Cost-benefit Assessment of Item Level RFID in Apparel Retailing : A Case Study of an RFID Pilot Project in Moods of Norway

• Main Authors: Sundene, Hanne, Hole, Merete
• Format: Others
• Language: English
• Published: Norges teknisk-naturvitenskapelige universitet, Institutt for industriell økonomi og teknologiledelse 2014
• Online Access: http://urn.kb.se/resolve?urn=urn:nbn:no:ntnu:diva-25767

The use of RFID in apparel retailing and supply chains has gained much attention since the initial deployments in 2003. The application of use has advanced as more initiatives have been conducted the later years, and implementation with item level tagging is now regarded as the way to go as it enables more benefits. At the same time, several researches are skeptical to the actual outcome of such an implementation, especially when the tag price is still substantially higher than the price of the commonly used barcode. There exists a lack of empirical data on the actual experienced costs and benefits obtained by implementation of item level RFID-tagging. The goal for this thesis is therefore to provide insight on the effects RFID will have on an apparel retailer. This is achieved through a comprehensive cost benefit assessment of an RFID initiative.The research is pursued by doing a single case study on the RFID-pilot project in Moods of Norway, the winter of 2014. The findings from the case study and the pilot are used to estimate the effect a full deployment will have on the company.The outcome of the case study supports the growing interest in RFID in supply chains. MoN is expected to get a payback on the investment in 4 months if unrealized monetary effects from labor savings are excluded, or 7 months if included in the calculations. The distinction between the two cases are made as MoN decided to consider savings in labor as time to spend on sale performing efforts rather than directly translate the labor to a cost saving, which is the widespread way to regard labor savings in the literature. The saved time from streamlining in store processes has been considered an increase in revenue according to the equivalent alternative cost of the salaries. The change for need in labor in the distribution center and the administration, as well as labor spent in relation with the investment, could however not be spent or taken from sales enhancing activities. The result is the two payback calculations where the 4 months is what is likely to be experienced by MoN as they do not regard labor as a cost, while the 7 months include the effect the implementation will have on both the operating labor level and the labor needed as investments. After an implementation most costs are expected to occur in close relation with the implementation, as RFID-equipment and tags are needed. Benefits are expected to be seen quite fast as well, through automation of store processes and a better data accuracy which will give less stock-outs and better availability in the stores. Nevertheless, the magnitudes of the benefits are less certain than the costs. This makes the actual payback time prone to uncertainty. At the same time does analysis performed with only quite certain factors still support a decision of an RFID-implementation.The main contribution of the research is the identification of and the empirical data on RFID specific benefits and costs, and the seemingly positive outcome. In addition, this thesis can be regarded as a decision support tool for the case company. As the research to a large extent is considered generalizable for apparel retailers, this thesis can also be seen as more general guidelines and decision support for other companies that consider implementing RFID.