Automated inventory management is becoming a 'key battleground'

Dive Brief:

Automated inventory management is a "key battleground" to keep businesses competitive in the mid- and long-term as sellers move more inventory, according to a report from ABI Research.
RFID systems for soft goods and fashion merchandise can offer a 3% boost in revenue and 44% return on investment (ROI) within the first year at stores with annual sales of just under $6 million, with ROI increasing to over 200% in the third year.
Though RFID systems can be effective in some merchandise categories, more advanced tech is required to reap similar benefits in other industries, and those technologies are less developed as of yet.

Dive Insight:

As RFID penetration picks up, and other artificial intelligence-backed technologies come to market, the value of achieving "near-perfect" inventory comes into focus. So much so that research firm ABI Research's new report asserts it will be a major area of competition for businesses of all sizes.

Though RFID has been around for over a decade, adoption rates have only recently increased to any significant degree as the technology has become more affordable, according to ABI Senior Analyst Nick Finill.

Based on Finill's interviews with RFID technology providers — both hardware and software — as well as the head of RFID technologies from a major U.K. retailer, the ABI senior analyst concluded that small retail business could save approximately $6,000 per year in inventory-related labor, and a large store could save $72,000 per year.

Emma Cosgrove / Supply Chain Dive, Data from ABI Research

"Now we are seeing many market leaders launch major investments and follow through with them. Once the market leaders go, others will follow so we can expect adoption to progress fairly quickly in the next few years," Finill told Supply Chain Dive in an email.

Benefits of implementing RFID technology include increased customer satisfaction, reduced shrinkage and improved sales velocity, leading to an increase in revenue.

Barriers to adoption include current cash-strapped retail environment and the difficulty of adopting new tech across hundreds or thousands of locations and integrating with legacy systems.

"Ironically it’s the struggling retailers which need the efficiency savings the most, but are least likely to invest. Its survival of the fittest at the moment in retail and technology is key here ... It requires a lot of expertise to implement RFID effectively at scale. Other, more immediate business issues may receive investment before RFID," said Finill.

Despite the "transformative" possibilities of RFID technology, it's still limited in its impact on retail since it is only relevant to fashion and other soft goods. For more complicated inventory scenarios, more advanced technologies must be brought to bear — technologies leveraging artificial intelligence and computer vision to largely remove humans from the inventory process. Adoption rates for these kinds of solutions are even flimsier than those for RFID, however, because the category is so new.

"The technology is more immature, and so fewer deployments have occurred," said Finill. He added that technology such as roaming, shelf-scanning robots are more affordable than one might think since many providers have adopted a "robot-as-a-service" model, getting rid of the massive upfront investment of a traditional equipment purchase. He offered robotics startups BossaNova and Simbe Robotics as examples.

What's even more uncertain than inventory robots so far is static computer vision systems.

"Computer vision deployed via static cameras at the shelf level is actually a much higher costs and more doubts exist over its viability in the market right now. The Amazon Go model for example is not scalable for most stores. ROI here remains to be proven, even though early pilots have been taking place in the US and Europe," said Finill.