SMART INVENTORY MANAGEMENT HELPS RETAIL IN OPERATIONS, REDUCE SHRINK PROVE
Retailers today are looking for smarter, more time-efficient, more cost-effective ways of inventory management. Traditional methods of inventory management are time-consuming and prone to human error, which costs businesses time and money. By deploying smart inventory management solutions such as autonomous inventory robots, smart shelves, RFID, etc., retailers are able to reduce shrinkage and improve overall business efficiency. The average shrink rate in the retail industry in 2018 was roughly 1.4 percent, which translates to US$50.6 billion, according to the 2019 National Retail Security Survey by the National Retail Federation. The majority of survey respondents indicated that they will allocate more money to loss prevention efforts, with a majority of that going toward technology. The need for more advanced inventory management solutions in retail has driven retail technology providers to develop smarter, easy-to-use solutions. Furthermore, with new challenges facing retailers, these solutions may be the key to improving business operations and providing customers with a better in-store shopping experience.
Smart Inventory Management Provides Retailers with Real-Time Data
Utilizing smart inventory management, like autonomous inventory robots, smart shelves and RFID, is helping retailers become more operationally efficient and reduce shrinkage.
Smart inventory management is enabling retailers to make informed decisions based on real-time inventory data. Today, as the retail market shifts more toward omnichannel and cross-selling, the need
for accurate data has become more important than ever for retailers to make informed decisions. “Smart or real-time inventory is an innovative way to control cost and operations using data to minimize inefficiencies,” said Sergio Ramos Jubierre, Product Manager for Stockbot and Head of Retail at Pal Robotics. Traditional inventory management is done by hand, which Jubierre notes is only appropriate for small retailers (i.e., less than 500 square meters). However, on a bigger scale this method is costly and time consuming, as well as more prone to human error. By automating the inventory process retailers can not only save time and money, but also increase operational efficiency and reduce the dreaded retail shrink. In fact, a recent report estimates the global retail automation market will reach US$19 billion by 2023, according to MarketsandMarkets.
Autonomous Inventory Robots Provide Real-Time Data
Autonomous robots have found their way into an entire gamut of industries, including retail. Several robotics companies have developed autonomous inventory robots specifically to help retailers automate the inventory process and provide a plethora of other valuable data. Pal Robotics created Stockbot, its autonomous inventory-taking robot system for retail. Equipped with RFID and a vision camera, Stockbot provides retailers with the necessary data to make informed inventory decisions. The robot is able to autonomously move around and perform inventory while the shop is open with customers. Furthermore, it does not require any additional equipment or complicated setup. “Due to the high amount of data Stockbot is able to generate it has a positive impact on customers, employees and management,” Jubierre said. “By being able to localize products Stockbot positively influences the in-shop customer experience, and, therefore, the brand reputation as well.”
Smart Shelves Tell Businesses When to Restock
Smart shelves have been around since the early 2000s and have become an alternative emerging technology in the retail business. By utilizing various types of sensors (e.g., light, optical, weight, etc.), smart shelves not only keep track of current stock availability but can also measure customer interest and enhance the in-store shopping experience. Recently Amazon launched the Dash Smart Shelf aimed at small businesses. The shelf has a built-in scale that can be set up to automatically place orders with Amazon to restock when supplies are low; alternatively, it can send notifications to alert the business if automatic ordering is not wanted. Kroger, the US’s largest supermarket chain and world’s fifth-largest retailer, partnered with Microsoft to develop its EDGE smart shelf. The shelf is powered by Microsoft Azure and connects to IoT devices. The technology aims to enhance the grocery shopping experience by connecting to the customer’s smartphone shopping list and highlighting similar items on the shelf. It also allows Kroger to better manage its inventory and eliminate paper and tags by enabling stores to quickly change prices on digital displays.
Analytics Predict When to Reorder
Retail analytics are often integrated with a store’s point-of-sales (POS) system, analyzing data to help retailers better optimize their inventory and make pricing decisions. The National Retail Federation’s 2019 National Retail Security Survey reported that 55.6 percent of retailers surveyed have already implemented some kind of POS analytics across all its stores. “Analytics are now available closer to the retailer decision maker due to the ability to have more computing and cleverer analytics software close to the data user,” said Harley Feldman, Co-Founder and CMO of Seeonic. Feldman pointed out that more analyzed data will become available to retailers as analytics algorithms improve and computer processing power grows. He added that data capture will also continue to improve as better RFID tags are created to deal with distance, metal and liquids. Demand for RFID (radio frequency identification) is on the rise in the retail sector. This is partly a result of the growing need for real-time inventory tracking and the growth of omnichannel retailing, according to a report by Frost & Sullivan. Retailers have been using RFID for quite some time; however, as analytics have improved and the need for more data has increased, more and more retailers are adopting
RFID solutions. “Soft goods retailers are already beginning to see real benefits from RFID,” said Don Taylor, VP of Business Development at Newave Sensor Solutions. According to Taylor, some soft goods retailers are already quoting 10- to 30-percent inventory savings with RFID while keeping more goods on their shelves and improving inventory accuracy. “We have found that using real-time technology such as RFID, when compared to current inventory methods, is much more accurate,” Taylor added. “This technology provides more information to manage and track products and is far less labor intensive and more accurate.” He noted that audits in particular are highly inaccurate, being just a spot check. “The analogy is that audits are like a photo at one point in time compared to real-time smart technology that is like a video showing exactly what was happening over a specified period of time,” Taylor explained.
How RFID Can Improve Real-Time Inventory Management for Retailers Retailers are driving growth in the RFID market, using the technology for real-time inventory tracking and to improve customer experience.
Retailers are driving growth in the RFID market, using the technology for real-time inventory tracking and to improve customer experience.
Advantages of RFID in Retail
Harley Feldman, Co-Founder and CMO of Seeonic opined that using passive RFID tags is the best method for counting in-store inventory. He explained that using RFID tags gives retailers the ability to perform in-store inventory much more quickly and accurately than manual counting, while also allowing them to easily collect inventory data electronically. Data from RFID also provides retailers with the ability to use analytics to monitor store inventory, such as time-on-shelf by SKU or item, react to changes in demand more quickly, and monitor items from the time they enter the store until sold. Still, there are challenges to using RFID. For one, the technical limitations of 10 to 15 feet of read distance and difficulty with metal and liquid items can be problematic; although, future developments in RFID are expected to improve upon these issues. Then there is the issue of the item’s manufacturer needing to be the one to create and attach the RFID tags. Over the last few years, though, it has become more commonplace for manufacturers to place RFID tags on merchandise, especially in apparel, Feldman noted. The cost of an RFID solution is also a barrier — costs include readers, antennas, the tags, etc. “The tags are typically in the US$0.06 to $0.09 range and carry the SKU of the retail item along with a unique serial number for that individual item,” Feldman said. However, as the technology continues to develop and advance, and as demand continues to rise, the price for RFID is expected to decrease making costs more affordable.
RFID and Smart Shelves
To get around the issue of tagging each individual item, Newave developed a patented RFID system to track merchandise availability in real-time without tagging each item with an RFID label. This system focuses on grocery, convenience and mass merchandise retailers. Newave’s Smart Shelf system provides retailers with information on shelf item movement in seconds using the company’s patented wave RFID antenna technology. When an item leaves the shelf, Newave’s Smart Shelf sees it even when it is not tagged. Based on criteria set by the retailer for low inventory limits, the Smart Shelf software signals an alert in real time that can be sent on-site to store managers, or remotely to merchandising and loss prevention personnel as well as suppliers. It can also trigger an audio alarm message and a video capture alert within the store. “Newave’s Smart Shelf system strives to make it easy to get real-time in or out-of-stock shelf information available anytime to any authorized person or group,” explained Taylor. Such a system could greatly lower costs by providing on-shelf merchandise availability without the need for tagging the products on the shelf.
WHAT RETAILERS WANT IN A SMART INVENTORY MANAGEMENT SOLUTION
Retailers are looking for smart inventory management solutions to help reduce shrink, improve the customer experience and boost overall operational efficiency.
Today more than ever brick-and-mortar retailers need smarter, more efficient inventory management solutions. The most common methods of retail inventory management currently used are technologies and processes that have been around for several years. “Unfortunately retailers continuing to use these methods will still see out-ofstocks at a minimum of 4 to 8 percent of sales, and scanning bar codes for shelf management has proven to be very labor intensive. In many cases, retailers do not have the personnel to monitor and manage their inventories and shelf availabilities. This drives the consumer to other stores or online shopping,” explained Don Taylor, VP of Business Development at Newave Sensor Solutions To combat these issues and to keep customers coming into physical stores, retailers want to improve the in-store experience by reducing out-of-stocks, personalizing in-store ads and having store personnel focus on customer needs. Retailers are also looking for solutions capable of automated tracking of shelf inventories, faster scanning of products, ease of installation for new systems, reduction of labor costs and real-time visibility to a problem at the shelf. According to Harley Feldman, Co-Founder and CMO of Seeonic, the top issue requested by retailers is inventory accuracy by SKU currently on shelves in retail stores. “Retailers are satisfying more and more customer demand, especially ‘Buy Online and Pick Up in Store (BOPIS)’ orders, from store inventory. Therefore, the inventory accuracy is critical to satisfying customer demand accurately and quickly,” he said. Other requests such as data for time items spend on shelf and times items are removed and returned to shelf can be performed more accurately with the serialized data available from the RFID tags, Feldman added.
Easy-to-Deploy Solutions and Positive ROI
Deploying a smart inventory management solution requires time and money — two things retailers want to spend less of. To overcome those obstacles companies like Pal Robotics and Newave Sensor
Solutions have developed solutions that are easy to deploy and guarantee good ROI. “We have created a ready to deploy solution that doesn’t need any layout modifications or additional store installations,” said Sergio Ramos Jubierre, Stockbot Product Manager and Head of Retail at Pal Robotics, of its autonomous inventory-taking robot Stockbot. Pal Robotics provides clients with leasing options that could allow retailers to deploy Stockbot with no upfront cost and positively impact operational optimization and return on investment (ROI). “Stockbot generates data that can be integrated and manipulated for numerous application, such as store floor management, supply chain visibility, process automation and accuracy, omnichannel retailing, promotional activities, returns, locating items, loss prevention and cross selling. Those have a direct impact on store/brand reputation, customer satisfaction and thus on sales,” Jubierre explained. Taylor explained how the soft goods retailers that first adopted RFID into their store operations have seen a good ROI and are continuing to expand RFID use. Retailers are also beginning to move away from handheld RFID scanning and toward fixed portal readers, which allows them to better utilize store resources and improve productivity. Major mass merchandise retailers are also beginning to use RFID portals in their distribution centers to track cartons and pallets going in and out. Newave believes this will evolve into more store-level use of RFID technology. For instance, the company, along with its partner, recently completed installation of over 1,500 dock door portals for a leading international retailer. Within days the RFID solution paid back with a 25-percent improvement in productivity by day two after installation.
Overcoming Retail Challenges with Smart Inventory Management
The retail sector faces many challenges when it comes to implementing smart inventory management, ranging from cost to resistance to change.
Implementing new technologies always comes with its challenges — this is no different in the retail sector. Nowadays retailers face new challenges. Among these are dealing with growing demand and the dynamic nature of product movement. Other challenges originate from the side of operation and logistics. Sergio Ramos Jubierre, Stockbot Product Manager and Head of Retail at Pal Robotics highlighted scalability, tracking, automation and reporting as some of the biggest difficulties that need to be tackled. Additionally, speed of delivery is a problem encountered by both customers and retailers. Challenges with RFID in Retail Jubierre pointed to RFID technologies as a compelling solution for the retail industry. In addition to RFID tags, the fast-moving consumer goods (FMCG) sector has adopted barcodes. “Due to the low margin in the FMCG sector barcodes are the preferable choice for food retailers,” he said. The cost of RFID tags is most definitely a barrier to adoption for certain smart inventory management solutions, as is the cost of the technology needed to read the tags and collect the data. However, the price of RFID tags is dropping and will continue to do so with the projected growth in volume. “Metal and liquid-filled items will benefit from newer tag designs,” explained Harley Feldman, Co-Founder and CMO of Seeonic. The number of manufacturers adding RFID tags to their products will also continue to grow as more and more retailers demand the tags be added. “Since it is more efficient to add RFID up, but it provides the ability for retailers new to RFID to add the technology more easily,” Feldman said. He explained that automatically collecting RFID data is desired, but the cost to do so is still high. As a result, most retailers still use handheld RFID scanners to collect real-time inventory as they are flexible, inexpensive and readily available. Unfortunately, handheld scanners require a person to use it resulting in labor costs.
Challenges with Smart Shelves
In regard to using smart shelves for inventory management, it can be costly since the retailer may have to replace its existing shelving to incorporate new sensing devices. Don Taylor, VP of Business Development at Newave Sensor Solutions explained how in many cases Newave’s Smart Shelf can retro-fit to existing shelving to reduce the cost of installation. In fact, Newave’s Smart Shelf solution has helped retailers reduce out-of-stocks by 60 percent in the first few months after installation. To achieve accurate information on smart shelves, Taylor noted the retailer needs to already have some disciplines in place. Newave requires a product planogram, so that they can monitor and track every SKU. “Retailers need data to be able to determine if they have achieved a positive ROI on their new technology investment. Newave can provide real-time information to any authorized smart device on out-of-stocks, low inventories and missed sales to name just a few categories that will assist the retailer in formulating an ROI,” Taylor said. According to Newave, its technology will deliver a positive ROI in less than a year.
Championing New Technologies
In order for more smart inventory management solutions to be adopted, it is important that retailers are educated on the benefits of these new technologies. Oftentimes it is the lack of education on new technology, not understanding how it works, how it can benefit a business, that keeps them from adopting smart solutions. Retailers need an internal champion to drive new technologies through their stores. By providing proper training to retailers, they will have the knowledge needed to understand and push for new smart technologies.