1. Describe the customer value proposition and the profit model that underlay CHEP’s new business model deploying RFID-enabled pallets
The adoption of the RFID technology by the consumer, in this case, Albertsons who are CHEP’s customers, will bring about tangible benefits. Albertsons operates supermarkets, combination food-drug stores, as well as warehouse stores. This customer has to supply goods to various consumers and thus requires a way to do it quickly, effectively, and in a timely manner to meet the customer requirements. Embracing the RFID-enabled pallets will help this consumer to achieve that. The company will need to use the pallets to distribute the goods to the consumers and thus will need a way of tracking to ensure there is visibility of the supply chain as well as the inventory. Albertson will also reduce the labor requirements because many supplies and product checking tasks will be automated with the use of these RFID-enabled pallets from CHEP.
CHEP, on the other hand, has to configure its resources for the purpose of offering value to the above customer in a systematic as well as in a sustainable manner. CHEP’s business model will need to be aligned with the customer value proposition. CHEP must determine if this customer is ready and willing to pay for the better service or improved features. CHEP must also determine the formula to use that includes the revenue that can be generated, the fixed and variable costs, the profit margins, and the main financial measures that can aid in fully assessing the business model. CHEP will need to build a good relationship with her consumer adding another line of business responsible with the RFID-enabled pallets is also necessary for CHEP, and that will ensure that the customer value proposition is realized and the new technology delivers its ROI.
CHEP will also realize the benefits of recovering the lost pallets. It was initially difficult to determine who is responsible for the loss of the pallets because of the many people in the circle, but now with the improved visibility of the supply chain, it will be possible to know who is responsible for the loss, and the RFID technology will even prevent the loss from occurring. CHEP will also reduce its many staffs that were being used to check out the pallets, and that will translate to the increased revenue because of the reduced costs.
2. Identify and describe the major costs to be borne by customers with such a switchover
The first type of costs that the customer will be ready to incur is the additional costs of paying for the new technology. CHEP has incurred additional costs with the investment in the RFID-enabled pallets, and it is obvious that all these costs will go to the consumer. That Means that Albertsons will have to pay more because of the additional RFID tags attached to the pallets for improved security, visibility along the supply chain, and more accurate inventory checkout. The client also may incur the costs of tracking because if she supplies the goods to the consumers using the CHEP’s RFID-enabled pallets, she will need to pay for the tracking services because the readers of the tags are with CHEP. These costs a specific to the installation of the RFID technology on the pallets and they were not being incurred before in the pre-RFID installed pallets.
The other cost that will be borne by the customer, Albertsons, in this case, is the cost of training its staffs on how the technology works and security of the new technology. The other fourth cost to be incurred will involve the installation of the technology itself. Albertsons will need to have a similar RFID technology that will also check out the pallets and the goods for confirmation of the stock. These costs were not incurred previously because there was no thought of the RFID technology and everything was manual.
3. Identify and describe the major benefits to be (potentially) realized by customers with such a switchover. Be sure to make clear how each benefit relates to moving to RFID-enabled pallets and is different from those benefits already realized from the customer’s use of CHEP’s pre-RFID standard blue pallets
For one, the customer will realize increased visibility and avoid losing the pallets in the hands of the consumers as it has been the case before when the pre-RFID standard blue pallets were being used. With the RFID-enabled pallets, the client will now be able to know at what points the goods are and where also the pallets are. They will be able to know, in case the pallets have been lost, at whose hands they got lost and arranged on how to recover them so as to avoid fines from CHEP. That is a benefit that was not being realized before due to the lack of the way of knowing the supply path of the goods in a timely manner.
The other benefit that the customer will get from the RFID-enabled pallets is security. Their goods supplied to the consumers, or other retailers will be properly secured because it is easy to know a number of goods supplied and whether they were delivered to the right target consumer. In the past, with the pre-RFID standard blue pallets, it was easy for the goods to get lost on the way between the manufacturer and the distributor, between the distributor and wholesaler, and between the wholesaler and the retailer. Albertsons can pay extra fees to CHEP and have the pallets used for transporting the goods to their retailers or consumers as that will greatly improve the security of the goods.
The other benefit that will potentially be realized from the switch over to the RFID-enabled pallets is the provision of return on investment (ROI ) via increased inventory availability, labor costs savings, reduced stock-outs. In the past, with the pre-RFID standard blue pallets, there were many points of check terminals and all these required human labor. The company would also manually count the pallets that have been supplied by the supplier, and because they were many in number, it was hard to determine their correct number and to know how many have not been returned by the consumer. That made the company be fined by CHEP because the fine was provided for in the agreements. With the RFID-enabled pallets now replacing the pre-RFID standard blue pallets, the company can automate the checkpoint services thereby replacing significant human labor. The costs saved can be used for other meaningful activities including paying for the extra costs accompanying the RFID-enabled pallets.
The other intangible benefit that will be realized by Albertson due to the adoption of the RFID-enabled pallets is the increased customer turnout because of the improved services. Because the checkout of the pallets containing the goods is being done at a faster rate than before, the company will be able to deliver the goods to the consumers in a timely manner. Nothing interests the consumers than being given the consumer-oriented services when they need them. As the consumers will now get better services than before due to the automation of many processes, their loyalty will improve, and that will also encourage other new consumers. Previously, with the pre-RFID standard blue pallets, some consumers may have gone away because of the failure to get the supply of the needed goods promptly, the required number or in the right conditions. The RFID-enabled pallets directly or indirectly solve all these problems.
4. Describe how the technology and cultural ecosystem need to change, to realize these benefits.
The culture and technology in Albertsons will be impacted in one way or another because of the switch to the RFID-enabled pallets. This customer will need to liaise with the supplier of the pallets, CHEP to have the readers that can help them to read and track their supplied products in the supply chain through to the consumers and retailers. It will also be prudent to acquire the RFID technology and have it installed on their product containers or cartons and do away with the traditional barcode technology that is not as powerful as the RFID technology. That means that all the barcode labels on the items will need to be changed and replaced with the RFID tags that do not require a line of site of the item being read (De Marco et al., 2012).
The acquisition of the RFID technology will be important because it will be difficult for the company to monitor the products that are not being tracked. Tracking the pallets alone is not enough, and it is not the tracking of the pallet that is important for this customer, but the tracking of the goods in the pallets. Needless to say, tracking of the pallets majorly benefits the supplier of the pallets, in this case, CHEP, but tracking of the goods benefits the supplier of the goods, in this case, Albertsons. With the introduction of the new technology, training will also be a must for the purpose of ensuring that the technology can be better managed and controlled. The training of Albertsons’ staffs will help to make sure that the issue that may arise with the acquired technology are seamlessly resolved promptly before they can have a diverse significant effect on revenue and other benefits.
The full benefits of the new technology can also not be realized with the
change of the company culture. For one, the status quo will need to be
addressed in the new transformation. As
the new technology is being realized, some managers may be demoted while others
will be promoted. All the staffs will need to be educated on the benefits of
cooperation as they had been doing before even though their roles and authority
will have been affected by the new technology.
The company will also need to introduce the culture of training on the
security policy and procedure because the new technology and other critical
company information and data need to be effectively secured. The training on
the RFID technology and its security requirements will also have to be embedded
in the orientation of new employees in the company.
Vitzthum, S. & Konsyski, B. (2008). CHEP: The Net of Things. Communications of the Association for Information Systems, 22(26), 485-500.
De Marco, A., Cagliano, A. C., Nervo, M. L., & Rafele, C. (2012). Using System Dynamics to assess the impact of RFID technology on retail operations. International journal of production economics, 135(1), 333-344
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