German retailer Metro Group has asked its top suppliers to begin attaching special microchips to shipments, giving a boost to an emerging computer-based logistics system that is expected to help retailers reduce their inventory-tracking costs.
Metro, which operates 2,300 stores in Europe and Asia, plans to install the system at 250 supermarket and wholesale stores in Germany this year, the company said Monday. The microchips will be attached to shipments of everything from shampoo to cream cheese. The project, one of the largest of its kind in Europe, involves a technology known as radio frequency identification (RFID), which experts predict could one day replace bar code technology.
U.S. retailer Wal-Mart Stores has launched a similar initiative and is asking its top suppliers--including Gillette, Kraft Foods, Procter & Gamble and Tyson Foods--to put RFID "tags" on shipments headed for its U.S. warehouses and stores next year, starting with its Texas stores.
Metro expects its top 100 suppliers to start outfitting containers and cases of merchandise with RFID "tags" in November. RFID tags, which contain special microchips and antennae, are designed to automatically relay precise information about merchandise and its location to computers via radio frequency signals.
The technology is expected to reduce much of the manual labor and human error involved in tracking inventory and could save Wal-Mart close to $8.4 billion annually, according to investment research firm Sanford C. Bernstein. Metro's chief information officer, Zygmunt Mierdorf, declined to comment on how much the retailer expects to save through its RFID system.
Metro plans to expand its RFID program to include more than 300 suppliers and all of its 800 German stores over the next three to four years, Mierdorf said. Other than Procter & Gamble, the technology chief declined to name merchandise suppliers involved in the project, citing confidentiality agreements. Metro's technology suppliers for the project include IBM, Intel, Microsoft and SAP.
Metro has been testing RFID technology for the past nine months at a single store in Rheinberg, Germany, that sells groceries and household items. In addition to using RFID equipment to keep tabs on inventory in the supply chain, Metro's "store of the future" in Rheinberg is a test bed for in-store RFID applications, including self-checkout lanes and antitheft systems.
Concerns over privacy and costs have kept some retailers, including Wal-Mart, focused on using RFID in warehouses and back rooms, with the tags being removed before they reach consumers' shopping baskets. But in a project separate from the one it announced Monday, Metro is using an RFID technology in two of its Galeria Kaufhof department stores to monitor stock--a brand of women's apparel from German clothier Gerry Weber International--on store shelves. Items of clothing in those stores have RFID tags attached to them to help store managers locate goods and keep shelves stocked, Mierdorf said. The company plans to expand the project, which is the foundation of a self-checkout system, to more department stores and more labels this year, he said.
U.K. retailers Marks & Spencer and Tesco are also testing so-called item-level RFID systems.