t the M9-606-053
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
(See Exhibit 1 for other potential RFID applications.) RFID belonged to a group of automatic identification technologies used to identify people or objects. Other examples included bar codes and optical character readers. Automatic identification technologies increased efficiency and reduced data entry errors and labor time. In most of these systems, a person was required to manually scan a label or tag in order to read the embedded information. RFID, however, used radio waves to automatically identify people or objects as long as the tag passed within reading range of an RFID reader. An RFID system was composed of a transponder and a reader linked to a computer system. A typical RFID transponder, the RFID tag itself, consisted of a microchip with an attached radio antenna; the chip stored information about a product or shipment. (See Exhibit 2 for an example of an RFID tag.) The information stored in the tag was detected and recorded when a tag passed near a reader equipped with an antenna that tracked the tag’s movement in real time and passed its digital identity to a computer system. Readers could be incorporated into almost any component of the supply chain, from the manufacturing floor to the sales floor. In retail stores, for instance, readers could be integrated into receiving and shipping gates and into “smart shelves” that