RFID OR NOT by chenmeixiu

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									Chipping of Goods
    Annam Judie
   Jason Beichley
   Sharmila Iqbal
   Travis Sullivan
Chipping of Goods
                       Agenda

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




        Should We Expand RFID into
      Woolworth’s ENTIRE Supply Chain?
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    SWOT Analysis: Expanding RFID
Chipping of Goods
                    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 competition’s move on RFID
   • Upcoming trucking regulation
   • One transportation provider

   Threat
   • Competition & profits
   • Increased shrinkage problem
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            Distribution Network Analysis
                           Tote
Chipping of Goods        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
                           Tote
Chipping of Goods        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
Chipping of Goods
                     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
Chipping of Goods
                    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
Chipping of Goods
                    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
Chipping of Goods
                        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
Chipping of Goods
                              Financial Impact
                               Actual    VTS Only      Full RFID
                                                      Deployment

          Net Income          £25.2 MM   £27.3 MM     £27.6 MM

          Operating Profit
                               1.19%       1.26%        1.28%
          Margin

          ROE                  5.84%       6.32%        6.39%

          % increase in ROE      -         7.68%        8.69%

          Total Cost             -       £1.15 MM      £2.4 MM

          Annual Savings                 £3.15 MM      £3.6 MM

          Breakeven time         -       4.5 months    8 months
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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
Chipping of Goods
                         Moving Forward...

   • No further RFID Implementation
          –   Benefits don’t outweigh costs
          –   Roll cage system not automated
          –   Company’s growth strategy
          –   Follow the industry
          –   Suppliers’ initiation
   • Place scanner/GPS units in the trucks
   • Use Bar Codes for roll cages
Chipping of Goods
                       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
Chipping of Goods
                          Questions

                    Chipping of Goods
                        Annam Judie
                       Jason Beichley
                       Sharmila Iqbal
                       Travis Sullivan

								
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