RFID may have gotten its start as a technology for supply chains, but three top European retailers see it as so much more

Laurie Sullivan, Contributor

March 4, 2005

5 Min Read

In the past, Tesco didn't count products--including its RFID-tagged DVDs--as they were picked, packed, and shipped from distribution centers to stores. Inventory counts were based on assumptions, Cobain says. That changed in November, when Tesco expanded RFID to one of its distribution centers.

Goods are picked and placed into designated plastic totes that travel around the distribution center on conveyor lines, and the totes are tagged with RFID labels. At certain points along the conveyer system, mounted readers scan the labels and identify tote numbers and electronic product codes to verify where items are in the distribution process. The information is sent back to a central warehouse-management system. When the totes leave the distribution center, they're scanned again to update inventory counts. Readers at the stores that receive products again update the system once stock has been delivered.

Metro store



A demonstration at Metro's Innovation Center shows how RFID technology can be used to sort shelves.

Metro also tried item-level tagging at two Kaufhof department stores in Münster and Wesel, Germany, and at its Neuss distribution center. The item-level inventory-replenishment system was designed to link Metro's point-of-sale platform with its order-processing software. When RFID-tagged garments were scanned at checkout, signals were sent to the order-processing system, which then alerted clerks to restock store shelves. The order-processing software also could report if there was available merchandise in the stockroom or if the store needed to get another shipment from the distribution center. If inventory at the distribution center fell too low, the system was built to automatically send a replenishment signal to the supplier.

The five-month test, completed in November 2003, enabled Metro to test automatic-replenishment processes at the store level. It hasn't moved into mainstream operations at Metro, because the company is taking a slow, cautious approach to its RFID deployment, which includes extensive research to realize maximum benefits.

"We must increase our understanding about the technology and how it will influence our internal business processes," says CIO Mierdorf, who believes it will be a couple of years before Metro dives into item-level tagging. "We're trying to understand where the technology will provide the biggest benefits. It's obvious with logistics and supply chain. Additionally, we try to understand how we can create customer benefits and simplify the shopping process. We know there's more."

Metro is a conglomerate of convenience stores, department stores, supermarkets, electronics outlets, and other retail businesses. It develops and tests many of its RFID systems at what it calls a Future Store supermarket in Rheinberg, Germany, and at a research-and-development lab called the Innovation Center, which it opened in July in its Neuss warehouse.

The work under way at these locations should help Metro modernize its retail systems and applications so they can accept, compute, and act on RFID data. In its 1,500-square-meter Innovation Center, Metro has built a simulated sales floor to test processes related to RFID-tagged clothes and food items, including an RFID-enabled automatic checkout. It even includes a mock distribution center with an RFID-ready automated clothing sorter that scans RFID tags on items and then organizes the pieces for delivery to specific stores. The sorter can process from 4,000 to 8,000 garments per hour, compared with 150 pieces manually.

Metro also is testing an application that directs RFID readers in dressing rooms to scan tags on the clothes customers are trying on, analyze the data, and search a database to find other available sizes and colors of the item and even complementary accessories. The resulting information is flashed on a visual display in the dressing room.

Other retailers are shoring up their applications and technology backbones to support the data, reporting, and visibility that RFID affords the supply chain. To that end, Tesco is moving its software to a standard platform that Cobain calls Tesco in a box, a common set of processes and IT systems, including point-of-sale, enterprise-resource-planning, inventory, and warehouse-management applications that will support RFID in the company's operations around the world. At the platform's core is Retek Xi, an ERP suite from Retek Inc. for merchandising, floor planning, inventory planning and optimization, and warehouse management.

Tesco in a box includes modular sets of software designed to bring up specific locations on an RFID platform in a fraction of the time it would take normally and grow with individual stores' changing requirements. "The upgrade process has four stages, so as the business in that country matures, you plug in the next level of IT system," Cobain says. "We start with defining the business process and use the technology to change the way you do things." Samsung Tesco, which Tesco operates in partnership with Samsung in South Korea, received the first Tesco-in-a-box software, followed by Tesco Kipa in Turkey; stores in Japan are lined up to go live on the application this month. The retailer expects to complete the rollout by the end of 2007.

It may take years for reality--including the systems, apps, business processes, and consumers--to catch up to European retailers' visions of where RFID will take them. But when it does, Europe may well be the continent that rocks the RFID revolution.

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