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RFID Migration Strategies: The Key to Electronic Product Code
Michael DominyDirector, Enterprise ServicesThe Yankee GroupOctober 21, 2004
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Agenda
RFID Basics
Implementation Strategies
Costs and Risks
Benefits
Best Practices
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Agenda
RFID Basics
Implementation Strategies
Costs and Risks
Benefits
Best Practices
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RFID Basics: Data and Processes
4 2
ERP/SCM Apps3
1 1Tags, Readers, LAN, WLAN, Software
Server and DatabaseB2Bi
Retailer
Manufacturer
Supplier
Source: The Yankee Group, 2004
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RFID Basics: Technologies
Tags (chips)
Readers
Network (LAN or WLAN)
Reader and network Software
Integration software to database
Database
Integration software to applications
Data communication software/services
PML Server
ERP Applications(Inv., SCM, Planning)
ONS Server
Reader Network
SavantSCE Applications(WMS and TMS)
EPC
RFID Tagged Pallet and Cases
Source: EPC Global
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EPC RFID Spending on Technology and Services
Source: The Yankee Group, 2004
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
2004 2005 2006 2007 2008
Co
st(i
n T
ho
usa
nd
so
f U
.S. D
olla
rs)
$0.30 $0.18 $0.09 $0.05
Applicators
Scanners
WLAN
Database
Middleware
Services
Tags
As tag costs decline and adoption increases, the RFID market will reach $4.2 billion by 2008
Cost per Tag
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RFID Basics: The Opportunity
Reduce inventories $117-$293 billion
Increase sales $83-$166 billion
How?
• Connecting, collaborating and synchronizing with the extended supply chain
RFID as a key enabler for improved SCM
Source: The Yankee Group, 2004
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RFID Basics: Key Decision PointsCustomer Process People Technology
Related / Other Areas / Impacts to Consider
Decision Points Decision Points Decision Points Decision Points Decision Points
What must I tag?Where / when should I apply the tag?
How will this change people's jobs? What are all the pieces?
How much should I budget to spend on RFID?
When do I need to start?Should I use people or equipment?
Will people lose their jobs?
What tags / chips should I use?
What are the benefits to my organization?
How much volume needs to be tagged?
From which location should I ship RFID tagged product?
Will Unionized Employees do it?
What RFID reader should I use?
Will this impact my brand (Privacy Concerns with RFID)?
What data do I need to communicate? When? Should I outsource?
How much training is required?
Should I use fixed or mobile readers?
Transportation Spend (depends on deployment strategy)
What other customers will require RFID?
Will 3PLs & Carriers also need to comply?
Who should be on the project team?
What RFID Reader Management S/W should I use?
Should I use RFID more broadly (in Yard too)?
What standards will they use?
How does it impact my replenishment plan (VMI)?
Who will lead the initiative (IT, Ops, other?)
Centralized or localized management of readers?
What deployment strategy is best?
Will my customer pay for the tags?
How can I analyze EPC data to improve my processes?
Which middleware / integration software (readers to database)?
What are others in my industry doing?
Source: The Yankee Group, 2004
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Agenda
RFID Basics
Implementation Strategies
Costs and Risks
Benefits
Best Practices
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Implementation Strategies
RFID at all distribution centers with selective tagging in manufacturing
Basic RFID capabilities at all (typically 4-7) distribution centers
Minimal RFID at limited locations (typically 1-3) distribution centers
CommittedConservativeCompliance
Source: The Yankee Group, 2004
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Implementation Strategies Across Verticals
Implementation Strategies(# of Locations to be equipped with RFID)
9.1%
16.2% 16.5%
12.6%
27.8%
32.7%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
2004 2005 2006 2007
% o
f R
es
po
nd
ents
0 1 2 - 4 5 - 7 8 - 12 13+ Don’t Know / Cannot Provide
Survey of 309 enterprises.
Source: The Yankee Group, 2004
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Industry Implementation Strategies: Survey Says…
Implementation Strategies
20.2
13.3
7.12.4
4.711.5
19.2
27.1
05
1015202530
2004 2005 2006 2007
Nu
mb
er
of
Loca
tion
s
Pharma All Industries Consumer Goods
Survey of 309 enterprises.
Source: The Yankee Group, 2004
ConservativeCommitted
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B. Compliance (1-3 distribution centers)C. Conservative (4+ distribution centers)D. Committed (ALL distribution centers and
some implementation in manufacturing)E. No plans to implement RFID
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What best describes your RFID implementation or migration strategy?
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SAP Users Implementation Strategies: Survey Says…
Source: The Yankee Group, 2004
Survey of 76 SAP Users.
Implementation Strategies (# of Locations to be Equipped with RFID)
17%
37%
11%17%14%
4%
22%
33%
0%
10%
20%
30%
40%
2004 2005 2006 2007
% o
f S
AP
Us
ers
0 1 2 -4 5 - 7 8- 12 13+ Don’t Know / Can't Provide
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Industry Implementation Strategies: Survey Says…
Implementation Strategies
2.05.2
9.013.1
0.0
5.0
10.0
15.0
20.0
25.0
2004 2005 2006 2007
Nu
mb
er
of
Loca
tion
s
SAP Users All Industries
Survey of 309 enterprises.
Source: The Yankee Group, 2004
ConservativeCommitted
Compliance
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Agenda
RFID Basics
Implementation Strategies
Costs and Risks
Benefits
Best Practices
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Costs and Risks
Slow adoption Changing
requirements Technology
changes Typical cost:
>$30 million
Invest too broadly and quickly—“pioneer”
Multiple expansion projects as volume rises unevenly
Typical cost: $7-$10 million
Unable to meet increasing volume requirements (capacity)
Longer lead times Increased logistics
costs (intranetwork transfers)
Typical cost: $1-$2 million
Costs and Risks
CommittedConservativeCompliance
Source: The Yankee Group, 2004
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Planned RFID Spending
Source: The Yankee Group, 2004
Average Total RFID Budget by Year
$5.14
$7.55
$9.81$11.20
$-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
2004 2005 2006 2007
Year
Mil
lio
ns
(US
$)
Survey of 309 enterprises.
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B. 0 C. >$1 millionD. $1–$3 millionE. $3+ million
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How much do you plan to spend on RFID in 2005?
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Agenda
RFID Basics
Implementation Strategies
Costs and Risks
Benefits
Best Practices
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Degree of Collaboration andLinkage Between Planning and Execution
Ben
efit
Op
po
rtu
nit
y
Low High
High
•Reduce labor in DC operations
• Improve yard management• Improve inventory
management and asset management
• Improve promotion effectiveness• Improve freshness/reduce obsolescence
• Improve extended SCM• Improve on-shelf availability
• Invoice matching
• Processing efficiencies• In-transit visibility• Reduce shrink• Improve deduction management
RFID Improving Internal Supply Chain Execution
RFID Improving Extended Supply Chain Execution
RFID Driving Collaborative Planning and Execution
RFID Benefits Continuum
Source: The Yankee Group, 2004
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Benefits
Volume discounts/ leverage with vendor
Identify internal savings:
— Logistics cost — Inventory — Demand planning — Supply planning — Revenue
Conserve capital Defer committing
to a particular technology vendor
Hedge against additional customer requirements
Small labor savings
Minimize capital expenditures
Minimize operational impact
Minimal (if any) operational benefits
Benefits/Advantages
CommittedConservativeCompliance
Source: The Yankee Group, 2004
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Benefits: Gaining Value from RFID
Supply Chain Partner 1
Supply Chain Partner n
Transactions (EDI, XML,…)RFID Data
Analyze, Model, Redesign, Execute
Extended Supply Chain Flows
The sooner you implement technology that enables you to understand inter-enterprise supply chain flows, the faster you can improve the flow of goods through the supply chain
Source: The Yankee Group, 2004
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A.Yes, for the extended supply chain but not my operations
B.Yes, for the extended supply chain and my operationsC.Yes, for my operations but not the extended supply
chainD.No, ROI for my operations or the extended supply
chainE.Don’t know
Will RFID deliver ROI?Hosted by
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Benefits: Survey Says… Most (57%) of SAP Users See ROI in RFID
Source: The Yankee Group, 2004
ROI Expectations (SAP Users)
14%
45%
12%
3%
26%
0% 10% 20% 30% 40% 50% 60%
Yes, for the extended supply chain but notmy operations
Yes, for the extended supply chain andmy operations
Yes, for my operations but not theextended supply chain
No ROI for my operations or the extendedsupply chain
Don't know
Weighted Totals SAP
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Agenda
RFID Basics
Implementation Strategies
Costs and Risks
Benefits
Best Practices
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Best Practices
1. Get started now! Set-up a RFID lab
2. Target problem areas
3. Begin with a manageable project
4. Look beyond “generic” benefits
5. Put ROI in perspective
6. Ask, “What if…?”
7. Develop a business and migration road map
Source: The Yankee Group, 2004
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Yankee Group Recommendations Use RFID to establish a supply chain road map
• From “chains” to “networks”
View RFID as one element of your wireless supply chain strategy
Turn to the right migration manager:• Who understands supply chain networks?• Who understands RFID and complementary wireless
technologies?• WHO DO YOU TRUST?
Use best practice selection and decision processes for selecting vendors
Next-generation SCM marries traditional and wireless supply chains