**3. Re-designing services with CCOR model**

140 Emerging Informatics – Innovative Concepts and Applications

Back in June 2003, Wal-Mart, a US retailer, strictly required its top 100 suppliers to implement RFID technology by tagging the pallets and cases in the supplies for operation improvement through sending real-time inventory data from individual store to suppliers (Hardgrave and Miller, 2008; Roberti, 2004). Wal-Mart and its suppliers use the real-time data to improve replenishment with out-of-stocks reduced by 16% by tracking cases of goods with RFID tags carrying EPCs, where this data enables suppliers to measure the execution of promotions and boost sales which benefit to both parties (Roberti, 2005; 2007). The Wal-Mart case demonstrates an RFID implementation that only predominately affects only a small portion of the supply chain (from retailer distribution centre to store backroom) and makes use only limited RFID system capability (e.g. finding and counting items at pallet level and case level only). Given this limited scope of exposure and application, determining

In supporting the lean thinking initiative, three mini-cases are presented to illustrate how the application of RFID technology combined with the EPCs benefits apparel retail

1. **Marks & Spencer**, one of Europe's largest retailers, has expanded its RFID deployment to include six clothing departments across 53 stores (Hess, 2008). The company uses RFID to track goods as they move throughout the supply chain into its stores. Apparel is individually tagged and eventually ends up on the sales floor. Store employees can quickly read racks of the RFID-tagged items by passing an RFID reader past the apparel. Tagging the items at the manufacturing point allows Marks & Spencer to

2. **Levi Strauss & Co.**, a U.S. apparel retailer, demonstrated the value of RFID technology in inventory management through item-level tracking (Wasserman, 2006). The company has reported that sales clerks can complete a storewide inventory in about an hour, a process that used to take two days. That inventory data is used on the sales floor to replenish sizes, colors and styles of clothing. Levi says the in-store use of item-level

3. **American Apparel**, a U.S. apparel company, which operates more than 180 stores in 13 countries, is jumping into item-level RFID tagging and product tracking (O'Connor, 2008). The company saw quick benefits from the technology. The weekly process of taking inventory of all items in the store, which previously took four workers eight hours to complete, could now be accomplished with just two people in two hours. This gives employees more time to assist customers directly, and carry out other tasks. As seen from these examples, many RFID-based apparel retail systems is mainly used to improve accuracy or efficiency of business logistics in relation to inventory management or checking out of product items but however do not address all the concerns on sales-floor management, e.g. improving shopping experience or item availability. RFID technology is traditionally offered to the retail segment for improving business logistics. Some apparel retailers use RFID technology in product authentication or article surveillance. Apparel retail is a season-driven and time-sensitive industry. In today's fast-paced society, customers with more sophisticated buying needs and increased choices but have less time to devote to shopping. Apparel retailers have to face the challenge of adapting quickly and efficiently to keep up with fashion and buying trends to meet customer demand, in view of the shelf-life of most product items are just around 20-40 days before their first markdown (Wasserman, 2006).

RFID on clothing in Mexico City, which started in 2005, has increased sales.

the payback and ultimately creating business value are challenging.

monitor its shipments more accurately as they arrive in stores.

management:

Service design is considered as part of operations management that concerns the production of goods and services. Shostack (1982, 1984) is one of the earliest contributors in designing services that are process driven and customer focus with the methodology named service blueprinting. Shostack (1982) identified three important concepts in service design: (i) *process charts* for illustrating the operations processes flow, (ii) *PERT charts* for visualizing the project yields, and (iii) *systems/software programs* for supporting the service operations. Shostack (1984) further introduced the process of designing a blueprint which includes the steps of: (i) *identifying processes*, through mapping the processes that constitute the service, (ii) *isolating fail point*, by identifying the vulnerabilities of the service delivery system on the process chart, (iii) *establishing time frame*, as standard execution time which is below the maximum delay time tolerable by the customers, and (iv) *analyzing profitability*, based on the service execution time which is considered as cost component of service that should be minimized. However, the leakage of sales prospects, i.e. customer conversion is not included as a measurement of service profitability and the metric should be used in designing customer focused retail services.

Developed by Supply-Chain Council's (SCC), CCOR model expands the application range of the supply chain operations reference (SCOR) model, which is also a methodology, diagnostic and benchmarking tool developed by SCC for standardizing the process of supply chain management, from improving supply chain processes to enhancing service operations of a firm at its customer touch points (Saegusa, 2010). CCOR model provides a standard framework of high-level customer chain definitions that enables firms to benchmark their processes with other firms that use the same approach, and then identify and implement the changes needed to improve their customer chain which aims at cutting cost and time for subsequent improvement programmes (SCC, 2010a). The process reference framework adopts a standardized approach to speeding up the improvement programmes (Magnusson, 2010; SCC, 2010a) which includes three major steps: (i) *reengineering business processes* by capturing the 'As-is' business activity structure and deriving the future 'To-be' state, (ii) *benchmarking* by quantify the operational performance of similar companies and establish internal targets based on the 'best in class' results which involve defining metrics for making comparison, and (iii) *best practice analysis* by adopting suitable management practices and software or technological solutions that result in superior performance.

CCOR model defines the value-creating processes in the sales operations of a firm as the collection of business activities along the customer chain in which both the pre-sales and post-sales activities in the sales execution processes are designed to convert customer needs into sales orders (Magnusson, 2010). According to SCC (2010a, 2010b), the sales execution processes are triggered by planned or actual events including customer visits, responding to customer inquiries, creation of customer solutions, processing of claims and support calls, which are organized into four major process groups:

RFID, an Emerging Wireless Technology for Sustainable Customer Centric Operations 143

suppliers and customers that create *value* to products and services (Russell and Taylor, 2009). Lean thinking enriches customer value based on the principle that the final customer should not pay for such as the cost, time and quality penalties of wasteful processes and this is achieved by adopting five lean principles as a cyclical route to seek perfection (Harrison

 *Specify value* – value is specified in two fronts, (i) representing the customer value, which may include: increasing *delivery speed* and enhancing *service flexibility*, and (ii) representing the shareholder/management value in the business aspect which may

 *Identify and map value stream* – the whole sequence of process steps in the supply chain with all the activities required for a company's product and services, no matter value

*Make value flow in the supply chain* – Wasteful tasks/processes are removed by lean

 *Enable customer pull* – By working collaboratively with suppliers to make only on response to a signal from the customer in downstream supply chains. Pull enables the value stream to produce and deliver the right materials at the right time in the right

 *Pursue perfection* – continuous improvement of all processes through empowering employees actually doing the work to remove waste and to design and implement more

Lean service is the adoption of lean thinking in services, which are suitable nearly for any working environments no matter they are operational or support in nature (Aikens, 2011; Russell and Taylor, 2009; Voehl and Elshennawy, 2010). An important value created by the adoption of lean thinking is the reduction of customer order fulfillment time by eliminating non-value-added wastes from the processes (Ohno, 1988), and other value creating objectives such as reducing lead-time or inventory can also be applied to services by streamlining the processes so that businesses can be more responsive to changes (George and Wilson, 2004; Russell and Taylor, 2009). In the past decades, information technology (IT) has continued to expand into key manufacturing and service delivery systems, and more importantly, into their process workflows and supporting procedures where this expansion has been seen lately in the retail sector that implement lean thinking in the service operations (Husby and Swartwood, 2009; Martin, 2010). IT applications facilitate simplification, automation, integration, and monitoring of business processes, as well as the management and control of material and information flows that fully realized the lean thinking initiative in services (Martin, 2010). With the emergence of wireless computing, the "*Internet of Things*" is now happening where the things such as people and physical assets in organizations can be enabled with a wireless capability to provide visibility throughout the business and real-time tracking of inventories, movements, security and safety forms the

Through streamlining and automating operations processes with real-time asset and personnel visibility, RFID-based lean services in the "last 50 feet" of the supply chains resulting in improved item management in store management as well as enhanced customer experience which enables retailers to cope with customers of more sophisticated buying needs in the fast-paced society who have less time devoted to shopping (Doyle, 2004;

include *reducing cost* and *inventory* or *acquiring new knowledge/skill*.

added and non-value added, should be identified for the next step.

effective process, which is generally known as 'kaizen' in Japanese.

and Hoek , 2008; King, 2009; Womack and Jones, 2003):

principles in which JIT or pull systems enable flow.

basis of business process improvement (Hawrylak *et al*., 2008).

amounts with minimal inventory.


The sales operations and related service support tasks happened on the shop floor of a retail store that concern customer conversion involve mainly pre-sales activities, which are organized into three process groups, i.e. '*relate*', '*sell*' and '*contract*' (SCC, 2010b), and can be adapted as the basis for mapping the value creating activities to shopping process in retail operations.

**Figure 1** depicts the concept of customer conversion in the customer chain processes. By visualizing the conversion of potential customers of the target markets to contract customers at each stage of the shopping processes, CCOR model measures the value of the services developed in the chain through enhancing the speed and flexibility of the operations in each process group leading the retailer to overall profitability improvement in response to the evolving markets and changing customer demands (SCC, 2010a, 2010b). The conversion metrics can be adopted for measuring the profitability of new service in two folds, i.e. overall profitability, and profitability by process group so that retailers can lay different emphasis on the process groups in performance tuning according to their business priority and resource availability.

Fig. 1. Customer Chain Process and Conversion Rate

### **4. Realizing lean services with RFID technology**

Lean thinking began in manufacturing and is originated in Toyota with names 'Toyota production system (TPS)' or 'Just-in-time (JIT) manufacturing' beginning back in 1960s, aiming for a total management system that works for any type of business and stresses value creation (Ohno, 1988; Womack and Jones, 2003; Womack *et al.*, 1991). It is a strategic move to adopt lean thinking as a total management system and the success is determined by how well a company coordinates all of its internal process, including activities with its

The sales operations and related service support tasks happened on the shop floor of a retail store that concern customer conversion involve mainly pre-sales activities, which are organized into three process groups, i.e. '*relate*', '*sell*' and '*contract*' (SCC, 2010b), and can be adapted as the basis for mapping the value creating activities to shopping process in retail

**Figure 1** depicts the concept of customer conversion in the customer chain processes. By visualizing the conversion of potential customers of the target markets to contract customers at each stage of the shopping processes, CCOR model measures the value of the services developed in the chain through enhancing the speed and flexibility of the operations in each process group leading the retailer to overall profitability improvement in response to the evolving markets and changing customer demands (SCC, 2010a, 2010b). The conversion metrics can be adopted for measuring the profitability of new service in two folds, i.e. overall profitability, and profitability by process group so that retailers can lay different emphasis on the process groups in performance tuning according to their business priority

Lean thinking began in manufacturing and is originated in Toyota with names 'Toyota production system (TPS)' or 'Just-in-time (JIT) manufacturing' beginning back in 1960s, aiming for a total management system that works for any type of business and stresses value creation (Ohno, 1988; Womack and Jones, 2003; Womack *et al.*, 1991). It is a strategic move to adopt lean thinking as a total management system and the success is determined by how well a company coordinates all of its internal process, including activities with its

 *Relate* - The process of establishing and maintaining relationships with customers, *Sell* - The process of establishing an understanding of the customer's needs and

 *Contract* - The process of pricing a solution and gaining customer agreement, and *Assist* - The process of providing after-sales support for products/services.

presenting and/or developing a solution to meet those needs,

operations.

and resource availability.

Fig. 1. Customer Chain Process and Conversion Rate

**4. Realizing lean services with RFID technology** 

suppliers and customers that create *value* to products and services (Russell and Taylor, 2009). Lean thinking enriches customer value based on the principle that the final customer should not pay for such as the cost, time and quality penalties of wasteful processes and this is achieved by adopting five lean principles as a cyclical route to seek perfection (Harrison and Hoek , 2008; King, 2009; Womack and Jones, 2003):


Lean service is the adoption of lean thinking in services, which are suitable nearly for any working environments no matter they are operational or support in nature (Aikens, 2011; Russell and Taylor, 2009; Voehl and Elshennawy, 2010). An important value created by the adoption of lean thinking is the reduction of customer order fulfillment time by eliminating non-value-added wastes from the processes (Ohno, 1988), and other value creating objectives such as reducing lead-time or inventory can also be applied to services by streamlining the processes so that businesses can be more responsive to changes (George and Wilson, 2004; Russell and Taylor, 2009). In the past decades, information technology (IT) has continued to expand into key manufacturing and service delivery systems, and more importantly, into their process workflows and supporting procedures where this expansion has been seen lately in the retail sector that implement lean thinking in the service operations (Husby and Swartwood, 2009; Martin, 2010). IT applications facilitate simplification, automation, integration, and monitoring of business processes, as well as the management and control of material and information flows that fully realized the lean thinking initiative in services (Martin, 2010). With the emergence of wireless computing, the "*Internet of Things*" is now happening where the things such as people and physical assets in organizations can be enabled with a wireless capability to provide visibility throughout the business and real-time tracking of inventories, movements, security and safety forms the basis of business process improvement (Hawrylak *et al*., 2008).

Through streamlining and automating operations processes with real-time asset and personnel visibility, RFID-based lean services in the "last 50 feet" of the supply chains resulting in improved item management in store management as well as enhanced customer experience which enables retailers to cope with customers of more sophisticated buying needs in the fast-paced society who have less time devoted to shopping (Doyle, 2004;

RFID, an Emerging Wireless Technology for Sustainable Customer Centric Operations 145

The approach of orchestrating the service innovation project by Firm S includes two dimensions: (a) *project deliverables*, regard creating innovative lean services, and (b) *project management*, regards managing the process of creating project deliverables in a controllable manner. Unlike project management, obtaining project deliverables requires understanding of the product markets and has no established rules to follow. Products of apparel retail typically have **short shelf-life**, in which the markets are characterized by: (1) *short lifecycle*, as the product is designed to capture the mood of moment and hence the saleable period is very short, (2) *high impulse purchase*, as the buying decisions for these products are mainly made at the point of purchase, and (3) *high volatility*, which is sensitive to *shrinkage* and *dwell time* of the inventory and ultimately influence the efficiency, operations visibility and total cost of the store operations (Christopher *et al.*, 2004). Besides, customers' perception on the sales dynamics such as service levels and operation efficiency, could also affect their

The approach depicted in **Figure 2** aims at improving the 'As-is' processes with most suitable management practice (e.g. lean thinking, six-sigma, or CCOR model). Based on lean thinking, various value creating activities can be identified as the basis of new services for addressing corresponding market characteristics, and the 'To-be' processes of new services are created by automating/streamlining with suitable enabling technology. In practice, the metric for measuring proposed customer refers to all transacting customers, while it refers to repeated customers (VIP) when measuring contract customer. The approach can be applied to not only

The approach adopted in apparel retail operations is shown in **Table 1** in which the shopping processes are optimized with relevant value creating activities that are powered by RFID technology with associated systems aiming at simplifying shoppers to environment interaction and providing smarter decision support in the shopping processes so that sales can be closed faster than the conventional approach. Unlike service blueprint emphasizing

> **Market chars.**

inventory records (3) Clothing with RFID tags and clothing

checkout process (3) Clothing with RFID tags and RFID-

**Enabling technologies for new services** 

items with mix-and-match photos database for: (a) enhancing customer experience, and (b) improving operation efficiency and visibility

enabled ePOS application systems

tangible services, but also online services considering value creation as the goal.

Fig. 2. A Generic Approach of Developing Innovative Service

**Value creating activities in new services** 

Mix-and-match suggestion

Automatic/contactless

on clothing (1), (2)

on clothing (1), (2)

Table 1. Identifying Value Creating Activities for Apparel Services

Product catalog and

Fitting room Mix-and-match suggestion

**5.3 Approach of developing innovative retail services** 

purchase decision.

**Shopping process** 

Search and locate

Dressing mirror

Checkout at

POS

Hardgrave and Miller, 2008; Sarma, 2008). Hence, adopting lean services with RFID technology in retail operations supporting Martin (2010)'s IT capabilities becomes feasible and brings improvements to the operation as a whole. A case study of RFID applications in realizing lean services in apparel retailing is presented below aiming to provide insights on formulating relevant adoption tactics based on real-life experience.
