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SCM 502 / MIS 503SCM 502 / MIS 503October 21, 2005October 21, 2005
Woolworths CaseWoolworths Case
Woolworths Group plc and its problemsWoolworths Group plc and its problems RFID: Technological ReviewRFID: Technological Review Pilot ProjectPilot Project Financial AnalysisFinancial Analysis RecommendationsRecommendations
Woolworths Main FocusesWoolworths Main Focuses
Principal UK retailer of products for homePrincipal UK retailer of products for home Entertainment (E.UK, 2 Entertain, and Entertainment (E.UK, 2 Entertain, and
Streets Online)Streets Online) Home & FamilyHome & Family Kids (toys and clothing)Kids (toys and clothing) ConfectionaryConfectionary
Average annual income - Average annual income - £2.7 billion£2.7 billion
Woolworths Major Management Woolworths Major Management StrategyStrategy
Centralize accountingCentralize accounting Invest in new technology and new Invest in new technology and new
information systemsinformation systemsRationalize the store baseRationalize the store baseReduce the costsReduce the costsCentralize distributionCentralize distribution
Woolworths Major ProblemsWoolworths Major Problems
Inventory shrinkage (56%):Inventory shrinkage (56%):1.1. Incorrect shipment deliveriesIncorrect shipment deliveries
2.2. Stock lossesStock losses
Theft (44%):Theft (44%):1.1. Theft in transitTheft in transit
2.2. ShopliftingShoplifting
RFID: Technological ReviewRFID: Technological Review
RFID – RFID – Radio Frequency IdentificationRadio Frequency IdentificationGeneric termGeneric term for technologies that use for technologies that use
radio wavesradio waves to to automatically automatically identifyidentify people or objects people or objects
An RFID TagAn RFID Tag
CHIP
ANTENNA
SUBSTRATE
Active RFID TagsActive RFID Tags
Active TagsActive TagsCatch the attention of the RFID reader by Catch the attention of the RFID reader by
sending out a signalsending out a signalFunction with battery powerFunction with battery powerCan be detected over a greater distance Can be detected over a greater distance Are more expensiveAre more expensive
Passive RFID TagsPassive RFID Tags
Passive TagsPassive TagsAlert the tag to communicate through a Alert the tag to communicate through a
reader when the reader’s signal is detected reader when the reader’s signal is detected by the tagby the tag
Communicates without battery powerCommunicates without battery powerDerives power from the reader’s Derives power from the reader’s
electromagnetic fieldelectromagnetic fieldSmaller range of detectionSmaller range of detectionRelatively inexpensiveRelatively inexpensive
How RFID works?How RFID works?
RFID Tag RFID Reader Middleware
Enterprise System
Why use RFID?Why use RFID?
Labor-saving technologyLabor-saving technologyMonitoring and controlMonitoring and controlSecuritySecurityTransparencyTransparency Information integration and flowInformation integration and flowMeet customer specificationsMeet customer specifications
Woolworths Pilot ProjectWoolworths Pilot Project
Serviced its 800+ stores through 4 DC:Serviced its 800+ stores through 4 DC: 2 primary and 2 seasonal 2 primary and 2 seasonal
100,000 roll cages (large items) 100,000 roll cages (large items) Totes for smaller items Totes for smaller items Initial challenge: define a manageable scope in Initial challenge: define a manageable scope in
terms of the products, vehicles, stores and DC. terms of the products, vehicles, stores and DC. SwindonSwindon - “proof of concept”- “proof of concept” System tracks dollies to stores and back again System tracks dollies to stores and back again
Woolworths Pilot ProjectWoolworths Pilot Project
““Russian Doll” strategy achieves item-level visibility without Russian Doll” strategy achieves item-level visibility without item-level tagsitem-level tags
Combined technologies to reduce theft and lost items:Combined technologies to reduce theft and lost items:
- Bar Codes on individual items and tote boxes- Bar Codes on individual items and tote boxes
- Active RFID Tags - Active RFID Tags
- Short & long range RFID devices within DC- Short & long range RFID devices within DC
- RFID Readers to track movements from DC to stores- RFID Readers to track movements from DC to stores
- Global Positioning System to track vehicle on route- Global Positioning System to track vehicle on route
- Wireless Wide Area Network to transmit data to control- Wireless Wide Area Network to transmit data to control
systemsystem
Woolworths Pilot ProjectWoolworths Pilot Project
Outbound distribution technologies:Outbound distribution technologies:
Automated Storage and Retrieval System:Automated Storage and Retrieval System: uses uses robots to stock merchandise in totes on the shelves robots to stock merchandise in totes on the shelves and to extract merchandise bound for storesand to extract merchandise bound for stores
Pick-to-light System:Pick-to-light System: employees are guided employees are guided visually by lights to exact bin locations to pick small visually by lights to exact bin locations to pick small items and place it into totes destined for each storesitems and place it into totes destined for each stores
Dispatch Bay (SmartChain real –time logistic platform + Sign Post Medium Range)
Totes with Bar Codes
Sign Post (short-range device)
Electronic signature from the store manager
Symbol PDT8100 handheld computer
Symbol PDT8100 handheld computer
Savi SmartChain
Dollies with SaviEchoPoint active tags
automated stacking system
activate tags
Broadcast infoSign Post (long-range readers )
Software Systemdata
associates bar codes on totes with RFID tag on dolly
Load dollies , tags are activated and read
Vehicle
Alert w/ flashing light when wrong dollies were loaded
Symbol PDT8100 handheld computer + GPS transmitter
Encrypted sealed and punched 4-digit code
Storesdelivery
Keyed in 4-digit number to identify right stores “geofencing”
Keyed in 4-digit code to unlock the seal
Instructions on which dollies and totes to unload
Symbol PDT8100 handheld scanner
Dollies and totes are unloaded
Scan dolly
Confirm that the right dolly or totes are unloaded
Alert when wrong dollies were unloaded or too many/few
Secure vehicle door, enter seal number
Accept any returns to the distribution center
Vehicle
Connect PDT8100 to base station and transmit data Microlise’s
Transport Mgmt Center
Data was forwarded to record asset movement history
Next Stop
Dispatch Bay (SmartChain real –time logistic platform + Sign Post Medium Range)
Totes with Bar CodesTotes with Bar Codes
Sign Post (short-range device)
Electronic signature from the store manager
Symbol PDT8100 handheld computer
Symbol PDT8100 handheld computer
Savi SmartChain
Dollies with SaviEchoPoint active tags
automated stacking system
activate tags
Broadcast infoSign Post (long-range readers )
Software Systemdata
associates bar codes on totes with RFID tag on dolly
Load dollies , tags are activated and read
Vehicle
Alert w/ flashing light when wrong dollies were loaded
Symbol PDT8100 handheld computer + GPS transmitter
Encrypted sealed and punched 4-digit code
Storesdelivery
Keyed in 4-digit number to identify right stores “geofencing”
Keyed in 4-digit code to unlock the seal
Instructions on which dollies and totes to unload
Symbol PDT8100 handheld scanner
Dollies and totes are unloaded
Scan dolly
Confirm that the right dolly or totes are unloaded
Alert when wrong dollies were unloaded or too many/few
Secure vehicle door, enter seal number
Accept any returns to the distribution center
Vehicle
Connect PDT8100 to base station and transmit data Microlise’s
Transport Mgmt Center
Data was forwarded to record asset movement history
Next Stop
Electronic signature from the store manager
Symbol PDT8100 handheld computer
Symbol PDT8100 handheld computer
Savi SmartChain
Dollies with SaviEchoPoint active tagsDollies with SaviEchoPoint active tags
automated stacking system
activate tags
Broadcast infoSign Post (long-range readers )
Software Systemdata
associates bar codes on totes with RFID tag on dolly
Load dollies , tags are activated and read
Vehicle Vehicle
Alert w/ flashing light when wrong dollies were loaded
Symbol PDT8100 handheld computer + GPS transmitter
Encrypted sealed and punched 4-digit code
Storesdelivery
Keyed in 4-digit number to identify right stores “geofencing”
Keyed in 4-digit code to unlock the seal
Instructions on which dollies and totes to unload
Symbol PDT8100 handheld scanner
Dollies and totes are unloadedDollies and totes are unloaded
Scan dolly
Confirm that the right dolly or totes are unloaded
Alert when wrong dollies were unloaded or too many/few
Secure vehicle door, enter seal number
Accept any returns to the distribution center
Vehicle Vehicle
Connect PDT8100 to base station and transmit data Microlise’s
Transport Mgmt Center
Data was forwarded to record asset movement history
Next StopNext Stop
Woolworths Pilot ProjectWoolworths Pilot Project
Woolworths Pilot ProjectWoolworths Pilot Project
SmartChain tracking platform -> focal SmartChain tracking platform -> focal point of the tracking processpoint of the tracking process tote-pick control system tells SmartChain tote-pick control system tells SmartChain
which picks and totes are going to each store which picks and totes are going to each store TMS provides SmartChain with data about TMS provides SmartChain with data about
which order goes to which vehiclewhich order goes to which vehicle
SmartChain integrates all dataSmartChain integrates all data
BenefitsBenefitsAbility to integrate combination of Ability to integrate combination of
technologiestechnologies
Information and visibility in supply chainInformation and visibility in supply chain
Invisible to userInvisible to user
Error notificationError notification
Six Categories of BenefitsSix Categories of Benefits
ShrinkageShrinkageBookstock AccuracyBookstock AccuracyReduced Labor CostsReduced Labor CostsAsset ManagementAsset ManagementTransport EfficienciesTransport Efficiencies Identification of Future RFID applicationsIdentification of Future RFID applications
ShrinkageShrinkage
Better inventory visibilityBetter inventory visibility
Errors corrected in real timeErrors corrected in real time
Automated audit trailAutomated audit trail
Bookstock AccuracyBookstock Accuracy
Automated update of bookstockAutomated update of bookstock
Higher visibilityHigher visibility
Lower inventory levelsLower inventory levels
Improved customer serviceImproved customer service
Reduced Labor CostsReduced Labor Costs
Reduced manual check-inReduced manual check-in
Reduced updating of stock recordsReduced updating of stock records
Reduced effort to investigate stock lossesReduced effort to investigate stock losses
Asset ManagementAsset Management
Dollies, tote boxes, roll cagesDollies, tote boxes, roll cages
Greater visibility of these assetsGreater visibility of these assets
Improved utilizationImproved utilization
Reduced capital expenditureReduced capital expenditure
Transport EfficienciesTransport Efficiencies
Tracking of vehiclesTracking of vehicles
SecuritySecurityVehicle routingVehicle routingDriver performanceDriver performanceVehicle availabilityVehicle availability
Identifying Future ApplicationsIdentifying Future Applications
Workers involvedWorkers involved
OwnershipOwnershipExcitementExcitementSuggestionsSuggestions
Problem AreasProblem Areas
Efficient use of space on dollies/cages?Efficient use of space on dollies/cages?
Store returnsStore returns
‘‘Russian doll’ system security?Russian doll’ system security?
Financial AnalysisFinancial Analysis
Difficult to quantify benefits of RFIDDifficult to quantify benefits of RFID
A very conservative approach used to A very conservative approach used to estimate financial benefits of RFIDestimate financial benefits of RFID
How does the ROI of new store addition How does the ROI of new store addition compare to that of RFID implementation?compare to that of RFID implementation?
Woolworths $avings with RFIDWoolworths $avings with RFID
Reduced Supply Chain Theft/LossReduced Supply Chain Theft/Loss Inventory and AvailabilityInventory and AvailabilityAsset Utilization (Roll Cages)Asset Utilization (Roll Cages)Reduced PaperworkReduced Paperwork Improved Vehicle UtilizationImproved Vehicle Utilization
$avings Amounts$avings Amounts Theft/LossTheft/Loss
(₤ 42M) x (Expected decrease in SC theft/loss)(₤ 42M) x (Expected decrease in SC theft/loss) Inventory and AvailabilityInventory and Availability
(Total Sales ‘03) x (Expected increase between 0.25% (Total Sales ‘03) x (Expected increase between 0.25% and 0.50%) and 0.50%)
Roll CagesRoll Cages (2,500 cages/year) x (₤100/cage) = ₤250,000(2,500 cages/year) x (₤100/cage) = ₤250,000
PaperworkPaperwork Savings of ₤350,000 on reduced paperworkSavings of ₤350,000 on reduced paperwork
Vehicle UtilizationVehicle Utilization Estimated £8M to £10M savings with telemetricsEstimated £8M to £10M savings with telemetrics
Woolworths Woolworths Savings.xlsSavings.xls
Summary of FindingsSummary of Findings
New Store New Store
ROI = 1.1ROI = 1.1
VSVS
ROI = 1.3 to 8.5ROI = 1.3 to 8.5
RFID RolloutRFID Rollout(Or (Or 2.5 to 12.12.5 to 12.1 with Telemetrics Savings) with Telemetrics Savings)
RecommendationsRecommendations
RFID – cutting edgeRFID – cutting edge
Benefit Analysis AreasBenefit Analysis Areas
$trong Financial $upport $trong Financial $upport
RecommendationsRecommendations
Short-TermShort-TermPartial roll-out of RFIDPartial roll-out of RFID
Implement through fraction of companyImplement through fraction of companyStarting with passive tagsStarting with passive tags
Not on individual items (yet)Not on individual items (yet)
Continual AnalysisContinual AnalysisEvaluateEvaluateLocate and eliminate problemsLocate and eliminate problems
RecommendationsRecommendations
Long-TermLong-TermFull roll-out of RFID Full roll-out of RFID
Use of active and passive tagsUse of active and passive tags Passive tags on every individual itemPassive tags on every individual item
RFID is the way to go!RFID is the way to go!
MBA Team 2MBA Team 2::
Marcus AlexanderMarcus Alexander
Simon FrostSimon Frost
Neil HinesNeil Hines
Serhiy PonomaryovSerhiy Ponomaryov
Ramona SidhartaRamona Sidharta
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