Title: Woolworths Chips Away at Inventory Shrinkage through RFID Initiative
1Woolworths Chips Away at Inventory Shrinkage
through RFID Initiative
- Xinjuan Zhou
- Robert Wilson
- Theresa Burgmeier
- Kory Beidler
2Pilot Project
- Increased visibility of the movements
- of tagged dollies
- Increased security of both product and
- distribution assets
3Tracking in Distribution Center
Automated storage and retrieval system / Pick to
light system
Totes with barcodes
Dolly with RFID tags
Dispatch bay
Dollies loaded onto trucks
4Tracking to Store
Truck equipped w/ GPS
Truck locked w/ security code
Store manager electronically signs that order was
delivered
System lets the driver know what is to be
delivered
Data forwarded to Smart Chain platform
Handheld uploads information back to
Transportation Management Center
5Benefits seen from Pilot Program
- Shrinkage
- Bookstock Accuracy
- Reduced Labor Costs
- Asset Management
- Transport Efficiencies
- Identification of future RFID applications
6- Do we continue use the RFID technologies?
- Do we expand use of RFID throughout Woolworths?
7Cost vs. Savings
8Cost of Deployment
- Estimated cost of 2-3 million
- Same cost of opening one new store
- Where would this money better be spent?
9 Hardware Costs
- Tags for 100,000 roll cages, readers for
distribution centers, and units for delivery
drivers - Paid 8 for tags during the pilot program, cost
could be reduced to 5 or less
10 Hardware Costs (cont.)
- Bay readers, signposts, and handheld readers for
drivers will cost 500,000 - Total cost 1,000,000
- Computer hardware upgrades
- Worst case - 1.2 million
- Best case - 1 million
11 Software Costs
- Estimated 400,000 for
- integration of total system software
- Pilot program utilized most of the necessary
software, new software will be minimal - Computer software upgrades
- Worst case - 480,000
- Best case - 400,000
12Equipping Vehicles
- Delivery fleet will need to be updated
- Trucks will have GPS-enabled performance
monitoring and reporting capability - Total cost of the vehicle implementation is
estimated at 1,000,000 - Vehicle system upgrades
- Worst case - 1.2 million
- Best case - 1 million
13Things to Consider
- RFID implementation costs 8 - 12 of
Woolworths net income in 2003 - Hidden costs?
- Is this plan feasible to implement in one year?
14Where will the savings come from?
15Reduced Supply Chain Theft/Loss
- Assign inventory accountability to each
participant. - Deterrent effect
- Evidence for criminal investigation
- Reduction in theft of merchandise (75 million)
- Worst case 2 reduction 1.5 million
- Best case 40 reduction 30 million
16Improved Vehicle Utilization
- Vehicle Telemetrics System
- Prolonged vehicle lives and reduced vehicle
downtime - Transportation cost could be reduced by 8-10
- Share the investment and savings with the
strategic transportation partner
- Reduction in transportation (100 million)
- Worst case 5 of 8 million 0.4 million
- Best case 20 of 10 million 2 million
17Improved Asset Utilization
- Roll cages were expensive
- distribution assets, costing 100 .
- Better asset tracking would save
- at least 2,500 cages each year.
- Reduction in lost/damaged cages
- Worst case - 100 per cage x 1500 150,000
- Best case - 100 per cage x 3500 350,000
18Reduced Paperwork
- Electronic tracking and signature system
-
- The estimated savings in the paper
- forms purchased and staff reductions
- are 350,000 per year.
- Savings from resolving errors with
- manual data entry
- Reduction in paper work and office staff
- Worst case 200,000
- Best case 350,000
19Inventory and Availability
- Inventory levels followed seasonal cycles.
- With a more accurate stock count,
- availability could be improved or
- safety stock lowered or both.
- Increase in availability could
- translate into increase in sales,
- according to the retail studies.
20Inventory and Availability (cont)
- Additional sales from better availability
- Worst case 0.5 in availability 0.25 0.5
in sales - 2004 Forecast 3 - 7 million sales increase
- Best case 5 in availability 1.25 2.5 in
sales - 2004 Forecast 36 - 71 million sales increase
21- How do these savings and expenses affect the
balance sheet and income statement? - What about affecting ratio analysis?
- What about 2004s forecast?
22Woolworths Income Statement Data ( in millions)
23Woolworths Balance Sheet Data ( in millions)
24Woolworths Ratio Analysis
25Total Savings
- Worst Case
- COGS ? 1.5 million
- Expenses ? 0.75 million
- Sales ? 3 million
- Best Case
- COGS ? 30 million
- Expenses ? 2.7 million
- Sales ? 71 million
Total Expenses
- Worst Case
- Expenses ? 2.88 million
- Best Case
- Expenses ? 2.4 million
26Woolworths Balance Sheet Worst Case / Best Case
( in millions)
27Woolworths Income Statement Worst Case / Best
Case ( in millions)
28Woolworths Ratio AnalysisWorst Case / Best Case
29Considerations
- Employee Training
- RFID Tags on Totes
- Locking / Unlocking Cages
- Continual Upgrade Cost
- Set an Implementation Time Process
30Final Recommendation
- Due to the success of the pilot RFID program and
the likely benefits just reviewed, it is our
recommendation that Woolworths (UK) implement a
RFID program across our entire distribution and
transportation supply chain. - Based on 2004 company sales forecasts.
- To be completed within one year.
31Questions / Concerns