How to Calculate RFID's Real ROl

Transcription

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3 How to Calculate RFID's Real ROl Presented by: Toby Rush, President Rush Tracking Systems

4 Agenda Today s Objectives Key Insights and Value Indicators Real-World Case Studies Value Calculator Example

5 Today s Objectives Discuss value indicators and buckets Provide examples of business case results Work through RFID Value Indicator spreadsheet calculator

6 Rush Tracking Value RFID Solutions, Enabling Visibility, Delivering Value Trusted RFID Advisors Strategic planning and business case development RFID business process re-engineering World-class systems integration Unparalleled technical depth Deployment experience

7 Markets Served Industrial Manufacturing Automotive Aerospace CPG Medical Pharmaceutical Petrochemical Retail

8 Process Core DNA for RFID Success Business process management, lean, Six Sigma, Kanban, user interfaces, change management Financial Business Case Business performance & ROI analysis, value creation, capture and articulation Software RFID middleware, architecture expertise, application creation and integration, workflows, custom programming, handhelds, mobility Hardware Requirements, solution design, installation, readers, printers, applicators, tags RF Physics Frequency, sensitivity, propagation, interference, amplification, interoperability

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10 Key Insights Losing track of inventory bigger issue than losing inventory Critical operations often run on sparse data Exception handling labor savings dwarfs savings from removal of labor to collect scan Broken Systems Coping Mechanisms Institutional Wisdom Tribal Knowledge Strong ROI requires breadth and depth of use cases

11 Key Value Indicators Complex supply chains with significant material movement and human involvement Vertically integrated (with reverse logistics) Larger & geographically dispersed Highly regulated Utilizes returnable containers Dynamic, capacity strained organizations

12 Enterprise RFID ROI Assessment Methodology Process Technical Financial Review Review Review Review Review Review RF Performanc Cost y Data Processes CAD Constraints e Stats Drivers Preliminary Analysis Enterprise Whiteboar d overview Summarize Future State Envision to be Options Summarize to be Use Case Overview Finalize Use Cases Review Rough Design Summarize Test Cases Pain & Anecdotal Strategic Values Summarize Value Proposition s Network Values Final Report Facility Department Process Overview Confirm Use Case Constraints Confirm Design Collect Exception Data Operator Process DILO Collection Test as Required Solution Design Validate Value Summarize Cost Sum Process Performanc e Sum ROI

13 Agenda Today s Objectives Key Insights and Value Indicators Real-World Case Studies Value Calculator Example

14 Case Study Kanban Replenishment Goals: Improve Kanban accuracy Reduce hot calls, rework Improve replenishment efficiency and accuracy Scope: 3 facilities (mfg, 3PL, 3 rd party paint facility) Solution: Tag Kanban returnable containers Setup portals & forklifts to automate scan points (20,000 scans a week) Integrated into SAP Results: During pilot, reduced hot calls from 52 per month to 0 Pilot started with 2 dept. and 350 containers; now at 10 dept and 6,500 > 28% ROI predominantly from labor savings

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16 Example: Closed Loop Container

17 RFID Portal at 3PL

18 Tunnel to Paint Supplier

19 VisiblEdge Enabled Forklift

20 SAP Kanban Board

21 Case Study: Large Industrial Mfg Goals: Reduce labor costs & cycle time, improve transaction and inventory accuracy, increase capacity Quantify network effect of RFID Develop detailed roadmap Identify common use cases and scalable solutions across sites Scope: 7 internal facilities, 5 third-party facilities Findings: 8 Core use cases identified, significant in searching & expediting SAP configured to avoid costly labor, but are cause for inaccuracy System accuracy confidence is low, many coping mechanisms exist Value from RFID: Significant labor reduction, increase transaction and inventory accuracy Network effect dramatic for some sites ROI: 59% % Payback: 2.8 years NPV: 2.7M

22 ROI Assessment Results XYL Network ROI Average measures Cost / Benefit / ROI over 6 years after investment Low 1 Cost year High Costs Kanban Transaction effect KMTR-Putaway Cost of $4,500,000 capital 12% 150% 12% MZ4B-Inventory Move $4,000, % Costs Foundry MTGF Goods Receipt $3,500,000 over 7 years 92% (before discount) $18,013, % $20,510,667 PBYRC- Kanban advance $3,000,000 Suppliers Benefits over 7 years (before discount) $43,583,026 50% VLKMN- $43,583,026 Pick product for ship $2,500,000 14% 28% VBVCN Ship transaction Net Cash $2,000,000 Flow over 7 years (discounted d cash) $12,115, % $9,674, $1,500,000 Paint 3PL Benefits Costs/ Return on investment (discounted average) 71% 50% $1,000,000 Chip & Grind 3PL $500,000 Payback in Year after investment year -61% $0-50% -100% Reinvestment t Rate 12% 12% Averages Foundry Chip/Grind Paint 3PL WHSE 3PL ROI per rcentage MFG3 Net Present Value (cost savings) $3,637,805 $1,488,875 Avg-Costs WHSE $384,740 $376,569 $589,197 $781,426 $1,251,900 Avg-Savings $1,015,705 $589,013 $1,036,807 $413,710 $4,010,867 Avg ROI 92% Internal Rate of Return (IRR) 14% 28% -61% 133% 22% 16% AvgPayback (yr) Modified NPV Internal Rate $129,219 of Return (MIRR) -$52,894 -$31,087 -$460, % $740, % NBHB Consumes Parts ZCVB7- Goods issue MNJ2 Production Report ZNJK- Allows Payment KLRSC Goods Receipt ZLJK7/LM67/98 Putaway ZJK_BOL BOL JK_TO_KY- Prints TOs KLTruck_BOL Gen BOL HYTruck_YI Load truck ABC_RCPT - Receipt BHYE5 Goods Receipt One-Sided Transaction Ship & Receipt MFG4 MFG2 Suppliers MFG1 1 Only transactions that are used for material movement are outlined

23 Real World Example Consumer Packaged Goods Manufacturer 3 facilities in scope Finished Goods Warehouse Average 14 fork trucks per facility 3 shift 5 day a week operations RFID tagging g at pallet level Forklifts throughout warehouse

24 Production to Warehouse Manufacture Package Putaway Storage Kraft Combo 1 Action: cases are palletized & automatically RFID tagged Benefit: eliminate data ID, scans, data entry & manual labeling 2 Action: RFID lift truck auto ID s pallet Benefit: eliminate errors, scans & automate SAP transaction ti for putaway 3 Action: RFID lift truck auto ID destination location Benefit: eliminate put errors, scans & automate t SAP confirm transaction

25 Picking to Loading Wrap/Aggregation Stage Storage Load 1 Action: RFID lifts read pallets picked Benefit: auto ID, eliminate pick errors, scans & automate SAP pick transaction Action: confirm full or Action: mixed cases are Action: RFID lift truck 2 partial picks, & deliver to 3 aggregated to pallets and 4 reads, validates load, wrapping or stage moved to staging location, & order Benefit: auto ID, eliminate Benefit: auto ID, eliminate Benefit:, auto ID, avoid pick errors, scans & loading errors, scans & scans, pick errors, autoautomate SAP transaction automate creation of SAP pick confirm based on moves BOL, ASN s & SAP aggregation transaction

26 Value Calculator Example

27 Real World Results Conducted ROI Assessment across 3 facilities Worked with enterprise, plant, operators to build business case Confirmed findings with corporate

28 Value by Facility

29 Plant operating cost and facility layout directly affect the benefit returned $16,000,000 No Growth: Value at Manufacturing Cost/Benefit Analysis 600% $14,000,000 $12,000, % 553% Benefits Costs ROI IRR 500% Cash Flows $10,000,000 $8,000,000 $6,000, % 400% 300% 200% $4,000,000 $2,000, % 148% 100% 41% $ 0% Facility 1 Facility 2 Facility 3 Benefits: 10 years $ 12,700,056 $ 14,248,150 $ 6,787,334 Costs: 10 years $ 2,292,228 $ 2,191,024 $ 2,113,264 ROI 457% 553% 223% IRR 115% 148% 41% Net Cash: 10 years $3,153,193 $3,712,529 $1,289,762 Payback in Year NPV $2,741,907 $3,228,286 $1,121,532

30 Summary Start with the business users/problems Must look at breadth and depth of use cases Exception handling value can be large The more detailed and ROI assessment, the more likely a rollout

31 Thank You Toby Rush, President Rush Tracking Systems

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