In today’s global retail marketplace, where consumers buy products through a multitude of different channels, counterfeit products are permeating the supply chain.
Counterfeiters—who are often also contributing to terrorism or other organized crime—are stealing design files, reverse-engineering products, or simply replicating luxury items using cheap materials that are of poor quality and are often hazardous to consumers. The International Chamber of Commerce estimates that counterfeiting causes companies worldwide to lose roughly $1 trillion in sales annually, which doesn’t even account for losses attributed to damaged reputations, legal costs and exhausted internal resources.
With brands’ intellectual property increasingly under threat and consumer’s expectations for vast product selection and swift delivery rising, the retail industry is feeling the pressure to deliver the perfect omni-channel experience. The so-called fake omnichannel, or “fomni-channel,” is often indistinguishable to the consumer—they may spend money buying fake products without even realizing it. It’s more important than ever for brands to protect their product authenticity by implementing proactive anti-counterfeit strategies.
Serialized item-level identification ensures authenticity
At the heart of any good anti-counterfeit plan is inventory visibility, and the use of Electronic Product Code (EPC)-enabled Radio Frequency Identification (RFID) has become a critical enabler. Using this standards-based technology ensures product authenticity—products can be uniquely identified at the item level with EPC-enabled RFID, rather than at the batch level.
This year has been a particularly pivotal year for retailers discovering the value of RFID. Those who have announced RFID deployments—Levi’s, Target and Amazon for example—have cited the technology’s supply chain efficiency aspects and are using it to increase inventory visibility for higher customer satisfaction. A secondary, yet extremely valuable benefit to RFID implementation is quality assurance. Through more efficient authentication processes and the ability of RFID tags to hold more information about where the product was manufactured, the use of RFID in retail can significantly reduce the amount of counterfeit products in the market.
The EPC framework, on which RFID operates, is based on the same GS1 Standards that thousands of businesses already have in place to facilitate barcode scans. Retailers can leverage existing technology investments—such as enterprise resource planning (ERP), inventory management, and point-of-sale systems—when implementing EPC-enabled RFID. Using technology solutions that leverage this standard, brand owners assign a unique serial number to each item, which is then stored in a database. On the retailer’s end, employees can scan the tag and immediately find out whether the numbers are among those assigned by the original manufacturer. Serialization also helps retailers spot out-of-sequence numbers that may signal counterfeit products. Further, using RFID tags at the source can also enable speedier, more informed stops through customs for international shipments.
The benefits of RFID
Although its value has been known for over a decade, RFID has recently gained traction in retail due to its ability to provide the critical foundation for retailers to achieve omni-channel success. ChainLink Research recently reported about 6.5 billion UHF RFID tags will be sold in 2015, two-thirds of them for use in retail. That’s up from 4.9 billion in 2014, representing a 27 percent growth rate.
RFID increases item availability, which research from the RFID Lab at Auburn University says can lift sales from 2 to 20 percent for retailers. Using RFID, inventory inaccuracies within SKUs improved from an average of 63 percent to between 95-99 percent, which is not only based on extensive research by the RFID Lab, but has also been validated by retailers.
Manufacturers also clearly benefit from the ability to provide and maintain more granular data about their products, which can help accelerate any kind of problem-solving, including product authentication. According to RFID Lab research, using EPC-enabled item level RFID throughout the entire supply chain improves electronic proof of delivery (EPOD), lowers receiving time by 90 percent and can improve shipping and picking accuracy by up to 80 percent. Additionally, RFID helps the manufacturer save on operational costs, reduce obsolete inventory write-downs and increase margins.
Technology has opened up a whole new “always open, always on” digital shopping environment—which has brought great advances in being able to deliver what a customer wants, whenever and where ever she wants it. But it has also carried the unintended consequence of making the retail supply chain vulnerable. With the new power of e-commerce comes the responsibility of ensuring safe, authentic products. Brands and retailers can protect their integrity and the quality of their products by enhancing anti-counterfeit strategies using RFID.
Melanie Nuce is Vice President of Apparel and General Merchandise at GS1 US and leads the GS1 US Apparel and General Merchandise Initiative.
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