REV: APRIL 1, 2009
ZEYNEP TON VINCENT DESSAIN MONIKA STACHOWIAK-JOULAIN
RFID at the METRO Group
In early 2004, the METRO Group (Metro), Germany’s biggest retailer, announced its upcoming radio frequency identification (RFID) technology rollout at 250 stores and 10 warehouses, in collaboration with 100 suppliers. The news echoed throughout the retailing community. Previous similar announcements by Wal-Mart and Tesco had made it clear that some in the industry believed that the new technology had the potential to improve the performance of retail supply chains significantly. Among the many potential benefits of this technology were reduced shrink,1 increased product availability, better data quality, and higher labor productivity. In April 2003, Metro began testing RFID technology in its Future Store under the leadership of Dr. Gerd Wolfram, managing director of Metro’s internal IT service group, METRO Group Information Technology GmbH (MGI). In July 2004, the company further demonstrated its commitment to RFID by opening the METRO Group RFID Innovation Center, a platform to develop and promote the technology. That November, certain Metro distribution centers (DCs) and stores began receiving RFID-tagged pallets from several suppliers. By August 2005, the RFID rollout had expanded to 33 suppliers, 9 Metro DCs, and 13 Metro stores. The rollout had taken place at the pallet level but, theoretically, RFID tags could also be put on cases or even on individual items such as shampoo or ketchup bottles. Each level of granularity, however, brought additional complexities and increased implementation costs. Tagging at the item level was seen only as a long-term possibility, given the current high costs of RFID tags. Wolfram worked with the strong support of Zygmunt Mierdorf, Metro’s chief information officer (CIO) and a member of its management board. Now, in November 2005, with a Metro RFID steering committee meeting coming up on December 13, Mierdorf and Wolfram wondered what course of action they should recommend, based on the rollout experience so far. The most straightforward option was to expand pallet-level RFID tagging to more suppliers. Alternatively, Metro could introduce case-level tagging, entering a deeper relationship with the suppliers that had already introduced pallet-level tagging. While both Mierdorf and Wolfram were convinced that RFID would revolutionize retail supply chains, the technology had its opponents within Metro. Several colleagues argued that, rather than focusing on RFID as a cure-all solution, there were other improvements that could be made to Metro’s supply chain, such as improving existing store and DC processes, giving better training to
1 Shrink is caused by employee and customer theft or damaged merchandise.
Professor Zeynep Ton, Director of the HBS Europe Research Center Vincent Dessain and Research Associate Monika Stachowiak-Joulain prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2005, 2007, 2009 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.
RFID at the METRO Group
employees, creating initiatives to reduce employee turnover, and limiting the size of the backroom or eliminating it altogether.
The origins of RFID...