RFID at Metro Group

RFID AT METRO GROUPHow RFID will improve

its retail supply chain performance

Garuda TeamAlbert Winadi – Fredy Jingga – Kartika Martina Ruru

Situation Overview

Situation•Metro Group to use RFID

Question•What should Metro do next to improve its supply chain with RFID?

Answer •Introduce case-level RFID tagging

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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”

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Cash & Carry

Wholesale

RealHypermarke

ts

ExtraSupermarke

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Media Markt and SaturnConsumer Electronics

About RFID

Radio-Frequency Identification Identification and tracking using radio waves.

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Why RFID?

Automatic Identification• More efficient• Reduce errors in data entry• Save labor time

Electronic Product Code• More information• Precisely identify individual items

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RFID Benefits in Retail Supply Chain

Reduce Shrink in Supply Chain

Improve On-Shelf

Availability

Improve Planogram –Promotion

Compliance

Increase Productivity

and Labor Efficiencies

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Process Flow

Manufacturer

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Current Process

Place Cases on Pallets

Shrink-wrap pallet with barcode

Move pallet to storage

area

Store pallet

Scan & pick pallet, take to shipping area

Assemble pallet for

truckloads

Store Pallet

Scan Barcode on Pallet

Manufacturer

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What Can RFID Improve

Place Cases on Pallets

Shrink-wrap pallet with barcode

Move pallet to storage

area

Store pallet

Scan & pick pallet, take to shipping area

Assemble pallet for

truckloads

Store Pallet

Scan Barcode on Pallet

Manufacturer

at

Improved Process

Place Cases on Pallets

Shrink-wrap pallet with barcode

Move pallet to storage

area

Store pallet

Assemble pallet for

truckloads

Manufacturer

at

Current Process

Unload From Truck

Scan Barcode

Count cases on Pallet and inspect

paper work

Forklift Driver Scan

on Pallet

Transfer Pallet to storage

Receiving and Storing Pallets on DC

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What Can RFID Improve

Unload From Truck

Scan Barcode

Count cases on Pallet and inspect

paper work

Forklift Driver Scan

on Pallet

Transfer Pallet to storage

Receiving and Storing Pallets on DC

at

Improved Process

Unload From Truck

Count cases on Pallet and inspect

paper work

Forklift Driver Scan on Pallet

Transfer Pallet to storage

Store Pallet

Receiving and Storing Pallets on DC

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Current Process

Scan barcode on pallet

Transfer pallet to

picking area

Scanning Pallet

Assemble mixed pallets

for store

Move mixed pallet to SA

Shrink-Wrap and put the

barcode

Sample Mixed pallets and check

for accuracy

Scan Barcode

Picking and Shipping Pallets to Store

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What Can RFID Improve

Scan barcode on pallet

Transfer pallet to

picking area

Scanning Pallet

Assemble mixed pallets

for store

Move mixed pallet to SA

Shrink-Wrap and put the

barcode

Sample Mixed pallets and check

for accuracy

Scan Barcode

Picking and Shipping Pallets to Store

at

Improved Process

Transfer pallet to

picking area

Assemble mixed pallets

for store

Move mixed pallet to SA

Shrink-Wrap and put the

barcode

Sample Mixed pallets and check

for accuracy

Load to Metro Store

Picking and Shipping Pallets to Store

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Pallet vs Case at

An average pallet arriving at an Extra store : 70 cases

Financial Benefit – Pallet 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

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Financial Benefit – Case 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

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Cost Saving

COST SOURCE

Tag Printer

Tag

Portal - Reader

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Growth on Sales at

2005 2006 2007 2008 2009 -

20000.000

40000.000

60000.000

80000.000

100000.000

120000.000

140000.000

84614.000 93075.000

102382.000 112621.000

123883.000

Pallet Case

(in 1,000 EUR)

Savings at

(in 1,000 EUR)

2005 2006 2007 2008 2009.000

10000.000

20000.000

30000.000

40000.000

50000.000

60000.000

70000.000

2357.000 2593.000 2852.000 3137.000 3451.000

39934.000 43927.000

48320.000 53152.000

58468.000

Pallet Case

Cash Flow at

(in 1,000 EUR)

1 2 3 4 5.000

10000.000

20000.000

30000.000

40000.000

50000.000

60000.000

70000.000

40515.00044517.000

48919.00053761.000

59087.000

2937.000 3182.000 3450.000 3746.000 4071.000

Cash Flow - Case

Case Pallet

ROI - IRR

Pallet Case0

100200300400500600700800900

1000

70

995

59

827

ROI IRR

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NPV

Pallet

Case

- 100000000.000 200000000.000

8544247.000

182114706.0

00

NPV

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Q&A Session