Aug 16, 2006The Warehouse, New Zealand's largest general merchandise retailer in terms of revenue, is evaluating RFID technology in three steps, according to Caleb Nicolson, the company's supply chain program manager. "Firstly," he says, "we would complete a proof of concept; secondly, a pilot; and thirdly, a rollout, should it be appropriate."
The firm has now completed its proof of concept for using RFID technology on cases and pallets. Next, it is preparing to pilot RFID in one of its 128 stores at the end of the year.
The retailer began exploring the technology in late 2004, when it established a cross-functional team led by its IS department to build a greater understanding of RFID. From June to October 2005, The Warehouse tested the technology in a replicated store, created in a lab. "Our main objective was to prove we could get RFID working in our environment," says Owen McCall, The Warehouse's CIO.
In the lab, the company attached RFID tags to cases of a variety of goods and tested the technology at the case and pallet levels, placing stationary readers (interrogators) at a simulated receiving door, case compactor and sales-floor entrance. The project consisted of Alien Technology EPC Gen 1 handheld readers and Psion Teklogix portal readers. Both types of interrogators operated at 864 to 868 MHz, reading EPC Gen 1 Class 1 tags from Alien. IBM provided The Warehouse with software and consulting services throughout the project.
One challenge resulted from The Warehouse's practice of storing cases of merchandise on shelves above the items put out on the sales floor. McCall says it was important to prove RFID technology would be able to track cases moved to the sales floor, as well as boxes entering the back room. "We were pretty confident we could track stock into the back dock, but we wanted to be sure we could track cartons to the shelf," he says. "For that reason, stationary readers were placed at the sales-floor entrance.
For the proof-of-concept project, the team first tested the system in the laboratory setting, sending RFID tagged cases through several reader portals in the simulated store. They then tested the technology in one of the retailer's Auckland stores for several days, using the same format of four fixed readers.
"We have documented the outcome, proven the technology can work," McCall says, noting that the RFID team presented the results to The Warehouse executives six weeks ago. "The technology exceeded our expectations," he says. "The read rates and accuracy were way above what I expected." The percent of successful reads was reportedly in the middle to high 90s.
The next steps in The Warehouse's RFID plans will be to calculate the costs associated with RFID implementation and to determine how the technology can best serve the company financially. "Our issue is not only the technology—it's driving the business benefit," he says.
The key RFID business opportunity for The Warehouse, Nicolson says, lies in the final 50 yards of the supply chain. The goal is to use RFID to improve what the retailer calls its In-Store Stock Management (ISSM) processes, which McCall describes as "the way we manage stock in our stores, and how we ensure the stock gets to shelf in a timely and efficient manner."
Later this year, The Warehouse's RFID team plans to carry out an in-store pilot involving case- and item-level tagging on specific apparel items. The group will also test EPC Gen 2 tags on cases and items.
"We, as many others do, recognize the opportunity in item-level tagging of apparel, footwear and CDs," Nicolson says. "We believe there is real opportunity for us to improve our offering to customers in two ways: Firstly, ISSM supported by RFID will be a key driver of on-shelf availability. Secondly, efficiency in store replenishment enables us to spend more time in customer-facing activities."
