RFID: The Book on Item-level Tagging

By Debra D'Agostino  |  Posted 11-01-2006

Wal-Mart Stores Inc. may have made RFID (radio frequency identification) a household word, but the mega-retailer may no longer be the technology's lead adopter. At least one company has managed to implement RFID at the item level—rather than on pallets or cases—the Holy Grail of supply-chain management.

That company is Boekhandels Groep Nederland's Selexyz, Holland's largest bookseller, with 42 stores, 11 million customers and $4.8 million in revenue. Selexyz is using RFID systems from Bedford, Mass.-based Progress Software Corp. to help optimize store operations, improve customer service and, most important, sell more books. How? The company recently completed a pilot program that tagged all inventory at the item level—every book on every shelf—at its 1,000-square-meter store in Almere, Netherlands.

And it couldn't have happened soon enough. In 2000, the company lost roughly $7.5 million to what CIO Jan Vink calls non-core bleeders—"hidden costs, too many consultants—we needed a better handle on costs." Vink's job was to see how IT operations could be improved.

After a large-scale IT centralization effort, Vink and CEO Matthijs Van der Lely attended an RFID conference. "It was clearly the next step," Vink says. The system, which includes six state-of-the-art RFID scanning systems, cost roughly $600,000, not including the cost of the tags themselves, at roughly 25 cents per chip. The system was completed in April, and the results were immediately tangible. "Taking inventory of new books used to take hours," Vink says, "because we had to scan the barcodes on each box of books and then open each box to see how many books were sent." The Almere store offers 24,000 titles in stock and has a total of 38,000 items in its inventory. Introducing RFID at the item level cut the inventory process from four minutes per box to just seconds. That's significant, considering that Selexyz processes more than 7 million books each year across its retail chain.

But the greatest benefit, Vink says, is the ability to improve customer service—and increase sales. The tagged books link into Selexyz's order-management system, which customers can access through in-store kiosks as well as the company's online e-commerce site. Since each book can be instantly located, customers can purchase books online and pick them up at their local store—a handy benefit that still eludes U.S. booksellers. What's more, misplaced books in the store can be quickly located and re-shelved. "We scan the entire store three times a week to find books that are out of place," Vink says.

Of course, there are still some kinks to be worked out. For example, it's fairly easy to remove RFID tags from the books, so it's not yet a worthy deterrent for thieves. Still, Vink says, in the first 8 weeks after the RFID system went live, sales at the Almere store increased by 12 percent. "We estimate that implementing RFID across all the stores will give us an additional annual revenue of $3.8 million," he says. Plans are underway to equip 16 more stores with RFID before the end of 2007.