RFID – Lessons Learned

July 22, 2004

Russ Brown

Agenda

RFID Basics RFID Vision RFID Upside RFID Concerns RFID Lessons Learned RFID Future State The Real Value Close

RFID Basics RFID Vision RFID Upside RFID Concerns RFID Lessons Learned RFID Future State The Real Value Close

RFID Basics

• RFID – Radio Frequency Identification• RFID has three components:

– An antenna or coil– A transceiver (with decoder) or reader (interrogator)– A transponder (RF tag) electronically programmed

with/carrying unique information

• RFID – Radio Frequency Identification• RFID has three components:

– An antenna or coil– A transceiver (with decoder) or reader (interrogator)– A transponder (RF tag) electronically programmed

with/carrying unique information

RFID Basics

• RFID is communication through reflected power. The basic concept behind RFID was defined in 1948. It began being used in the 1960’s. The technology to implement it is just now becoming more cost-effective – with cost being relative.

• RFID has broadcast or output restrictions defined by the FCC in the US and other governing bodies worldwide.

• RFID is communication through reflected power. The basic concept behind RFID was defined in 1948. It began being used in the 1960’s. The technology to implement it is just now becoming more cost-effective – with cost being relative.

• RFID has broadcast or output restrictions defined by the FCC in the US and other governing bodies worldwide.

RFID BasicPrinciple

M

RWD Antenna

Label Antenna

Energy

Data

Basic principle of inductive passive RFID systems

RFID BasicsPrinciple Applied

Basic principle of microwave RFID systems

RFID Reader

RFID Data

RFID Reader

RFID Reader

RFID tag placed on

items, cases and pallets at manufacturer

/ supplier

Merchandise is ‘read’ as its shipped by

supplier and received at the DC

Merchandise is ‘read’ as its shipped by DC and received at the retail

outlet

Merchandise is ‘read’ as it leaves the retailer’s backroom and enters

the sales floor

Streamlined customer checkout

1 2

4

5

3

RFID Vision

RFID Upside

• Improve in-facility accuracy/accountability within the supply chain

• Improve management of in-facility inventory and demand planning– Reduce safety stock inventory requirements

– Improve inventory “shrink” problems

– Improve visibility of assets as they move through the supply chain

• Improve in-facility accuracy/accountability within the supply chain

• Improve management of in-facility inventory and demand planning– Reduce safety stock inventory requirements

– Improve inventory “shrink” problems

– Improve visibility of assets as they move through the supply chain

RFID Upside

• Reduce labor-intensive activities such as physical inventory while improving accuracy of results– Tags can be read without contact and/or line of sight

– RFID readers can differentiate and read multiple items simultaneously

– RFID tags can be updated with new information as items pass through the supply chain

• Most companies using RFID are seeing a reduction in inventory costs but this occurs in buffer/on-hand reduction when your inventory processes are strong

• Reduce labor-intensive activities such as physical inventory while improving accuracy of results– Tags can be read without contact and/or line of sight

– RFID readers can differentiate and read multiple items simultaneously

– RFID tags can be updated with new information as items pass through the supply chain

• Most companies using RFID are seeing a reduction in inventory costs but this occurs in buffer/on-hand reduction when your inventory processes are strong

RFID Concerns

• Cost to implement (initial capital investment)– Actual cost of a label with a tag and an antenna is not coming

down as rapidly as anticipated – continues to range form $.20 to $.70 – you can anticipate that this cost will go up once the standards for the Class I Version 2 have been approved and moved to production

– Some applications are currently cost prohibitive

– Potential costs increase with the distance from the tag

• Potential of RFID tags being duplicated

• Cost to implement (initial capital investment)– Actual cost of a label with a tag and an antenna is not coming

down as rapidly as anticipated – continues to range form $.20 to $.70 – you can anticipate that this cost will go up once the standards for the Class I Version 2 have been approved and moved to production

– Some applications are currently cost prohibitive

– Potential costs increase with the distance from the tag

• Potential of RFID tags being duplicated

RFID Concerns

• “Eavesdropping” or interception of private data– Efforts are underway to protect privacy by securing

information

– Main issue is that data is being transmitted over the air

• Privacy standards have not been finalized by standards committees and governmental agencies– Consumer level privacy is a major concern – do companies

disable these as purchasers complete the transaction (this is usually at the purchased item level)

– Do not want other retailers to be able to read RFID tags on clothing as consumers enter or exit stores

• “Eavesdropping” or interception of private data– Efforts are underway to protect privacy by securing

information

– Main issue is that data is being transmitted over the air

• Privacy standards have not been finalized by standards committees and governmental agencies– Consumer level privacy is a major concern – do companies

disable these as purchasers complete the transaction (this is usually at the purchased item level)

– Do not want other retailers to be able to read RFID tags on clothing as consumers enter or exit stores

RFID ConcernsWhat does the consumer think about this?

RFID ConcernsChip/Cost Paradox

Lessons Learned

• Start small – follow a pilot process, learn the technology and become comfortable with it

• Accept the fact that you are re-engineering an important piece of your supply chain and that it is going to add cost to your process – hence you need to look for cost to eliminate.

• The manufacturing process continues basically as is

• Start small – follow a pilot process, learn the technology and become comfortable with it

• Accept the fact that you are re-engineering an important piece of your supply chain and that it is going to add cost to your process – hence you need to look for cost to eliminate.

• The manufacturing process continues basically as is

Lessons Learned

• The printing of the case content label that is currently being scanned will generate the barcode label just as today and the printer will also populate the RFID tag with the necessary data

• Cases will be received by customers or by our DC’s via barcode scanning and/or by RFID reading equipment.

• The printing of the case content label that is currently being scanned will generate the barcode label just as today and the printer will also populate the RFID tag with the necessary data

• Cases will be received by customers or by our DC’s via barcode scanning and/or by RFID reading equipment.

Lessons Learned

• RFID chips are fragile:– Be aware of static during handling that can “fry” the chip

– There is a “no man zone” when using manual chip writers – if you have the chip inside this zone when loading the chip with data, the energy will overload the chip and “fry”it

– Partner with a label (with the chip embedded) supplier that does a level of testing prior to receipt for your use to mitigate the amount of bad tags

– Accept the fact you will probably encounter bad tags during any step of your process and have a response step defined to address this when it occurs

• RFID chips are fragile:– Be aware of static during handling that can “fry” the chip

– There is a “no man zone” when using manual chip writers – if you have the chip inside this zone when loading the chip with data, the energy will overload the chip and “fry”it

– Partner with a label (with the chip embedded) supplier that does a level of testing prior to receipt for your use to mitigate the amount of bad tags

– Accept the fact you will probably encounter bad tags during any step of your process and have a response step defined to address this when it occurs

Lessons Learned

• RFID chips are fragile (cont.):– The time to encode and verify might surprise you – keep

statistics on this process and know what is occurring

– You will encounter encode failures

– Test the case/pallet scan rates. We have learned that a forklift can go too fast and it can also go too slow

• Include a verify process as your product is loaded – a last step to insure the tag was readable as it leaves your facility

• RFID chips are fragile (cont.):– The time to encode and verify might surprise you – keep

statistics on this process and know what is occurring

– You will encounter encode failures

– Test the case/pallet scan rates. We have learned that a forklift can go too fast and it can also go too slow

• Include a verify process as your product is loaded – a last step to insure the tag was readable as it leaves your facility

Lessons Learned

• Take steps to insure who is liable when tags fail after they leave your DC and accept the fact that they will fail

• Know your customers timelines and expectations– Far too much is being published in various literature, etc.,

without providing companies with specific requirements and dates for implementation

– Define customer segment requirements, including timelines – Wal-Mart being the primary concern

• Take steps to insure who is liable when tags fail after they leave your DC and accept the fact that they will fail

• Know your customers timelines and expectations– Far too much is being published in various literature, etc.,

without providing companies with specific requirements and dates for implementation

– Define customer segment requirements, including timelines – Wal-Mart being the primary concern

Lessons Learned

• Actively investigate the costs associated with implementing a test for RFID – a learn as you go technique

• Strongly recommend that you develop a phased approach to this new technology

• Actively investigate the costs associated with implementing a test for RFID – a learn as you go technique

• Strongly recommend that you develop a phased approach to this new technology

Future State

Future State

Future State

Future State

Future State

The Real Value

• As the data for scanned cases becomes available for your analysis, you should better understand where your product is located within your customer’s supply chain – use this data to mitigate the amount of your product within your customer’s supply chain– By helping your customer have the right product in the right

place at the right time, this will lead to an improved partnership/relationship between your company and your key customers

• As the data for scanned cases becomes available for your analysis, you should better understand where your product is located within your customer’s supply chain – use this data to mitigate the amount of your product within your customer’s supply chain– By helping your customer have the right product in the right

place at the right time, this will lead to an improved partnership/relationship between your company and your key customers

The Real Value

• Accept the fact that re-engineering processes is an important piece of this initiative – from manufacturing to the DC to your customer

• Accept the fact that re-engineering processes is an important piece of this initiative – from manufacturing to the DC to your customer

The Real Value

• To succeed you must execute, execute, execute• To succeed you must execute, execute, execute

There are risks and costs to action. But they are far less than the long

range risks of comfortable inaction

John F Kennedy