Chipotle is testing radio$-$frequency identification technology at

its Chicago distribution center and about $200$ restaurants in the

Greater Chicago region to improve its traceability and inventory

systems, the company announced last week. The fast causal

chain partnered with Auburn University RFID Lab to develop

the test.

The RFID labels will be used on meat, dairy and avocados from

five Chipotle suppliers. Ingredients being tested will have RFIDenabled case labels that are scanned with RFID readers, which

complement existing scanners in restaurants.

This RFID technology, which will be used to trace food from

suppliers to restaurants using serialization, is designed to allow

Chipotle to respond to food safety and quality concerns more

efficiently.

Dive Insight:

Chipotle has come a long way since it faced several food safety

issues from $2015$ to $2018.$ During this time, over $1,000$ people were

sickened by E$.$ coli, and management$$s lackluster response led to a

slip in sales. The company agreed to a $$25$ million settlement with

the Department of Justice in $2020.$ As part of that settlement,

Chipotle committed to continuing to improve its food safety

policies and procedures. The RFID technology will make it easier

for the company to respond to any food safety issues.

$$RFID labels transform inventory management into an automatic,

digital function that optimizes restaurant operations and gives our

Restaurant Support Centers access to inventory data in real$-$time,$$

Scott Boatwright, chief restaurant officer at Chipotle, said in a

release. $$This integrated technology is improving our employee

experience in participating restaurants while also benefiting our

supply partners.$$

Chipotle$$s suppliers added the RFID technology using the burrito

chain$$s specifications. The company said it expects suppliers will

save time on inventory management and stock rotation, reduce

human error and improve expiration date visibility and

accountability. The chain is using its stage$-$gate testing process for

the RFID tech and will incorporate feedback from employees and

suppliers before it looks into a systemwide rollout. The company

has been developing this program for two years, Laurie Schalow,

chief corporate affairs and food safety officer at Chipotle, said.

An RFID system could also potentially reduce food waste, which

will be key given ongoing issues related to rising food costs and

supply chain disruptions. Many restaurant employees manage

inventory manually, so an RFID system could help employees

better track inventory and reduce time spent doing checks. Some

systems can send alerts on products nearing expiration.

Chipotle$$s food costs increased $60$ basis points to $31\mathrm{.}6\%$ in Q$42021$

compared to the previous year$$s quarter, CFO Jack Hartung said

during the company$$s Q$42021$ earnings call. Labor costs also rose

$100$ basis points during Q$4$ to $26\mathrm{.}4\%$ compared to the previous

year$$s quarter, Hartung said.

Combined with a labor scheduling tool, which the company is also

rolling out, the back$-$of$-$house RFID technology can improve

overall operations and boost customer satisfaction. CEO Brian

Niccol said during the earnings call that its labor scheduling tool

uses artificial intelligence and analytics to help employees avoid

running out of product.

$$If we can give them tools where they don$$t have to worry about

making too much or not making enough, it just makes their job so

much easier. It eliminates one stress. They don$$t want a

disappointed customer,$$ Niccol said

In what ways does the implementation of RFID technology at Chipotle's Chicago distribution center and selected restaurants improve food traceability and inventory management? Discuss the benefits for both Chipotle and its suppliers.

Identify the challenges Chipotle might face in integrating RFID technology across its supply chain. How can feedback from the pilot program at the Chicago distribution center and restaurants help mitigate these challenges before a system$-$wide rollout?