Dillard's RFID Roadmap - Chuck Lasley, Director of Merchandising and Supply Chain Applications Dillard's, Inc.

Dillard’
       s RFID Roadmap
Chuck Lasley, Director of Merchandising and
        Supply Chain Applications
               Dillard’s, Inc.

                April 4, 2008

Dillard’
       s, Inc.
• One of the top U.S. fashion apparel
  and home furnishing retailers.
• 330 stores in 29 states.
• All carry the Dillard’
                       s nameplate.
• Revenues exceeding $7.7 billion.

Dillard’
       s, Inc.
• Established 1938 –Nashville, AR.
• Corporate HQ in Little Rock, AR.
• Rapid Growth Via Acquisitions.
• Publicly traded on NYSE as DDS.
• Website www.dillards.com.
• The Dillard family actively involved
  in the company operations.
• 60,000+ Associates.
• 500+ IT Associates.
• 130+ Developers.

Completed Testing and Pilots

• August, 2006 –Dillard’   s and Paxar (now Avery Dennison) did an item level test
  at a Dallas, TX store. Results: It was determined that item level tagging was
  feasible and this should be a long-term goal pursued by Dillard’    s.
• Fall 2006 –Dillard’ s engaged the University of Arkansas for extensive carton
  level testing in their RFID lab. Results: Carton level tagging was feasible and a
  pilot project should be started.
• March, 2007 –Dillard’   s began it’s first pilot by tagging secure totes from one
  distribution center to one selling store. Results: 100% RFID tag readability on
  plastic reusable shipping cartons was achieved.
• July, 2007 –Dillard’  s carton-level tagged an entire trailer of merchandise going
  from a pilot distribution center to a pilot store. Results: Revealed certain
  scenarios where a carton level RFID tag could be missed when being
  loaded/unloaded from a trailer. Overall read rates were still impressive.

First Item Level Pilot
• Dillard’s worked with one vendor
  to tag a select number of styles
  of denim product at the carton
  and item level.
• The scope of the pilot was one
  distribution center and one pilot
  store.
• The pilot began in October, 2007
  and ran until the end of January,
  2008.
• The goal was to determine the
  accuracy of RFID at an item
  level.

First Item Level Pilot –Distribution Center
• Cartons were received at the Dillard’ s
  distribution center receiving dock.
• RFID tagged cartons were routed to a special
  processing area.
• In the processing area, the cartons were
  singulated on a gravity line where they rolled
  though an RFID portal.
• The carton’ s tag as well as any items tagged
  within the carton were read as the carton rolled
  down the line.
• A light indicated an RFID read took place.
• The carton and its contents were then barcode
  scanned and pushed out to shipping.
• The RFID counts were compared to both the
  Advanced Ship Notice (ASN) and the barcode
  counts to determine performance results.

First Item Level Pilot –Distribution Center
• The carton level RFID tag was read again
  as it is was loaded onto the outbound
  trailer.
• Cartons are typically either hand carried
  onto the trailer or fed into the trailer using
  an extendible conveyor.
• A single reader with one antenna hung
  over the shipping door was used.
• Additional antennas were hung above
  adjacent shipping doors to determine the
  amount of bleed-over reads being seen.
• Cartons were floor loaded with all
  garments on hangers being placed on
  ropes at the rear of the trailer.

First Item Level Pilot –Store Receiving
• A single reader with one antenna
  hung over each of the three
  shipping doors was used.
• RFID tagged cartons were read as
  they passed under the antennas.
• Associates barcode scanned and
  sorted the cartons by department
  and delivered them directly to the
  selling floor for immediate put
  away as normal.
• Barcode scans were being
  compared with RFID reads.

First Item Level Pilot –Store Selling Floor
• Sales associates performed daily
  RFID cycle counts.
• Once a week these counts were
  compared to the legacy inventory
  management system and a barcode
  scanned inventory count.
• Tags were read and removed at the
  point-of-sale terminal.
• Customer returned merchandise was
  re-tagged in store as was
  merchandise that happened to come
  in untagged.
• Signs explaining how Dillard’
                              s is
  using RFID appear on the shelves
  and at the sales register.

Next Phase –Expand Current Pilot
• Three month study with the
  U of A to determine effects
  of RFID item level tagging
  on inventory management,
  sales, shrink, and out of
  stocks. Started Feb. 2008.
• Expand current pilot to add
  more denim styles and two
  brands of high-end hand
  bags.
• Add an additional RFID-enabled store and two control stores.

Expanding the Scope
•Move into other product lines such as shoes,
 fashion apparel, cosmetics and suits.
•Begin partnering with other vendors that want to
 begin item level tagging.
•Explore source tagging of private label
 merchandise.
•As departments become 100% RFID tagged, the
 tagging will be expanded to other stores.

Future Goals –D.C. Yard Management
•Apply RFID tags to tractors and trailers.
•Track their movements and location via mobile
 readers and/or GPS on hostler trucks.
•Expedite gate check-in and check-out of trailers.

Future Goals –Distribution Centers
•Quickly audit and route every carton coming into
 a distribution center.
•Add portals at the receiving dock to evaluate
 carton contents as cartons are unloaded by
 comparing the RFID read to the ASN.
•Any carton with contents that adequately match
 the ASN will be eligible for immediate cross dock.

Future Goals –Store Receiving Dock
• Introduce item level receiving
  at the store by reading each
  carton and its contents as it is
  unloaded off of the trailer.
• Adds an additional check of
  contents before they are
  added to the store’  s inventory.
• Explore reader on trash
  compactor to see carton tag’   s
  end-of-life or item tags exiting
  through the trash door.

Future Goals –Store Inventory
•Be able to view real time store inventory counts.
•Enable daily checks of merchandise levels
 instead of waiting for semi-annual inventories.
•Explore the use of shelf readers, ceiling-mounted
 readers, hand held and cart mounted readers.

Future Goals –Store Markdowns
•Explore Gen 2 Class 3 battery-
 assisted tags on items to allow
 mass retail updates via RFID.
•Improve the current retail mark-
 down process by using these
 electronic smart ink tags.
•Turn a very manual and costly
 process into an automated function.

Future Goals –Customer Service/Shrink
•Explore the use of smart mirrors or shoe smart
 cubes to interact with and educate customers.
•Use item level tags as a proof-of-purchase tag to
 simplify the return process and address fraud.
•Explore RFID as an EAS device.
•Increase the true visibility of inventory levels to
 insure that customers can find the merchandise
 they want when they want it.

Closing Thought
• The true value of RFID will be realized when
  vendors and retailers achieve the common goal of
  item level tagging. This will open up a realm of
  possibilities that were previously unavailable in
  the barcode world.

Thank You!

For more information about Dillard’
                                  s and RFID, see
  our website at www.dillards.com and click on the
  RFID tab.