Distribution System Design

From Industry 4.0 to…. Retail 2.0

giovanni.miragliotta@polimi.it
Agenda

• A short introduction to Industry 4.0

• Purchasing process and the new technologies

• Advertising & Marketing

• Inside POS

2
 The Fourth Industrial Revolution
First Industrial Second Industrial Third Industrial Fourth Industrial
Revolution Revolution Revolution Revolution

• Introduction of • Labor organization, mass • First step regarding • Interconnected products and
mechanical production, use of automation, with services thanks to the new
production tools electricity electronics and digital technologies
Prima rivoluzione Seconda rivoluzione Terzacomputer
rivoluzione Quarta rivoluzione
science
industriale industriale industriale industriale?
entering companies
rima rivoluzione Seconda rivoluzione Terza rivoluzione Quarta rivoluzione
industriale industriale industriale industriale?

18 secolo 19 secolo Anni '70 Oggi

18 1780
secolo 187019 secolo 1970 Anni '70 2011 OggiTIME
First loom First assembly line First PLC
Tempo
First appearance of
powered by
steam
(1870) (1969) "Industrie 4.0"
Tem
The Fourth Industrial Revolution
Definition

Industry 4.0 is a vision of the future of Industry and Manufacturing in which

Information Technologies are going to boost competitiveness and efficiency
by interconnecting every resource (data, people and machinery) in the
Value Chain

Sustainability New materials

Industry 4.0
Circular Economy Nanotech
 The Fourth Industrial Revolution
Definition

Industry 4.0 is a vision of the future of Industry and Manufacturing in which

Information Technologies are going to boost competitiveness and efficiency
by interconnecting every resource (data, people and machinery) in the
Value Chain

Advanced
Industrial
SMART MANUFACTURING

Human-Machine
Internet of Things
Interface
TECHNOLOGIES

Industrial Advanced
Analytics Automation

Cloud Additive
Manufacturing Manufacturing

Operational Technology
Information Technology
The Fourth Industrial Revolution
What do they have in common?

Advanced
Industrial IoT Human-Machine
Interface

Industrial Analytics Advanced

Automation

Cloud Additive
Manufacturing Manufacturing

Bridge the gap New skills

between physical
and digital worlds Adequately
Remove
mature
constraints
 The Fourth Industrial Revolution
Playground
PROCESSES

Smart Lifecycle Smart Supply Chain Smart Factory

Cloud
• Production
Manufacturing
• Production &
• New Product Management
Industrial Distribution
Development
Analytics Planning • Logistics
SMART TECHNOLOGIES

Industrial
Management
IoT • Supply Chain
• Product Lifecycle • Maintenance
Event
Advanced management Management
HMI Management
• Quality
• Suppliers
Advanced
• Suppliers Management
Automation Relationship
Relationship
Additive
Management
Management • Safety &
Manufacturing Compliance
 Why Manufacturing is so important?
1 – Economic reasons

Manufacturing as a % of GDP – 2014

Cina 35,9%
Korea,… 30,3% Services for manufacturing
Germania 22,6% (Italy, 2014)
Indonesia 21,0%
Giappone* 19,7%
Messico 17,7%
210 –
India 17,1% 250
Russia 15,6%
Italia 15,4% 100
Spagna 13,2%
USA* 12,5% %PIL "Manifattura" %PIL "Servizi
direttamente legati
Francia 11,2%
all'output industriale"
Brasile 10,9%
Canada* 10,7%
Regno Unito 10,6%
Average

Source: The World Bank (2013) Source: ISTAT, Rapporto di competitività 2014
 Why Manufacturing is so important?
2 – Social reasons
• Economist, jan 14th 2017, "Politicians cannot
bring back old-fashioned factory jobs"

• "Manufacturing exerts a powerful grip on politicians

and policymakers in the rich world. It is central to
what they want for their countries…. This is because it
used to provide good jobs of a particular sort,
jobs that offered decent and dependable wages for
people, particularly men, with modest skills, and would
do so throughout their working lives.

• Such jobs are much more scarce than once they were,
and people suffer from the lack of them. In their suffering, they
turn to politicians—and can also turn against them.

• Hence Donald Trump’s promise to create

millions of manufacturing jobs"
Why Manufacturing is so important?
3 – Strategic reasons
Gary P. Pisano, Blog, “Is the U.S. killing its innovation machine?”

“The prevailing view of the past 25 years has been that the U.S. can thrive as a center
of innovation and leave the manufacturing of the products it invents and designs
to others. Nothing could be further from the truth.

This logic is predicated on utterly false assumptions about the divisibility of R&D and
manufacturing… R&D and manufacturing are tightly intertwined. Unless you know
how to manufacture a product, you often cannot design it. And, to understand
how to manufacture it, you have to have manufacturing competencies and
experience.

To innovate, you need great two-way feedback. You need to transfer knowledge from
R&D into production, but you also need to move knowledge from production back
to R&D. … What this means is that when manufacturing capabilities migrate from a
country, design and R&D capabilities eventually follow."
 Why Manufacturing is so important?
Everyone is acting about it
Belgio - 2013
Made Different Svezia - 2014
Produktion 2030 Danimarca - 2012
UK - 2014 Made
Canada – 2015
Catapult-High Value
Conestoga:
Manufacturing
Centre for Smart Olanda - 2014 Korea del Sud – 2015
Manufacturing Smart Industry Manufacturing innovation
Spain - 2016
3.0 Strategic Action
Industria Conectada
Germania - 2011 Programme
Industrie 4.0
Portugal - Giappone - 2015
PRODUTECH Industrial Value
Stati Uniti - 2012 Chain Initiative
Advanced
Manufacturing Italia – 2016
Francia - 2015 Piano Nazionale Cina - 2015
Partnership
Industrie du Futur Industria 4.0 Made in China 2025
India - 2015
Make in India

Australia - 2013
The Next Wave
of Manufacturing
The Fourth Industrial Revolution

13
The Fourth Industrial Revolution
Impact areas

Labour productivity Productivity of materials, capital and energy

New / Enhanced New business models

Products and Services New entrepreneurship models

14
The Fourth Industrial Revolution
Labour productivity

Labour productivity

Data processing to
Data support decision Actuate decision,
collection making share knowledge

Advanced Automation

15
The Fourth Industrial Revolution
Materials, capital, energy productivity

Productivity of materials, capital and energy

Servitization Sharing Economy Circular Economy

Energy

Materials

16
The Fourth Industrial Revolution
New products and services

Products and Services

Product Service

Enhanced

MaaS
New

17
The dawn of the 5th one
Artificial Intelligence

18
Agenda

• A short introduction to Industry 4.0

• Purchasing process and the new technologies

• Advertising & Marketing

• Inside POS

19
The purchasing process

ACQUISITION CONVERSION RETENTION

IN-STORE LOCAL
DEMAND GENERATION PAYMENT LOYALTY
ENGAGEMENT SEARCH

PROMOTIONS STORE SELF-SCANNING & PAYMENT

& COUPONS CHECK-IN SELF-CHECKOUT FLEXIBILITY

IN-STORE PRICE PAYMENT LOYALTY

COMPARISON

20
The new (retailing) technologies

Touchscreen

Radio Frequency Identification

Tech costs (Capex, Opex)
Near Field Communication
Tech diffusion
BTLE (BT 4.0) / iBeacon
Customer cooperation
Visual Recognition
Privacy issues
Augmented Reality / Peripheral Vision

Kinect / 3D Scanners

Olfactory simulators

21
Agenda

• A short introduction to Industry 4.0

• Purchasing process and the new technologies

• Advertising & Marketing

• Inside POS

22
Advertising & Marketing
Inside / Outside stores

• Interactive shop window

– Special effects and customized window to engage the client, such as:

• Repetto Paris – shop window with digital animations, controlled by the

person in front of the glass using gestures

• Nike – shop window with animation of physical objects based on the

people movement outside the shop

• Sephora, Dior, Ray Ban, Diesel – shop window showing a digitally

enhanced video of the person in front, adding special effects

23
Advertising & Marketing
Inside / Outside stores

• Interactive shop window

– Special effects to engage the client, such as:

• Luis Vuitton – QR-code and augmented reality magazines

• Hugo Boss – shop window shows a different animation based on the QR-
code shown by the client

• Net-a-Porter – Interactive shop window with image recognition and

second screen device

24
Advertising & Marketing
Inside stores

• Targeted in-shop advertising:

– Kiosk/totem – after identifying the client by scanning his loyalty card
(Barcode, NFC) personalized promotions can be granted to the client
– iBeacon – as a communication channel for pushing advertising
messages towards the client depending on his current location

See later

• The client can be engaged by using gamification approaches,

using her phone or the shop kiosks/screens

25
Advertising & Marketing
Outside stores

• Digital bus shelter

– Innovative viral marketing ploy based on the usage of special
multimedia effects shown on the digital screens inside bus stops:
• Ex: Pepsi Max ad stunt in London

26
Agenda

• A short introduction to Industry 4.0

• Purchasing process and the new technologies

• Advertising & Marketing

• Inside POS
– Customer Identification & Tracking
– Customer Experience
– Payment
– Streamlining operations

27
Inside POS
Customer Identification & Tracking

• Customer identification is the key to enable innovative

services and solutions:
– A better experience in the point-of-sale (ex: VIP treatment, name-
based client interaction)
– Personalized offers based on client profiling and purchase history
(both online and in-shop):
• Shown on the large screens in the shop (client localization required)
• Proposed directly by the sales assistant

28
Inside POS
Customer Identification & Tracking

• Customer identification is the key to enable innovative

services and solutions:
– A better experience
– Personalized offers

• Solutions:
– Customer side:
• Physical Fidelity card or token
• Virtual Fidelity card card, on the phone*, e.g. Google Wallet, Apple Passbook

– Shop assistant side.

• Mobile devices (tablet), allowing to browse client related info

*plus all client tracking solutions 29

Inside POS
Customer Identification & Tracking

Customer tracking:
– Offers deep insight into client preferences and behaviour, enabling
better client profiling (retail analytics) – translates existing online
(ecommerce) client tracking mechanisms into the physical world

– Provides the basis for in-store personalized marketing

– Enables the improvement of the shop layout based on factual data

30
Inside POS
Customer Identification & Tracking

Customer tracking:
1. Acoustic/sonic tracking
• Uses subsonic emitters which generate sounds picked up by an app on the
client smartphone

2. LED lighting
• Makes use of in-shop LED lighting systems and mobile phone cameras;
E.g. ByteLight

3. Magnetic field
• Identifies the specific signature of the Earth magnetic field (no hardware
installation required) using the phone digital compass; E.g. IndoorAtlas

31
Inside POS
Customer Identification & Tracking

Customer tracking:
4. Wi-Fi / Bluetotth
– Uses the WiFi / Bluetooth signal levels in order to localize the mobile
of the client:
• Cooperative mode: the signal levels coming from various Blu-Fi access
points read by the cellphone, and elaborated by an app (which needs to
be installed and running); E.g. Ekahau
• Non-cooperative mode: the BluFi access points measure the signals
coming from the client cellphone (even when not connected / paired to
the network), identifying and tracking it (using the MAC address)
– Tracking clients in their multi-channel shopping experience E.g. Euclid
Analytics, Turnstyle

– Possible privacy issues?

32
Inside POS
Customer Identification & Tracking

Customer tracking:
5. Video cameras
– Uses video recognition in order to identify the movement of people; E.g.
PrismSkyLabs

– Video cameras can be used to identify demographic data:

• Gender
• Age
• (Race)

– Video cameras to recognize deeper information:

• Emotions
• Level of attention
• https://labs.affectiva.com/jssdk-ytlive-demo/
33
Inside POS
Customer Identification & Tracking

Customer tracking:
6. Bluetooth Low Energy / iBeacon
– Uses the Bluetooth Low Energy (onboard most smartphones) short-
range protocol in order to open a communication channel with BTLE
anchors installed within the shop
– Enables the following macro-functionality:
• Proximity location (within a given range) of the client in various areas of the shop
• Unique identification of the client (via MAC address)
• Sending custom messages to the client (custom promotions, gamification, etc.)
based on the client location
• E.g. Estimote, Roximity,
– Large scale deployments:
• Apple in all 254 shops across the USA
• American Eagle Outfitters (100 shops)

34
Inside POS
Customer Experience

A lot of effort is being invested into revolutionizing the customer

experience in brick-and-mortar shops, in order to provide an
appealing alternative to online shopping

1. Information fruition / Interaction with the merchandise

2. Augmented reality / Fitting rooms
3. In-shop targeted promotion

35
Inside POS
Customer Experience

• Information Fruition
– Creating a shopping conducing ambiance
– Presenting information and multimedia content
– Browsing through virtual catalogue
– Searching for products, etc.

• Main technologies:
• Video Walls
• Large Touchscreens
• MS Kinect (as in interactive windows)
• Tablets

36
Inside POS
Customer Experience

• Information Fruition – Video walls

• Large scale video screens, composed of several digital pannels or
video projectors
• Besides classical formats, variable geometry implementations are
available, like the ones manufactured by da Samsung (right photo)
• Implementations: Victoria Secret , Bond Street store – 30 screens,
live feeds from catwalks, controllable from any mobile device
(provider: PlayNetwork)

37
Inside POS
Customer Experience

• Information Fruition – Touchscreens & digital displays:

– Attempt to combine online and traditional shopping through the use
of a digital screen in place of a classic shelf
– This not only allows the browsing of ALL products, even those out of
stock, but it also facilitates the consultation of product reviews, or
calling a sales assistant when needed
– Ex: Xq Shelf

38
Inside POS
Customer Experience

• Information Fruition - Tablets

– Scanning of a 2D code (QR) or NFC tag with the mobile phone (item
identification)
– Identification of a specific product area (ex: jeans) using an iBeacon
– Usage of fixed scanning points/kiosks, equipped with an RFId reader,
and a large screen digital display for showing the retrieved information
• Ex: New Balance, Boston Flagship

40
Inside POS
Customer Experience

• Augmented Reality: a powerful way to enhance the in-shop

customer experience
• Most implementations are composed of 3 systems:
– A video capture device (usually "stereo"), such as the Kinect from Microsoft
– An automatic identification system for the merchandise (optional)
– A large digital display, usually functioning as an enhanced mirror
• The main benefits:
– Virtually trying out items, changing at will colours and models, without having
to physically wear them
– Receive advice on matching or alternative items
– Real-time sharing on social networks of pictures ("selfies"), asking friends for
advice

41
Inside POS
Customer Experience

• Augmented reality – with RFId identification

– The integrated RFId reader (within the "mirror") is able to identify the
item worn, allowing the client to:
• Receive information regarding the item tried on,
• Receive suggestions related to matching items,
• Watch related multimedia content (ex: catwalks)
– Ex: Keonn's AdvanMirror, Ad Notam Mirror (proof-of-concept)

• Augmented reality – without RFId identification

– Ex: MagicMirror.me, Nedap Tweet Mirror
– Trial: UniQlo (Magic Mirror)

42
Inside POS
Customer Experience

• Augmented reality - 3D Body Scanning

– Body-scanning system able to retrieve all the significant
measurements of a person and create a 3D virtual representation,
with the aim of creating tailor made clothes
– E.g. 3d-a-porter, BodyMetrics
– Implementations: Acustom apparel (NY, USA), Institchu (AUS)

43
Inside POS
Customer Experience

• Augmented reality - 3D Body Scanning

– Body-scanning system able to retrieve all the significant
measurements of a person and create a 3D virtual representation,
with the aim of creating tailor made clothes / shoes

– E.g. Else Corp

– E.g. Else Corp + Atom (https://vimeo.com/207420327)

44
Inside POS
Customer Experience

• Augmented reality – Advanced image recognition

– Smart Make-up simulator
– Implementations: Sephora (IT)

45
Inside POS
Customer Experience

• Some augmented reality with automated item identification

can be used inside the fitting rooms
• Ex: Prada New York Flagship
– Usage of a screen integrated in the fitting room mirror that allows the
client to see himself from front and back simultaneously
– Electronically-controlled privacy glass (clear/opaque), controlled by
the client

46
Inside POS
Payment

• Several innovative options to check out and pay

– Instead of traditional check-out, to reduce costs and especially to improve
the customer experience (no queue, higher conversion rate, more
personalized customer interaction, faster transaction, ecc.)

• Technologies:
– NFC (card present)
– QR (card not present)
– Visual / Biometrics (card not present)

– Es: Square, PayPal Here, Intuit, …

– Implementations:
• Starbucks (App with QR, prepaid card)
• Apple (iTouch, credit card)
• Moosejaw Mountaineering

47
Agenda

• A short introduction to Industry 4.0

• Purchasing process and the new technologies

• Advertising & Marketing

• Inside POS
– Customer Identification & Tracking
– Customer Experience
– Payment
– Streamlining operations

48
Streamlining operations at the POS
Operations @POS

• Good receival, check & storage

• Shelves replenishment

• Inventory check

• Anti-shoplifting

• Analytics & Reporting

Streamlining operations at the POS

Courtesy of
 Source Management: Merchandise Visibility
Advanced Shipping Notice (ASN)

6. 30340779241D57400000000C
30340779241D6B000000000C
Advanced 7. ASN Sent
30340779242719000000000D
Shipment
3034077924274240000000012 Electronically to
Notification
30340779242719000000001B Distribution Center
(In Advance)

Pallet loaded,
5. Shipment
validated

Lot packing
validated,
Packages
3. “Read”
into system
1.
RFId tags sewn
in or attached to
merchandise 4. Garment
during packages
manufacturing palletized

Tagged
2. garments
packaged

Manufacturing Line End Packaging Loading Dock

(Finished Merchandise) (Containerization/Shipping)
 Distribution Center (DC): Merchandise Visibility
ASN Assembled with
6. Corrected Package Data
7.
Advanced Shipping
Advanced Shipping Notice
Notice (ASN)
(ASN)
Store Request
Advanced Order:
Shipping Notice (ASN)

 30340779241D57400000000C
30340779241D57400000000C  30340779241D57400000000C
Store Request  Updated
1. ASN Received  30340779241D6B000000000C
30340779241D6B000000000C 3. Order Filled 
30340779241D6B000000000C

from  30340779242719000000000D
30340779242719000000000D 30340779242719000000000D ASN Sent
 
 3034077924274240000000012
3034077924274240000000012 Electronically
Manufacturing 3034077924274240000000012
3034077924274240000000012
 30340779242719000000001B
30340779242719000000001B X
 30340779242719000000001B
30340779242719000110001A
30340779242719000110001A to Retail Store

RFID Reader Portals

4. “Identify” an Incorrect
Package on Pallet

ASN Validated, Inventory

Transferred to Retailer
RFID Tagged Garment Bags
Move from DC Receiving
to DC Shipping Incorrect Garment
5. Package is Replaced
with Correct Package

RFID Tagged
2. Pallets & Garment
Bags Received at DC

Distribution Center - Receiving Distribution Center – Shipping

(Dock Doors #04 & #05) (Dock Door #20)
 Retail Store: Merchandise Visibility

Advanced Shipping Notice (ASN)

 30340779241D57400000000C
Fitting Room
 30340779241D6B000000000C
 30340779242719000000000D
1.  3034077924274240000000012
 30340779242719000110001A

SALE SALE
ASN Received from
Distribution Center

4.
Store
Employee
Updates Store
Inventory with Handheld
Reader Reader

SALE
POS
POS Window
5. Updates Log
with Purchase
Confirmation
Front Door
Portal
SALE
2. Reader Portals
3. RFID Tagged 6. Alerting Record Log
RFID Tagged Garments that Garment has
Garments Sales Moved from left Store
Received at Floor Backroom to (Good Purchase)
Retail Store Portal Sales Floor

Backroom Sales Floor

ON-HAND INVENTORY – QUICK AND EASY!

Actionable Information

• Cycle count stockroom & sales floor

• View the restock report
• Correct out-of-shelf & out-of-stock
“EYE-IN-THE-SKY” – HANDS FREE TECHNOLOGY
eNode controller
Wired and/or wireless

eNode sensor input

STAR Array Receiver

eNode exciter
antennas

e
RF ENERGY COVERS WALL TO WALL
 Customer Shopping Experience

Fitting Room
SALES

Products information and availability

Interactive Marketing SALES

Interactive fitting room

SALES POS

On line Cupons
Cross selling
Front Door
Personalized selling RFId Portal
SALES

FS/BS
Door

Backroom Sales Floor

Interactive Customer Shopping Experience based on a RFID UHF/NFC mix

 MERCHANDISE VISIBILITY DELIVERS COMPELLING BENEFITS
RFId drives real and measurable results in retail:

Increases Inventory Accuracy by 50%+… Reduces Out-of-Stocks by 60-80%...

Example shows industry average inventory accuracy Example shows industry average OOS rate
12-14%
95%+

62%
5-6%

Before With Before With

RFID RFID
Sources: U of Arkansas, June 2010; Stores Magazine, Nov. 2010; ABI Research, 2009 Sources: ABI Research, 2009; U of Arkansas, 2008-2010

Increases Sales by 6-14%... Reduces Working Capital by 30-59%...

Example shows typical integrated specialty apparel retailer Example shows typical integrated specialty apparel retailer

$800MM

$2.8MM
$500MM
$2.5MM

Before With Before With

RFID RFID
Sources: U of Arkansas, 2008-2010; RFID Sherpas, 2008; Stores Magazine, Nov. 2010; Checkpoint study 2009 Sources: ABI Research, 2009; U of Arkansas, 2008-2010
DISNEY 820 – THE PROMENADE

Checkpoint
Overhead 2.0 System
Customer: Express
Customer: Pepe Jeans

Checkpoint
Overhead 2.0 System
E10 – Covers – Fabric and
Customizable
WIRAMA RADAR™ IDENTIFIES ITEMS AND LOCATIONS…

Suits

Outside
the Store
Alarm Zone

Shirts

Outside
the Store

63
…TRACKS DIRECTION OF TRAVEL …

Suits

Outside
the Store
Alarm Zone

Shirts

Outside
the Store

64
 … ALERTS ON ITEMS EXITING STORE, AND CAN REPORT WHAT WAS STOLEN

POTENTIALLY STOLEN ALERT Suits

SKU # Item Desc.

707526 Men’s Grey 2-Pc Suit
495323 Men’s Oxford Shirt – Li-Blue
566002 Men’s Oxford Shirt - Yellow
Outside
the Store
Alarm Zone

Shirts

Outside
the Store

65
Loss Prevention Systems
Main advantages:
- Absence of false alarms
- Increased detection range
- No pedestals
- Detection filter (detects only store alarms, no other stores)
- Ability to upgrade to other features of RFId
- Knowledge of those product that has come through the door
and can be considered as theft

Hard Tag RFID “Smart” POS

Detacher
E10 Pedestal

Overhead Antenna
Using technologies all across the distribution chain

www.seramis-project.eu