Supply Chain Frontiers issue #2. Read all articles in this issue.
The future of retailing is on display at the Extra Future Store in Rheinberg, Germany, where many customers navigate the supermarket's aisles using cart-mounted computers and weigh produce on intelligent scales that recognize and label items. Also on display is the huge potential of radio frequency identification technology--and its limitations.
The Extra Future Store is not a museum piece. The fully operational shopping outlet is part of the METRO Group, the world's fifth largest retailing company with 2400 locations in 28 countries. The futuristic store celebrated its first anniversary this April and is already yielding benefits for the parent group. As a result of the customer feedback it has received in the outlet, METRO plans to install 200 self-checkouts in 50 of its stores and increase the number of intelligent scales.
Headquartered in Dusseldorf, Germany, METRO "wants to be an innovator" said Jim Rice, Director - Integrated Supply Chain Management Program, MIT Center for Transportation & Logistics. He recently visited the facility as part of the Smart Objects research project on RFID that the Center is undertaking with computer chip maker Intel.
Said Rice, the retailer has partnered with more than 40 companies to build the Extra Future Store and is open to suppliers that want to find out more about the technologies being deployed. That is a very different approach to retailers that are focused almost exclusively on their own operations, he pointed out.
The result is a store where "technologies are being integrated for the first time under real-life conditions," according to the retailer. Customers who choose to use a cart computer, called a Personal Shopping Assistant, are greeted by the unit. The Assistant shows the prices of items scanned by its built-in barcode reading device.
Hastily scrawled shopping lists are a thing of the past: the system presents an electronic shopping list based on previous purchases that can be managed by the customer. On the other side of the counter, store employees use Personal Digital Assistants, or PDAs, to communicate and access the supermarket's merchandize management system. Shelves are equipped with RFID readers that detect potential stock outs.
From an RFID perspective the store is a showcase of the technology's strengths and weaknesses. "RFID will be one of the underlying technologies but not the only one, by itself it will not win the competitive game," said Rice. Similarly, in a wider context the full potential of RFID will not be realized until it functions as part of a broad network of technologies.
The RFID technology used in the Store of the Future represents state-of-the-art applications in the grocery and retail environment, arguably the most progressive user of the technology. Ultimately, RFID will stitch together various management and display systems in the store, but "there are still islands of technology" that need to be connected Rice observed.
At present only a select few product lines are tagged with RFID chips. The tagged products are being studied for in-store operation to improve read rates. Also being investigated is the integration of data between back-of-the-store activities and the upstream supply chain with a view to improving product visibility.
As Rice explained, such problems are symptomatic of the technology. The many issues yet to be resolved include which radio frequencies are to be allocated to RFID, how much information electronic tags should carry, and the size and shape of these devices given the limitless range of products that will be tagged.
But there is encouraging news as well. Much work is being done to create RFID standards in crucial areas such as reader design and information storage. Some companies are helping their suppliers to adopt the technology. METRO will open a new Innovation Center this July in order to explore RFID adoption together with its suppliers. The facility will include a complete working warehouse, a retail store and an information technology center.
Forward-thinking investments such as these appear to be showing results. In the Extra Store of the Future, for example, customers are getting used to the novel shopping experience. Since the store opened for business more than 80% of its customers have tried one or several of the technologies implemented. Forty-four percent have taken advantage of the automatic self-checkout facilities at least once, and 67 percent of customers have used the store's intelligent scales. For these consumers the future of retailing has arrived.
For further information on the MIT Center for Transportation & Logistics/Intel Smart Objects research project, contact Jim Rice at jrice@mit.edu, tel: 617 258- 8584.