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Chapter 8
ANOTHER LOOK

RFID and Corporate Culture
American Apparel is a unique company even by the standards of the fashion industry.
The company was founded in 1989 by Dov Charney, who started out in the clothing
business as a college student selling t-shirts. Eventually, Charney built American Apparel
into a vertically integrated fashion company that makes its clothing in Los Angeles
rather than importing it from manufacturers in low-wage countries. In addition to
manufacturing its own clothes, American Apparel designs its own garments, which it
sells through a network of company-owned stores. The company also creates all of its
218 advertising and marketing materials (which are known for generating heated
controversy).
However, while the American Apparel was cultivating a hip image in the world of
retail, it was also developing a reputation for being soft on shoplifting. Former employees
allege that managers were asked to turn a blind eye to shoplifting so the “right type of
person” would be wearing American Apparel clothing. In addition, lax internal controls
over shipping and delivery combined with young store employees allegedly hired more
for their looks than for their management ability led to high levels of employee theft. In
an initial trial of RFID tags on garments in 2007, American Apparel found that inventory
“shrinkage”—a reduction in inventory due to human error, theft, or damage—was
20 percent, double the retail industry average. Employee theft was clearly a significant
portion of this high level of shrinkage.
While reducing theft is an important part of American Apparel’s RFID initiative,
improved customer service is the primary goal. With RFID, American Apparel can use a
continuous replenishment process to ensure on-shelf availability of their products. RFID
also improves on-the-rack availability and inventory control at American Apparel by
reducing mistaken identity. Many of American Apparel’s styles look similar, and
manually inputting inventory data increases inventory accuracy problems. Stores with
the RFID technology now have inventory accuracy above 99 percent, and in many
stores, the RFID technology has paid for itself within 6 months, based on inventory cost
savings. “We measure everything, and have accountability of every item. Every item
counts, and when we change that culture, employees start treating products better,” says
Stacey Shulman, American Apparel’s vice president of technology. On February 8, 2012,
American Apparel reported that it intends to equip all of its 285 stores with RFID
technology.
Questions:
1. RFID technology allows a company to more accurately track employee
performance—from mistakes in inventory handling to theft. How would you
feel about working at a company that used RFID technology to monitor your
performance? Do you think this use of technology is good for a company’s
culture?
2. In what other industries might RFID technology have an impact similar to that
seen at American Apparel?

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