Host Mike Graen is joined by Umesh Cooduvalli and Jamie Kress from Sensormatic to discuss opportunities for RFID and other supply chain technologies at retail.

Hello, my name is Mike Graen. Welcome to another

Conversations on Retail and the University of Arkansas Supply

Chain Management Research Council focusing on on shelf

availability. Today, we are joined by a couple of experts

from the Sensormatic company. When we think about

radiofrequency identification to get inventory accurate and

products on the shelf, we typically think of three

components, hardware, certainly the tags that are actually on

the product and the software. Sensormatic provides a great

solution and we're about to hear a lot more about it. So please

join me as we join the conversation in progress. Well,

good morning, good afternoon, and good evening, wherever you

might be around the world where you're listening to this

podcast. My name is Mike Graen and I welcome you to another

Conversations on Retail and the University of Arkansas supply

chain organization to another discussion around on shelf

availability and retail. We'll start with Jamie. Both of these

folks are with the Sensormatic/JCI company. Jamie,

we'll start with you. Go ahead and unmute and kind of introduce

yourself to the audience.

Great. Thanks, Mike. Thanks for having us as

well. So I'm Jamie Kress, I'm responsible for the RFID

business for North America for Sensormatic. Been in the RFID

business now for just about 20 years. 15 of that has been with

Sensormatic over the years. Prior to that I was with the

company that Sensormatic acquired with the RFID software.

So I've been a part of this group since really the inception

of RFID, been involved with programs all over North America

and some in Europe as well. So excited to talk to you and the

group about it today.

Well if you've been doing for 20 years, we should be

done by now, right? We can just all retire and go sit on the

beach somewhere, right?

Wouldn't that be great, right? Exactly.

All right and my good friend, Umesh. You've been

in this industry a long time as well, but I believe you're

fairly new to JCI and Sensormatic. Why don't you go

ahead and introduce yourself for us.

Globally. I've done pilots and rollouts in the

US and Europe and also in Asia, including China and Japan. So

I've been in the RFID space for over a decade and I know a lot

of people. And thank you all for attending this session and look

forward to our conversation today.

Got it. Well and again, I appreciate you guys

spending the time for sure going through going through this.

There's a lot of confusion out in the industry. And Jamie, I

was kidding you about doing this for 20 years, we should be done

because I think if anything has gotten more complicated than

it's gotten simpler. Even though the technology has gotten

better, it's it certainly works better, but it's all delivered

on kind of that focus on on shelf availability for

customers. That's where we always start. So tell us a

little bit about Sensormatic and JCI. An interesting relationship

with the two companies, you know, kind of tell us a little

bit about you know, what, what do they do beyond RFID, and then

specifically, what are they doing in the RFID space?

Yeah, certainly, I think we might have a slide to

show that but I can certainly speak to it. So Sensormatic is a

part of the the Johnson Controls family. We are the Sensormatic

brand is the retail brand for for Johnson Controls. We really

have three primary pieces of our business, which you can see

there on the screen. We have our our heritage, which is in loss

prevention. So that's how most people know us in the industry.

That's where we have a lot of representation across retailers

all over the globe, with our loss prevention business. Next

is our traffic or our stopper track business. Again, it's a

global business for us, but yet, somewhat separate from the RFID

business. And lastly, what we call inventory intelligence or

our RFID business and that's what we're here to talk about

today. What's interesting what's happened over the years where

those three divisions used to be kind of separate groups for

Sensormatic, we found out probably three or four years ago

is that there's so many great insights that you can get across

those areas when you look at combining traffic level insights

with RFID, and especially looking at the loss prevention

insights. You know, I think we'll talk a little bit about

that as we go on today. But with the rise in ROC and the

challenges we have and the smart exit solutions we've deployed,

the connection to the LP side of the business and RFID has really

grown over the years.

Yeah, and just to build on that, I'm sure we've

all seen it at number of times the video when Doug McMillon was

part of the Squawk Box thing where he said, you know, if we

don't figure out how to get this under control, we'll either

raise prices or shut down stores and now they're shutting down

stores in Portland. They haven't exactly attributed to those but

I think doesn't take a genius to figure out those are probably

connected for sure.

Yeah, absolutely. Couldn't agree more.

Yep. Well, let's, let's start. I love to start

each one of these out with, you're not only a retail

executive in this space, specifically on things like

inventory intelligence and loss prevention, etc, but you're also

a customer. Each one of us go and buy things from stores.

Whether we walk in a store and buy it, and through the

traditional brick and mortar or we buy it online and pick it up

in store, whatever we happen to do. But tell us about a time

from a customer perspective that you were disappointed. You

thought you had the track on getting some product in the

store, only to find out they didn't have it. So I'll put you

guys on the spot and see if you got a couple of examples because

we all have them.

Ya no, we talk a lot about this. I'll jump in

first Umesh. So you know, we've all been there, we walk into the

store, we're looking for the size we're trying to get, we're

searching through a stack trying to find that specific size. Most

customers don't want to ask for help and have the associated

kind of dig. So we've experienced that. I was gonna

you know what I was thinking about this this morning, it's

with the rise in omni channel, we all are shopping online

first, before we go to the store. There's nothing more

frustrating than when you you look online for something, you

want to go to your nearby store that you prefer to shop at, they

don't have it. You happen to be there later that day or the next

day, and you see what you were searching for on the shelf. So

it's a little bit of a twist on your question, which is I was

disappointed online. I find a customer has it in the store,

which is frustrating for the retailer because they could have

sold that to me with my online purchase the day before. And I

think it just begins to erode the customer confidence in the

brand. And I think that's what we see as a consumer. I know

that happens to me and that those those are some of the

challenges that we're trying to solve and you're addressing with

this podcast.

Yeah, awesome.

I had an experience, you know, went to a

cell phone store to buy a case for my phone and this is a major

cell phone retailer. And they didn't they don't have the

proper pairing of inventory. You know, for all the right sizes of

the phones, they don't have the right chargers, or the cell

phone cases, etc. So they could easily do it with RFID

solutions. And also they didn't know they told me to go to a

nearby store and they didn't even know if they would have it

or not. So this is something that we easily do, we do it

today in sports and fashion. We can show what you have you in

that particular store and what you have in a nearby store as

well. So I thought that was interesting, I think, you know,

with electronics, that's another, you know, a tangential

market that's going to grow as as more awareness happens with

what are the possibilities.

Yeah. There was a recent article by IHC group that

said that 24% of Amazon's revenue started because somebody

tried to buy something in store and then couldn't find it. So

they use the retailer's Wi Fi to order it from Amazon. How about

that for a slap on the face? So

Awful.

That's awful. That's awful. Thank you very much for

giving me the free Wi Fi to order the product I was here to

get from you but I went and bought it from Amazon because

they had it and they'll deliver it in three days. Fascinating.

Right. Fascinating.

All right. Well, that very good very, very good

Yeah.

Yeah

examples, etc, etc. So talk a little bit about the retail

industry itself. I mean, we've already talked about the

disappointment of a customer perspective that we didn't

actually understand exactly how products are in the store. And

we got we end up pushing people to competitors, because

unfortunately, we didn't have what we wanted. Sensormatic has

played a role in that either from a loss prevention

standpoint or inventory management standpoint. And so

there's all this excitement, all of these big right retailers,

Walmart, Target, Macy's, Nordstroms Dick's Sporting

Goods, Dillards. Everybody's kind of excited about RFID and

that's become the new platform for how you do work, especially

if you're an apparel retailer. So how does Sensormatic fit into

that?

Yeah, just a question, you know, years ago

Mike when you and I would be talking about this we would be

talking about what does RFID do for in store execution? How does

it allow an associate in the store to know what's in the back

room that needs to be brought to the to the front of the store? A

lot of retailers do a fantastic job with making their store look

perfect, it looks beautiful. All the shelves are full. But what's

really hiding behind those full shelves are you know they're the

wrong sizes. You have a shelf full of smalls or a shelf full

of mediums, or a footwear display wall that is missing

several colors that you know the customer is not going to buy it

if they don't know that color is available. What we've seen

change with the onset of omni channel, and a lot of times I'll

go talk to a customer and they'll say, Well, tell me the

connection between RFID and omni channel because omnichannel's

online. And I you always give the example of, you know, if

your inventory accuracy in that store with the stores where

you're looking for the inventory for your customers, if your

inventory accuracy at 60%, 70%, on a good day, maybe it's 80% in

a traditional world, if your OMS system is looking for that

inventory in the store, and it thinks it's there, but it's not.

So now you have store associates who are searching for items in

that store for that for that omni order, and they have to

decline that order, and then it goes to the next store, then it

goes to the next store. So you'd have huge impacts on labor,

you've got huge impacts on your shipping and, and put them in

situations. Back to your previous question as consumers,

you know, several of us will place an order online, and then

we wait for the order to kind of come in, you get three or four

different boxes, and you always think I just placed one order,

why am I getting these boxes at different times in different

boxes. So I think that's where we've seen as Sensormatic, we've

seen a tremendous change in the industry as we've gone just from

in store execution, now we're looking at omni channel. And

then where we're seeing it now is, you know, everyone at NRF,

for example, was talking about self checkout, you know that

that becomes the big conversation, how do you make it

as frictionless as possible? And RFID has a tremendous role in

that space as well. How can RFID if you're putting the tag on the

product, you as a retailer are making the investment in that

tag, it is to your benefit as a retailer to figure out how many

use cases can I support and grow with that initial investment?

First, I'll fix my inventory accuracy, then I'll improve my

omni channel program, then I'll be able to look at self

checkout, then I can understand my my shrink at the exit. All

those things tie together and that's what's fun about it,

because the use cases just keep growing and growing.

Yeah, and I talk to a lot of people also at,

you know, NRF. And what's happened there, you know, they

talk about endless isle right. So, and the velocity of artist

has increased tremendously. I mean, you know, just look at how

many people order right from their phone. And also the

increase in DTC direct to consumer business has, you know,

probably tripled, is the and, the retailers can make more

money with DTC right. So that that portion of the business has

significantly increase what that means is the DC use cases. So

we'll talk about that in a little bit. Of course.

Yeah.

Yep. Well, and what's what's been interesting

about this is you mentioned this the DC work, Umesh. I think

that's right, because what's interesting about RFID when you

look at and Jamie you and I've been working on this for a long

time, we started out in the 2000s thinking about it as a

supply chain from manufacturer to the distribution center to

the store, etc. We all go well wait a minute, the real value

proposition here is at the store making sure you know exactly

what you have and where it's located. Well, now fast forward

20 years now inventory accuracy at the store is better much

better for those retailers that are using it. And they're

starting to think well what can we do this from a supply chain

perspective? How do I eliminate claims because of they said I

didn't ship them enough stuff, but I can tell you I did ship

them stuff and I've got proof because it left our dock here's

what we've here's what we actually had. To me it's

actually reversing back to where we were back in 2005 and

starting to think about the supply chain opportunities now

that we got the stores taken care of. So Umesh any any

thoughts on other other kinds of opportunities that you see?

Oh, absolutely. And Jamie already

talked about self checkout, you know those types of customer

experience use cases. Those are important and also in the DC, I

don't know if we are talking about now or later there's so

many use cases you know about reducing chargebacks to

everything and what I see is that is incoming receiving you

know, receiving audit, but more and more retailers are doing

outbound outbound verification and I don't know if you all saw

this on the internet UPS announced a huge program, that

is that is a game changer. You know they announced $140 million

dollars investment for this year in 2023 just for the RFID

program. That is phenomenal. They are they're looking at you

know, missed loads reducing the you know, one in 400 to one in

800, that is phenomenal, you know, it's a 10x improvement and

all the you know, the errors you see in cross docking and

everything else will go away.

So I got a chat question from Ursula, I think

it's a really good question. Do you have some examples outside

of apparel? Everybody's heard the apparel success stories, and

someone mentioned Sam's. I think it was a different conversations

regarding Sam's, I think I mentioned that. But But do you,

do you see it starting to expand outside just an apparel play?

Absolutely. Yeah, sorry, Umesh. We are seeing

tremendous, you know, growth outside of apparel, you know,

largely due to the Walmart, with the their requirement for tags

on new categories. But you know, those those categories make so

much sense. You know, when I gave the example earlier of the

denim wall, you know, someone trying to find a pair of pants,

they all look the same, the same can be true of a wall full of

tires, a wall full of car batteries, Umesh's example, a

wall of accessories for iPhones. You know, all of those things

still suffer from the same core problem, which is it's a dense

SKU environment, it visibly looks the same to the customer,

and how can we provide tools to them, to help the associates to

make sure the stores are fully stocked, but also help the

consumer. We're seeing benefits for using an EPC tag to not only

identify that item, but maybe tying it to the IMEI number on

that particular phone so that you're now looking at managing

the serialization of those phones. So we are seeing, I

would say to that question, that's where all the growth is

that we're seeing in the market right now. And I'll say one more

thing. What is fun about RFID and Mike and Umesh, I'm sure

you've seen it is you go into a retail environment, you're

trying to solve one, two or three primary problems. And

invariably in the pilot, or the first year of that program, you

find a problem and a solution with RFID that you never

expected as part of the original program. Macy's did that early

on years ago with their footwear compliance solution. RFID solved

that for them. And that's what's fun and I think we've uncovered

a lot of those in apparel and footwear. But we're just

scratching the surface on those similar use cases that probably

someone hasn't even thought of yet, in hard goods and

electronics, in automotive, in sporting goods, not just the

apparel, on sporting goods, but also, you know, all those other

golf clubs and the bat and the hockey skates. I think that was

interesting for all of us who are in the industry is we're

about to uncover some really interesting use cases that no

one's ever thought of. And as a friend of mine says in the

industry, what's great about RFID is it shines a light on a

problem that you never really knew how to solve, or maybe you

didn't even know it existed. I think that's what that we're all

kind of looking forward to.

Health and Beauty. You know, we we just did

a rollout for Renner in Brazil, 400 store roll out health and

beauty products. You know, small items, they have a lot of

inventory issues that were solved and we have a case study

on our website for people to download.

Awesome. Yeah, clearly, I got a great

opportunity to be part of Walmart when we rolled out the

automotive tire and automotive battery that Jamie mentioned.

And everyone's like, how do you lose a tire? Happens all the

time, right? We think we have four we tell the customer we

have four they drive in we go try and get four we only have

three. Now what do I do?

I didn't lose one sale, I lost four sales because

Right

nobody's gonna put three tires on right? Printer, printer

cartridges, you got 100 printer cartridges, 1000s of printer

cartridges in the store at a Best Buy or Walmart. But you're

missing the black cartridge for the my HP printer. I'm not going

to switch, I'm not going to switch. And I think the only

other one that I would tell you that some of the big CPG

suppliers are starting to get pulled into RFID because of

Walmart's direction on things like automotive and hardware.

Well guess what? P&Gs of the world says sell air fresheners

for automotive, so they're gonna get introduced to that business.

And, you know, Kimberly Clark probably makes paper towels or

industrial paper towels for you know, hardware department, so

they're gonna start getting introduced to this concept. The

only other thing I'll tell you is RFID in food right now is

exploding, right? Because not only it's the on hand accuracy,

but I actually am when I apply the product, for example, to a

to a package of lettuce, I know exactly how many days it's been

on the shelf. So I could potentially mark it down for

reduced sale rather than throwing away the food. So

there's a whole dating process. That sounds bad, but you get the

point. Ageing of product and making sure that you are keeping

the freshest product available for the customers.

And what I love about that example is, you know,

there's certainly the corporate view or the business view of

having that freshness view. I also love the store associate

view of it, right. The store associate, they're tasked with

making sure that they have the items on the store shelves that

you want to sell first and that you're not putting you know the

newest items and that they're aging in the back. To give them

the tools that makes that job for them easier to be able to

identify the lettuce in your example that's going to expire

earlier and make sure that's on the shelf, so that you're not

mixing up what's on the shelf. I love the examples of the store

associates are the ones saying, hey, thank you for deploying

this, it makes my life so much easier.

Absolutely.

Just to add to that, you know, I mean, this is

first in first out, you know. You're in fast food, McDonald's

and Chipotle, there's a great case study, you know, online,

you can find the, you know, really good use cases and recall

management, right. So, you know, in food supply chain, something

always happens, right, you know, so you can pinpoint where it

went bad instead of the entire country shutting down. You know,

like what happened with Chipotles. There's a lot of use

cases. Yeah.

So hopefully that answers the question around

category expansion. Are we tagging watermelon yet? I don't

think so. Will we ever? I'm not sure that we will, in my

lifetime. There's certain products that just don't make

sense, because of RF challenges. Frankly, because of price

points. I don't even know if there'll be a day where we'll

put it on cereal. Because if I'm, if I'm looking for this

particular cereal, and you don't have it, I'm leaving with

cereal, right? I'm not I'm not I may switch, I may not be happy,

but I don't know that I have to RFID tag cereal, I could be

wrong, but clearly cut

It's not about the price point, but it's about

how much profit you make on that item. You know, it's all about

that. You know, like, I know, some retailers like you know,

some of our customers who are fully tagging the entire store,

they actually tag a water bottle, you know, a plastic

water bottle that's selling for like, $3.99 they're tagging them

because their margins they're, like nearly 80 or 90% profit.

And, and managing the inventory accuracy in those high dollar

profit SKUs is important to them.

Yeah. So I think what you're gonna hear is RFID

number one, nobody needs to do a pilot to see if RFID works.

That's over. Everybody knows it works. To me, number two, and I

think that was a very, very important question. It is no

longer just an apparel play. It's an electronics play, it's a

hardware play, it's a food play. You're gonna see people

reapplying this for different uses. And I think you're

McDonald's and Chipotle examples are really good. Matter of fact

a shameless plug for RFID journal, I think McDonald's is

going to be presenting at RFID journal, talking about the

success story that they've done with their quick service,

restaurants, things. So it's going to continue to expand

categorically. I want to switch this thing to the reason we

actually did this was just to get the inventory accurate in

store, but now that we've got things tagged, and they're

typically tagged at store, what are the kinds of use cases are

available other than just getting your inventory right. So

we're going to turn this over big broad question. But what

else are retailers and suppliers using this RFID technology for

beyond just getting the inventory right at store level?

Yeah, so I think there's there's a lot of use

cases that people look at, and I think, and some require fixed

infrastructure in the store to kind of enable and others don't.

Let me use an example of fitting rooms. People have and again,

going back to the apparel example, but it's people have

talked a lot about and we have tested over the years and have

partners in the space of how can we get the most out of our

fitting room? How can we get the data out of the fitting room? In

previous years, you know, you didn't know why an item wasn't

selling. And so you just continued to mark that, that

item down until you had to get it out of the stores. To know

within a matter of days, that certain items are going into the

fitting rooms multiple times a day and then not being sold. You

know, that's phenomenal information. So I think you

know, that's an example of a use case in addition to inventory

accuracy. But then you then you begin to look at okay, loss

prevention, how do I how do I get better control over my loss

prevention? So certainly, you're going to have an eye on strength

always. You can, let's use the same example. How do I know if I

put a if I put a smart exit, which we have a significant

number of Macy's today, if I put an exit so I know exactly what

left the store, tie that to video, know the exact items that

went out the store and know those price points. And if I

know the last read of some of those in certain stores are the

you know, when it's going through a fitting room, if you

have readers around the fitting room, you know where that source

of theft is taking place. You don't always know that, but I

think that's an example. So I think the biggest use case with

the biggest return, Mike, that we're seeing right now is all

around ORC it's all around shrink management and all the

tools that RFID can give you in that space.

Yeah, I will talk about, you know, I'll

mention three use cases replenishment key use case, you

know, so how do you replenish to the sales floor, so you don't

have, you know, zero on the sales floor, you know, it's

about planogram management, right. So what you don't show,

you don't sell. So you got to replenish, replenish

intelligently, you know, the high dollar value items, high

profit items, make sure they're represented on the sales floor

at all times, right? In today replenishment, even within the

same day, you know, like outlet malls, like Orlando, places like

that, by the time you open the store at 10am, by noon, you're

already sold out on a lot of things. So you have to replenish

three, four times within the same day. Everything is real

time with API's that we do. So it's a fantastic. Other second

use case I want to talk about store to store transfers. Our

store back to DC transfers, what happens in different seasons,

you know, what do you do with the items you have? So, you

know, the store in Orlando is not the same as a store in

Alaska, right. So

I didn't know that.

And receiving receiving is a great use case,

you know, with RFID. Receiving, you know, in my I have done my

own studies, it's about six times more efficient. That

means, you know, six times more cost savings than how you

normally do receiving. And if you're replenishing, typically

most retailers replenish about four to five times per week in

each store. So that is a significant personal cost

savings, which basically pays for the entire program.

So in many retailers, there are two ways to

sell things. One is we call it on the shelf or on the side

counter. One is display, end of aisle display or actionality

Walmart calls it actionality etcetera. Ursula, just ask a

question around, can you use RFID technology to leverage

whether display got set or not? And if so, how do you do that?

Yeah, we've we've tackled that a couple different

ways in a couple of different environments. So we run programs

or evaluated tagging the actual floor to floor display in

Well, I hope you enjoyed part one of our discussion with the

totality. So if you have a shrink wrap display that you

want to move from back to front, like in a Walmart example, you

can certainly know that that was supposed to hit the hit the

sales floor on March 1, or you know what the director from

corporate, you can know via RFID that that item has actually

moved from back to front. You know, when you get into zone

level accuracy on the sales floor, it becomes a little bit

more challenging with an RFID environment to know where

something is on end cap versus an aisle. But I would say micro

location is another of the use cases and capabilities that

really all of the all of the players in the market are

looking at and I think it has tremendous value. So eventually,

with micro location, you can begin to apply a value

associated to different locations in the store, you

certainly think the end cap is the most valuable location. But

how can you apply it to the front table to the end cap to

various locations in stores so using micro location will

certainly enable that as well.

folks from Sensormatic. Join us next time as we continue our

conversation with them talking about the future capabilities of