Germany's METRO Group to Introduce RFID Company-wide

Retailer targets first use of radio frequency identification technology along the entire process chain

Retailer targets first use of radio frequency identification technology along the entire process chain

New York — January 30, 2004 — Europe's METRO Group, the world's fifth-largest retailing company, will begin using radio frequency identification (RFID) technology throughout its entire process chain in a project to kick off later this year, the company announced recently.

Beginning in November 2004, approximately 100 suppliers initially will affix RFID tags to their pallets and transport packages for delivery to 10 central warehouses and around 250 stores within the METRO Group's sales divisions Metro Cash & Carry, Real "hypermarkets," Extra supermarkets and Galeria Kaufhof department stores.

Tests with the new RFID tags have been successfully conducted over recent months at the METRO Group's Extra Future Store in Rheinberg, Germany, the first project of the group's so-called Future Store Initiative. In Rheinberg, the initiative has tested the use and interaction of a number of new retailing technologies under real-life conditions, with the objective to develop solutions that benefit both for customers and retailers.

The company believes that RFID technology is particularly important to achieving this goal because it enables non-contact transmission of product information such as price, manufacturer, expiration date and a product's weight via radio frequency.

"In the future, the use of innovative technologies will be one of the crucial competitive factors in our industry," said Hans-Joachim Korber, chairman and CEO of the METRO Group. "With the Future Store Initiative, the METRO Group will push the modernization of retailing."

Solution providers working with METRO Group on the Future Store Initiative include SAP, Intel, IBM and about 40 other companies from the information technology, consumer goods and service industries. The most recent member to join is Microsoft.

Thus far, the initiative is only testing RFID in certain areas of the process chain, primarily in warehouse management. RFID technology enables the automatic inspection of incoming goods: Goods delivered to the Future Store in Rheinberg are fitted with RFID tags in the central warehouse, and the tags are read in upon arrival at the store. During transport from the store's warehouse to the salesroom, goods are read in again and identified as "moved to the frontstore."

METRO Group says that the tests in Rheinberg have shown that RFID offers retailers and their customers enormous advantages, including more effective processes and consequently lower costs. Using RFID, goods can be located along the entire process chain, from production all the way through to the shelf in the store, the company says, and order management can be optimized, losses reduced and out-of-stock situations avoided, assuring more consistent availability of goods for the customer.

Utilization of RFID for the first time along the entire process chain is the most sweeping project thus far for the METRO Group Future Store Initiative. It is a multi-stage plan beginning November 2004 that provides for approximately 100 of Metro's suppliers to outfit all pallets and transport packages with RFID tags in their production facilities for goods bound for ten of the METRO Group's central warehouses. The goods' path from manufacturer to METRO Group's warehouses will thus be recorded using RFID technology.

One hundred stores from the Real and Extra sales divisions, 122 Galeria Kaufhof department stores and 59 Metro Cash & Carry wholesale stores in Germany will be receiving RFID-tagged deliveries from these warehouses.

To assure a smooth implementation of the project, METRO Group has set up a lab for the suppliers involved. In this lab, the functionality of the RFID technology, such as the reading of tags, is being tested.

"We see RFID as one of the crucial technologies for the future of retailing," said Zygmunt Mierdorf, a member of the management board and chief information officer of the METRO Group. "With our large-scale introduction of RFID, we will for the first time cover the entire process chain with this technology. The strongly expanded and mutually supportive cooperation with our suppliers in this area will help to significantly move forward the establishment of international standards for RFID."

For more information on trends relating to RFID, see the following articles:

For more information on RFID projects underway today, see the articles on initiatives at Benetton (April 9, 2003) and Gillette (January 8, 2003).

For more information on the use of RFID solutions in the supply chain, see "Needle in a Supply Chain Haystack," the Net Best Thing column in the January 2002 issue of iSource Business (now Supply & Demand Chain Executive) magazine.

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