By  on April 5, 2006

CHICAGO — Levi Strauss & Co. plans to expand tests of radio frequency identification technology in U.S. and Mexico stores this year.

Glen Bradley, information technology director, U.S. supply chain, for Levi's, told WWD the apparel company tested RFID with one U.S. retailer and is looking for more test partners. He declined to name the retailer involved. The one-store pilot is separate from Levi's work to meet Target and Wal-Mart's RFID compliance initiatives.

The U.S. test follows a successful item-level RFID pilot in a Levi's-owned Mexico City store last year. Levi's outfitted a second Mexican store with RFID technology last month and plans to equip all new stores and remodels in Mexico with the system. By yearend, at least 10 Levi's stores in Mexico are slated to have the technology, according to sources familiar with the project.

In the Mexico City test, item-level RFID tagging reduced stockouts by 56 percent and generated a small sales lift, Bradley said during the National Retail Federation annual conference in January. Cycle counts once took four employees more than two days to complete every six weeks, he said. With RFID, one employee can take inventory in 45 minutes, and the process is done daily. Accuracy levels reach as high as 99.7 percent, Bradley said.

The ability to conduct cycle counts frequently is one of RFID's great opportunities, said Marshall Kay, senior manager and RFID specialist at Kurt Salmon Associates. He said stores often do not know what they do not have in stock, and that leads to lost sales. "Perpetual inventory inaccuracies can lead to as much as a 20 percent loss in comp-store sales opportunity, based on failure to replenish basic items that are thought to be in stock," said KSA principal Mike Brown, citing KSA research during a live Webcast last month.

RFID tracking and frequent cycle counts provide that inventory visibility. "Because you are doing a daily cycle count, you can identify a hole in the planogram, and you know if you don't have it in the back room," said Kay.

With RFID-tagged merchandise, stores can identify priority cartons within an incoming shipment — such as those containing hot sellers or items that are out of stock — and get them to the sales floor quickly.Levi's Mexico City test saw speed improvements in the receiving process, too, Bradley said. Processing 650 units manually had taken at least two hours; with RFID, 650 items are received in 30 minutes, Bradley said.

The Mexico City test used RFID technology from Alien Technology of Morgan Hill, Calif., embedded in labels printed by Paxar and attached to garments. That test involved handheld readers, but Bradley said Levi's is "intrigued" with the prospect of shelf-mounted RFID readers.

There is much talk about RFID technology, but many companies testing it are reluctant to share test results. RFID proponents say more success stories need to be made public to give the movement momentum. There's also concern that business and technology executives still have a steep learning curve to scale.

In an RFID skills survey released in late February, 75 percent of respondents indicated there is not a sufficient pool of talent in RFID technology today. And 80 percent of this group said the lack of people skilled in RFID technology will affect its adoption. The survey was conducted by the Computing Technology Industry Association, a trade association based in Chicago.

"The respondents indicated that training and education of their staff on RFID was one of the major challenges to implementing RFID technology," said David Sommer, vice president of electronic commerce at CompTIA.

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