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DHL Consulting case:

Books & Codes
Topic Difficulty Style
Operations strategy Intermediate Real Case
Profitability analysis

A friend of yours recently got promoted to the position of director of a

university library. Yesterday, your friend received a call from the Ministry of
Education, who offered him to be part of a national RFID pilot with his library.
As your friend is unsure if he should pursue this option, he asks you for your
advice.

Your task is to assess the RFID technology for his library. How would you
approach such a request?
Comments

Since this is a candidate-led case, the candidate should drive the case from
start to finish.

Information about RFID technology will be provided to candidate if

required
Knowledge on the RFID technology will not be assessed, transfer of
(given) knowledge is expected.

Short Solution

By implementing RFID the entire lending process of a book can be

significantly streamlined. The working time savings sum up to almost 1 FTE
per year at an even better customer experience. Thus the implementation
of RFID can be highly recommended.
 Paragraphs highlighted in green indicate diagrams or tables that can be
shared in the “Case exhibits” section.

Paragraphs highlighted in blue can be verbally communicated to the

interviewee.

Paragraphs highlighted in orange indicate hints for you how to guide the
interviewee through the case.

The following framework/structure provides an overview of the case:

Feel free to share Figure 1 with a best-practice approach if the interviewee

seems to be stuck or lost.

I. First analysis of RFID potential

In this phase the candidate should come up with the following deliverables

Overall structure for following analysis

Identified need and potential of RFID technology, including key benefits
and main risks
First assessment of RFID idea

Ask the candidate whether she is familiar with the RFID technology. If yes, let
her explain the key characteristics. Otherwise you can provide the following
additional information.

Radio-frequency identification (RFID) is the use of an electronic chip

(RFID tag) applied to e.g. a product in order to identify and track it
using radio waves
Latter is done by a RFID scanner
RFID tags can be scanned over a wide range (~7 meters)
RFID tags can be scanned in bulk

Based on this high-level knowledge about RFID the interviewee should be

able to assess its potential. Let the interviewee suggest a framework/
structure to do this assessment.
 If the candidate does not come up with a framework by herself these are
generally good frameworks for such problems:

Cost-benefit analysis
SWOT
4Cs

Let the interviewee conduct a SWOT analysis to assess the implementation of

RFID.

Share Figure 2 with a possible SWOT analysis with the interviewee.

The interviewee should infer from the SWOT analysis that there are strong
arguments on the benefits side. Therefore RFID seems to be quite promising
and its worth to have a closer look at it.

It is important that this first step ends with a clear hypothesis stating whether
the implementation of RFID is beneficial for the library or not. If the
interviewee does not take a clear view on it she is not applying an answer-
first approach.

II. Understanding of as-is situation

In this phase the candidate should come up with the following deliverables

High level understanding of current library system including all key

drivers

High level understanding of RFID pilot offer

Let the interviewee ask relevant questions regarding the current as-is
situation.

You can provide the following information:

Current system:

Barcode, each book scanned manually by employee for lending/

return
 RFID pilot offer:

2 tiers: bulk checkout process conducted by employee (all books

scanned at once) + automatic return process (for non opening hours)
Financial aspects of investment negligible (covered mostly by
governmental ministry)

Library:

4 employees, working 8h a day

Media, mainly books: 900,000 books
20,000 students, 1,000 faculties, 100,000 inhabitants of city

Ideally the interviewee lays out the typical lending process of a book in a
library first to gain full transparency.

Share Figure 3 showing the lending process with the interviewee.

As a second step the interviewee can indicate which process steps are
affected by RFID. Let her then calculate the potential time savings coming
from the new RFID system (for the employees) to quantify the benefits.

Reminder:

RFID system offers

bulk lending/return process conducted by employee

automatic return process (for non opening hours)

Time savings are possible at

the lending step (user comes to checkout, books to be scanned) and

the return step (... same procedure)

III. Calculation of saved process time

In this phase the candidate should come up with the following deliverables

Description of lending process

Based on realistic assumptions, calculation of difference between
barcode and RFID systems for major processes
To quantify the benefits of RFID the interview should calculate the process
time of the current lending process using traditional barcodes and compare it
with the process time of the lending process using RFID. The gap is the
potential benefit or loss respectively.

Current process using barcodes:

Checkout process conducted by employee: Take one (next) book ->

open it -> scan it -> close it -> put it away

Based on this process chain it is reasonable to assume 10 sec per book for
the checkout. To derive the total time demand for the checkout process in an
entire library the interviewee needs to estimate how many books are
borrowed per year. The number of books borrowed multiplied with the
checkout time per book results in the total time demand.

Key question: How many books are borrowed per year?

Who borrows books?

Students (20,000)
Faculty (1,000)
Inhabitants of city (100,000)

Detailed computation for students:

8 courses per semester per student

per course, 2 books borrowed on average
Books borrowed by students per year = (8*2 + 8*2) * 20,000 = 640,000

Detailed computation for faculty (simplified assumption):

20 books per faculty per year

Books borrowed by faculty per year = 20*1,000 = 20,000

Detailed computation inhabitants (simplified assumption):

2 books per inhabitant per year

Books borrowed by inhabitants per year = 100,000 * 2 = 200,000

Total number of borrowed books per year:

= 200,000 + 20,000 + 640,000 = 860,000

Total duration of process on yearly basis:

= 860,000 books * 10sec = 8,600,000sec

= 143,333min = 2,388h = 298.5 FTE days (assumption: 8h working time/day)

Auxiliary calculation FTE days per year:

365 days - 52*2 weekend days - 30 vacation days - 10 public holidays =

221 FTE days / year and FTE

Calculated in FTE (Full-time employees) you need 1.35 FTE (298.5/ 221) to
carry out the checkout process throughout the year. To finally evaluate this
workload we need to determine how many FTE are needed for a new process
using RFID technology.

New process using RFID:

New checkout process conducted by employee: Take all books -> put
under scanner -> scan all at once -> put books away

Since this process is quite similar to how it was before it is reasonable to

assume also 10 sec time demand per borrower. Not much has changed
except the fact that a bulk of books can be scanned at once instead of
scanning every single book. However, this slight process difference leads to a
significant time benefit.

To derive the total time demand for the new checkout process the interviewee
needs to estimate how many borrowers show up in the library per year. The
number of customers (borrowers) multiplied with the checkout time per
borrower results in the total time demand.

Key question: How many borrowers per year?

Who borrows books?

Students (20,000)
Faculty (1,000)
 Inhabitants of city (100,000)

Detailed computation for students :

Ceteris paribus assumptions of barcode computation

Books borrowed by students per year = (8*2 + 8*2) * 20,000 = 640,000
Each time a student borrows 4 books at once when she goes to the
library (assumption)
Borrower per year from students = 640,000 / 4 = 160,000

The interviewee could doublecheck this by evaluating whether the

implicitly assumed number of library visits per student is plausible or not.
In this case the implicity assumed number of library visits is 160,000 /
20,000 (#students) = 8 per year. This sounds reasonable.

Detailed computation for faculty (simplified):

4 library visits per faculty per year

Borrower per year from faculty =4 * 1,000 = 4,000

Detailed computation inhabitants (simplified assumption):

2 library visits per inhabitant per year

Borrower per year from inhabitants: 100,000 * 2 = 200,000

Total number of borrowers books per year:

= 160,000 + 4,000 + 200,000 = 364,000

Total duration of process on yearly basis:

= 364,000 borrowers * 10sec = 3,640,000sec

= 60,666min = 1,011h = 126.5 FTE days (assumptions c.p.)

Calculated in FTE (Full-time employees) you need 0.57 FTE to carry out this
new checkout process throughout the year.

IV. Recommendation incl. reasoning

In this phase the candidate should come up with the following deliverables
 Clear recommendation including reasoning

Potential next steps if only weak recommendation

Based on the pure time savings it is highly recommended to switch to RFID.

The library can save almost one entire FTE which equals ~30,000 EUR per
year in savings (assumed salary: 30,000 EUR + social insurance). In addition
it is highly likely that the perceived service quality will be better at the same
time; e.g. due to possible returns during non-opening hours (as indicated in
the SWOT analysis).