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2© 2003 Cisco Systems, Inc. All rights reserved.IBSG 0s
The EPC/RFID Revolution
Matt Maddox
Internet Business Solutions Group
333© 2003 Cisco Systems, Inc. All rights reserved.IBSG 03
The 1980 Boston Marathon and the Global Supply Chain
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What is EPC/RFID?
F127.C238.DF1B.17CC
ePC codeUnique number – 96 bits long
“Smart Tag”Made from microchip with antenna – Transmits ePC code
Typical objectAddition of “Smart Tag” makes each object unique
From MIT Auto ID Center
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What Makes it Work?
• Globally identifies:Manufacturer (EPC Manager)
Product (Object Class) (SKU)
Individual identity (serial#)
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Science Fiction or Business Imperative?
Key chain fobs to buy gas… and hamburgers
Tagging 80,000 casino employee uniforms, cutting replacement
costs in half
Automated toll collection
RFID tags the size of a grain of rice
implanted into pets
Identification, Friend or Foe (IFF)
Retail security tags
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Consumer Products
Homeland Security
Industrial Products
Logistics/Trans.
RetailGovernmentHealthcare
Markets and Applications
Financial
SupplyChain
AssetTracking
Security &Regulatory
Track product & containers through supply chain (palettes, cases, individual items)
Efficiently use expensive assets (tractors, medical & manufacturing equipment)
Identify people, vehicles, and other items to ensure regulatory and security compliance
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Bullwhip Effect Today
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Retailer
Wholesaler
Distributor
Factory
Adapted from Walmart
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Bullwhip Effect with EPC/RFID
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Adapted from Walmart
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Potential Benefits
• DC: Automated inventory count
• DC: Faster shipping and receiving
• DC: Improved quality inspection
• Store: Real-time accurate inventory
• Store: Improved in-stock
• Store: Reduced inventory
• Store: Anti-shrink
• Store: Auto checkout
• Efficient production planning
• Smart recalls
• Improved inventory control/reduced inventory
• Efficiencies
Retailers Suppliers
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Loss Prevention
• Shrink costs retailers $30b annually• Every minute, 1,500 shoplifters strike, each stealing $25 in merchandise • 26% of shrink occurs at POS
Shoplifting23%
Retail Pricing3%
Vendor Dishonesty
5%
Accounting3%
General Employee
Shrink28%
Cashier Caused Shrink26%
Receiving Errors
5%
Damage7%
In 2000, Shrink was 2.26% of retail sales – the average superstore lost $450K, and the average grocery store lost $200K – over half of which was caused by store employees
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Out-of-Stocks
Out-of-Stocks: How Big Is The Problem?• Supermarkets: 8.2% (Coca-Cola Research Council study, 1995)• C-Stores: 9.2% (CSNews Online report, 2002)• Mass Merchants: 6-12% (National Housewares study, 1995)
Customer Loyalty• 71% substitute; 29% leave empty-handed• Product related: 50% of tobacco consumers will not substitute• After 2.4 out-of-stock experiences, customer will not return
What Does This Mean To The Store?• Translates into lost sales of 3%
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RFID Market Growth
• Near term activity is focused on proving RFID technology in a variety of environments
• Mandated Supply Chain implementations for DOD and Walmart will drive value chain
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The Chicken and the Egg: Tag Costs
Cheaper
Higher Volume
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Declining RFID CostsEnable Widespread Adoption
• Current tag pricing is appropriate for high value items and containers
• Examples of high value items are batteries, clothing, pharmaceuticals,
medical equipment, and trucks/trailers
• By 2008, decreasing tag prices will enable individually tagged items
• The volume of RFID infrastructure and traffic will escalate as more items
are tagged
Global RFID Reader and Tag Market, 2002-2006
Source: IBM, June 2002
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What’s Walmart Doing?
Tagging at case and pallet level
• Regional rollout (Dallas TX) to Walmart stores and SAM’s Clubs
• Rollout to regional, grocery, and SAM’s DCs
• Future expansion: domestic and international
All suppliers by the end of 2006
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What Are Walmart’s Suppliers Doing?
“Slap and ship”: meet minimum compliance while learning
Developing internal business case
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Going Through the EPC/RFID Change Curve
Surprise
Resistance Exploration
Commitment
Morale&
Productivity
Time
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Call to Action
Procter & Gamble considers EPC to be a transforming technology … EPC promises to generate significant new business for technology providers, especially those … active in shaping the technical direction and meeting the early user’[s] … needs. We believe Cisco is uniquely positioned to take advantage of that [opportunity] because of the key role of technology … on the edge where EPC tags and readers will reside.
Steve N. DavidGlobal CIOProcter & Gamble
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RFID and Cisco
March ‘03 Dec. ‘03
Gillette/AlienAnnouncement
Wal-MartDecree
Cisco Begins
CDO Commits
RFID Network Model
Begin Tech Roadmap
DoDDecree
RFID Readiness
Rest of the WorldSun RFID Business
Unit Symbol RFID Lab
CiscoRFID Market
Model
BU’s Engaged
AutoID ORGModels AutoIDfor Retail/CPG
P&G Endorsement
Metro Store of the Future
Wal-MartSets RFID Timeline
IBM RFID Practice/Solution
SAP Solution
Customer Endorsement
Launch RFID
“Ready Network”
Customer Lab
Participation
Cisco RFID Tiger Team
Research and Dev. Product/ Alliance
Opps
Join Tesco, Carrefour,
Metro Consort.
Join EPC Global
232323© 2003 Cisco Systems, Inc. All rights reserved.IBSG 03
Which Brings Us to Wireless Security…
Transactional information
Sophisticated attacks
Edge vulnerability
Ubiquity of wireless access
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