Metro Group, German's leading retailer, aims to optimize its supply chain performance with RFID. The initial results are satisfactory, and right now the company arrives at a new question: Expand the already-proven pallet tagging, or increase the granularity with case-level tagging?

1. RFID AT METRO GROUP
How RFID will improve
Metro Group retail supply chain performance
Garuda Team
Albert Winadi – Fredy Jingga – Kartika Martina Ruru

2. at
Situation Overview
• Metro Group to use RFID
Situation
•What should Metro do next to
Question improve its supply chain with
RFID?
• Introduce case-level RFID
Answer tagging

3. at
About Metro AG
 Germany’s biggest retailer
 €56.4 billion sales in 2006
 2,300 locations in 30 countries
 250,000 employees
 6 independent “Retail Formats”
Cash & Carry Real Extra
Wholesale Hypermarkets Supermarkets
Media Markt and Praktiker Galeria Keufhof
Saturn
Consumer
Building Department
Electronics Materials Stores

4. at
About RFID
 Radio-Frequency Identification
Identification and tracking using radio waves.

5. at
Why RFID?
Automatic Identification
• More efficient
• Reduce errors in data entry
• Save labor time
Electronic Product Code
• More information
• Precisely identify individual
items

6. RFID Benefits in Retail Supply at
Chain
Reduce Improve Increase
Improve
Shrink in Planogram – Productivity
On-Shelf
Supply Promotion and Labor
Availability
Chain Compliance Efficiencies

7. at
Process Flow
Receiving and
Storing Pallets
on DC
Picking and
Manufacturer Shipping Pallets
to Store

8. at
Current Process
Manufacturer
Assemble
Place Cases
pallet for Store Pallet
on Pallets
truckloads
Shrink-wrap Scan & pick
Scan Barcode
pallet with pallet, take to
on Pallet
barcode shipping area
Load Truck
Move pallet to
Store pallet ship to Metro
storage area
DC

9. at
What Can RFID Improve
Manufacturer
Assemble
Place Cases
pallet for Store Pallet
on Pallets
truckloads
Shrink-wrap Scan & pick
Scan Barcode
pallet with pallet, take to
on Pallet
barcode shipping area
Load Truck
Move pallet to
Store pallet ship to Metro
storage area
DC

10. at
Improved Process
Manufacturer
Load Truck
Place Cases
Store Pallet ship to Metro
on Pallets
DC
Shrink-wrap Assemble
pallet with pallet for
barcode truckloads
Move pallet
to storage Store pallet
area

11. at
Current Process
Receiving and Storing Pallets on DC
Scan Storage
Unload From
Barcode to verify Store Pallet
Truck
Location
Transfer Pallet to
Scan Barcode
storage
Count cases on
Pallet and Forklift Driver
inspect paper Scan on Pallet
work

12. at
What Can RFID Improve
Receiving and Storing Pallets on DC
Scan Storage
Unload From
Barcode to verify Store Pallet
Truck
Location
Transfer Pallet to
Scan Barcode
storage
Count cases on
Pallet and Forklift Driver
inspect paper Scan on Pallet
work

13. at
Improved Process
Receiving and Storing Pallets on DC
Unload From
Truck
Count cases on
Pallet and
Store Pallet
inspect paper
work
Forklift Driver Transfer Pallet to
Scan on Pallet storage

14. at
Current Process
Picking and Shipping Pallets to Store
Sample Mixed
Scan barcode on Shrink-Wrap and pallets and
pallet put the barcode check for
accuracy
Transfer pallet to Move mixed
Scan Barcode
picking area pallet to SA
Assemble mixed Load to Metro
Scanning Pallet
pallets for store Store

15. at
What Can RFID Improve
Picking and Shipping Pallets to Store
Sample Mixed
Scan barcode on Shrink-Wrap and
pallets and check
pallet put the barcode
for accuracy
Transfer pallet to Move mixed
Scan Barcode
picking area pallet to SA
Assemble mixed Load to Metro
Scanning Pallet
pallets for store Store

16. at
Improved Process
Picking and Shipping Pallets to Store
Transfer pallet to Load to Metro
picking area Store
Sample Mixed
Assemble mixed pallets and
pallets for store check for
accuracy
Move mixed Shrink-Wrap and
pallet to SA put the barcode

17. at
Pallet vs Case
An average pallet arriving at an Extra store : 70 cases

18. Financial Benefit – Pallet at
Tagging
Specific Change €-cent/Pallet
Manufacturer Truck loading at manufacturer 20
Auto scanning at warehouse 5
Process Change 25
Total benefit 50
Retailer Auto scanning in receiving and storing pallets 11.2
Auto scanning in order assembly 2.8
Truck loading for shipments 1.7
Total benefit 15.7

19. Financial Benefit – Case at
Tagging
Specific Change €-cent/Case
Manufacturer Increase profit from better on-shelf status 7
Total benefit 7
Retailer Eliminate case counting in receiving goods 0.3
Labor reduction in picking mixed pallets 1.7
Eliminate sample checks of mixed pallets 0.3
Reduce inventory counts 0.1
Reduce mispicked cases 1.5
Increase profit from better on-shelf status 5
Total benefit 8.9

20. at
Cost Saving
COST SOURCE
Tag Printer
Tag
Portal - Reader

21. at
Growth on Sales
140000.0
120000.0
123883.0
100000.0 112621.0
102382.0
80000.0 93075.0
84614.0
60000.0
40000.0
20000.0
-
2005 2006 2007 2008 2009
Pallet Case
(in 1,000 EUR)

22. at
Savings
70000.0
60000.0
50000.0 58468.0
53152.0
40000.0 48320.0
43927.0
30000.0 39934.0
20000.0
10000.0 2357.0 2593.0 2852.0 3137.0 3451.0
.0
2005 2006 2007 2008 2009
Pallet Case
(in 1,000 EUR)

23. at
Cash Flow
Cash Flow - Case
70000.0
60000.0
50000.0 59087.0
53761.0
40000.0 48919.0
44517.0
30000.0 40515.0
20000.0
10000.0 2937.0 3182.0 3450.0 3746.0 4071.0
.0
1 2 3 4 5
Case Pallet
(in 1,000 EUR)

24. at
ROI - IRR
1000
995
900
800 827
700
600
500
400
300
200
100
0 70 59
Pallet Case
ROI IRR

25. at
NPV
Case 182114706.0
Pallet 8544247.0
- 50000000.0 100000000.0 150000000.0 200000000.0
Pallet Case

26. Q&A Session