Host Mike Graen and Dean Frew continue their conversation about the current and future opportunities of RFID at retail and the business-use cases that are being considered in this part 2 episode.

Greetings, my name is Mike Graen and welcome to

another University of Arkansas Supply Chain Management Research

Council podcast on on shelf availability. Today we're joined

by Dean Frew, the CTO of SML. SML is a leading provider of

full solutions for radio frequency identification for

retail, including tags, technology, software and

services as well. Please join me in welcoming Dean Frew to the

podcast. From your seat, what are the next set of use cases

because claims is obviously one of those, I mentioned asset

protection before as one of those. There's a lot of things

that from yours and again, I'm not asking you to share anything

that's not you know, public, I'm not looking for you to release

competitive information. I know you won't. But you've made a

number of acquisitions and or engagements, I believe the

location in London is starting to look at running actual RFID

products through a tunnel to be able to capture that. We're

seeing the work that you're doing in store with, with with

the company you just partnered with. So you've been doing this

for a long time, where do you see the big bets coming in the

future?

Well, I mean, one of the ones that's been ignored is inbound

into distribution centers. And, you know, the assumption is, is

that everybody's sending you what they tell you they're

sending you, and that the tags work. And, and I think it's as

we start getting to clients that are limited in what they can do

in the store because their inbound processes are telling

them the wrong number, okay. And so, you know, when I was if I

was at 65% inventory accuracy, who cares if I was off by 5% on

my inbound. But when I'm at 98, and I'm trying to get to 99, you

know, it could make that could be a big difference, okay. I

just saw Robert's note, it's at the case level, but case with

the items on the inside is what I'm talking about. So we've got

multiple projects around the world, some really big ones

where and there's other examples out there that, you know, that

have been publicized, where, you know, I think that's the next

thing, Mike, if I was to pick it one thing, it's, it's the, it's

the thing that would make the biggest impact in the whole

industry, is just having all of these DCs know exactly what

they're receiving, and make sure that all of the tags work on the

stuff that they're getting coming in. We have seen during

COVID, we've seen a decrease in tag quality, okay. A lot of

players are trying to provide tags, and there's no way for the

people that are buying them to know if they're any good or not.

So is that is that implying that we're going away

from Auburn, Auburn University Arc standards, or are we just

are those particular quality

Arc standards, Arc standards are really around

performance. This is around did it get encoded right.

Oh, gotcha. Gotcha.

All right. All right.

So it's not the performance of the tag. It's

No

Did we encode it correctly and does it have the

right information,

I've got one example where people are putting tags on

product with the EPC logo and no RFID tag inside the sticker.

That's a real example. So yeah, so it looks like it's a tag, it

smells like it's a tag, but it's not an RFID tag. So we're going

to continue to see shenanigans like that and brands and

retailers are going to become as they become more important, more

dependent on accurate information are going to be

looking at I think some of those things for compliance checking.

Yeah, and to your point, if you see it and it's a

problem at the store, it's not been encoded correctly at the

store. It's way it's way too late. It's final, it's like

trying to find a needle in a haystack. Right? You got to

catch it upstream in the supply chain. Obviously that's that's

the key to this thing. So catching it inbound at the DC at

the latest would be certainly something would be valuable.

Talk to us about what you can about the any potential CPG

suppliers that are using your solutions to make sure that what

they're putting in a box that destined to a potential retailer

customer is the right stuff. How are you seeing that kind of

playing out?

It's it's a I would say it's been a continued

interest for years. The challenge is, is you know,

putting in place solutions in places that don't have a lot of

technology is difficult. And I think that's why what we're

seeing is is is brands and retailers moving toward the step

before them, which is that DC, right? They can control the

technology, usually has a lot of technology in it, even if it's

just Wi Fi and, and some kind of networking system. You can use

handhelds, you can use tunnels, you can use things like that.

So, you know, going all the way to we've got multiple projects

where we're in at factories, okay. I will tell you that it is

difficult, even with local teams to be able to work through all

you know, some factories don't allow there to be public Wi Fi.

Wi Fi at all, in the factory, because they don't want people

surfing on their phone. So again, it's it's there's just a

little bit more headwind in doing factories. It's not a

technology issue, per se. It's a, you know, are they going to

do they have the infrastructure in place to be able to support

it. So and, and they're getting very little out of it. So I

think what's going to happen is the inbound deployments are

going to drive that technology upstream one step further, just

like what we saw for Walmart when they held compliance on

consumer packaged good stuff.

Yeah, yeah. There's this, there's this phenomenon in

the CPG industry called the tipping point, which is when you

have enough retailers asking to have things RFID tagged at

source, at what point in time do you just say, I don't want to

have two piles of inventory that's the same product,

although this one's RFID tagged, and this one's not. Let's go

ahead and do that migration and Auburn quotes that number 60%. I

think that's a pretty close approximation for when I was

with Procter and Gamble. It's like, if we have that much

coming in, let's just tag it all. Then people start to say,

well, if it's all tagged from us, then what can we do with it

internally? And I think that's, that's one of the things that's

definitely going to kind of play out. The other one is and I know

that you were your team was at Auburn a few months ago, when we

had folks from the supplier community specifically Hanes

talk about the incredible we're all RFID tagged, yet our claims,

compliance is still on an upward trajectory. Why? Why, because

we're not taking advantage of that yet. That claims thing,

which is, Dean, I sent you 27 of those, and you're claiming it,

we have no argument today. Maybe talk a little bit about the role

that RFID plays to ensure that that is actually you did receive

it and here's how you did it.

Yeah, I mean, we had a brand owner that their their

whole business case justification was get in and

getting rid of claims for Macy's. I mean, you know, high

six figures for a solution. And it was all about the fact that

Macy's was doing a good job of looking at claims, and charging

significantly for that. And so I think it's a natural, if you if

you start measuring something, and doing it in a way that has

integrity, then you have an opportunity of doing two things.

One, giving someone the opportunity to fix it, and two

making them pay for the fact that it did impact your

business. And right now, what we're seeing is, is we're

seeing, I would say that every one of our store deployment

customers, is now either already or in the process, or thinking

about the fact that this is an important issue.

Yeah.

And, and whether they set up a Profit and Loss Center,

to go after folks or not, is a different issue. And that's, you

know, there's a whole spectrum of what people want to do with

that. But I think in general, most of them, just want people

to tag the product and ship the product, as they said they did.

Just a wild question. I've talked about this

with a few people, but we'll go ahead and make this one public.

Do you ever see us using item level and then eventually case

level RFID as the official agreement that that product

actually got because your your example of they encode, they

shipped a bunch of socks, I'll make it up socks that weren't

encoded. Well, then we didn't receive those socks. So we're

going to deduct for those. That puts pressure in the system, to

make sure that everything's coded correctly, upfront, etc.

Because if the reader in a retailer, we don't see it, we're

not going to pay for it. Do you ever see it going to that level

where you could actually potentially do? Yeah.

I do. Because the the impact to the business of not

having those socks tag is is nonzero. I mean, it's a there is

a direct impact that either somebody's going to have to tag

them or they're going to be invisible through the RFID

process all the way through sale and loss prevention.

Right, right. Yep. So completely switching gears I

got I've got a couple others and by the way, if anybody else has

any more questions, please, please forward them. I've got a

couple more questions left. This one's this one's a little bit

out of the blue. I've been on some messaging threads with both

some retailers in the United States, and also some folks over

in Europe. And I don't think this is a new topic, but it's an

interesting one. Which is, if we have RFID systems, and we have

categories and departments and potentially like, in some cases,

whole stores that are RFID tagged, why do we still go

through a yearly inventory audit where we're counting every

single pair of socks and every little thing that we've got?

What's the roadmap to automate that because to me, that's like,

that's like a yearly process that we do, that's not done very

well. And by the way, we're doing RFID, on a weekly basis

that I could guess out in the door is much more accurate that

it is at a once a year audit. Any perspective that you have on

that?

I mean we've seen a spectrum of customers. We have,

what we are finding is the small to medium retailers are much

more willing to go to their auditors and say, let me explain

to you how this works. And we have one retailer that actually

took their auditors into a store and did a count. And then they

picked a category and they went and counted it by hand and

realized it was it was dead on.

Dead on.

Okay. And so they tend, what we're finding is they have a

better chance of making their RFID count on December 28 their

ledger for their balance sheet. Larger retailers, much more

complicated. So we have we have large retailers who have gone

through that. We have some retailers have been with us for

years, and they still can't convince other members of the

corporate staff

Right

that this really is better and, and for sometimes

good reasons. For example, if I have, you know, 98% of my

product is tagged, you know what, what our customers are

saying is well, at least let's use that.

Right

Okay, because you can't get a false positive. It

is, it is much better than what I counted six months ago by hand

by my folks who didn't care about doing this anyway.

Right.

Okay. And so, so we're seeing success in the

middle there. And then we have others that are like, I'm not

even taking it forward, right. It's a career limiting move for

me to get into somebody else's business. And I'm just not gonna

go there. So that's the spectrum we're seeing. And, and I think

over time, you know, it's a big cost.

Huge cost.

combination, the consolidation of those two

companies. It's a huge cost and specialty retailers where

everything is, nearly everything is tagged. It's it should be a

very easy transition to just take the December 28th count as

your balance sheet.

Yep.

At least for your stores.

I think I think it's got to get there eventually. How

do you do that and do it in the right way and things that are

Sarbanes Oxley

It's probably the most, one of the biggest, the

biggest things I've learned in the last 10 years or 13 years

now doing retail apparel, is that it's the most complicated

discussion that takes place internally.

Yeah. Do you think do you think that's a cost

versus retail cost accounting discussion, or it's just, no

we're just we've always put people in the stores to count

this stuff?

It's kind of that, I mean, it's kind of that the loss

prevention teams tend to have a say that the, you know, but then

the CFO, it depends if it gets back to now you got to talk to

these auditors who tend to have a hunch, you know, we have a

different relationship with them. And so it's just very,

very complicated. And, and one that we've just supported on the

peripheral, to make sure that our teams that we're working

with in the retail have everything they need to present

the truth and the facts as to what's going on.

Got it. Got it. I want to come full circle back on

a question we asked and we started to talk a little bit

about before, and I actually see Robert has asked a question

related to that, as well is returns. You know, specifically,

let's just talk about how RFID technology can help the returns

process, let's just say that returns where the RFID today is

attached to packaging and not incorporated into the actual

product. That's a different question, Robert. So we'll get

to that one in a second. But talk to us about that. So if I

if I'm one of your retailers, and I'm using this and somebody

returns something, how does your system account for that to make

sure that it correctly identifies it coming back into

inventory?

Yeah, so we've got customers that have used the

the, you know, let's take the in store scenario. Someone bring

something back and it has a ticket on it still, right. So

it's still got the RFID tag. We have the ability to bring that

into inventory immediately, okay. And to do heck we could do

it at the basket level, right? So as you see in most tills,

there's a basket of returns, right? Just throw the things in

there, scan them and bring them back into inventory. Well, the

example they bring it back, there's no ticket. Well, in most

cases, the retailer has the ability to print out a non RFID

ticket anyway. You stick on an RFID tag, and you do a scan

scanning code, and you bring it into inventory, right.

Yep.

All of those events are captured. So if someone was

looking at if they were interested in that they could

have a BI report on what they returned and nobody seems to be

that interested in that right now, but it could be. The

biggest thing that's going on right now, for that we see is

mass returns and distribution centers. Huge problem. Okay.

And, you know, we've got deployments with some brands,

where dramatically changing the way they think about managing

returns. When some brands are getting hundreds of thousands of

items a year, and still processing them the same way

they always have. okay. And so and then I think there's some,

there's some other returns kind of things that, that that are

coming down the pipe that we think will also add value for

some of the issues that are out there for that so. But you know,

DC and store, sorry about that my dogs barking.

He needs to go outside.

No, he needs, he wants to go eat the UPS guy

because he's

Oh the UPS guy. Gotcha. They're showing up with

those three, three boxes that want to return.

So anyway, I think returns is something the DC is

was really interesting to look at what these brands are having

to do for returns. And again, think about understanding what

it is and what grade it is to know if you can get it back in

the market versus not. Most brands have covenants with their

retailers, about how many of the poor grade product that you can

ship back to me. And there's no way of measuring that really

other than my hand today. So there's a number of things that

and down the road, I think we're gonna get to beyond returns,

we're going to get to the resale market and that whole market

that is going to leverage potentially could leverage RFID

to automate that secondary life of product and ultimately

recycling and some of those things.

Yep. Okay. Awesome. We are, we're just about out of

time. Dean, I want to ask you one kind of kind of follow up

questions, anything else that you see in the future and is

there anything that I should have asked you that I didn't?

Kind of a follow up kind of closing question.

I think one of the things that that that we're

pondering is I think we're about to see continued consolidation

in the retail space. We're already seeing that and and that

consolidation impacts a lot of different components. And one of

those components is technology investment

Okay

And where you might have had, you know, three or

four brands that were underfunded, they couldn't

invest, and so on. We're seeing a growing number of retailer

consolidation plays, where they're stepping back and

saying, if we're going to do this, let's do this with the

right technology from the beginning. And I think I think

that that play is, could be very interesting for the market for

all of us that are in this market. Because it's, it's, it's

unprecedented. I've never seen this before, where I've seen

this level of consolidation. And so it's gonna be very

interesting. I think that's the one thing that is on top of mind

as we start looking at what's going on.

Got it. Got it. Man, it's great perspective. Dean,

thank you so much. I know you've, I know you've had a lot

of stuff going on both at work and at home. I am so thankful

you had an opportunity to spend some time with us. I think

you're you're one of the obviously premier industry

leaders in this space, not only from a technical perspective

from a business perspective. So thank you very much for your

time. We definitely appreciate it. Thanks for joining today's

podcast and appreciate Dean Frew for a great job of walking us

through the state of the industry and some of the

opportunities that he sees going forward. Please join me next

time when we have JW Franz and Daniel Blank from the Barcoding

Incorporated. They'll talk about how they're working with both

suppliers and retailers to provide services to drive retail

technology capability in the future. I look forward to seeing