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MACY’S, INC. – Bloomingdale’s Item Level RFID Pilot Overview

Macy’s Logistics RFID Technology in Furniture & Bedding

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Macy’s Today

Macy*s

• Annual Sales = $20B

• Stores = 808

• In 45 States,

The District of Columbia, Guam & Puerto Rico

• Macys.com

Bloomingdale’s

• Annual Sales = $2B

• Stores = 40

• In 12 States +

1st International Location – Dubai in 2010

• Bloomingdales.com

•Annual Sales – $22 Billion

NYSE Symbol “M”

Diverse Workforce Of Approx. 167,000 Employees

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MACY’S, INC. – Bloomingdale’s Item Level RFID Pilot Overview

Fall 2008 Spring 2009

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Bloomingdale’s

RFID The sustainable inventory

solution?

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RFID Pilot-Phase IBloomingdale’s Item-Level RFID Pilot through VICS

Objective:

Pilot the use of item-level RFID technology in a Bloomingdale’s store location to determine impact in the areas of inventory accuracy, out of stock, locating product,loss prevention and sales.

Project ‘kick-off’ with Bloomingdale’s, ADT, Avery Dennison, Macy’s Logistics/Systems, Motorola U of Ark, Stealth Network Communications 2 Pilot stores: 1 RFID-enabled – SOHO, NY,NY; 1 non-RFID stores – Short Hills,NJ (control store) Men’s and Women’s premium denim jeans; 10,000 units each store. Pilot ran Sept 08 to December 08

Both control and pilot store executed 3 barcode and 3 RFID inventories a week.

Store associated RFID tags with UPC during daily receiving process.

Standalone system.SKU file updates to VUE software weekly.Decommissioning station at POS.

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Bloomingdale’s SOHO Conceptual Design

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Item-Level RFID Pilot – Fall 2008

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Item-Level RFID Pilot – Fall 2008

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Item-Level RFID Pilot – Fall 2008

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Pilot Metrics PHASE l

Data Collection Metrics for PilotR

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Detail EPC/UPC UPC UPC UPC UPC UPC

start/stop time

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30 random samples

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tracking by LP in

store

Middleware activation report vs pipeline receipts

Format RFID system Excel Excel Excel Excel Excel

Short Hills X X X X X X X X X X X X X X X

Soho X X X X X X X X X X X X X X XRFI

DValidated analytics for ourselves.Forced ourselves to look into the data.Questioned everything!

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The Foundation for a Business case.Concept of Gross Inventory Distortion and the Impact to Item File Accuracy 

I – Sources of Distortion:

• POS transactions - sales and returns

• Booking errors - both DC and store direct (over bookings, vendor misroutes ASN/128 )

• Shortage- Stolen, Fraud

• Re-ticketing

• Vendor Substitutions

• Handling of RTV and Damages

• Inventory taking

II – What does Distortion Impact?

• Item file integrity• Reporting tools- any report associated with

on hands • Replenishment (in-store reporting/inforem;

ROP release• Item locator system/ store to door

III- How do we Correct?

• Frequent Item updates

• Communication and education at all levels

• Focus on high distortion, high replenishment and high velocity businesses for now.

• Measure results; drive Macy’s to change their existing inventory model.

V- What could we Gain?

• Release of ROP more often perpetuates turn

• Stockroom to floor – drive c/s representation

(large doors)

• Inventory management

• Accurate reporting

• Associate confidence

• Customer satisfaction

IV – What are the Risks?

• Could create more distortion• Place us in overstock position

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Soho Expansion-Phase ll• Secured capital funding

• Expand RFID throughout the Soho store excluding shoes, FA, and cosmetics (200,000 units tagged to date)

• Additional infrastructure to include readers/antennas in all stockrooms, receiving and DC.

• Read/write stations at registers

• MST network integration and enterprise solution.

• Perpetual inventory integration ( Work in progress)

• POS integration (work in progress)

• Expanded reporting (work in progress)

Added additional tracking zones, to include DC.

Store works replenishment reporting 3x daily

Store use Geiger counter method to find merchandise.

Inventories every other week.Cumulative data collection at exits

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Responsibility Matrix

Function Tasks Measure

Logistics Divert Tag WriteRe-packShip

Touch Labor ExpenseVendor Accuracy (distortion)Impact and value of outsourcing tagging

Receiving Ready Merchandise for Floor Accuracy received vs LogisticsTouch Labor opportunities, Merchandising Efficiencies

Operations / Merchandising

Follow set planogram/color sizeInventory bi-monthlyExecution/Training

Touch Labor reduction and reallocation.Replenishment Execution.Impact to stockroom inventory

Sales Value of color/size full representationWrite tags for re-ticketing(reticketing impact)Merchandise to floor not stockroom

Replenishment Sales- back to frontFrozen release impactImpact - item update to salesCustomer impact

Shortage Control Item file updatesSKU file (Planogram) updatesEAS v RFIDAudit program

In-store DistortionInventory Results/efficienciesItem Updates Loss Prevention (case productivity)

MST Primary - Network Integration (on-net)Secondary - POS Integration , PI integration

Sustainability

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Driving the business case @ a larger scale

• Replenishment sales – promo/non-promo• Release of reorder point allowing for replenishment• One and two rule- item locator-increase the % of filled orders• AUR increase • MKD decrease the % of goods “aging” in the stockroom• Gross Margin increase• Touch labor reduction or reallocation• Liquidation compliances increase-all existing mdse found• Shortage reduction• Improved Inventory management performance • RFID provides continuity of operational effectiveness beyond promotional

periodTo prove viability we should show:1. Improved store performance versus ty/ly, plan,

other stores with like business.

2. Grow incremental sales?

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What we are Learning

Granularity into the business makes a difference, we can work smarter not harder and improve service and sales.

Removing distortion resets the foundation our tools are based on bringing back confidence to the users.

We can work within our current systems not around them as they were intended alleviating more problems.

Taking an inventory once a year is not enough, but it doesn’t need be once a week either.

We have opportunity in replenishment on many levels.

RFID implementation is flexible and should be adjusted as the business need is determined. Know your model, know the ROI, leveraging the technology to fit your business needs.

We run our business well, we can run it well everyday!

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MACY’S, INC. – Macy’s Logistics RFID Technology in Furniture &

Bedding

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MACY*S Furniture & Bedding

•2008 Annual Sales – 1 Billion +

• Units Received – 2.1 Million

• DC Network – 14 Parent / 6 Hubs

• Supports 432 Macy’s stores / 284 Macy’s Furniture Only Stores

• Supports 26 Bloomingdale’s stores (6 Bedding Only; 2 Furniture Only)

• Supports all Macy’s Inc internet selling

• 800,000 Customer Deliveries

• 5 Trading partners represent 50% of Furniture Purchases

• 20 Trading Partners represent 75% of Furniture Purchases

• Technology Focus - Barcode RF Scanning / EDI

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Technology Focus - Macy’s Logistics Furniture & Bedding

Why RFID?

•Used in enterprise supply chain management with various companies to improve the efficiency of inventory tracking and management. •Is superior to barcode identification that we use today in that it does not rely on the line-of-sight reading that bar code scanning requires to work.•lays the foundation for future process improvements

RFID is an advanced technology … it works!

Why in Furniture & Bedding Warehouse Facilities?

•High density product, High Average Unit Retail •Consistent Operational standards and processes •Will gain enhanced inventory visibility with improved accuracyand reduction in ‘not in location” units resulting in increased sales opportunities. •Limited vendor / supplier base to collaborate with on upstream supply chain solutions

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Objectives• Validate that the use of RFID tags and readers will enable ‘Macy’s Logistics’

Furniture and Bedding Operations to significantly reduce: – time and resource required for Cycle Counting – “not in location” stock issues

Assumptions • To develop ability to apply pre-encoded / printed RFID tags and/or print tags in-

house on demand and scan to cross reference the tag to internal locator cards • Initial deploy – integration with RFID and Cycle Count programs - replacing the

piece by piece barcode scan in the bins.• Develop an integrated solution into Macy’s systems to enable future

partnerships with vendors, who would apply an RFID tag using the UCC128 number as the ID.

Macy’s Logistics RFID Technology in Furniture & Bedding RFID Objectives and Assumptions- Initial Phase Cycle Counting

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Key Metrics•Improved inventory accuracy and reduced cycle count time

Benefits•Reduction in cycle count time and labor with RFID-enabled readers •Enhanced inventory visibility with improved tracking and reduction in “Not in Location pieces”, resulting in increased availability of product for sale. •Vendor provided RFID tags would expedite new receipts and put away of the merchandise and eventually eliminate tag printing in the facilities.

Scope• Implement RFID for Cycle Count in the 8 parent Furniture & Bedding warehouses.

Macy’s Logistics RFID Technology in Furniture & Bedding Metrics and Benefits – Initial Phase Cycle Counting

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•Use pre-encoded / printed RFID tags and apply to merchandise in receiving, inbound returns, and transfers (1 tag per unit)• Process: Scan UCC 128, print internal locator card, apply the RFID tag, and “associate” the RFID tag to the locator tag via barcode scanning.

•Next Steps: Select Pilot Vendor (s) would begin affixing RFID labels to cartons with the UCC128 number as the RFID number

Cycle Counting via RFID Process Overview:Cross Reference RFID tags with Internal Locator Tags

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Cycle Counting via RFID Process Overview :Tag Inlays – Bin Labeling and Merchandise Labeling

AD-223 Inlay - into a 4x1" tag with high grade adhesive. The Inlay, embedded into the label, is encoded with a (7) digit location number and a visual printed (7) digit location number. The tag/inlay is placed on a 4x1 foam backing placed onto metal racking.

The AD-224 Inlay, into a 4x2" tag with high grade adhesive. The Inlay, embedded into the label, is encoded with a (20) digit, sequential serial number with a visual printed (20) digit sequential serial number and bar code. The tag/inlay is placed on product.

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• Motorola RD5000 RFID readers are mounted on one side of the lifts used for cycle counting.

•A second antenna is attached to provide two individual read zones:

•One for Product tags•One for Bin tags

Cycle Counting via RFID Process Overview :Collecting Data via RFID

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•Lifts follow a prescribed path on each side of the test aisles following each shelf, then up a level and back, etc.

•Product and bin tags would be read automatically.

•Software will use read time stamps and other values to determine current bin and product within the bin.

Cycle Counting via RFID Process Overview :Collecting Data via RFID

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SummaryBarcode Cycle Count RFID

Data Collection Cycle Counter hand scans each unit RFID readers mounted to forklifts

Reconciliation Unit variances reported and researched No Change to current process

Controls Perpetual Inventory Report Card No Change to current process

Perpetual Inventory Health ReportCycle Count Discrepancy ReportCycle Count Error Resolution Weekly Audits

RFID will replace the manual scanning of units during cycle counts Data will be posted to cycle count system and variances will be reported in same

manner as current process and variance reconciliation will remain as it does today

Benefits of RFID Cycle Count Payroll savings/productivity improvements Reduced cycle count time

Increase number of counts each quarter Additional time to reconcile/resolve NILs Improve accuracy of counts

Establishes framework for future use of RFID functionality

First use of this technology integrated to Macy’s systems!

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RFID Technology in Furniture & Bedding Distribution

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RFID Technology in Furniture & Bedding Distribution

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RFID Technology in Furniture & Bedding Distribution

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RFID Readers(Fixed, Mobile)

RFID Printer

DC Server

Mainframe

ProductTags

BinLabels

RackingWood/Metal

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Hardware OSWinCE / Win Mobile

BizTalk RFID Mobile Application

Device Service Provider

.Net

Fra

mew

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DataStore

BizTalk RFID - Event Processing

BizTalk RFID - Device Management

BizTalk Business Rules OrchestrationSQL

Server

WebServices

CICS Service Layer

DB2Store

COBOLServices

BatchServices

Macy’s RFID Architecture

Host systemcommunicates withBizTalk to control

devices and collectdata

BizTalk / BizTalk RFIDcontrol devices, collect data,

and orchestrate businessrules.

Devices capture data andforward to BizTalk RFID forcollection and integration to

back-end systems.

Physical layerprovides data input to

RFID readers.

RFID Technology – High Level Architecture

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Lessons Learned: Initial Phase

•Involve key internal stake holders to develop the business case

•Keep it simple with a narrow scope for the first phase

•Partnership with key technology vendors is key!

•Detailed Site analysis during planning and development prior to ‘smoke’ testing and ‘go live’

•Environment specific hardware installation

•Technical testing with readers / tags - ensure read rates outside of the application

•Reader and Inlay matching process – allow time for tuning

•Begin testing back end processes as soon as possible

•RFID technology works!

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RFID Technology - Next Steps … 2010 / 2011

Phase II: RFID Data Capture – Receiving •Interface with Receiving; Eliminate locator tag printing

•Enable scan of UCC128 label instead of locator tag

•Select Pilot Vendor(s) to begin affixing RFID labels to cartons (UCC128)

Phase III: Delivery Binning via RFID•Capture RFID as merchandise is moved into the delivery bin and update

record to binned•Provide visibility / manifesting tracking for line haul – movement between

hubs and stores

Phase IV: “Hands Free” Putaway and Picking•Utilizing the forklift mounted readers eliminate hand held scanning during

putaway and pick keeping the associates hands free to handle the merchandise.

Other Areas: Furniture & Bedding Departments within Store / Gallery Locations

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Questions?