How Customer Dissatisfaction Affects Wal-Mart and Tesco - Dissertation Example

ABSTRACT Issues like the globalisation of markets, extreme competition, augmenting cost pressures and the rise of customised demand with high product variance confront the grocery retail industry. Many researchers contend that the solution to these problems is for grocery retail industry to implement Radio Frequency Identification (RFID). RFID is an emerging technology that is wireless, provides unique identification to items and tracks items through the entire supply chain. This study investigates the problems and issues in the grocery retail supply chain in order to implement RFID technology. This study evaluates the potential benefits and challenges of RFID implementation at grocery retail supply chain, using a case study approach: secondary data were collected for this study and cross-case synthesis techniques were used to analyse three large grocery retailers. This study looks into the effects of RFID implementation and attempts to answer a few questions that arise from the same. The findings indicate that the potential benefits of a RFID implementation could reduce product shrinkage, reduce Out-of-Stocks (OOS), reduce cost, improve customer satisfaction, improve security, increase data accuracy and increase sales. The research findings show that the barriers of a RFID implementation are privacy issues, technology and high costs; it can, however, be overcome by technological advancement. Acknowledgements I would like to take this opportunity to express my gratitude to my supervisor, Mr. Philip Oliver, for the guidance, advice and constructive criticism in the preparation and compilation of this study which turned out to be successful. Moreover, I would especially thank Mr. Ritesh Teshwalall for his help in the grammatical correction of my dissertation; his constant encouragement during the writing of this dissertation is worth a mention as well. Lastly, I am indebted to my family and friends, without whose support I may not have reached the end of this journey. 1.2 Aims and Objectives The aim of this dissertation is to explore how the implementation of RFID technology may overcome the problems or issues faced by grocery retail supply chains. To achieve the research goal, the main objectives of research are as follows: To undertake a literature review in the area of RFID implementation in the grocery retail sector, with an emphasis on their supply chains. To undertake three case studies of the grocery retail sector, to study the impact of RFID on their supply chains. To draw up a model of the potential impact, as well as challenges, of RFID in grocery retail supply chains to guide future implementations. Chapter 8 Discussion of Finding 8.1 Introduction This chapter will discuss and justify the findings of the case studies, including the problems faced by the grocery retail supply chain. The potential benefits and implications of RFID technology in the grocery retail supply chain will be examined and, finally, a few proposals will be made to remove the problems in RFID implementation. 8.2 Problems/Issues Based on the findings, it is established that the three grocery retailers had problems in product shrinkage, OOS, and other customer issues in their supply chain. Table 6.1 shows that two out of three retailers – Wal-Mart and Tesco – face high product shrinkage and OOS problems caused by customer dissatisfaction. The retailers Marks & Spencer also have product shrinkage issues, though less OOS and customer issues, at their stores. However, all three retailers can reduce the problems in their supply chain through the potential benefits of RFID technology. These are consistent with the summary (Figure 4.1) that retailers face product shrinkage, OOS and customer dissatisfactions with the present technology. 8.3 Benefits of Implementation RFID Based on the findings above, it is clear that the retailers feel that RFID works better than barcodes system in their distribution centres and stores, thus, reducing problems. The wireless features of RFID enables data to be read without line-of-sight; it is able to read myriad of data, and it is an automated process that can be used across the entire supply chain, therefore, it increases the operational efficiency and visibility, along with reducing the problems of theft, food damage, loss, OOS etcetera. For instance, Wal-Mart, when using RFID, is able to scan through the products that are shipped by suppliers without opening the boxes or from a distance, thereby increasing efficiency and reducing product shrinkage. In addition, RFID provides a unique identity to an item or pallet, so it is capable of storing and retrieving records, helping in stock checks and customer requests and, thus reducing OOS and improving customer satisfaction. For example, Marks & Spencer can check the stock in their store quickly for replenishment when a customer requests for a specific size or colour due to the RF-tag being able to record unique information. Moreover, the “trace and track” characteristic of the RFID is able to track products through the supply chain in real-time, thus, retailers and suppliers have increased data accuracy and improved visibility and, consequently, increased sales. For instance, Tesco is able to keep track of its products’ real-time information through the CCTV camera: when a customer picks up an item the RF-tag transmits a message to the CCTV and photos are taken. Additionally, once a product is sold-out, replenishment can immediately be done by the staff. This means an increased stock availability to their customers and an increase in sales. Based on the findings, by using the RFID technology, retailers were able to increase operational efficiency and visibility, reduce product shrinkage, reduce OOS, improve customer satisfaction, increase data accuracy and increase sales. This is in line with the Summary provided (Figure 4.1) in that the three major RFID characteristics – it is wireless, it provides unique identification to an item, and it traces and tracks items – are beneficial to the grocery retail supply chain. Furthermore, Wal-Mart has seen an increased ROI in the supply chain; Tesco has increased product availability and work effectiveness, and Marks & Spencer has increased sales in their RFID trial stores, based upon findings. This is in line with the Summary provided (Figure 4.1): an increased ROI as a consequence of using RFID technology, though it is limited in that it, i.e. increased ROI, is only proven through one case study (Wal-Mart). 8.4 Challenges of Implementation RFID Based upon the reviews, privacy issues are what concern the retailers the most. For example, Tesco item-level tagging has been boycotted by the consumer group CASPIAN due to the reluctance of many customers to take, what they deem, spy chips to their homes (Out-Law News, 2005). However, Tesco explained that the tags are only for distribution centres operations and can be thrown away after the item is purchased. Marks & Spencer also stated that the tags on their garments can be discarded after purchase, so the customers do not have to take the tags to their home. On the other hand, Wal-Mart seems only to use RFID to track the product and their tag can be removed when the product is paid for. These are challenges presented in the Summary (Figure 4.1), however, there is a need for customers to be better informed on this issue; this would result in their objection being removed, thus the privacy issue can be eliminated from the challenges in the implementation of RFID. Another challenge faced while implementing RFID, based upon the reviewed literature, is the issues involving standardisation and reliability of technology. However, the retailers using the technology have not, so far, made any such observations: Marks & Spencer retailer notes that RFID readers are able to read their items quickly and accurately; Wal-Mart and Tesco have used EPC system which are standardised, more flexible on read and write and reliable. Though it is necessary that more stores implement RFID before there can be any concrete proof of RFID being reliable or otherwise. There is a need, like stated before, for other stores to implement RFID before the standardisation and reliability of the technology can be mapped. In this regard, the EPC system and ISO can help in standardisation of the system. Based upon the Figure 4.1, another barrier in RFID implementation is the high cost of tags. However, based on Figure 7.3, the cost of tags on the pallet or unit level will fall down: Wal-Mart has mandated that all its suppliers implement RFID, this would result in the tags prices dropping as per the economies of scales. Hence, these findings show that this challenge can be removed, though for now it is valid. 8.6 Research Result Based on the findings, this study found that the challenges of RFID implementation can be overcome by technological advancement and other issues. For instance, the RF-tag can be thrown away after purchased so it minimises customer privacy concerns; technology issues can be overcome with technological advancement such as EPC system and ISO for a worldwide standard; and the cost of tags will fall as a result of Wal-Mart’s mandate. The three main characteristics of RFID – it is wireless, it provides unique identification to items, and it traces and tracks items – could help reduce product shrinkage, reduce OOS, reduce cost, improve customer satisfaction, improve security, increase data accuracy and increase sales. In other words, this technology could increase ROI supply chain; however, as this is proven only through the results of one retail store, more research is done to augment this assertion. The new challenges that face the implementation, as per the findings, would be: to assuage the concerns of the consumers (and consumer groups like CASPIAN) by better informing them regarding the technology and its capabilities, and a need for standardisation of the RFID technology, this would entail more involvement by retailers in the adoption of RFID at more stores. The concerns regarding the price would be dealt with by the principles of economy: once RFID technology is adopted by more stores, the tag prices would go down. However, for now all these factors remain a hurdle/challenge in the implementation of RFID. Chapter 9 Conclusions and Recommendation 9.1 Introduction In this chapter, the overall dissertation shall be discussed, and conclusions and recommendations arising thereof will also be discussed. This includes initial aims and objectives of the research, its methodology, conclusion of findings, limitations of the study and, finally, recommendations for future research. The aims and objectives of the research have been achieved. 9.2 Aims and objectives of the study The main purpose of this study was to investigate how the implementation of RFID technology can help in reducing the problems or issues that are faced by grocery retail supply chains. Furthermore, the objectives of the research were to understand the problems and issues of grocery retail supply chain, the benefits and challenges of RFID implementation, and a discussion of how RFID might contribute towards an increase in the ROI supply chain, an assertion that needs more research before it can be taken as proven. Based on the literature reviewed, this study summarised RFID implementation (Figure 4.1) and arrived at a few questions that are listed below: 1. What are the problems or issues being faced at grocery retail supply chain? 2. What is the current status of RFID implementation in the grocery retail industry? 3. How does grocery retail supply chain work with RFID technology? 4. How could grocery retail supply chain benefit from implementation of RFID technology? 5. What are the challenges of implementation RFID at grocery retail supply chain? In order to conduct the research, the exploratory case studies and experimental case studies were used together to explore the phenomenon to gain in-depth knowledge (Collis and Hussey, 2009). Three grocery retailers: Wal-Mart, Tesco and Marks & Spencer, were used as case studies. They were analysed with the use of secondary data, data collected from the internet and books. A case study analysis was presented in chapter six, case study findings were evaluated in chapter seven, a discussion of findings was made in chapter eight and in this chapter, i.e. chapter 9, the overall thesis will be summarised. 9.3 Summary of Findings Based upon the findings, three grocery retailers, namely Wal-Mart, Tesco and Marks & Spencer, faced problems such as product shrinkage, OOS, customer dissatisfaction along with others issues in their grocery retail supply chain. To overcome the problems, these grocery retailers implemented RFID technology in their distribution centres and stores. Wal-Mart requested that their suppliers implemented RFID on pallets and cases before shipping them to their distribution centres. In addition, Wal-Mart implemented RFID readers between distribution centres and stores to keep track of the products being shipped to distribution centres and monitor products being sold in the stores (Tutorial-reports.com, 2007). Tesco suggested to their suppliers that the latter use RFID tags on cases and pallets before shipping them to the former’s distribution centres. Also, Tesco implemented RFID on item-level: onto razor blades and DVDs stores. Then, Tesco adopted RFID readers on cases, totes and trays before sending them to the retail stores, to be arranged on shelves. The RF-tag is fixed into an item; when the item is moved from the shelf, the RF-tag transmits a message to the CCTV camera located within the store. Through the CCTV camera, Tesco can manage the stock replenishment immediately (RFID Journal, 2003b; Wilding and Delgardo, 2004). Marks & Spencer has implemented an item-level RFID tagging on their garments departments. An RF-tag inlay with existing paper barcode label called Intelligent Label that is for stock control by RFID reader. The information will be sent to the central stock database, where it will automatically make comparisons with the stock profile for the store, triggering a replenishment order (Supply Chain Summit, 2007). 9.3.1 The potential benefits of RFID With the implementation of RFID, the grocery retailers will be able to reduce the problems and issues faced by their supply chain. These are as following: 9.3.1.1 Reduced Product Shrinkage Product shrinkage problem is one of the most common problems faced by the three mentioned grocery retail supply chain. The features of RFID, which enable it to authenticate the product, trace the product, automate processes so it can be theft preventive and provide real-time information, reduce the product shrinkage problem. For instance, Wal-Mart is able to trace the boxes that are shipped to their distribution centres, thus preventing the loss while shipping. 9.3.1.2 Reduced OOS Apart from product shrinkage, based on the findings, OOS problems often occurred within the stores. The real-time tracking feature of RFID tags, which can provide updated information between distribution centres and stores, helps improve efficiency and increase the stock replenishment in the stores. For example, Marks & Spencer has used the RFID reader to read the Intelligent Labels for stock checks and stock counts. Subsequently, the information is sent to the central stock database where it triggers a replenishment order from the store. 9.3.1.3 Improved Customer Satisfaction With the potential benefits of RFID technology, retailers are able to increase efficiency, reduce product shrinkage and reduce OOS in the grocery retail supply chains. In other words, the stock availability is increased by RFID technology so the customers find what they want easily. For instance, Tesco fixed the CCTV camera within the store to monitor the products, once the products are sold out then stock replenishment can be done immediately by the staff, increasing stock availability to the customers. Based on the findings, the potential benefits of RFID technology can overcome the problems faced by grocery retail supply chain. With the use of RFID technology, Wal-Mart has seen a ROI supply chain, Tesco has increased product availability and, thus, work effectively and Marks & Spencer has increased sales in the RFID trial stores. Therefore, there is a high probability of increasing ROI supply chain; this is a probability, and needs to be augmented through further case studies. 9.3.2 Challenges of RFID Implementation The retailers’ most pressing issues in implementing RFID are privacy, issues with technology and cost. However, the challenges of RFID implementation can be overcome with technological advancement. For instance, privacy issues can be prevented when the tag can be thrown away after a purchase, something consumers need to be informed effectively about; technological issues can be overcome by the standardisation approval by EPC Global and getting ISO worldwide standardisation (Rajni, 2007) and the cost of tag is expected to fall, as shown in Figure 7.3, due to the Wal-Mart mandate and others who will follow suit. There is a need to address the concerns listed in the summary (Figure 4.1) and, perhaps, further studies that help illuminate the concerns. 9.3.3 Research Result Based upon the findings, a summary has been presented of RFID implementation, which shows the RFID implementation benefits in the grocery retail supply chain. There have been some challenges shown therein, however, with time, and with the suggestions given herein – suggestions that need further research and exploration – these challenges can be overcome. 9.4 Limitations of the study (1) The study was focused on large grocery retailers so it was difficult to undertake semi-structured interviews with those holding high-level positions at the store. In addition, the time limitations of this study mainly prevent advance in-depth investigation. Hence, there is no primary data contained in this study. Moreover, this study research may not be applicable from the point-of-view of small-medium grocery retail industry. (2) The secondary data collected may not be updated for this study and the information may not exactly refer to the case studies or research sector, and it, therefore, may have an effect on the quality of the research result (Prescott, 2008). The data is based upon the author chosen, so it may possibly create bias in this research. 9.5 Recommendations for Future Research (1) The case studies selected for this study are limited to three large grocery retail industries. To improve the reliability and validation for future study and research, the samples of case study (Yin, 2003) can be increased. Apart from that, RFID adoption in the small-medium grocery retail industry can be investigated in future study and/or research. (2) All the data collection in this research is secondary data, so, the primary data, such as interviews, questionnaires, focus groups and so on, can be used in future research to improve the research result. A suggestion in this regard is that both qualitative and quantitative method can be combined for future study (Brown & Russell, 2007). (3) This study has mentioned the barriers on the implementation of RFID in the grocery retail industry. Hence, a future study with an in-depth investigation on this topic may improve the RFID knowledge in the grocery retail industry, thereby enabling widespread RFID deployments world-wide (Huber and Michael, 2007c). (4) Future studies can be focused on the implementation of RFID benefits for suppliers and manufacturers of grocery retail industry, keeping in mind that this study is more concerned with the retailer level of grocery retail industry. Besides that, an in-depth investigation of RFID implementation, with an increase of ROI at grocery retail industry can be undertaken. It would be interesting for the entire retail sector. Read More