Written By Louis Sirico

I recently had the honor of being invited to France for a behind-the-scenes look into some of the largest RFID deployments in the world, including DHL Exel Supply Chain / Metro Group and the world’s second largest retailer.  My invitation actually came from Neopost ID, the solution provider responsible for designing and implementing these solutions.  In Europe, Neopost ID is considered one of the leading RFID system integrators with an extremely impressive client list, including the aforementioned companies.

In this white paper, we’re going to examine their use of RFID technology in the supply chain and what has made these enormous implementations successful.

Background

For 7 years, the team at Neopost ID has been focused on developing logistics solutions and perfecting a solution-as-a service model. If you’re not familiar with this type of model, it works like this: Neopost ID charges no upfront costs to the customer for deployments, only a fixed monthly fee.  Companies essentially lease the equipment, software, and everything that ties it together from Neopost ID.  Design, installation, and on-going support costs are all factored into the monthly charge.  The consumables, such as RFID tags, are a separate cost based on volume. This takes the majority of the risk away from the implementer and places it on Neopost ID.  It also makes return on investment (ROI) determination significantly easier.

Beyond confidence in their technical capabilities, Neopost ID’s mother company Neopost Group’s size and strong financial position allows them to offer this model which has proven itself in some of the largest RFID deployments in the world, including the two covered in this article.

DHL Exel Supply Chain / METRO Group Cash & Carry Stores

As a third party logistics (3PL) provider, DHL Exel Supply Chain wanted to improve the supply chain operations with one of their most important clients: METRO Group.

Working with Neopost ID, DHL and Metro launched the largest RFID deployment in France in 2008.  They have implemented RFID technology in 152 dock door portals installed in 6 DHL food logistics centers and 90 METRO Cash & Carry stores in France, tracking 1.5 millions pallets per year.  The solution is focused on the delivery of dry goods and alcoholic beverages.

How the Solution Works

RFID at the DHL Distribution Centers

Single and mixed SKU pallets, such as the one pictured below, are built at a DHL distribution center and affixed with an ISO/IEC 18000-6C compliant RFID tag.  The data on the RFID tag is associated with the pallet contents.

At the dock door, an industrial-type RFID-enabled portal designed by Neopost ID (pictured below), is used for verification of outbound shipping.  The portal has a number of sophisticated features including:

• a keypad on the dock door portal that allows the dock door to be securely opened and associated with the store number the trailer is going to;
• a bright red LCD display gives the fork-lift operator the running count of how many pallets have been loaded, along with a letter denoting the category of contents of the pallet just loaded;
• a smaller LED display shows the pallet ID. 

As the RFID tagged pallets are properly loaded into the trailer, a friendly green light flashes, the portal beeps, and the counter on the portal increments by one.  However, if an operator accidentally tries to load a pallet destined for a different store, a red light flashes and an alarm sounds.  This helps to prevent mis-shipments.

These portals also manage the receiving process of pallets coming from other DHL platforms for cross-docking operations. The portals are able to determine the direction the pallet is traveling (inbound or outbound) by using a combination of sensors and an intelligent algorithm developed by Neopost ID.

RFID at the Metro Stores

On the other end of the supply chain, each METRO Cash & Carry store has one or two RFID-enabled dock door portals.  These units have a different design than the units at the DC because the stores have a much simpler environment (see photo right).

As directionality is important at the dock doors in the stores, the portal is designed with 3 optical sensors used to determine the direction and speed in which the pallet is traveling.

At the store we visited, I watched as mixed pallets, such as the one pictured below with cat food and wine, were quickly received without any errors.  Like the DC, a counter increased with each received pallet.

The Backend Integration

Neopost ID hosts all of the real time tracking information using EPCIS servers at their data center in the South of France.  DHL and Metro use a web-based application designed by Neopost ID to manage delivery tracking at the DCs and the dock-door portals at each METRO Cash & Carry store. The Neopost ID software application interfaces with multiple DHL and METRO information systems, for instance to produce the RFID labels in the DHL DCs.

Employee Experience with RFID is Essential

I had the opportunity to speak with François Langlet, Business Process and Optimization Engineer at DHL, a key member of the solution team regarding the implementation.   “Today, RFID is considered a success. We are experiencing nearly 100% read rates.”

Two of the primary reasons for not achieving 100% read rates are associated with operator error.  Warehouse staff sometimes fail to apply an RFID tag or they forget to turn on the RFID enabled dock door.  However, such mistakes are becoming more uncommon.  Langlet explains, “At first, when a pallet didn’t read via RFID, the operators simply ignored it and kept doing what they had done before.  Now, RFID is becoming part of the process. They make an effort to understand why a pallet does not read”.

METRO Group's Recently Reported RFID Related Results

Internet Retailer reported that in an October 27 speech by office chief, Gerd Wolfram, he stated METRO Group found that using RFID-tagged pallets for inventory tracking brought a “significant reduction of shipping mistakes and resulting compensation claims,” in addition to a 15 percent cut in truck unload time and halving the time it takes to verify proper item delivery. Additionally, by using RFID to coordinate sales floor promotional displays with ad campaigns METRO Group has yielded a 54 percent increase in sales.

A Large French Retail Group

Paris, France is considered by many to be the fashion capital of the world.  It seems appropriate that two companies that are headquartered in Paris should design and build one of the largest RFID apparel tracking implementations in the world.
As the world’s second largest retailer and the top European retailer, this retail group has over 15,000 company-owned and franchised stores in 31 countries.  It has found significant value using RFID for apparel tracking or, as it’s referred to in Europe, RFID solutions for the textile supply chain.

This retail group is currently testing EPC/RFID technology with apparel and books.  Their primary goals for textile tracking include:

• Improve supply chain execution
• Use the global visibility to improve stock management
• Assess the visibility of follow-up of products within the store

RFID Apparel Project Overview

Neopost ID has implemented RFID technology throughout the retailer’s supply chain: from source tagging at the manufacturer in China, through the distribution centers in France, to a first selected store in Europe. The project includes 12,000 RFID-tagged apparel articles in store.

Eliminating Shrink that isn’t Shrink

One of the first discoveries the retailer made after implementing RFID was they were receiving goods they didn’t order. For example, the store would order quantity 100 of the size L of a particular garment, but actually received 100 sizes M. Because stock management was based on monthly manual inventory and order details alone, their inventory system assumed they received what was ordered. They didn’t have the labor to verify receipts manually. Their inventory system would report 100 size L in stock, when in reality they were under stocked in L and overstocked in M. Knowing what was actually received solved serious shrinkage problems because they had wrong numbers to start with – it was not theft.

At picking in the DC, there is an RFID-enabled table for verification, as well as a portal at shipping that verifies the expected number of tags on the pallet match the actual number. 

Improvements in Inventory Accuracy

 Although the total item counts were close to accurate, the accuracy for style, sizes and colours were not actually close to reality. If there was a pile of clothes, the inventory control person would normally count only the top item, so if the size was different below, a variance in inventory would be created. The example (pictured right) demonstrates this.  (Please note, "Magasin" is French for "Store".)

Before RFID, they had 50% inventory accuracy.  Now with RFID they are achieving 99% accuracy.  The only reason it’s less than 100% is due to some items not being tagged correctly.  The benefit to the customer has been increasing over time.

Savings in Inventory Labor Time

The staff is far more comfortable using RFID technology and the store is now measuring employee performance using RFID. Before RFID, it took an average of 50 hours to perform a manual inventory.  That was reduced to 2 hours for inventory when the implementation started.  Today, it takes approximately 45 minutes for inventory.  That’s a productivity gain between 80-92% depending on staff experience level.

Strong Success for RFID in Apparel

“RFID’s use in the apparel sector represents the greatest near-term opportunity for business improvements and fewest impediments to growth in the retail industry,” says ABI Research's RFID practice director Michael J. Liard. “A quick, demonstrable ROI and key business metrics for adoption have been clearly established and the results of nearly all evaluations conducted have been compelling. As a result, market activity is brisk and promising, especially among early-adopter specialty apparel retailers.”

An analysis of American Apparel by RW Baird suggests the per-store payback for a 260 store RFID roll out is about 4.5 months given increased sales from fewer out-of-stocks and reduced labor. The strong return on invetement is a result of increased revenue per store of 14% compared to non-RFID stores, and a labor savings of just under 190 hours per month. RFID boosted revenue by providing improved inventory visibility and automation that enabled process changes to ensure a full complement of product offerings were available on the retail floor at all times. This was accomplished with reduced labor for weekly cycle counts and inventory searches. The complete American Apparel Case Study Write-up and Analysis is available here.

For additional information on RFID in Apparel, please see our related article: Retail Fashion Market RFID Solutions.

Conclusion

The world’s largest retail companies are successfully using RFID technology in their supply chain operations.  Every day, the RFID-enabled processes improve as employees become more experienced with the technology, which yields even greater benefit.