Its for education purpose only based on a case study of 'RFID at the Metro'.

1. TOPIC : RFID AT THE
METRO GROUP

2. ABOUT METRO COMPANY
Germany biggest retailer
Founded : Otto Beisheim, 1964
56.4 Billion sales in 2006 (Became world 3rd largest retailer)
2,300 locations
30 Countries
2,50,000 employees

3. SIX INDEPENDENT RETAIL FORMATS OF
METRO
Cash & Carry Wholesale
Real Hypermarket
Extra Supermarket
Media Markt and Saturn Consumer Electronics
Praktiker Building Materials
Galeria Keufhof Departmental Store

4. ANNOUNCED RFID TECHNOLOGY ROLLOUT IN
EARLY 2004
Target
250 metro stores.
10 metro warehouse
In collaboration with 100 suppliers.
(For the rollout in April 2003 testing started for RFID technology in Metro’s
Future Store )
By August, 2005 RFID rollout expanded to,
13 metro stores
9 metro DCs
33 suppliers

5. WHAT IS RFID
(RADIO FREQUENCY IDENTIFICATION)
TECHNOLOGY?
RFID belongs is automatic range identification technology used to
identify people or objects
It used radio waved to automatically identify people or objects as
long as the i-tag passed within the range of RFID reader.
It consist of three things
1. RFID tag or intelligence tag (I-tag)
2. RFID reader
3. Middleware (Computer)

6. PALLET AND CASES DIFFERENCE

7. SYSTEM AND PROCESS
REQUIREMENTS FOR
IMPLEMENTING RFID
.

8. 1. RFID TAG (I-TAG)/INTELLIGENCE
TAG
•Metro’s suppliers need to purchase RFID tags.
•Class 1/Gen 1 tag type (Passive tag) to be used, which data could be
written once and read many times.
•Print the appropriate Electronic Product Code (EPC)
•It specified what was stored in each pallet, on each tag using RFID
printer.
(Inner) (Outer)

9. PROCESS FOR USING I-TAG
The supplier need to affix the I-tag (RFID tag) to the right
locations on the pallet to ensure high reading quality.
Full length of I-tag must be visible for RFID reader
Suppliers need to send a shipping note with
a Serial Shipping Container Code (SSCC)

10. TYPES OF RFID INTELLIGENCE TAG
(I-TAG)
1. Passive I-Tag
•Derived their energy from radio frequencies transmitted by readers
•30 feet range
•Cost $0.20 to several US Dollars
2. Active I-Tag
•Contained their own battery sources and could broadcast signals
•Had a range up to 300 feet
•Cost from $20 to $50 US Dollars

11. 2. RFID PORTAL (READER)
•Cost €8,500.
•To be installed at the entry and exit.
•Facilitates data transfer between the reader and the edge server (Computer)
•Edge server would send the shipment data to the servers at the headquarter
to compare shipment data with the advanced shipping note (SSCC)
•Green light indicates if it was matched indicating successful.
•Red light would turn on if there was some problem. (Reading I-tag problem
or portal problem)
•If there was reading problem the employee would manually check the
delivery.
•If there was mismatched between what was sent and what was ordered,
employees would correct the invoice

12. RFID READER

13. 3. EDGE SERVER
(COMPUTER)/MIDDLEWARE
•The computer that runs middleware were called edge servers.
•It is usually placed near the RFID readers.
•It act as a store-house of data.
•It filtered reader’s data and passed it to enterprise applications.
•Some middleware managed the readers : It could monitor their
performance. Configure them, or send software updates

15. WHY TO ROLLOUT WITH RFID?
Automatic Identification
More efficient
Reduce errors in data entry
Save labor timeElectronic Product Code
More Information
Precisely identify individual
items
• .

16. 1. ANALYSIS ON USING PALLET-LEVEL TAGGING
(TO IMPROVE TRUCK LOADING PROCESS AT THE MANUFACTURE’S
WAREHOUSE)
•With RFID, the truck drivers could automatically check the identity of
the pallet eliminating manual scanning.
•Warehouse personnel would not need to supervise the entire loading
process.
Metro estimated manufacturer could save
•10 minutes of supervising time for each of the 15 trucks everyday.
•Assuming 250 working days and a labour cost €25 per hour.
•The manufacturer could save €16,000 per year or €0.20 per pallet
shipped.

17. 2. ANALYSIS ON USING CASE-LEVEL TAGGING
(TO IMPROVE MIXED-PALLET PICKING AT METRO DC’S)
•Through RFID, DC generate picking orders and forward to pickers
(Employees)
•Picking orders indicate mix of cases in the pallet.
•Each mixed pallet consisted 80 cases on average.
•Having picked cases, the picker confirmed the number of picked
cases using a handled device (Reader).
Metro estimated,
•Saving of 4 minutes for each 1,300 pallets per day.
•Cost saving of €430,000 of €0.003 per case.

18. 3. ANALYSIS ON USING CASE –LEVEL TAGGING
(TO IMPROVE SHELF RE-STOCKING AT STORES)
•With RFID, employees would know which products were available in the backroom.
•Using the RFID data in combination with Point-of-Sale (POS) data, store personal would be
notified of products needing to be replenished from the backrooms.
Metro estimated
•With RFID, in-stock rate would increase to 98%
•Increase in in-stock levels would lead to 0.5% increase in store sales
Assuming, a price €2 and a gross margin of 25% on each additional product being sold.
•Metro profit would increase by €0.5 per additional product sold.
•With 20 products per case, 0.5% increase in sales would generate an additional profit of
€0.05 per case.

19. KURT SALMON ASSOCIATES (KSA)
ESTIMATION
According to KSA (A consulting firm), after examining process and
product flows using RFID at the ‘Extra Future Store’
Identified 3 sources of benefits
1. RFID at case level would result 17% labour reduction.
2. 11% to 18% theft reduction
3. 9% to 14% stock-outs reduction (due to product being in the
backrooms but not on the selling floor/shelves)

20. PROBLEMS BEFORE RFID
AND
SOLUTIONS AFTER RFID
.

21. 1. REDUCE SHRINK IN SUPPLY
CHAIN
Problem
•Shrink levels is 2% of sales worldwide which cost the company to
incur huge losses.
•It was estimated that theft constitutes 1.3% of sales which is around
$26 Billion.
Solution
•As per IBM analysis, RFID could reduce shrinks for average retailers
by 25% if used in Case-level and up to 40% if used in pallet-level, by
reducing theft.

22. 2. IMPROVE ON-SHELF AVAILABILITY AND REDUCING
OUT OF STOCKS
Problem
•Out-Of-stocks was found approximately 6% - 10% in grocery retailing.
•This was found to significantly impact on sales, brand loyalty, and consumer’s
satisfaction.
•The store receives case packs but all could not fit on the display shelf. They were
supposed to be in display shelf when the units displayed are sold, but it could not be
managed in time.
• Hence, the product remains in the backrooms and were not available to the customers.
•It was found that 25%-30% of all grocery stock-outs involved products that were at the
store backrooms but not on the display shelves.
Solution
•RFID technology could improve replenished process from the backrooms and hence
reduces out-of-stocks at the stores.
•This can be done by placing RFID portals at store receiving docks and at the door from the
backroom to the selling floor.
•In addition, RFID could reduce stock-outs by improving the accuracy of inventory data and
providing stock visibility.

23. 3. IMPROVE PLANOGRAM-PROMOTION COMPLIANCE
Problem
•Stores often lacked the resources necessary to carry out so many
events which were agreed with manufacturers.
•Manufacturers have to hire third party to visit the store for the
improvement of planogram and promotion compliances.
Solution
•RFID technology could provide data on the location of the products
and hence improve planogram and promotion compliance.
•Store data shared with manufacturers , allows the manufacturer to
observe weather their agreement were being executed at the store
level

24. 4. INCREASE PRODUCTIVITY
Problem
•There was low productivity and high labour cost in maintaining stocks
from manufacturers to distribution channels and to stores.
•All process involved manual data entries and bar scanning for
dispatch and deliveries of products.
Solution
•With the RFID technology, I-Tag will be used in the pallets and cases.
•While passing through the exits and entrances, products will be scan
automatically leading to update all data automatically.

25. STARTING THE ROLLOUT OF RFID (2004)
1. At Pallet-level
Started with few large suppliers like Gillette, Nestle, and Esprit
In 20 Metro distribution centres (DC) and stores.
Extreme situation, 1 pallet contains 900 cases
1 pallet = 60 to 80 cases
33 to 36 pallets per truck

26. PROBLEM FACED AT PALLET LEVEL
•Human errors
•Technology problems
•Suppliers used low quality tags which made it difficult to read tags.
•RFID implementation cost.
•Problems with the connections of middleware i.e., advance shipping
note contains the wrong information.
•Insufficient trainings to employees.
•Nevertheless, between November 2004 and July 2005, Metro’s read
accuracy increased from 30% to over 90%.

27. FINANCIAL BENEFIT – PALLET LEVEL TAGGING
Manufacture
r
Specific Change €-cent/pallet
Truck loading 20
Auto scanning at warehouse 5
Process change 25
Total benefit to
manufacturer
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 to retailer 15.7

28. 2. MOVING TO CASE-LEVEL TAGGING
By mid 2005, the company was able to work with 33 suppliers, 13
stores and 9 distribution centres. Here, tagging was done for each
cases which is a part of pallet.
Problems faced
•Requires more involvement for the manufacturers and Metro.
•Purchase more tags.
•Process change is required inside the manufacturers plant.
•Changes in Metro’s IT system
•More investment in employees training at its stores and DC’s

29. FINANCIAL BENEFIT - CASE LEVEL TAGGING
Specific change €-
cent/case
Manufacturer Increase profit from better on
shelf status
7
Total benefits to manufacturer 7
Retailer Eliminate case counting in
receiving goods
0.3
Labour reduction in picking
mixed pallets
1.7
Eliminate sample checks of
mixed pallets
0.3
Reduce inventory counts 0.1
Reduce mis-picked cases 1.5
Increase profits from better
on-shelf status
5
Total benefit 8.9

30. FINANCIAL ANALYSIS

31. The total cash flow of the company had grown by 839.3% for 2003-
04.
0
100
200
300
400
500
600
2003 2004
Years
Total cash flow (€ Million)
Total cash flow (€ Million)

32. The growth of Net sales from 2003-04 was 5.25%.
52000
52500
53000
53500
54000
54500
55000
55500
56000
56500
57000
2003 2004
Years
Net sales € Million
Net sales € Million

33. The growth rate of balance sheet for 2003-04 was 5.69%.
By comparing the above financial data it can identified that Metro Group had
gained by implementing RFID technology in their business operations.
25500
26000
26500
27000
27500
28000
28500
2003 2004
Years
Position Statement (€ Million)
Position Statement (€ Million)

34. QUESTION AND ANSWER
For December13, 2005 steering committee, Mierdrof CIO (Chief
information officer) and Wolfram MD (Managing Director) wondered
what course of action they should recommend based on the rollout
experienced so far.
Best Option (Answer)
1. Expand pallet-level RFID tagging to more suppliers.
2. Introduce case-level tagging .By entering into a deeper
relationship with the suppliers that had already introduced pallet-
level tagging.

35. .
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