Germany, Singapore put RFID into action

A retail store in Germany and a Singapore logistics company show how RFID helped improve their supply chain processes.

Germany and Singapore are continents apart, yet the two countries mirror each other in their modernity, efficiency, and their denizens' yen for all things hi-tech.

And with Germany among the world's largest and technologically advanced suppliers of products, such as steel, cars, and electronics, and Singapore being a trading and logistics hub in Asia, it is no surprise that commercial entities in both countries are increasingly adopting radio frequency identification (RFID) technologies in a bid to further improve business processes.

Wide-scale RFID implementations across retail shops are already taking place in Germany, while in Singapore, numerous logistics companies are initiating roll-outs within parts of their supply chains.

ZDNet Asia takes a look at two recent examples of RFID implementations in both countries.

A pilot in Deutschland
The Germans are one of the keenest people in Europe to embrace the technology, and some of the RFID industry's most mature implementations have manifested in various sectors.

According to a study conducted by IDC in the first quarter of 2005, of the 286 decision makers surveyed across Western Europe, Germany had the least number of people responding with "no plans" to implement an RFID system.

RFID has started to dot the retail landscape in Germany, with the Metro Group, one of the biggest department stores in Europe leading the charge under its Future Store Initiative.

In July 1, 2003, one of the Metro Group's sales division, Kaufhof Warenhaus AG, a leading department store in Europe, implemented a "pioneering" RFID project in an attempt to better manage inventory, boost the efficiency of their processes, while reducing stock levels.

Founded in 1879, Kaufhof Warenhaus has 27,000 employees working in 133 stores throughout Germany and 15 stores in Belgium. About two million customers patronize the stores each day.

During the pilot phase of the project, Kaufhof, together with garment supplier Gerry Weber International AG, tested RFID applications for five months. Each time Kaufhof department stores introduces the latest Gerry Weber clothing collections, the merchandise travels from the Gerry Weber production facilities to logistics service provider Meyer & Meyer, and to the Kaufhof distribution center, where the merchandise is delivered to individual department stores.

On November 1, 2004, Kaufhof started rolling out RFID applications with other fashion garment suppliers, such as Esprit and Triumph, in what it considers as Phase 1 of the project.

Partners such as Siemens Business Services, IBM, Intel, and SAP, contributed hardware and software to the project, while research institutes provided the necessary technology know-how.

At a Siemens Business Services press workshop held in Munich last month, Uwe Quiede, Kaufhof's RFID project manager, outlined the implementation. The project objectives were to:

  • Test all available technology;

  • Identify all feasible RFID applications;

  • Assess investments for hardware and transponders;

  • Estimate costs and benefits;

  • Calculate profitability; and

  • Present requirements for the textile retail and RFID industries.

Siemens Business Services provide a range of support services, including the coordination of 16 partners, system integration, building up the technology at the test outlets, data collection and analysis, project management, time schedule controlling, calculation of profitability, and the testing for comparison of the frequencies used for the RFID tags.

Partners assessed the degree to which RFID can accelerate and simplify work flow throughout the supply chain, and a further objective was to analyze the use of RFID technology in anti-theft systems.

Setting up the system
For the consumer goods industry in Europe, two frequencies are applicable for RFID: the high frequency range of 13.56 megahertz (MHz), and the ultra-high frequency range of 868Mhz. The 13.56MHz frequency is typically used for RFID transponders, or chips with antennae packed in materials like paper or plastic, on the individual-item level.

Transponders in this range are less prone to disruptions, in particular those due to the deflection of radio waves by metals. However, high-frequency waves can be read from a short distance only.

Since the Metro Group introduced the technology in November 2004, Kaufhof Warenhaus AG, along with the participating sales division and cross-divisional service companies, has used the frequency range of 856-868MHz for RFID transponders on logistics units.

In the pilot project, logistics service provider Meyer & Meyer attached a transponder to each clothing item from the Gerry Weber destined for the Kaufhof stores located in the towns of Muenster and Wesel.

The following information were recorded on the RFID transponder:

  • Type of transponder; for items or logistics units;

  • European article number (EAN);

  • Internal Gerry Weber identification number;

  • Anti-theft tag

The RFID technology was integrated into the day-to-day processes in the warehouse and in the stores. In the test phase, the conventional work flows based on bar codes affixed with the EANs, such as the check-out procedure, continued parallel to the RFID-supported processes. The pilot project analyzed the application of RFID transponders on both logistic units and individual items.

The process flow
Based on the individual EANs, Gerry Weber generated the item-level RFID transponders at their headquarters. Gerry Weber then sent the labels and merchandise to Meyer & Meyer, where staff carried out order picking of the goods destined for both test stores, outfitting each item with a transponder.

Goods on hangers, such as dresses and suits, were packed in slip covers, while the stackable goods such as sweaters and t-shirts were packed in cartons. RFID readers installed in the outgoing goods area at Meyer & Meyer scanned the packed merchandise, before it was loaded for transport on trucks in a distribution center.

At the warehouse entrance of the regional distribution center located in Nuess, RFID antennas registered the delivered products which are divided into stackable and hanger-goods. The EANs stored on the RFID transponders were entered automatically and individually.

This enabled a significant streamlining of processes.

For example, the task of counting hangers was eliminated and in addition to detecting incoming goods, Kaufhof was able to run a quantity control check. Up to now, the high workload allowed for random testing of about 10 percent of goods. With RFID, quantity control of 100 percent of merchandise will take place automatically in future.

The RFID applications were tested and evaluated in various sections of the Kaufhof stores in Menster and Wesel--in the outgoing goods area and at a number of stations on the sales floor. Employees used a mobile RFID reader to locate individual items and to take inventory at a push of a button.

The sales team in the Gerry Weber Shop registered the RFID tags on goods on "smart shelves" and "intelligent clothes racks", which were equipped with RFID antennae, by walking by them. Employees no longer had to scan each individual bar code, and this allowed more time for serving customers.

During payment, staff placed the selected clothing onto the conveyor belt at check-out. All RFID transponders were simultaneously read and subsequently removed from the goods. Scanning the bar codes was no longer necessary.

Kaufhof also installed anti-theft gates with RFID technology on two escalators in the test store in Muenster. These registered the saved data on the RFID transponders only. If the status "not sold" was indicated, an alarm was triggered.

As the readers registered the RFID transponders at various stations it was possible to seamlessly track the path of the clothing items along the entire supply chain--from the manufacturer to the Kaufhof warehouse in Neuss, and on to the two test stores. Wireless data transfer ended with the purchase of the goods by the customer, when the transponders were removed at checkout.

The cost factor
Kaufhof's RFID project manager Quiede told ZDNet Asia that since implementing RFID, the company has seen process efficiencies improve by 12 to 17 percent, out-of-stock situations have reduced by 9 to 14 percent, and shoplifting incidences have lessened by 11 to 18 percent.

He expects to see payback on the RFID investment in less than two years from now. However, the system is still not ideal, yet.

Kaufhof currently uses reusable RFID tags, because single-use tags are too expensive, said Quiede. Each tag that comes with a theft-protection feature costs about 40 euro cents (US$0.50).

Although it is cheaper to recycle tags, single-use tags are a more viable option as the process of collecting tags for re-use by suppliers around the world is quite troublesome, he explained. "When the tag price comes down to (around 10 euro cents), we will consider switching from reusable tags to single-use tags."

As to whether Kaufhof would expand the scope of the project to other departments, Quiede said: "Our current focus is Germany and for garments only. We will consider using RFID for the rest of our merchandise when the tag becomes cheaper and technical barriers have been resolved."

Revving up for Asia
Siemens in Germany is keen to port its RFID know-how to Asia, where interest in the technology is growing. The company in July consolidated its RFID services across various business units in order to cater to different industries. It is now able to provide RFID consulting and integration through Siemens Business Services, hardware through Siemens Automation and Drives; and middleware through Siemens Logistics and Assembly Systems.

Jeff Loo, systems integration manager of solutions business at Siemens Business Services Singapore, observed: "There's a lot of interest around Asia in RFID technology. Compared to the European market, the RFID market in Asia is just booming and a lot of companies are only just starting to seriously look into RFID as a process enabler and how it can be integrated into their existing processes.

"The project implementation in Kaufhof provides important validation that the benefits of RFID can be exploited and that RFID is not just another industry buzzword," he added.

Loo is keen to extend what they've learnt from the Kaufhof project, such as the potential pitfalls that could plague an RFID deployment. "By sharing our experience in Europe, we can minimize the risk exposure of our Asia-Pacific customers," he noted.

Siemens Business Services is now offering its consulting and integration services to companies ranging from public sector organizations to private enterprises in industries such as manufacturing, healthcare and hospitality. He hopes "to help them understand how RFID can be incorporated into their processes".

Island slings into RFID
Singapore has been championing RFID for many years now, starting in 1998 when the National Libary Board (NLB) used RFID to manage its libraries and the Land Transport Authority (LTA) introduced the electronic road pricing system. Last year, the Infocomm Development Authority of Singapore (IDA) injected S$10 million (US$5.9 million) to promote the adoption of the technology.

The months of June and July 2005 witnessed a spate of RFID activities in the island state, including a collaboration between Sun Microsystems and transportation company Neptune Orient Lines, and the unveiling of a new RFID tag with read/write data storage capabilities by the country's lead research institute.

Between September 2004 and June 2005, five key users from logistics company YCH, together with nine consultants from Y3 Technologies and Oracle, implemented the RFID IHF frequency band 923-925MHz into its operations and subsequently integrated the system to its warehousing and inventory management system. Y3 is an affiliate company of YCH.

The system consists of RFID fixed readers with four antennae and hand-held RFID readers that are used during inbound, storage and outbound activities to capture information about the cargo goods faster and more efficiently, so as to improve turnaround time. With the system, YCH is now able to better control tasks such as inventory stocking and tracking, handling, packaging and labeling of high value and controlled inventory like wines and spirits within its bonded warehouse.

"The implementation also covers the area of cycle counting and ensures that the stock-taking process is done quickly and that any variance can be resolved efficiently," said James Loo, Y3's chief operating officer.

A bonded warehouse is an area approved by customs authorities to store controlled items, such as cigarettes or alcohol, for re-export or for local consumption. As YCH operates such warehouses, it needs to follow stringent guidelines to ensure that necessary duties are paid for goods meant for local consumption, and that proofs of re-export documentation are processed and secured for those items marked for marked for overseas re-distribution.

According to Loo, YCH's challenges are two-fold: to ensure 100 percent adherence to strict customs guidelines, and ensuring the integrity and security of data at any given time. As data entered along the supply chain can be viewed, accessed and updated by YCH's partners, there exists the possibility of its integrity getting compromised.

"Our challenge is to ensure that the date remains true and accurate," he said.

A one-touch rescue
To ensure that data is clean and error-free at the point of collection and that data integrated is maintained seamlessly, YCH installed the Oracle 10g infrastructure software as part of its "one-touch" strategy, said Loo. The Oracle 10g software enables YCH to capture the right data at the source and subsequently manages this data through its lifecycle, he explained.

In addition, YCH uses the Oracle Edge Server to tie up with the sensor devices such as the RFID tags and barcodes to collect data and filters it at source level. "Filtering at source will get us error-free data which will in turn save us from cleaning out the back-end errors at later stages," he explained.

The configuration serves to complement and empower YCH's existing supply chain management solutions, as well as its proprietary warehouse management systems, which are integrated to various ERP (enterprise resource planning) and MRP (material resource planning) systems, and allows the company to introduce passive tags, tag antennae and readers to the infrastructure with minimal fuss.

YCH is already getting payback in the form of better information accuracy as data is captured from source and updated automatically in real-time.

Said Loo: "With RFID, there is better utilization of manpower as more than one staff can process inbound and outbound orders simultaneously, resulting in shorter turnaround time to accomplish the tasks. The warehouse is now paperless and the data is real-time and easily accessible to the user on handheld devices as soon as the orders are created in WMS."