Retailers Make Big Bets on Tiny RFID Chips

April 12, 2023

At all Uniqlo’s stores in the U.S. and Canada, shoppers can checkout simply by placing their goods in bins of automated stations. Unlike the self-checkout process at many stores, customers of the casual apparel retailer don’t need to scan individual items or look up prices on a screen—they can simply drop their items in a bin and pay.

A customer uses the RFID-based self checkout system at the Uniqlo store in New York

This next-generation process is powered by radio frequency identification readers inside the checkout machines, which automatically read hidden RFID chips embedded in price tags. Uniqlo (Asia’s top clothing retailer) embeds these chips into their price tags—allowing it to track individual items from its factories to warehouses and inside stores. That data is critical for Uniqlo in improving the accuracy of inventory in stores, adjusting production based on demand, and getting more visibility into its supply chain, reports The Wall Street Journal (April 8, 2023).

Newer and cheaper RFID chips, reader hardware, and software are enabling retailers to implement the technology at lower cost and with more precision.  The cost of RFID tags has fallen from 60 cents a tag a few decades ago to 4 cents a tag, and reader hardware has improved in range and accuracy.

RFID has resulted in significant reduction in out-of-stock items on the Uniqlo sales floor, and has contributed to improving customer satisfaction. While the most common use for RFID is improving inventory management, the use of RFID at self-checkout machines is gaining traction as more apparel retailers explore ways to apply the technology once their merchandise has been tagged. Most apparel brands plan to implement RFID this year or next.

An article of clothing in the self-checkout system

The unique benefit of an RFID-based checkout system is that it is faster and more accurate than barcode-based self-checkout machines. Many retailers still rely on printed bar codes, which require manual scanning and are more limited in the data they carry.  Since Uniqlo rolled out the machines, customers have reduced their wait time at checkout by 50%. Computer vision, a form of artificial intelligence that analyzes images, is still too expensive for widespread use for self-checkout and inventory management.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

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