RFID Migration Strategies: The Key to Electronic Product Code

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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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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


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

(in

Th

ou

san

ds

of

U.S

. Do

llars

)

$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


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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?


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Agenda

RFID Basics


Costs and Risks

Benefits

Best Practices

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Compliance Conservative Committed

Minimal RFID at limited locations (typically 1-3) distribution centers

Basic RFID capabilities at all (typically 4-7) distribution centers

RFID at all distribution centers with selective tagging in manufacturing


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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

en

ts

0 1 2 - 4 5 - 7 8 - 12 13+ Don’t Know / Cannot Provide

Survey of 309 enterprises.


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Industry Implementation Strategies: Survey Says…


20.2

13.3

7.12.4

4.7

11.5

19.2

27.1

05

1015202530

2004 2005 2006 2007

Nu

mb

er

of

Loca

tion

s

Pharma All Industries Consumer Goods



Conservative

Committed

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A. Compliance (1-3 distribution centers)B. Conservative (4+ distribution centers)C. Committed (ALL distribution centers and

some implementation in manufacturing)

D. 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…


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…


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



ConservativeCommitted

Compliance

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Agenda

RFID Basics


Costs and Risks

Benefits

Best Practices

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Costs and Risks

Compliance Conservative Committed

Costs and RisksUnable to meet

increasing volume requirements (capacity)

Longer lead times Increased logistics

costs (intranetwork transfers)

Typical cost: $1-$2 million

Invest too broadly and quickly—“pioneer”

Multiple expansion projects as volume rises unevenly

Typical cost: $7-$10 million

Slow adoption Changing

requirements Technology

changes Typical cost:

>$30 million


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Planned RFID Spending


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

$)


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A. 0 B. >$1 millionC. $1–$3 millionD. $3+ million

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How much do you plan to spend on RFID in 2005?

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Agenda

RFID Basics


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


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BenefitsCompliance Conservative Committed

Benefits/AdvantagesMinimize capital

expendituresMinimize

operational impactMinimal (if any)

operational benefits

Conserve capitalDefer committing

to a particular technology vendor

Hedge against additional customer requirements

Small labor savings

Volume discounts/ leverage with vendor

Identify internal savings:

— Logistics cost — Inventory — Demand planning — Supply planning — Revenue


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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


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A.Yes, for the extended supply chain but not my operations

B.Yes, for the extended supply chain and my operations

C.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


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


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


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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

Next-generation SCM marries traditional and wireless supply chains

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Thank You!

[email protected]

RFID Migration Strategies: The Key to Electronic Product Code

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