Will the New Electronic Tags Eliminate Food Waste in Japan?
In April 2017, Japan’s Ministry of Economy, Trade and Industry declared a plan to introduce electronic tags to all products sold in major convenience stores in Japan by 2025. Will the electronic tags revolutionize supply chain management in the convenience store industry, and eliminate food waste in Japan?
In April 2017, Japan’s Ministry of Economy, Trade and Industry (METI), along with the top five convenience store chains in Japan (Seven-Eleven, FamilyMart, Lawson, Ministop, and NewDays), declared a plan to introduce electronic tags to all products sold in their convenience stores by 2025 [1]. The number of these products is estimated at about 100 billion products per year. Out of the five convenience stores, Lawson was the first to try out the new electronic tags, conducting a two-week field test at one of their stores in February 2017 [2].
So What is This Electronic Tag?
The convenience stores are planning to implement what is called a Radio Frequency Identification (RFID) tag, where radio waves are used to remotely identify objects. These RFID tags will replace the barcodes that are used today.
Two major advantages of RFID tags compared to barcodes are as below:
- You can input more data into the RFID tags, enabling each individual product to have its own unique ID, whereas with barcodes, all the same products are managed with the same barcode (no differentiation within the same product line).
- You can identify RFID tags without clear vision of the tag, and also identify numerous RFID tags simultaneously.
So How Will This RFID Tag Help Lawson and Other Convenience Stores?
On Lawson’s website, it is stated that in 2015, the average amount of food waste for a single store per day was 7.8kg [3]. In Japan, there were 55,313 convenience stores in September 2017 [4]. Though the amount of food waste is not the same for all the convenience stores in Japan, if you use these numbers to make a rough estimate of the amount of food waste from convenience stores in one year, you get 157.5 kilotons. Also, the Customer Affairs Agency of Japan has stated that in 2014, the total food waste in Japan was 6.2 million tons [5]. In contrast, the total amount of food aid in the world in 2012 was 4.7 million tons [6]. These are very shocking numbers.
To tackle these issues, Lawson is currently optimizing their supply chain by using the purchasing data that they retrieve from their “Ponta” point cards, which has over 70 million members in Japan [7]. But to optimize their supply chains even more, Lawson is becoming the first movers in the convenience stores to implement the RFID tags.
With barcodes, Lawson was only able to track how many each product was sold. But with RFID tags, they are able to track exactly which product was sold, with data such as the factory it was made, the lot number of when it was made, the expiry date of the product, etc. Putting this together with the advantage that you can identify these tags simultaneously without clear sight, inventory management becomes much more efficient.
For example, when inventory is managed at the convenience stores, we must scan the barcode of each item one by one. But with the RFID tags, this can be done in an instant. With data such as the expiry date for food, you can easily pick out the products that have close expiry dates and put discounts on the products to promote sale before they become waste. Or when there is a recall on a certain product, instead of having to get rid of all the products, you will be able to distinguish exactly which product was made in the factory or production lot that applies to the recall. Also, other than reducing food waste, the RFID tags have other merits such as enabling fully automated cash registers and preventing theft. The former is especially important in Japan, where the working population is decreasing.
Recommendations
Though being able to economically apply these RFID tags into the convenience stores is the first and most important goal, it is important to think of the broad range of possibilities that these RFID tags can bring. For example, by being able to manage the inventory with more detail, stores can automatically send real-time information of their inventory to their customers through apps, promoting sales with real-time discounts. Also, by managing data even after the customer purchases the products, a customer can manage the food in their refrigerator or pantry with more transparency, knowing when they will need to buy more stock, or by when they should eat the food.
Questions to Consider
In order for this initiative to work, you need the manufacturers to put the tags on the products, meaning that they will have to incur additional costs. What could be done for this to work out? Also, by expanding this initiative to not only the convenience stores but to all retails and beyond, what possibilities can the RFID tags bring?
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Sources:
[1] “Declaration of Plan to Introduce 100 Billion Electronic Tags for Products in Convenience Stores Formulated.” Ministry of Economy Trade and Industry, 18 Apr. 2017, http://www.meti.go.jp/press/2017/04/20170418005/20170418005.html, accessed 14 Nov. 2017.
[2] Lawson, Inc. Press Release, 18 Apr. 2017, http://www.lawson.co.jp/company/news/detail/1296986_2504.html, accessed 14 Nov. 2017.
[3] “Social and Environmental Activities.” Lawson, Inc. Website, http://www.lawson.co.jp/company/activity/preservation/waste/index.html, accessed 14 Nov. 2017.
[4] “Convenience Store Monthly Statistical Survey.” Japan Franchise Association, Sep. 2017, http://www.jfa-fc.or.jp/particle/320.html, accessed 14 Nov. 2017.
[5] Customer Affairs Agency, Government of Japan, http://www.caa.go.jp/adjustments/index_9.html, accessed 14 Nov. 2017.
[6] “2012 Quantity Reports.” World Food Programme, http://www.wfp.org/fais/reports/quantities-delivered-two-dimensional-report/run/cat/All/year/2012/recipient/All/donor/All/code/All/mode/All/basis/0/order/0/, accessed 14 Nov. 2017.
[7] “Loyalty Program.” Lawson, Inc. Website, http://lawson.jp/en/product_service/loyalty_program/, accessed 14 Nov. 2017.
This is a fascinating application of RFID to help retailers eliminate food waste. I’m particularly interested in how retailers may seek to use the data for pricing and promotional activity to further optimize their sales.
To your question regarding the weight on manufacturers to include this technology within their products I think there could be a role for the government to step in both lending support and increasing regulation in order to make RFID an industry standard. I think this could add immense value across the supply chain by also giving the manufactures insight into product demand and better integrating their production with the retailer’s sales.
The cheapest form of RFID tag, passive RFID costs around 10 cents USD, which means that annual additional costs amounts to ~US$10 billion (with the assumption of 100 billion products sold in convenience stores per year). Additionally, considerable amount of capital investment is required to install RFID readers in-store (around US$10,000-20,000 per checkout kiosk).
However, I believe that the implementation of RFID system in-store has significant potential to bring immediate value to companies. The most crucial advantage is that convenience stores will be able to associate specific purchases to individuals and track individual user behavior in-store. Through RFID usage, stores may be able to utilize specific data to create personalized promotions through online medium such as email newsletter. Additionally, stores can install a more advanced version of RFID tracker which could analyze the movement of goods and customers in-store, which can bring insight to specific products’ placement in-store to maximize basket size of each customer. All in all, implementation of RFID may be costly, but it also brings potentially game-changing advantages in the industry.
Sources:
[1] http://www.supplychaindigital.com/technology/capgemini-why-century-old-rfid-technology-can-disrupt-modern-retail-supply-chains
[2] http://itak.iaitam.org/simple-cost-analysis-for-rfid-options-choice-must-fit-the-organizations-needs-and-budget/
Real time data in food is becoming so important now! It is very hard to track back a lot of food products to their original source. This can open companies up to huge amounts of risk in a food safety crisis, such as a recall. I see this technology having big implications for that. I think if you could do a cost benefit analysis and show that the long-run risks mitigated (food safety concerns and food waste) through RFID are worth more financially than the upfront investment, then you could get more customers on board. Perhaps there could be some sort of price sharing agreement between companies where you can discount the upfront cost, but take a portion of the long-term “savings” – this might show good faith on behalf of the companies selling this technology.
This is a great investigation into a technology with many potential applications. As Lawson and their suppliers have aligned incentives to optimize inventory management, a cost sharing arrangement could be made. Perhaps Lawson could pilot the program with a private label product, and use the resulting data to make their case to suppliers.
Another application of RFID technology, to your second question, has recently been in wearable tech. Rebecca Minkoff, a handbag designer, has started including QR codes in her bags that can be used to access special events or promotions via the company’s RFID-enabled stores (https://www.fastcodesign.com/3067791/the-new-loyalty-card-is-just-a-chip-sewn-into-your-purse). The rationale is that these benefits will increase the number of times a customer selects a Rebecca Minkoff handbag from their closet, increasing the number of impressions on the street and therefore overall brand awareness and loyalty.
In addition to increasing the efficiency of inventory management, RFID tags could lead to the reduction of food waste by sending detailed information to suppliers about what the convenience stores need and what needs to be discarded, which optimistically could motivate these suppliers to produce/distribute a lower quantity of goods to avoid having an excess amount that ends up in the waste.
Therefore, in addition to the savings and additional knowledge that the use of RFID tags might represent, this strategy carries a strong sustainability component. The decrease of food waste means that some resources are being released, so that they could be used by other people, and that it is also possible to reduce CO2 emissions caused by the food leftovers.
A similar solution has been implemented at the IKEA store’s restaurants, where the employees are using smart scales to measure food waste, and later use this information to improve planning and develop measures to reduce food waste. The initiative stared this year, and the goal is to reduce food waste by 50% on 2020.
Hopefully other companies could adapt RFID tags or comparable technologies to increase the sustainability of its operations.
Source: IKEA, “Corporate news”, http://www.ikea.com/us/en/about_ikea/newsitem/062217-IKEA-FOOD-IS-PRECIOUS-Initiative, accessed November 2017.