American Apparel Case Study
Making A Bold Fashion Statement with RFID
Retail sales are tough enough. But when retailers face
a declining general economy and downward pressure
on consumer spending, they must squeeze as much
efficiency as possible out of their vital supply chains.
For one international clothing seller, that means finding
more efficient, automated methods to quickly and reliably
replenish merchandise on store shelves.
American Apparel tested and deployed an item level
RFID-based system that allowed store managers to track
the movement of clothing items from ASN receiving, to
back room put away, through restock staging and retail
sales floor cycle counts and on to the point-of-sale
execution. By leveraging this advanced RFID solution
from Xterprise, American Apparel reduced both labor costs
and out-of-stocks, while driving improve sales and samestore
performance.
A Restocking Challenge
Headquartered in Los Angeles, California, American
Apparel manufactures, distributes and sells basic fashion
clothing for men, women and children. The company sells
t-shirts, denim, sweaters, jackets and other casual wear at
260 retail outlets in the U.S., Canada, Mexico, Europe and
Asia, and also markets clothing wholesale and through online
sales. The company produces some 1.5 million pieces
of clothing a week, and generated more than $545 million
in revenue in 2008.
American Apparel utilizes a vertically-integrated business
model that minimizes the use of sub-contractors and
off-shore labor, and that relies heavily on a very efficient,
repeatable and scalable store item-level inventory
management approach. Under that demanding inventory
model, each company store stocks an average of 12,000
SKUs, but keeps just a single copy of each item on the
retail sales floor and replenishing those products from a
backroom stock of 26,000 items once the item is sold.
The company had previously used a barcode scanning
system at the point of sale to trigger the transfer of
inventory from the stock room. But this manual paper
based system requiring store personnel to perform twice weekly
physical counts to confirm overall store inventories.
Those manual counts were time-consuming and costly, typically
requiring 240 man hours a month. The system was also prone to
errors and miscounts, revealing anywhere from 100 to 300 missing
inventory items during each cycle count.
To compete and succeed in today’s demanding retail environment,
American Apparel needed a better way. The company wanted a
replenishment system that would streamline the process of moving
merchandise through backroom storage, staging, store shelves and
sales – and that would reduce the time and cost of those critical
inventory functions.
That’s when American Apparel took a hard look at RFID-based
technology from Xterprise.
High Definition Replenishment
To address the cost and inefficiency of its in-store replenishment,
and to reduce potential lost sales due to out-of-stocks, American
Apparel chose to evaluate an RFID based system to track and
manage in-store inventory.
The company began with a pilot program testing UHF Gen 2 RFID
technology in a single New York area retail outlet. The test involved
the manual tagging of all store inventory, and the use of fixed RFID
readers in the store room, the retail floor and the point-of-sale. As
a vertically integrated manufacturer, American Apparel has the
option of tagging and commissioning to associate each item of
merchandise with a tag at the factory, or tagging manually at the
store.
The Clarity Advanced Retail Solution (ARS) Store Inventory Management
solution from Xterprise gives retailers a broader, more granular
and up-to-the-minute perspective on the flow of merchandise
through their operations. That information enables retail managers
to make smarter and more effective decisions. It allows them to
spot, understand and respond to developing trends in consumer
behavior. RFID technology can be the catalyst that drives lower
costs, enhanced supply chain productivity and greater customer
satisfaction.
The solution deployed for American Apparel utilizes Microsoft
BizTalk Server 2006 R2 and its BizTalk RFID capabilities, providing
enterprise-class scalability at a low total cost of ownership.
Retailers can leverage this High Definition approach to achieve:
- Factory or DC garment tagging
- Box packing and ASN creation at the factory or DC
- Store item-level inventory management
- Tagging
- Receiving
- Transfers
- Returns
- Optimized event-driven back stock to sales floor fulfillment
- Mobile hand held reader inventory and cycle counting
- Management and operational dashboards with key performance metrics
- Automatic alerting of key inventory events
- RMS POS integration for rapid checkout
- RMS receiving integration for accurate receiving
Utilizing RFID-based technology, American Apparel now receives an alert from the POS
that an item has been sold. Store room employees then pick the item from inventory, and
then read the item’s RFID tag to confirm the movement of merchandise from backroom
to a staging area. Once a sufficient number of items have been staged, they are moved
to the retail sales floor where another RFID reader gathers the data needed to confirm
that movement. The system then automatically updates the retail sales floor and
backroom inventory counts.
The initial deployment included factory box packing and ASN generation, in-store
tagging, fixed readers in the: receiving area, back room, area between backroom and
retail sales floor and POS locations, support equipment and installation, software, and
staff training. To affect this implementation, the company made several adjustments,
including changes in inventory processes, training of retail employees, and the
positioning of RFID readers at key locations within each store. Because the company
operated multiple stores – in various geographical locations and often with unique sizes,
traffic patterns and assortments of merchandise – the company wanted to test the RFID
system in a number of locations.
American Apparel worked with Xterprise to implement this RFID solution, including
hardware installation, centralized software provisioning and updates, staff training and
the handling of early-stage support calls.
Faster, Cheaper Replenishment
This RFID-based approach has given American Apparel a more efficient and cost-effective
way to replenish store shelves.
Following the roll-out of this RFID-based inventory system to eight stores, American
Apparel analyzed the performance of this deployment. The company measured a
sales-per-store increased of 14%, thanks mainly to a reduction in out-of-stocks and the
increased availability of store personnel to assist consumers.
Each store saved over 188 hours a month in labor, and an estimated $27,072 per month,
due primarily to reduced cycle counting and store room searches. A statistical evaluation
revealed an average payback of about 4.5 months per store for this RFID inventory
system investment.
Download American Apparel Case Study