Magazine Article | November 15, 2007

Aggressive RFID Solutions, International Supply Chains, And 'Smart' Shopping Experiences

Source: Innovative Retail Technologies

METRO Group saves over $12 million through increased efficiency in its goods-receiving processes alone. 

Integrated Solutions For Retailers, December 2007

Mentioning RFID (radio frequency identification) and retail in the same sentence brings Wal-Mart to mind in the United States. Beyond the borders, however, German retailer METRO Group takes center stage. The company's six sales brands employ 270,000 people in 2,400 outlets scattered throughout Europe and Asia. The company recognized early on that new technologies could drive dramatic improvement in supply chain efficiency and, ultimately, provide a 'smart' shopping experience for customers.

METRO Group got involved very early in the development of RFID strategies along with prominent players such as Procter & Gamble, Wal-Mart, and Gillette. "It was a very early stage of RFID — before EPCglobal [electronic product code] was founded," says Dr. Gerd Wolfram, managing director of MGI METRO Group IT. "It was during these first steps that we determined we needed to test in a real-life environment to uncover challenges." That thought process led to the development of the company's Future Store initiative. 

The initiative was a way for the company and several of its key technology partners to test RFID technology in the live environment of one of METRO Group's smaller supermarket locations. The initial focus was on the goods-receiving process where countless hours are typically spent checking in merchandise. Using specialized EPC Gen-1 and Gen-2 RFID tags from European partner UPM Raflatac, METRO Group began having shipments tagged at the pallet level. All inventory loaded onto a pallet is electronically linked to the corresponding tag, and a comprehensive shipping list is created.

Large, drive-through gates in store receiving areas are equipped with tag readers from Sirit and Intermec, which are managed by TAP (tag acquisition processors) from Reva. Entire pallets of inventory are checked in at once when the pallet passes through the gate. Tracking shipments at this logistics level eliminated manual product check-in processes, reducing labor costs and providing better quality inventory data. By 2005, more than 40 supplier partners were involved and a 20-location rollout was underway. By the end of 2007, METRO Group will roll out pallet-level RFID to the goods-receiving areas in 180 of its stores located in Germany. A benefit analysis reveals a cost savings of 8.5 million Euros per year, which equates to 12 million U.S. dollars, due to efficiency improvements in the goods-receiving process alone.

Tackle Your International Supply Chain
METRO Group took the same processes being applied in the Future Store initiative and began implementing them on the more global scale of the international supply chain. "We are moving the supply chain in two directions," says Wolfram. "First, from the back room of the store to the shop floor, and second, along the international supply chain in our 'Advanced Logistics Asia' initiative." The company's efforts have been especially effective along the Asian supply chain, one of its most important and complex relationships. To spearhead the international effort, an RFID program called 'Tag It Easy' was launched, targeted specifically to Asian suppliers. Much like tracking goods at the pallet level, the purpose of the program is to have all export cartons labeled with an RFID transponder prior to loading them into an overseas shipping container.

Asian suppliers were easily convinced of the benefits of the program, agreeing to participate by tagging all export cartons bound for the company's distribution centers. Once all cartons are tagged, read, and loaded into the overseas container, an advanced shipping notice is created and uploaded electronically to MetroLink, the group's global, Internet-based supplier portal.

The shipping containers arrive at the German distribution centers three months later, and the process then occurs in reverse. The tags are read as export cartons are brought in through RFID reader-enabled gates, automatically verifying them against the shipping list and booking them into the inventory system.

RFID-Enabled Shelves, Tables, And Mirrors Promise A 'Smart' Shopping Experience
Goods-receiving processes and supply chain initiatives are not the only areas where METRO Group is seeing a tremendous impact. The company sees the store floor as the prime opportunity for RFID interaction. Pilot programs are under way now in the company's high-end Galeria Kauhof department stores to test RFID-enabled 'smart' shelves, tables, mirrors, and many other interactive applications. For example, RFID-enabled 'smart' tables feed inventory information to an attached flat screen monitor, showing the customer what styles and sizes are immediately available on that table. Mirrors can detect which garment the customer is holding or trying on and offer recommendations for complementary items.

These pilot programs go well beyond pallet-level ID, diving deep into item-level identification. METRO Group's move to use RFID leads retailing beyond the boundaries of bar code technology, which remains limited by its line-of-sight requirement and need for human intervention.

"We are in a very competitive environment and need to continue looking for solutions to help us in the future," says Wolfram. "There will be complex challenges in terms of international competition, supply chains, and increased costs." With RFID, the route that merchandise takes from production through the supply chain and onto the store floor can be documented all the way through to the checkout line. Order processes, warehousing, and transport can be simplified and accelerated, which in turn, facilitates the demand-oriented production derived from enhanced consumer experiences.

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