2005 March Issue
Cover Story
The Place: Bejing's most exciting retail concept
India's Retail Scene - A study of contrasts
Convention session opens with focus on RFID
Raffles City brings a little Shanghai to Singapore
HOFEX 2005 - an entrée into Asia's hospitality and F&D markets


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Convention session opens with focus on RFID


RADIO-FREQUENCY IDENTIFICATION (RFID), for a second consecutive year, continued to be a buzzword at the NRF convention, although currently only three retail companies in the world seem to be going full-speed ahead in implementing the technology.

And those three, the US giant Wal- Mart, Germany’s Metro and the UK’s Tesco, acknowledged their RFID projects are still in their infancy.

To the astonishment of many, an NRF session on RFID was the opener of its 94th annual convention, a spot normally occupied by distinguished economists forecasting the coming year and discussing what happened the previous year.

In addition, over 20 suppliers of RFID technologies got together to create a fantasy bookstore, using all the RFID technologies, at the exhibition that always accompanies the NRF convention, held once again at New York’s Javits Center. These included IBM, Cisco, Microsoft and Intel.

Wal-Mart’s executive vice-president and CIO, Linda Dillman, discussing Wal-Mart’s strategy and targets for RFID, said: “We believe it will benefit everyone involved.” She noted that, two years ago, Wal-Mart first challenged its 100 largest suppliers to be RFID-ready by November 2004. Full implementation started in January 2005. The initial thrust: Implementation at the pallet and, if feasible, the case level. (Item level seems to be in the distant future.)

The appearance and speech by Dillman was essentially out of character for Wal-Mart, which prefers not to share information with colleagues and the media. But the huge chain describes the RFID project as vitally important for its success, and for the industries it is working with.

“It is a journey we are just beginning,” Dillman said, “and we believe it will benefit everyone.”

It has been reported that, in addition to the original 100 suppliers on the “must do” list, another 37 have adopted RFID, some with a “slap and ship” (slap the chip on the pallet and hope for the best) attitude.

As of January this year, Wal-Mart was using RFID in 104 of its Wal-Mart stores, 36 Sam’s Clubs and three distribution centres, a minuscule part of the behemoth.

“[Now] two weeks into January, 57 suppliers are online, live; we have received 7,161 tagged pallets and 210,000 tagged cases, with 1.5 million ‘reads’ and in these stores we are running automated and prioritised pick lists and exception reporting.”

The benefits Wal-Mart expects from RFID:

  • Reduced inventory in its stores.
  • Increased inventory turns.
  • Increased efficiency in finding and handling shipments.
  • Reduced over-ordering and, for suppliers, less risk of overproduction.
  • Reduced loss for date-coded items (mainly, food items).

Most challenging, Dillman said, is “reading all the information on a pallet as it travels though a store”. Wal-Mart is currently getting a 66% read rate — “better than I thought.”.

She showed a video that was stunningly simple: An employee with a handheld device, working his way through a backroom warehouse. “You tell it [the device[ what to look for, and it tells you if you are getting ‘colder’ or ‘hotter’ in your search” — just like a child’s game.

“It beeps, and our associates [employees] love it. This is all as close to realtime information as we are going to get, for a while,” Dillman said, describing the RFID ability to notify suppliers of changes in inventory within 30 minutes.

Metro Group’s CIO, Zygmunt Mierdorf, said that RFID “will help us fill the requirements of our customers”.

However, the going is not rapid. It will be “10 years down the road” before Metro expects 100% compliance. But, “we are satisfied with the results so far”. Introduced in November 2004, with only 20 suppliers, only 20 stores and three divisions participating, Metro is experiencing results that are “more than satisfying”.

“Although we had to meet a lot of technical challenges, we are now able to speed up our receipt of goods process, thanks to RFID. A high reading accuracy makes us optimistic about the next step — equipping unit levels, such as carts and cases, by November 2005.”

Mierdorf demonstrated some of the RFID process in a live, real-time transmissions form Metro’s Neuss, Germany, RFID Innovation Centre. The live demonstration showed fully automatic order- picking of apparel items, including the use of hanger-goods sorters, which can arrange from 4,000 to 8,000 items in one hour, based on their destination.

Three Metro sales divisions in Germany have been participating since November 2004: Two Metro Cash & Carry stores; five Kaufhof distribution centres; and 11 Real hypermarkets. The first phase of the roll-out includes consumer- goods producers such as Gillette, Kraft Food and the apparel manufacturer Esprit. Over 90% of the smart chips are reading accurately, he said. A second generation of smart chip is to be available from mid-2005.

In the coming months, Metro will concentrate its efforts on winning additional industrial partners and increasing the number of participating warehouses and stores, and participating in the further development of RFID standards.

Tesco’s Colin Cobain said he likes to call RFID “radio bar codes” because “that is what it is”, and retail people have Attendees visiting the exhibition floor at NRF 2005: The convention and expo pulled in 14,500 visitors. identified for years with bar codes. For the huge UK-based grocery chain, the RFID impetus is at the pallet level and Cobain said the benefits are: “It is better for customers; simpler for staff and will be cheaper for Tesco.”

He described Tesco’s “secure supply chain” initiative as an initial effort to provide a method of tracking high-value and high-shrink products through its supply chain and into its shops.

Cobain said the radio barcode technology is “making life better for our customers, through improved merchandise availability and because it free up staff to spend more time with our customers”. The efficiency improvements and reduced shrink also help lower Tesco’s costs.

The roll-out to Tesco’s over 1,400 UK stores and 30 distribution centres is due for completion by year-end. Cobain demonstrated RFID use at Tesco in a video, showing the movement of trays of goods throughout the supply system. Currently, the RFID tag is applied to incoming goods on the back of the bar code’s ID label.

Tesco’s roll-out with suppliers is to be by product category. “High-value products and those that require more handling in the supply chain are “obvious candidates” for roll-out and, as costs come down, Tesco will reach further into its product range.

Products shipped in reusable containers provide “excellent opportunities”, because read performance is good and tag cost is negligible, he said. (Some industry sources suggest tag cost is about US$0.25 each.)

But, he cautioned: “We will not ask suppliers to do anything until the standards for the technology are fully in place and proven, with a level of stability, to remove the risks and costs of changing technologies. (Such standards are expected by late summer.)


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