Is RFID a good investment for Metro ?

1. RFID: Business Issues
Where’s
my ball?
I should
have
placed a
RFID
tag!
Ajal Jose WEB 52
BY

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2
ReaderTag Data Exchange
Tag
• The reader sends commands to the tag via pulse amplitude
modulation
• The tag sends responses to the reader via backscatter modulation
Reader

3. 333
Metro’s RFID Motivation
• Reducing Shrinkage in the Supply Chain. The retail industry
estimates that supply chain shrinkage runs at about 2% of
sales worldwide. In the US it runs around 1.3% or $26 Billion
a year. Analysis shows this can be reduced by 25% if tags
used at the case level and 40% if tags used at the item level
• Improving On-Shelf Availability and Reducing Out-of-Stocks.
Out-of-Stocks run at between 6% and 10% in grocery
retailing and higher in fashion retailing. GMA estimates that
approximately 25% of stock-outs are because of misplaced
items.
• Productivity and Labor Efficiencies. It takes approximately 6
seconds to do a barcode reading. Surveys show that RFID
can improve on that.

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Key Business Concerns: Across all
Businesses
• Standards and technology
• Changing technology
• Limited full scale reference deployments
• The item level problem – high costs versus
potentially high benefits
• Availability of RFID systems
• Current costs of tags and systems
• IT Infrastructure to handle the large amounts of
data
• Interoperability throughout the supply chain
• Who bears the cost, particularly in the supply
chain?

5. 555
Key Business Concerns: Across all
Businesses
• Standards and technology
• Changing technology
• Limited full scale reference deployments
• The item level problem – high costs versus
potentially high benefits
• Availability of RFID systems
• Current costs of tags and systems
• IT Infrastructure to handle the large amounts of
data
• Interoperability throughout the supply chain
• Who bears the cost, particularly in the supply
chain?

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Key Business Concerns: For
Individual Businesses
• Which customers are going to mandate RFID
usage? What is being mandated?
• How will the costs be spread – across customers
mandating technology or across all customers?
• What will the implementation model be?
• How will processes be managed for mandating
customers versus others?
• Fixed versus variable costs for new customers
• Is this technology here to stay? What is the life
time of the current systems? How will this
impact new customers?

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Identifying the Hurdles
• The Business Case: The key hurdle for most
RFID deployments will be coming up with a
business case to support the required
investment
• For a large consumer products manufacturer,
AMR Research estimates that a fully integrated
RFID deployment could cost between $13
million and $24 million.
• Companies complying with a mandate can
expect to invest from $1 million to $3 million

8. 888
Identifying the Hurdles
• Technical Hurdles:
RFID tag readability not 100%
Technology infrastructure will be too
cumbersome
Enterprise systems not designed for high
data volumes likely to be generated by RFID
systems
RFID system speed does not match either
warehouse speed or production speed
atat

9. 1. What factors contribute to in-
store logistics problems in
grocery retailing?
How would pallet and case-
level RFID reduce these
problems?
atat

10. 2. Examine the process flow in
Metro’s grocery supply chain
and identify how these
processes would improve with
the implementation of RFID at
the pallet level and at the case
level.
atat

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Today’s Supply ChainManufacturing
Packaging
Manufacturer’s
Warehouse
Customer
Distribution
Center
Store
‘Backroom’
StoreShelf
Transportation

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Today’s Supply Chain
$ Billions in losses$ Billions in losses
Manufacturing
Packaging
Manufacturer’s
Warehouse
Customer
Distribution
Center
Store
‘Backroom’
StoreShelf
Transportation

13. 131313
Designing the Supply Chain of the Future
Manufacturing Packaging Manufacturer’s
Warehouse
Transportation
Customer
Distribution
Center
Store
Backroom
Store
Shelf

14. 141414
The EPC Network
• A clear view into the supply chain
• Show where all the products are …
• How much a company has …
• Where it is…
• Where it needs to be…
• And when/where it goes missing.
Manufacturing Packaging Manufacturer’s
Warehouse
Transportation
Customer
Distribution
Center
Store
Backroom
Store
Shelf

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3.Is RFID a good investment for Metro? In your analysis, use the benefits
listed in Exhibit 8 of the case and any other benefits mentioned in
the case. Quantify the total savings that Metro would realize from
full-scale implementation of RFID (for both pallet-level and case-
level implementations).
atat

16. YES, RFID Is a good
investment for Metro
atat

17. 4.Which of the three options do
you recommend that Mierdorf
and Wolfram propose to the
RFID steering committee on
December 13?
1. Expand the scope of the current pallet-level RFID rollout.
2. Move to case-level RFID with the manufacturers currently
engaged in the pallet level rollout.
3. Stop the expansion of RFID efforts and focus on traditional
process improvement opportunities.
atat

18. Situation Overview
atat

19. Expand the scope of the current
pallet-level RFID rollout.
atat

20. 202020
Identifying the Benefits
• Inventory Management
More accurate shipments to customers?
Streamline Receiving/Shipping/Invoicing?
Streamline labor utilization?
Better record keeping?
• Order Management
Higher order fill rates?
Easier returns/recalls?
• Collaborative Planning
Increased demand planning accuracy?
Better upstream data from customers/partners?
Reduced safety stocks and shorter lead times?
atat

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Strategic Implementation Roadmap
• Phase I: The Wait and See Phase
No use of RFID technologies
Wait and see approach
• Phase II: The Compliance Phase
Compliance required by customer
No internal use of RFID
• Phase III: The Ramp-Up Phase
Limited applications internally
Mainly containers and pallets tagging
Passive tags
atat

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Strategic Implementation Roadmap
• Phase IV: The Supply Chain Visibility Phase
SKU tracking through out the distribution
channels
Case and pallet tagging
Passive tags
• Phase V: The Advantage Creation Phase
Customized applications
Active tags with Read/Write capabilities
Item level tagging
atat

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RFID Costs
• Hardware installation costs: Significant
• Fine-tuning costs: Medium
• Software costs: Significant
• Process changes: Medium
• Integration costs: Very High
• Maintenance: Medium

24. The Future
"Imagine an Internet of
things, where everyday
objects, rooms, and
machines are
connected to one
another and to the
larger digital world.”
- Business 2.0