RFID: Business Issues

Where’s my ball? I should

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RFID tag!

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ReaderTag Data Exchange

Tag

• The reader sends commands to the tag via pulse amplitude modulation

• The tag sends responses to the reader via backscatter modulation

Reader

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Metro’s RFID Motivation

• Reducing Shrinkage in the Supply Chain. The retail industry estimates that supply chain shrinkage runs at about 2% of sales worldwide. In the US it runs around 1.3% or $26 Billion a year. Analysis shows this can be reduced by 25% if tags used at the case level and 40% if tags used at the item level

• Improving On-Shelf Availability and Reducing Out-of-Stocks. Out-of-Stocks run at between 6% and 10% in grocery retailing and higher in fashion retailing. GMA estimates that approximately 25% of stock-outs are because of misplaced items.

• Productivity and Labor Efficiencies. It takes approximately 6 seconds to do a barcode reading. Surveys show that RFID can improve on that.

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Key Business Concerns: Across all Businesses

• Standards and technology

• Changing technology

• Limited full scale reference deployments

• The item level problem – high costs versus potentially high benefits

• Availability of RFID systems

• Current costs of tags and systems

• IT Infrastructure to handle the large amounts of data

• Interoperability throughout the supply chain

• Who bears the cost, particularly in the supply chain?

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Key Business Concerns: Across all Businesses

• Standards and technology

• Changing technology

• Limited full scale reference deployments

• The item level problem – high costs versus potentially high benefits

• Availability of RFID systems

• Current costs of tags and systems

• IT Infrastructure to handle the large amounts of data

• Interoperability throughout the supply chain

• Who bears the cost, particularly in the supply chain?

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Key Business Concerns: For Individual Businesses

• Which customers are going to mandate RFID usage? What is being mandated?

• How will the costs be spread – across customers mandating technology or across all customers?

• What will the implementation model be?

• How will processes be managed for mandating customers versus others?

• Fixed versus variable costs for new customers

• Is this technology here to stay? What is the life time of the current systems? How will this impact new customers?

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Identifying the Hurdles

• The Business Case: The key hurdle for most RFID deployments will be coming up with a business case to support the required investment

• For a large consumer products manufacturer, AMR Research estimates that a fully integrated RFID deployment could cost between $13 million and $24 million.

• Companies complying with a mandate can expect to invest from $1 million to $3 million

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Identifying the Hurdles

• Technical Hurdles:

RFID tag readability not 100%

Technology infrastructure will be too cumbersome

Enterprise systems not designed for high data volumes likely to be generated by RFID systems

RFID system speed does not match either warehouse speed or production speed

atat

1. What factors contribute to in-store logistics problems in

grocery retailing? How would pallet and case-

level RFID reduce these problems?

atat

2. Examine the process flow in Metro’s grocery supply chain

and identify how these processes would improve with the implementation of RFID at the pallet level and at the case

level.

atat

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Today’s Supply Chain

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Designing the Supply Chain of the Future

Manufacturing Packaging Manufacturer’s Warehouse

TransportationCustomer Distribution Center

Store Backroom

Store Shelf

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The EPC Network

• A clear view into the supply chain

• Show where all the products are …

• How much a company has …

• Where it is…

• Where it needs to be…

• And when/where it goes missing.

Manufacturing Packaging Manufacturer’s Warehouse

TransportationCustomer Distribution Center

Store Backroom

Store Shelf

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3.Is RFID a good investment for Metro? In your analysis, use the benefits listed in Exhibit 8 of the case and any other benefits mentioned in the case. Quantify the total savings that Metro would realize from full-scale implementation of RFID (for both pallet-level and case-level implementations).

atat

YES, RFID Is a good investment for Metro

atat

4.Which of the three options do you recommend that Mierdorf and Wolfram propose to the RFID steering committee on

December 13?1. Expand the scope of the current pallet-level RFID rollout.2. Move to case-level RFID with the manufacturers currently

engaged in the pallet level rollout.3. Stop the expansion of RFID efforts and focus on traditional

process improvement opportunities.

atat

Situation Overviewatat

Expand the scope of the current pallet-level RFID rollout.

atat

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Identifying the Benefits

• Inventory Management

More accurate shipments to customers?

Streamline Receiving/Shipping/Invoicing?

Streamline labor utilization?

Better record keeping?

• Order Management

Higher order fill rates?

Easier returns/recalls?

• Collaborative Planning

Increased demand planning accuracy?

Better upstream data from customers/partners?

Reduced safety stocks and shorter lead times?

atat

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Strategic Implementation Roadmap

• Phase I: The Wait and See Phase

No use of RFID technologies

Wait and see approach

• Phase II: The Compliance Phase

Compliance required by customer

No internal use of RFID

• Phase III: The Ramp-Up Phase

Limited applications internally

Mainly containers and pallets tagging

Passive tags

atat

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Strategic Implementation Roadmap

• Phase IV: The Supply Chain Visibility Phase

SKU tracking through out the distribution channels

Case and pallet tagging

Passive tags

• Phase V: The Advantage Creation Phase

Customized applications

Active tags with Read/Write capabilities

Item level tagging

atat

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RFID Costs

• Hardware installation costs: Significant

• Fine-tuning costs: Medium

• Software costs: Significant

• Process changes: Medium

• Integration costs: Very High

• Maintenance: Medium

The Future

"Imagine an Internet of things, where everyday objects, rooms, and machines are connected to one another and to the larger digital world.”

- Business 2.0