METRO GIVES RFID PLANS FOR SUPPLIERS 2004-01-19 (2)

MICHAEL GARRY

NEW YORK -- In a move similar to one announced last year by Wal-Mart Stores, Metro Group, Germany's largest retailer, said last week it will have its top 100 suppliers affix RFID tags to pallets and cases bound for Metro warehouses and stores.

Metro Group, based in Dusseldorf, Germany, made its announcement at the National Retail Federation's Convention & Expo held at the Jacob K. Javits Convention Center on Manhattan's West Side.

Metro also drew considerable attention at the convention with a 13,000-square-foot exhibit highlighting in-store systems it is testing at its Future Store, an Extra supermarket in Rheinberg, Germany.

Also at the NRF show, Colin Cobain, IT director for Tesco, the U.K.'s largest supermarket retailer, said Tesco planned this year to begin putting RFID (radio frequency identification) tags on totes and dollies carrying "high-value" nonfood products like cameras from its nonfoods distribution center to all of its U.K. supermarkets. Tesco is also testing RFID tags on individual DVDs in two stores.

Last June, Wal-Mart's chief information officer, Linda Dillman, said at the Retail Systems show in Chicago that Wal-Mart would ask its top 100 suppliers to place RFID tags on all pallets and cases beginning in January 2005 in the Dallas market, with the rest of its suppliers following suit by the end of 2006.

At the NRF show, Simon Langford, Wal-Mart's manager, RFID strategy, reviewed those plans, noting, "We will be working with suppliers to help them identify the benefits of RFID for their companies."

With its announcement last week, Metro becomes the second major retailer, following Wal-Mart, to announce a large-scale RFID tagging project with its suppliers to track the movement of goods through its supply chain.

The initial plan, slated to launch this November, will include deliveries on pallets and "transport packages" to 10 Metro warehouses serving 281 stores in Germany, including 100 of Metro's Extra supermarkets and Real hypermarkets, 122 Galeria Kaufhof department stores, and 59 Cash & Carry wholesale stores.

According to Albrecht von Truchsess, spokesman for Metro, the company will soon begin piloting the RFID applications, and the initial stores and warehouses would be equipped with RFID readers "quite soon after November." Metro's eventual plan, he noted, is to extend the RFID project to all of its roughly 800 stores in Germany by 2006, but it has no plans to roll it out to the 25 other countries in which it operates.

Zygmunt Mierdorf, CIO and member of the management board, Metro Group, told SN that as part of the project, individual apparel items at the department stores would be tagged for theft prevention, but no other individual items. Metro is currently testing apparel tags on one fashion brand at two stores.

To assure "a smooth implementation of the project," Metro said it would establish a lab where its suppliers could test the functionality of the RFID technology.

"We see RFID as one of the crucial technologies for the future of retailing," said Mierdorf. "With our large-scale introduction of RFID, we will for the first time cover the entire process chain with this technology." Heretofore, Metro has tested RFID tags on individual products at the Future Store, which opened to great fanfare last April.

Addressing privacy concerns, Metro recently installed at the store an RFID tag deactivator that shoppers can use after checking out. "We want to see how important privacy is to consumers," said Mierdorf. In addition, fliers explaining RFID technology are available to consumers at the Future Store.

Von Truchsess confirmed that Metro expects the RFID tags to cost suppliers between 30 and 40 U.S. cents apiece. He stressed that Metro did not view the plan as a mandate to suppliers. "It should be seen as an advantage to these companies," he said. "It's interesting to both us and them to track products to the shelf."

Mierdorf said Metro plans to invite its suppliers to a meeting in mid-May when it will "explain the technology and why they should do it, and come to an agreement." Metro has not yet selected the types of tags and readers it will use in the project or released costs.

RFID tags contain chips coded with identification information that is transmitted via radio waves to a nearby reader. Unlike bar codes, the tags do not require humans to operate the readers, nor do the readers require a line of sight to the tags, and multiple tags can be read at the same time.

According to Mierdorf, Metro plans to use RFID tags coded with the EPC (electronic product code), a standard under development by EPCglobal, Lawrenceville, N.J. Until EPC standards are finalized, the tags will contain EAN numbers similar to those in bar codes, said Mierdorf.

Once RFID tags are affixed to suppliers' pallets and cases, Metro will be able to track the flow of inventory into and out of its DCs and into its stores, explained Mierdorf. The tags will make it much easier to locate goods in the back rooms of hypermarkets, he noted, adding that tag readers will be able to trigger reorders for restocking shelves, assuring more consistent availability of goods.

Metro also plans to begin rolling out other systems being tested at the Future Store, including an intelligent scale that recognizes produce and generates bar-coded labels. The scale, developed by Mettler Toledo and IBM, will be installed as part of the "normal replacement cycle" at German Extra stores and Real hypermarkets, said Mierdorf. In addition, self-checkout lanes from NCR are being rolled out to all hypermarkets and some supermarkets in Germany. Metro has had electronic shelf labels installed at its Cash & Carry stores for several years.

Mierdorf said that based on surveys Metro has done of customers at the Future Store, usage of the technology at the store has increased over the past several months.

Using customer feedback, Metro has redesigned the personal shopping assistant, a shopping-cart device that displays product and promotion information and scans products. "We've significantly improved the graphical user interface [on the device], and made the scanner portable rather than fixed," said Mierdorf. "We want to make it as simple as possible." The new version will be launched in February.