Shoe store chain publicly dumps RFID

Discussion
Jul 16, 2015

Through a special arrangement, presented here for discussion is a summary of a current article from Supply Chain Digest.

In an odd press release, Peltz Shoes, a six-store chain in Florida, announced it was dumping RFID tagging of its shoe boxes over technical issues as well as higher labor costs.

Peltz began its RFID journey in 2009. At that time, CEO Gary Peltz felt that RFID "could increase efficiency in tracking and inventory management that would ultimately contribute to one goal: accurate inventory. The intention was to provide customers with the correct quantity on hand within the back office system and the e-commerce site," the press release said.

Apparently, it didn’t work out that way

After the system was rolled out, Peltz found that using RFID tags resulted in high labor costs to apply the tags, high label costs and inaccurate inventory levels.

Part of the problem was that the RFID printers being used would print unactivated (i.e., un-encoded) tags, and that these faulty tags could not be detected until inventory cycle counts were initiated. Also, if an associate put the wrong label on a box, the inventory would not be counted correctly. An unexpected labor cost was then incurred to remove the tags from the boxes, to re-label and re-inventory.

Peltz Shoes

Source: Peltz Shoes Facebook page

Scanners also sometimes failed to read some of the tags. Even if the readers were "99 percent accurate, the one percent [misreads] caused a big increase in labor. If scanning 300,000 pairs of shoes, one percent of those, or 3,000 pairs, would need to be manually verified for accuracy. The time and effort involved to correct such inaccuracies did not warrant the extra costs when compared to the low expense and accuracies of hand-scanning the entire inventory."

Finally, high total costs — including printers, labels, thermal ribbon and scanning equipment — also factored into the decision to discontinue RFID. The statement said, "Although seemingly small, the 11 cents per-label cost was the main reason for cancelling the RFID program. Every box needed to have a label to prevent inventory inaccuracies, which meant all of the retail stores plus the warehouse had to have an RFID label printer and supplies to keep up with the inventory."

A move to rely solely on bar code scanning for inventory control resulted in better inventory counts and lower inventory reconciliation levels.

Interestingly, the press release concludes by observing that if manufacturers applied RFID labels at the factory inside of the actual product, it would be much more beneficial — preventing mismatched boxes and tags as well as theft. It adds that RFID is "a great tool, but for all of the inaccuracies and associated high costs, it will not be a viable solution until a significant manufacturing change at the wholesale level occurs."

Does Peltz have some good points or did it just goof up its RFID implementation? What may Peltz’s experience forewarn about the adoption hurdles around RFID?

Braintrust
"Peltz has some solid points but it sounds like the people that helped deploy his RFID operation did an install and split. The system must be maintained properly. Peltz might have decided to not pay maintenance fees which would add to the problems. We are missing all the facts for a full post-situational analysis."
"I gotta say, this sounds like sour grapes to me rather than fundamental issues with the technology. Plus, if they made their tagging technology purchases in 2009 — I mean, there have been two to three new generations since then of both the tags and the readers."
"The global supply chain is based on RFID, from raw materials to the end user. It is not designed to be unique for a single shoe store."

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14 Comments on "Shoe store chain publicly dumps RFID"

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Tom Redd
Guest

Peltz has some solid points but it sounds like the people that helped deploy his RFID operation did an install and split. The system must be maintained properly. Peltz might have decided to not pay maintenance fees which would add to the problems. We are missing all the facts for a full post-situational analysis.

Nikki Baird
BrainTrust

I gotta say, this sounds like sour grapes to me rather than fundamental issues with the technology. Plus, if they made their tagging technology purchases in 2009 — I mean, there have been two to three new generations since then of both the tags and the readers. It’s surprising to me to find that a six-store chain was willing to take this kind of project on. And rather than focus on RFID for the supply chain, I might’ve recommended that they start with one store. For shoes I always thought the benefits came from store associates not having to go back and check to see if they have the shoe a customer wants in the right size — they could get the inventory while standing with the customer.

Sounds like an odd project: odd design, odd motivation, odd focus. Having said that, I’m definitely not necessarily defending the technology. But it just goes to show that any technology needs a defined project, a pilot with specific goals and a plan for how to take that pilot to a wider implementation. Sounds like several of those steps were missing.

Ian Percy
BrainTrust

As in life, there are multiple issues creating the situation. At the bottom of it all someone will eventually exclaim: “It’s the software stupid!”

On average you’re going to spend 40 percent of your IT budget just getting your systems to work according to plan. But take heart, if you were in government you’d be spending 80 percent.

The suggestions made here are good ones, but beware of trying to make a fundamentally faulty system more efficient. Regardless of all our advances, the quality of software still sucks. This is especially evident when we try to integrate systems. In a recent study by Bain, 80 percent of those who develop these programs claim to provide a “superior” performance. Unfortunately, only 8 percent of their customers agree. You are not alone. Feel better?

Gene Detroyer
BrainTrust

The global supply chain is based on RFID, from raw materials to the end user. It is not designed to be unique for a single shoe store. Peltz experiences are not surprising. The idea of having store labor add the chips is ludicrous. The chip should be part of the manufacturing process when the shoes leave the manufacturer. The box can then be followed from China or Italy across oceans to docks to warehouses to trucks to the store.

What is happening here is that high-level productivity technology is being implemented by low-level non-tech labor.

Naomi K. Shapiro
Guest
Naomi K. Shapiro
1 year 11 months ago

Both. Good points brought up, and the store may have goofed up its own RFID implementation. As a publicist, this is something I wouldn’t publicize unless there is a specific, positive message they want to get across to their customers. Another key is for wholesalers to listen. Makes sense that that’s the place to begin the labeling.

Cathy Hotka
BrainTrust

RFID can work wonders if done correctly (ask Macy’s). If you’re considering an RFID implementation, consult with experts rather than going it alone … This isn’t the kind of headline you want to find yourself in.

Mike Nichols
Guest
Mike Nichols
1 year 11 months ago

The Peltz experience clearly shows the need to use a knowledgeable integrator and to do a lot of work up front to understand all of the possible scenarios and address each. Peltz encountered issues, most glaringly the printer issuing un-encoded labels, that should have been addressed in the solution design. Perhaps they should never have done RFID at all, but it’s more likely a properly designed and deployed system would have succeeded. The lesson learned is that RFID is not yet simple enough to deploy to engage without a lot of preliminary work.

Peter Charness
BrainTrust

Amazing how hard it can be for a retailer to get its perpetual inventory to be right at store level. RFID or not, it’s just addition and subtraction. Even more critical today with needing an accurate picture of availability to promise for online, and store inventory needing to be exposed to the web shopper who wants to click and collect.

Ken Lonyai
BrainTrust

It’s hard to condemn RFID over this situation. It seems like good intentions were thwarted with oversights and possibly poor project management. I don’t know if they did a complete roll out or a pilot, but this is exactly why pilots are done. Get 98 percent or more of the kinks out of the process before rolling out chain-wide.

Kenneth Leung
BrainTrust

Both. In order for RFID to work, you need to make sure the process is there. Technology is not the miracle cure, and especially in this case, without vertical integration back to manufacturing, the cost of tag+applying the tag is probably too high for a small chain like that.

J. Kent Smith
BrainTrust

Didn’t we have the same discussion 20 years ago trying to get manufacturers to put anti-theft tags in the packaging? An idea not nearly as simple as it sounds…like…whose tag? It remains to be seen if this chain’s experience is unique or common, since retailers generally don’t put press releases out about program failures! And we don’t go to conferences and trade shows and visit booths announcing what doesn’t work.

Lee Kent
BrainTrust

I see a lot of missteps in the implementation and planning. Just sayin’.

For my 2 cents.

gordon arnold
Guest

Business to business sales for Information Technology systems are always bundles of an assembly of hardware, software, service and support. The buyer is offered whatever levels of quality and amount of these ingredients as they deem necessary.

Having sold very large scale business systems for many years, I know first hand that the less service and support that is available or sold the less chance for success there is for any system implementation or upgrade. In addition to products and services, there are compatibility issues that are often the cause of failure. The compatibility issue may be interfacing the existing enterprise systems and software with the new packages or the practical use and functionality of the new system to the company’s methods of doing business. This has the makings of a collection of bad decisions by a management team that was out of it’s element of expertise.

Scot Stelter
Guest
Scot Stelter
1 year 11 months ago

I second Nikki Baird’s observation regarding the age of the RFID technology Peltz is apparently using. Based on this article and 2010 articles about the Peltz solution, it sounds like they are using 2009 technology. Much has changed. Tag performance and field reliability is substantially better now that it was in 2009, and reader options have evolved as well.

As Tom Redd and others pointed out, it sounds as if the system was installed and left to age without ongoing maintenance. I can’t help but think that this is an execution issue rather than a technology issue.

wpDiscuz
Braintrust
"Peltz has some solid points but it sounds like the people that helped deploy his RFID operation did an install and split. The system must be maintained properly. Peltz might have decided to not pay maintenance fees which would add to the problems. We are missing all the facts for a full post-situational analysis."
"I gotta say, this sounds like sour grapes to me rather than fundamental issues with the technology. Plus, if they made their tagging technology purchases in 2009 — I mean, there have been two to three new generations since then of both the tags and the readers."
"The global supply chain is based on RFID, from raw materials to the end user. It is not designed to be unique for a single shoe store."

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