SCM 502 MIS 503

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Woolworths Case

• SCM 502 / MIS 503
• October 21, 2005

MBA Team 2 Marcus, Simon, Neil, Serhiy Ramona
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Woolworths Case

• Woolworths Group plc and its problems
• RFID Technological Review
• Pilot Project
• Financial Analysis
• Recommendations

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Woolworths Main Focuses

• Principal UK retailer of products for home
• Entertainment (E.UK, 2 Entertain, and Streets
  Online)
• Home Family
• Kids (toys and clothing)
• Confectionary
• Average annual income - 2.7 billion

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Woolworths Major Management Strategy

• Centralize accounting
• Invest in new technology and new information
  systems
• Rationalize the store base
• Reduce the costs
• Centralize distribution

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Woolworths Major Problems

• Inventory shrinkage (56)
• Incorrect shipment deliveries
• Stock losses
• Theft (44)
• Theft in transit
• Shoplifting

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RFID Technological Review

• RFID Radio Frequency Identification
• Generic term for technologies that use radio
  waves to automatically identify people or objects

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An RFID Tag
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Active RFID Tags

• Active Tags
• Catch the attention of the RFID reader by sending
  out a signal
• Function with battery power
• Can be detected over a greater distance
• Are more expensive

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Passive RFID Tags

• Passive Tags
• Alert the tag to communicate through a reader
  when the readers signal is detected by the tag
• Communicates without battery power
• Derives power from the readers electromagnetic
  field
• Smaller range of detection
• Relatively inexpensive

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How RFID works?
Enterprise System
RFID Tag
RFID Reader
Middleware
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Why use RFID?

• Labor-saving technology
• Monitoring and control
• Security
• Transparency
• Information integration and flow
• Meet customer specifications

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Woolworths Pilot Project

• Serviced its 800 stores through 4 DC
• 2 primary and 2 seasonal
• 100,000 roll cages (large items)
• Totes for smaller items
• Initial challenge define a manageable scope in
  terms of the products, vehicles, stores and DC.
• Swindon - proof of concept
• System tracks dollies to stores and back again

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Woolworths Pilot Project

• Russian Doll strategy achieves item-level
  visibility without item-level tags
• Combined technologies to reduce theft and lost
  items
• - Bar Codes on individual items and tote boxes
• - Active RFID Tags
• - Short long range RFID devices within DC
• - RFID Readers to track movements from DC to
  stores
• - Global Positioning System to track vehicle on
  route
• - Wireless Wide Area Network to transmit data to
  control
• system

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Woolworths Pilot Project

• Outbound distribution technologies
• Automated Storage and Retrieval System uses
  robots to stock merchandise in totes on the
  shelves and to extract merchandise bound for
  stores
• Pick-to-light System employees are guided
  visually by lights to exact bin locations to pick
  small items and place it into totes destined for
  each stores

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Woolworths Pilot Project
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Woolworths Pilot Project

• SmartChain tracking platform -gt focal point of
  the tracking process
• tote-pick control system tells SmartChain which
  picks and totes are going to each store
• TMS provides SmartChain with data about which
  order goes to which vehicle
• SmartChain integrates all data

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Benefits

• Ability to integrate combination of technologies
• Information and visibility in supply chain
• Invisible to user
• Error notification

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Six Categories of Benefits

• Shrinkage
• Bookstock Accuracy
• Reduced Labor Costs
• Asset Management
• Transport Efficiencies
• Identification of Future RFID applications

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Shrinkage

• Better inventory visibility
• Errors corrected in real time
• Automated audit trail

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Bookstock Accuracy

• Automated update of bookstock
• Higher visibility
• Lower inventory levels
• Improved customer service

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Reduced Labor Costs

• Reduced manual check-in
• Reduced updating of stock records
• Reduced effort to investigate stock losses

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Asset Management

• Dollies, tote boxes, roll cages
• Greater visibility of these assets
• Improved utilization
• Reduced capital expenditure

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Transport Efficiencies

• Tracking of vehicles
• Security
• Vehicle routing
• Driver performance
• Vehicle availability

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Identifying Future Applications

• Workers involved
• Ownership
• Excitement
• Suggestions

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Problem Areas

• Efficient use of space on dollies/cages?
• Store returns
• Russian doll system security?

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Financial Analysis

• Difficult to quantify benefits of RFID
• A very conservative approach used to estimate
  financial benefits of RFID
• How does the ROI of new store addition compare to
  that of RFID implementation?

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Woolworths avings with RFID

• Reduced Supply Chain Theft/Loss
• Inventory and Availability
• Asset Utilization (Roll Cages)
• Reduced Paperwork
• Improved Vehicle Utilization

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avings Amounts

• Theft/Loss
• ( 42M) x (Expected decrease in SC theft/loss)
• Inventory and Availability
• (Total Sales 03) x (Expected increase between
  0.25 and 0.50)
• Roll Cages
• (2,500 cages/year) x (100/cage) 250,000
• Paperwork
• Savings of 350,000 on reduced paperwork
• Vehicle Utilization
• Estimated 8M to 10M savings with telemetrics
• Woolworths Savings.xls

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Summary of Findings

• New Store
• ROI 1.1
• VS
• ROI 1.3 to 8.5
• RFID Rollout
• (Or 2.5 to 12.1 with Telemetrics Savings)

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Recommendations

• RFID cutting edge
• Benefit Analysis Areas
• trong Financial upport

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Recommendations

• Short-Term
• Partial roll-out of RFID
• Implement through fraction of company
• Starting with passive tags
• Not on individual items (yet)
• Continual Analysis
• Evaluate
• Locate and eliminate problems

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Recommendations

• Long-Term
• Full roll-out of RFID
• Use of active and passive tags
• Passive tags on every individual item
• RFID is the way to go!

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Questions?

• MBA Team 2
• Marcus Alexander
• Simon Frost
• Neil Hines
• Serhiy Ponomaryov
• Ramona Sidharta

Comments?