CSE 6002R Introduction Services Science, Management and Engineering Final Paper Presentation

IKEA and RFID Technology

Improving the Level of Service

27/03/07 Mikael Blomberg

Agenda

Introduction, Scope of the Paper IKEA What is RFID Technology? RFID and IKEA Conclusion

Introduction

Effective use of modern IT can be seen as a requirement to succeed in the markets

...although IT system is not a shortcut to success

IT system needs to be implemented on the needs of business The final paper concentrates on the problems in IKEAs business and presents possible solutions The focus of the paper is in the end of the supply chain, in the interaction between IKEA and the final customer

IKEA (1)

IKEA sells low-price home products, including furniture, accessories, bathrooms and kitchens

The chain has 251 stores in 34 countries

On year 2006 IKEA opened globally 16 new stores

IKEA (2)

One of the fundamental innovations made by IKEA is definitely the concept of self service It requires lots from the system that is built around it RFID technology can be seen as a part of the system that supports the self service Observations have been made during numerous visits in IKEAs retail store in Espoo, Finland

RFID Technology (1)

RFID (Radio-frequency Identification) is an automatic identification method RFID tags are used to store and remotely retrieve information The RFID tag has an antenna which responds to the transponder (reader) and sends the information The information in the tag can be read many times In some tag types the information in the tag can also be rewritten

RFID Technology (2)

The main division of RFID tags is between active and passive tags RFID tags operate using different frequencies

Low frequency tags (30-300 kHz) High frequency tags (3-30MHz) Ultra-high frequency (300MHz-1GHz)

Most likely the suitable tag type for IKEA would be passive HF tags (13.56MHz)

Problem 1: Long queues

Long queues increase the amount of misplaced products, and decrease customer satisfaction and gained revenue

Products may be big Products may be difficult to handle

Solution: RFID equipped cash desks

Problem 2: Difficulties with self service warehouses

Customers need to search for the correct product from the huge warehouse

Certain customers may get frustrated IKEA needs to hire employees to help customers to find the correct product

Solution:

Smart shelves and Personal Shopping Assistant (PSA)

Problem 3: Sharing accurate availability information

Customers do not want to come to the store just to notice that the product they wanted is out of stock Showrooms may contain some interesting product but the customer cannot know if the product is really available Solution:

More visible stock information and Electronic Price Labels (EPC)

Problem 4: Effective home delivery

One IKEA retail store usually serves a wide area the distances can be long and locations scattered

IKEA retail store needs to have effective transportation system

Solution:

Tighter connection between the IT system and home deliveries through RFID technology

Problem 5: Theft Prevention

IKEAs product selection includes products which are small but still relatively expensive Solution:

RFID tags working as a part of Electronic Article Surveillance (EAS) system

Problem 6: Recycling

In the future environmental regulations will become stricter Companies may need to accept the used product back and recycle it Solution:

RFID tags containing the recycling information

Conclusion

Product level tags will be reality in the near future RFID technolgy could give several benefits for IKEA The importance of careful planning and patience to develop the system cannot be underestimated

RFID technology will require lots from the supporting service and IT infrastructure