RFID: Business Issues
Where’s my ball? I should
have placed a
RFID tag!
Ajal Jose WEB 52BY
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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 ChainM
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Today’s Supply Chain
$ Billions in losses$ Billions in losses$ Billions in losses$ Billions in losses
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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
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