Grupo Pão-de-Açúcar (GPA) has found an RFID solution to a problem that previously affected both logistics and accounting for its Pão-de-Açúcar and Extra supermarket chains. The distribution of fish, as well as other products in its cold chain, presents significant challenges for the retailer. After all, fish do not have identical weights, and businesses work with average values per unit, resulting in differences between what theoretically was delivered to a store, what was really sold and the expected revenue generated by marketing.
Paulo Leonidas, GPA’s director of supply, says that prior to adopting RFID, his company had to calculate the fish’s average value since it was impossible to know each unit’s exact weight at the time of distributing tons of goods to supermarkets. “So, the store received 30 kilograms of a product, on average—but, in fact, it could be 32 kilos, which had just generated an additional sale of 2 kilos,” Leonidas explains.
The executive says weight differences resulted in significant accounting discrepancies—a problem that was eliminated with the use of RFID. The impact of this difference may seem to be merely 2 kilos at a single store, but across a network composed of hundreds of supermarkets, this variation amounts to a hundreds of kilograms valued at hundreds or thousands of Brazilian reals in revenue.
With the RFID system, the average weight was replaced by the actual weight. “RFID carries the ID number of each of the boxes of products delivered to stores,” Leonidas states. “If you have 32 kilos of fish, you have exactly 32 kilos, which eliminated the problem in the accounting books and also regarding the replacement of products.”
Prior to GPA’s adoption of RFID, Leonidas says, if the system indicated that the store had received 40 kilos of a product, based on the average unit weight, only 35 kilos might actually be available. “In such a situation,” he notes, “the consumer himself would be without your product, because the store manager would only realize that the stock would be at a critical level when the quantity of product was about to end, or when it was exhausted.”
Thanks to RFID, Leonidas reports, the risk of shortages of a certain type of fish at stores has been eliminated. The distribution efficiency—beyond the actual control of the revenue provided by these products—is encouraging the company to expand its use of radio frequency identification. “The idea is to expand the technology to meat and produce,” he says, “which also suffer from challenges quite similar to the distribution of fish.”
The group has distribution centers that serve all of its stores. “I contact the product suppliers for the entire network,” Leonidas says, “and we serve each store based on the Oracle business-management system [ERP] installed in the company. The Oracle system generates the request almost automatically, based on the stock that was received, as sold and even seasonal conditions.”
According to Leonidas, store managers’ involvement in the ordering process is now much less intensive. “Eventually, a manager can see, for example, that a close competitor might be missing a certain product,” he states, “and could then ask for an increase in the stock of that commodity to serve consumers.”
RFID technology is improving this automation, and is freeing managers to perform specific tasks, in order to take advantage of business opportunities that go beyond the routine.
“We, in fact, have been monitoring developments in RFID for some years,” Leonidas says, “because we have a very complex operation, with more than 150,000 SKUs [stock-keeping units] which require billing processes, handling, separation, etc. All this is very complicated to do without advanced technology. “
Although the company believes the tags are still expensive, Leonidas notes, it still finds that RFID technology offers paybacks, such as improving the reverse-logistics process for boxes, thereby representing a major saving for Grupo Pão-de-Açúcar. “We reduced the loss of boxes, because the control of the input and output of these containers in the stores was facilitated,” he says. “The use of RFID in a box of fish allows traceability—both in the delivery of products to stores and in the return of the empty box—bringing huge benefits to the process.”
RFID is also employed in other operations of the company, Leonidas says, allowing the exchange of data via forklifts, voice picking and other derivations of the technology’s usage. “We have other initiatives in mind, such as using RFID for textile products,” he says.
The growth of small shops that have a differentiated business model, such as Extra mini-markets, is demanding greater distribution efficiency, Leonidas adds. “The control that RFID offers to us is sensational,” he says. “We have other operations that can benefit from the technology, including consumer electronics. Thus, we gain not only productivity, but inventory accuracy.”