RFID stands for Radio Frequency Identification

Metros main objective was to improve the management of its goods at all the stages of the
supply chain from a supplier's warehouse to the shelves of retail stores, utilizing the
efficiency of automation wherever possible. In addition to provide an opportunity to explore
applications beyond the supply chain providing a better and engaging experience for the
customers. This was enabled by the use of RFID tags.

Metro groups RFID tests showed that RFID tags attached to the pallets and cases enable
tracking the transport and whereabouts of goods throughout the supply chain. This has helped
them in accelerating their workflows increasing the transparency of their inventory and
improving the effectiveness of their processes. Following are the advantages of RFID usage
in Metro Group

a) Warehouse and Stockroom inventories can be monitored more accurately and

replenishment orders can be issued faster.

b) Time lost from ordering incorrect supplies can be avoided

c) Stores requirements can be uncovered earlier and deliveries received faster thus improving
the availability of the stores merchandise

d)'Out of Stock' can be reduced

e) Inventories in warehouses, stockrooms are more visible and trackable

f) Quantities ordered can more accurately reflect demand

g) Manufactures can plan production better

h) Less storage space is needed reducing warehousing and handling costs

i) Better management oversight by improved logging of sales

Apart from the process improvements it has also benefited the retailing activities by

a) Providing savings in labor, costs or time

b) Enabling more efficient, faster or less complex processes

c) Data sharing among manufacturers and retailers

Deploying RFID based solutions to a wider scale beyond company walls poses vast technical
and organizational challenges. During the early stages a lot of difficulties arised from RFID
tagging

a) Tags on item level posed technical problems depending on product material. If product
contains metal or liquids.
b) Delicate success inhibitors are privacy issues both on legal level as well as on consumer
perception level.

c) Information creation would reach a new order if each individual product is followed all the
way through product life-cycle.

Also Metro group management faced a lot of privacy concerns. These privacy complaints had
gained public attention and put additional pressure on what was meant to enhance customer
convenience.

As a result the Metro Group introduced "De activator" for the customer. With this the
customer can overwrite the EPC stored on the RFID chip. Once the tags are read the number
code appears on the display and then the customer can deactivate the data by simply pressing
a button.

Future store consisted of four principles

First the Future store would be an operational store with real customers. For Metro to fulfill
its goals of developing an advantage in custom experience they would require to get feedback
from their customer base.

Second the store would take a holistic view of the customer experience and store operations.
They would innovate with RFID and collaboration wireless devices for the Store managers
and also experiment with more retailing issues such as store layout and lighting.

Third Metro was determined to be a leader in the development of technology standards

around RFID. For this is was critical that Metro identify and recruit partners with expertise
across the range of technologies and services necessary to enable a successful RFID
implementation.

Finally the vision of a fully operational Future Store could be created with the dedicated
participation of partners. Metro realized that it did not have the required competences and
resources to create the store they envisioned.

Partner Selection

There were six types of partners namely RFID, trade technology, brands, IT Technology and
services, software and other services. However not all partners were likely to be involved
with the same intensity throughout the initiative. In order to strike a good balance between
investments and engagement for all these partners the Future Store Initiative (FSI) used three
levels of partnerships (platinum, gold, silver) reflecting the different levels of participation.
Three companies participated at the platinum level prior to the Future Store Initiatives
launch: Intel, SAP and IBM. Having decided on the basic three-tier structure of the alliance
network, partner identification and recruitment was the next step. Innovative and
technological competences of partners were the first partner selection criteria. Secondly
nearly all the original participants had long-standing personal relationships with the
initiatives leadership team. So the initial team resembled a web of personal relationships, all
converging on the Metro Group leadership team and interconnected. Third for many partners
Metro Group is a significant client. As partners not only participated in the FSI but also had
normal business relationship with the Metro Group. This ensured their commitment.
However FSI was separated completely from all business deals between the partners and
Metro Group. Fourth Metro Group recruited partners to take on very specific predefined roles
within the Future Store. By clearly defining what a partner's contribution and responsibility
were Metro Group was able to create internal competition within the network. Finally each
partner was asked to make a financial contribution to the joint development and marketing of
the Future store in addition to the indirect costs of employee time and physical products
contributed. This ensured that all partners were risk-bearing. The basic partner network was
in place by 2002.

In order to manage the large number of partners a network governance structure was
developed. Metro Group and the three platinum partners meet regularly at the Executive
Committee. The executive committee was responsible for admitting new partners and ending
relationships. All partners were invited to the two or three annual meetings of the Marketing
Committee. This committee reviews and evaluates progress and Metro Group shared its
future plans with partners as well. Next there were four project teams each dedicated to one
of the four specific areas of innovation in the Future Store: comfort shopping, smart check-
out, in-store information and supply chain. Each project team is headed by a Metro Group
project manager. The project teams coordinate the separate innovation projects that are
implemented in the store. The different projects are set up to be run as independently as
possible. This increased the efficiency of knowledge sharing. Each of the innovating projects
had a project manager as well.

The structure was supported by contractual agreements between the partners. Partners signed
a Memorandum of Understanding and a Non disclosure Agreement. Both covered only high-
level issues. The Memorandum described the spirit and vision and did not specify in detail
what each partner contributes and gains. The Non disclosure Agreement only relates to basic
issues like the protection of confidential information partners may share. This ensured that
vision rather than contract is leading and that operations adapt flexibility to changing
circumstances. As there was no requirement for partners to share any of the value they gain
from the network with Metro Group they were motivated to collaborate.

In a Modular organization ideally only the interfaces between the modules need to be
managed. In the FSI the interfacing was easy because of the lack of proper system integrator.
This made it impossible to identify the person for having the ultimate knowledge about how
technical interfaces should work. However organizing the network in a modular way lowered
search costs within the modules.
Exhibit 1- Type and number of partners in the FSI (May 2005)
Exhibit 2- Structure of Future Store Initiative