Chipping of Goods

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Chipping of Goods

• Annam Judie
• Jason Beichley
• Sharmila Iqbal
• Travis Sullivan

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Agenda

• Woolworths Pilot Project
• Analyze our current system after the pilot
  project
• Our Decision
• Moving Forward..
• Conclusion
• Questions

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History of Woolworth

• Founded in the U.K in 1909
• In 1982 Kingfisher acquired Woolworths
• In 1999 opened Big W, similar to Wal-Mart
• Divested from Kingfisher in 2001
• Leading retailer with 900 stores in U.K.
• Business Competitors Sainsbury,Tesco,
  Wilkinson's, Boots the chemist, Wal-Mart

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Concern Inventory Shrinkage

• Lack of Visibility
• Causes of Inventory Shrinkage
• Incorrect Shipment deliveries
• Stock losses in the distribution center
• Theft of goods in transit
• Shoplifting within stores
• Woolworths loses 75 million per year due to
  shrinkage
• 56 due to internal process errors and theft
• 44 due to shoplifting in stores

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Chipping of Goods Initiative

• Why was this project initiated?
• Who initiated this?
• What was the goal of this project?
• Addresses property crime problem in U.K.
• Reduce shrinkage for the entire retail industry
• How will this project reduces Inventory
  Shrinkage?
• Visibility in supply chain by better tracking
• Audit trail helps identify where shrinkage occurs

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What is RFID?

• Radio Frequency Identification Device
• How RFID works
• Barcode vs RFID
• Types of RFID tags Active and Passive tags

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Pilot Project

• Technologies used
• Bar coded, RFID, GPS, WAN, Integration services
  with transportation
• Warehouse equipment used
• Totes and Dollies
• Sorting processes used
• Automated Storage Retrieval System
• Pick-to-Light System

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Pilot Project (Continued)

• Transport Planning System RFID
• Destination-stores
• Achieve supply chain visibility through
• Russian Doll Strategy
• Increased product security
• Improved distribution asset security

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Benefits Pilot Program

• Shrinkage
• Bookstock Accuracy
• Reduced labor Costs
• Asset management
• Transport efficiency
• Identification of future RFID applications

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Should We Expand RFID into Woolworths ENTIRE
Supply Chain?
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SWOT Analysis Expanding RFID
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Internal Factors

• Strength
• Knowledge from pilot project
• Basic infrastructure in place
• Weakness
• The roll cage system is not automated and was not
  used in the pilot project

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External Factors

• Opportunity
• Monitor competitions move on RFID
• Upcoming trucking regulation
• One transportation provider
• Threat
• Competition profits
• Increased shrinkage problem

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Distribution Network Analysis
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Tote Warehouse
Suppliers
Roll Cage Warehouse
Stores
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Tote Warehouse
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Roll Cages Warehouse
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Loading/Unloading Dock
Seal Doors
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Tote Warehouse
Suppliers
Roll Cage Warehouse
Stores
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Our Goal

• Increase product visibility
• Increase accuracy of orders shipped to stores
• Cut theft of goods in transit
• Get the right product, on and off the right
  truck, to the right store, at the right time

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Transportation Relationship

• All transportation needs met by a single
  strategic partner
• Current freight budget is 100,000,000
• Partner is required to meet new government
  regulations
• Install electronic recording system
• Effective April 2005
• System had unexpected benefits in pilot

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Vehicle Telemetrics System

• Adds GPS capability to basic recorder
• Benefits of VTS
• Improved fuel economy
• Aid in preventative maintenance
• Improved vehicle routing and availability
• Theft prevention measures
• Benefits are realized regardless of cargo

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Vehicle Telemetrics System

• Can reduce transportation costs by 8-10
• Can share costs and savings with our strategic
  partner
• 1,000,000 to upgrade basic recording systems
  that will be installed in trucks
• Conservatively save 3,000,000
• 100,000,000 6 savings, shared evenly by
  Woolworths and transportation partner

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Implementation Options

• Include roll cages in RFID project
• All product tracked
• Startup cost of approximately 2.4 million
• 1,000,000 for readers and tags
• 400,000 to integrate existing software
• 1,000,000 to upgrade vehicle GPS systems
• Reduced scale deployment
• Only deploy VTS to trucks
• Startup costs of 1.15 million
• 150,000 to integrate existing software
• 1,000,000 to upgrade vehicle GPS systems

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Full Implementation Benefits

• Direct savings
• 3,000,000 in transportation costs
• 350,000 from reduced paperwork
• 250,000 from better roll cage utilization
• Intangible benefits
• Visibility of all products
• Detailed audit trail, reduced theft
• Less inventory and fewer shipping errors

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VTS Only Benefits

• Direct savings
• 3,000,000 in transportation costs
• 150,000 from reduced paperwork
• Intangible benefits
• Detailed audit trail, reduced theft
• Less inventory and fewer shipping errors for
  totes and dollies

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Financial Impact
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Our Decision

• Implement VTS only solution
• Benefits similar to full-scale deployment
• Security for all cargo
• Improves visibility of smaller totes to all
  stores
• Less risky and more flexible
• Lower startup costs
• VTS useful in many future applications
• Not locked into expensive RFID equipment

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Moving Forward...

• No further RFID Implementation
• Benefits dont outweigh costs
• Roll cage system not automated
• Companys growth strategy
• Follow the industry
• Suppliers initiation
• Place scanner/GPS units in the trucks
• Use Bar Codes for roll cages

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Supply Chain Visibility

• Combining existing RFID with bar codes on roll
  cages and scanner/GPS units on trucks
• Still achieves excellent supply chain visibility
• Addresses shrinkage problem
• Easily adaptable for future applications
• Reduction in shipping costs
• Save 250,000 on new roll cages

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Conclusion

• Keep current RFID expand transportation
  technology to track
• Intangible benefits from our chosen plan
• Security
• Tracking (roll cages)
• Accurate shipping to the stores
• Improved availability
• Increase ROE from 5.84 to 6.32
• Increase Net Income from 25.2 to 27.3 million

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Questions
Chipping of Goods

• Annam Judie
• Jason Beichley
• Sharmila Iqbal
• Travis Sullivan