high-shrink item seems to be in a vulnerable, high-touch location, we can alert managers to move merchandise to a more secure place.”
At the end of Staples’ three-month pilot test, the retailer reduced out-of-stocks by 21%, “which was huge for us,” Soares reported. “This translated into positive comp sales, as well as a positive gross margin, for tagged merchandise.” The company also reported a 0% shrink rate.
Staples is preparing to expand the technology to more stores. Using reusable tags also will make the project more cost-effective. “Active tags are more expensive than passive ones,” he explained. “However, by reusing the tags, the price drops to half the price of a passive tag.”