Advancing public-private partnerships for e-business standardsGeneva, 18-19 September 2008

Implementation of RFID in retailHenri Barthel, GS1

© 2008 GS1

GS1 in a nutshell

GS1 is a not-for-profit organisation that develops global Identification, Automatic Data Capture and Communication standards for the supply chain

Global standards for electronic business messagingRapid, efficient & accurate business data exchange

The environment for global data synchronisationStandardised, reliable data for effective business transactions

Global standards for automatic identificationRapid and accurate item, asset or location identification

Global standards for RFID-based identificationMore accurate, immediate and cost effective visibility of information

© 2008 GS1

108 Member Organisations140 Countries served

1,2 million member companies

Countries with a GS1 Member Organisation

Countries served on a direct basis from GS1 Global Office (Brussels)

GS1 Member Organisations

© 2008 GS1

IT Infrastructure

RFID - Radio Frequency IDentification

RFID Reader

Electro-

magnetic

Field

RFID Tag/Transponder

© 2008 GS1

Passive RFID market sizing

© 2008 GS1

Where are standards required?

ID

reader computers

telemetry

Query services

dataID

telemetry

Internet

Information Services

Standard data

RFID

tag

Standard air

protocol

Standard software

Interfaces

Standard query

language

Standard network

architecture

© 2008 GS1

Why are global standards important?

• Reduce complexity• Within organizations

• Between organizations

• For H/W and S/W production and purchase decisions

• Reduce cost• Implementation

• H/W, S/W and Integration

• Facilitate trading partner collaboration

• Allow organizations to focus more on how to use the

information than how to get information

© 2008 GS1

Global Standards reduces complexity

Manufacturers sells common goods in multiple markets

Retailers are supplied by variousmanufacturers

© 2008 GS1

EPC reduces the costs of the tags

Tag

Price

€ 0.05

€ 0.20

€ 0.40

€ 0.60

€ 0.80

€ 1.00

2001 2002 2003 2004 2005 2006

launched

EPC Gen 2

Standard

issued

Year

© 2008 GS1

Supply chain visibility

• Potential to transform business process• bar code replacement alone will not deliver ROI

• The power of event related information • Improved customer availability

• Demand driven supply chain

• Reduced inventory

• Reduced counterfeit

• Improved ability to track and trace

• Shrinkage

• Returnable Assets

• Transformation of commercial relationships

© 2008 GS1

Tangible Examples

• Electronic proof of delivery– Avoiding waste of resources.– EPC data was able to refute received amount 80% of occasions

• Department of Defense– Reduced order backlog form 92k to 11k orders– $1.7bn ROI over 7 years– Improving “confidence” in the supply chain

• Baggage tracking– Improving control and accuracy– 99% read rate helping to solve a $1.6bn problem

© 2008 GS1

Tangible Examples

• Apparel– Improving customer availability– 20% improvement in accuracy (size and colours)

• Prompt movement of promotional items to sales floor

– Retailer 19% sales lift

– Supplier 26% sales increase

© 2008 GS1

Business Case examples

• Metro– Process efficiency - 12% to 17% (incoming merchandise & shelving)

– Loss/theft - 11% to 18% (depends on category)

– Goods availability - 9% to 14% (reduction OOS)

– Incoming goods - € 8.5mio (German est. only)

• Lemmi Fashion (SME – 1 mio garments per year)

– Stock turnover before tagging - 5,000 to 10,000 items per day

– Stock turnover after tagging - 20,000 items per day

– Increase of 250%-300% in receipt and shipment of goods

© 2008 GS1

The Business Case and the numbers

Increasing number of leading organizations are publicizing results, for example….

• Gillette – Improving product launches and promotion– “The Advantaged Strategy” – moving beyond an all or nothing approach

• Wal Mart– Improving on shelf availability– Broad based process improvements

• DoD– Improving “confidence” in the supply chain

• Baggage tracking– Improving control and accuracy

• Apparel– Improving customer availability through improved inventory accuracy

and control

• And many more…..

3 days3 days

16%16%

89%89%

99%99%

20%20%

© 2008 GS1

Current process to EPC-enabled process

Current Process

EPC Process

5 seconds per pallet

20 seconds per pallet

Receiving

80 seconds to 20 minutes per

pallet

20 seconds per pallet

Checking

10 seconds per pallet

5 seconds per pallet

Shipping

© 2008 GS1

RFID benefits at METRO Group

• Increased process efficiency by 12% to 17% (incoming merch. and shelving)

• Reduction of loss/theft by 11% to 18% (depends on category)

• Increased goods availability by 9% to 14% (reduction OOS)

• Incoming goods cost reduction of € 8.5mio (German estimation only)

© 2008 GS1

Barcode business case

The 1975 barcode business case proved to be too conservative

Final benefits were double than anticipated

Final costs were half than anticipated

Source: Ahold

0.2% to 3.4%

Soft Benefits

Hard Benefits

Costs

3.1% to 3.5%

-2.5% to -1.3%

Per

cen

t o

f S

ales

1975

(McKinsey)

1997

(PwC)

- Automatic reorder

- Shrink control

- Improved warehouse operations

- Improved DSD control

- Inventory reduction

- Sales increase

- Faster check-out

- Reduced check-out errors/loss

- Prevention

- Elimination of price marking

© 2008 GS1

Real savings

• A study conducted by Coopers & Librands based on the McKinsey calculations from the 70s shows that the net savings realised by the adoption of the Barcode at item level is equal to 5,69% of the retail price.

• Based on the 2006 figures of the global retail industry, this represents a saving of over €150 billion per year.

© 2008 GS1

RFID business case

The RFID business case could also be too conservative (?)

Final benefits could also be double than anticipated (?)

Final costs could also be half than anticipated (?)

Soft Benefits

Hard Benefits

Costs

Per

cen

t o

f S

ales

Today Future

© 2008 GS1

Contact detailsHenri Barthel

GS1 Global Office

Avenue Louise 326, bte 10

B-1050 Brussels, Belgium

E henri.barthel@gs1.org

T +32 2 788 78 23

W www.gs1.org

Thank you for your attention!