Goods That Talk. Strategic Impact of RFID. Online Seminar: Meeting the Retail RFID Mandate. February 26, 2004

Transcription

1 Goods That Talk Strategic Impact of RFID Online Seminar: Meeting the Retail RFID Mandate February 26, 2004 Copyright 2004, A.T. Kearney, Inc. All rights reserved.

2 Agenda (10:00 11:00 AM CST) Opening Remarks Omar Hijazi, A.T. Kearney 5 minutes Presentation of RFID Findings David Donnan, A.T. Kearney 20 minutes Guest Speaker Comments 5 minutes each Vinay Gokhale, Vice President RFID Products, Impinj Liz Churchill, Director of Life Sciences Solutions, Matrics John Thorn, General Manager, Checkpoint Systems Panel Questions & Answers Omar Hijazi, A.T. Kearney (Moderator) 15 minutes A.T. Kearney 7/41344/A 2

3 Today s Speakers Omar Hijazi Principal, A.T. Kearney omar.hijazi@atkearney.com David Donnan Vice President, A.T. Kearney dave.donnan@atkearney.com A.T. Kearney 7/41344/A 3

4 Today s Speakers Vinay Gokhale Vice President RFID Products, Impinj vinay.gokhale@impinj.com Liz Churchill Director of Life Sciences Solutions, Matrics liz.churchill@matrics.com x146 John Thorn General Manager, Checkpoint Systems john.thorn@checkpt.com x3105 A.T. Kearney 7/41344/A 4

5 RFID An Idea Whose Time Has Come MIT AutoID Center has established a foundation for the RFID/EPC technologies Various case and pallet trials undertaken June Linda Dillman of Wal-Mart sets a target for EPC implementation throughout Wal-Mart operations (case and pallet) Department of Defense establishes their timetable to parallel Wal-Mart for EPC implementation. Metro AG and Tesco announce their initiatives EPC standard approved by global retailers and manufacturers A.T. Kearney 7/41344/A 5

6 A Simple Tag, Powerful Results A thin, low cost, wireless communications device Capable of transmitting and receiving data Consists of a computer chip and antenna Can be powered or un-powered Range in capabilities from simple, unique license plate to encryption, memory and read/write capability Works with a wireless radio frequency reader, which relays the tag information to management systems A.T. Kearney 7/41344/A 6

7 Benefits Across Supply Chain Manufacture Warehouse Retail DC Retail Store Retail Shelf Labor Efficiency OOS Management Inventory Management Receiving Shipping Accuracy Reduced Claims Reduced Unsaleables Reduced Diversion Product Recall Management A.T. Kearney 7/41344/A 7

8 The Future Holds Great Promise Estimated RFIS Market Growth e for Europe & North America ($MM) Segment CAGR (2) Total 28% $4,389 Retail CPG Pharmaceutical 55% 61% 30% Accelerated Revenue Growth Driven by Adoption of Item Level Tagging Transportation 23% Defense & Homeland Security33% Diversified Mfg 24% Other (1) 21% e 2009e 2012e N.A. Europe Sources: ABI research RFID emerging applications ; AMR Research, A.T. Kearney A.T. Kearney analysis7/41344/a 8

9 But, the Benefits Require Collaboration Driven within Mfg. Four Walls Inventory visibility The tags will allow better tracking of case and pallets throughout the warehouse and distribution systems Labor efficiency Reduced cycle counting, manual recording and even bar code scanning will result in lower labor costs. Better fulfillment Reduced shrinkage, improved dock and truck utilization and improved product traceability and more precise product recall capabilities are all benefits to the manufacturer Driven by Trading Partner Activity Reduced store level out-of-stocks (OOS) Tagging of pallets and cases will allow for better tracking of goods within stores, reducing times when goods are in-house but not available to consumers Reduced claims Tracking of pallets will reduce unwarranted claims; claims processing costs will also be reduced Reduced unsaleables Goods with expiration dates can be better managed (moved more quickly when code dates are near), reducing need for write-offs due to spoilage A.T. Kearney 7/41344/A 9

10 For Suppliers, Forward Visibility is Key Benefits to Manufacturers Out-of -stocks Diverting Unsalables Labor Inventory Holding Costs Claims Reduced store level out-of-stocks (OOS) Tagging of pallets and cases will allow for better tracking of goods within stores, reducing times when goods are in-house but not available to consumers Reduced claims Tracking of pallets will reduce unwarranted claims; claims processing costs will also be reduced Reduced unsaleables Goods with expiration dates can be better managed (moved more quickly when code dates are near), reducing need for write-offs due to spoilage Reduced diversion Tracking and reporting compliance critical to success along with revised promotion incentives A.T. Kearney 7/41344/A 10

11 For Retailers, Labor Efficiency and Stock Control Labor in Warehouse Receiving Products Checking Products on to Truck Order Checking Back of Store Check in Product Find Inventory Replenishment Reduce Back Room Shrink Reduce Out of Stocks Reduce Inventory Levels Ensure Availability A.T. Kearney 7/41344/A 11

12 But, Benefits are Not Evenly Distributed High Value, Low Volume Sell more expensive goods and experience significant out-of-stocks, shrinkage, and unsaleables Relative lower number of cases sold per $ of sales Example : Pharma. OTC, consumer electronics, high fashion, cosmetics Low Value, High Volume Sell less expensive goods and, as a result, experience limited shrinkage High number of cases per $ of sales Example: Dry grocery, perishables, beverages, frozen goods, soaps and cleaners A.T. Kearney 7/41344/A 12

13 And There are Still Major Hurdles Privacy advocacy groups worry that product tagging could potentially be used to violate individual s privacy, by tracking movements of buyers inside and outside of stores Current technology cannot achieve acceptable read reliability and significant challenges with tag physics remain for broad product categories Price points and costs of implementation for emerging technology may push out any reasonable payback A single universal standard for tag and interface protocols has not been ratified A.T. Kearney 7/41344/A 13

14 So What is the Path Forward? Vision Visibility EPC WMS EDI Exchanges Transition Years Maturity GDS Source: Gartner Hype Cycle A.T. Kearney 7/41344/A 14

15 Manufacturers Consider Alternate Approaches Slap & Tag Tighten your belt Accelerate benefits Slap & Tag Minimum compliance No investment in infrastructure Tighten Your Belt Absorb as a cost of doing business Manage down operating costs and investments Accelerate Benefits Get behind the EPC rollout Focus on realizing benefits Engage other retailers to start implementation Secure information sharing agreements Promote consumer level benefits A.T. Kearney 7/41344/A 15

16 Managing the Transition Complete data synchronization efforts. Without correct data no benefits will be realized Understand the drivers of benefits especially the retail collaboration benefits Adapt business processes to take advantage of new supply chain data detail Expect to manage parallel systems for several years. Ensure management systems are agile Leverage the invested infrastructure consider other EPC applications and uses of the product tracking information A.T. Kearney 7/41344/A 16

17 Some Simple Rules This is not about technology This is about improving consumer value and solving complex business issues. Ensure there is a positive consumer point of view Set goals and measure results. Communications must be increased Top level message must be consistent Be realistic about costs and savings don t amplify the hype cycle Maintain flexibility and technology options Manage the pace of implementation Be proactive A.T. Kearney 7/41344/A 17

18 The Next 12 Months What to Look For Triggers to Watch for Will tag prices drop below $0.10? Will tag readability exceed 90%, 95%? What % of items will be on line by 2005? Will EPC standards be agreed in U.S. and Europe? Will liquid, metal packaging (foil) issues be resolved? Companies to Watch What new retailers will get on board? What other industry initiatives will follow? Will BIG technology firms join in? A.T. Kearney 7/41344/A 18

19 Goods That Talk Polling Question

20 Please identify which stage best describes your company s current approach to RFID adoption A. No plans, but we are monitoring developments B. We are in the process of developing a strategy C. We are pursuing a Slap & Tag approach to ensure only minimum compliance D. We see RFID as here to stay and are tightening our belts to absorb the technology as a cost of doing business E. We see an advantage and are aggressively pursuing RFID to accelerate benefits A.T. Kearney 7/41344/A 20

21 Poll Results E: We see an advantage and are aggressively pursuing RFID to "accelerate" benefits D: We see RFID as here to stay and are "tightening our belts" to absorb the technology as a cost of doing business 1.9% 11.5% A: No plans, but we are monitoring developments 9.6% 34.6% C: We are pursuing a "Slap & Tag" approach to ensure only minimal compliance 42.3% B: We are in the process of developing a strategy A.T. Kearney 7/41344/A 21

22 Goods That Talk Guest Speaker Comments Vinay Gokhale Vice President RFID Products Impinj,, Inc. A.T. Kearney 7/41344/A 22

23 Introduction to Impinj Impinj s technology enables high-performance rewriteable RFID tags in lowest-cost logic CMOS Impinj will deliver products to the UHF Generation2 (Gen2) standard The upcoming single worldwide RFID standard Impinj is active in the HAG and Gen2 technical groups that are finalizing Gen2 Impinj s Gen2 pilot schedule (w/key partners): Gen2 crossover pilots in May 2004 Gen2 pilots in Sept 2004 Gen2 in production volumes by year end 2004 A.T. Kearney 7/41344/A 23

24 Only Gen2 Meets User Requirements User Requirements Class 0 Class 1 6A/6B Gen2 Worldwide Compliance X? Multi Source Availability Rewriteable Nonvolatile Memory X X? X > 500 tags / second X X Multi-Reader Operation X X X Industry Endorsement X X X Security X X Availability Q3/04 A.T. Kearney 7/41344/A 24

25 How OEMs Should Prepare Join EPCglobal Contribute to the Business Action Group Monitor the Hardware and Software Action Groups Plan for Gen2 The upcoming single worldwide RFID standard Conduct independent analysis There is as much disinformation as there is information Invest in pilots Understand strengths and limitations of RFID technology Develop a business case for RFID deployment Plan for Gen2 s improvements over current technology Security, selectability, dense-reader operation, more A.T. Kearney 7/41344/A 25

26 Goods That Talk Guest Speaker Comments Liz Churchill Director of Life Sciences Solutions Matrics,, Inc.

27 The Matrics Philosophy Performance is critical Performance = Range + Orientation + Speed Customer wants performance Wal-Mart Compliance 100% pallet reads 100% reads at 600 ft/sec, 6 inch separation, 6 sides 100+ tags in dock door solution A.T. Kearney 7/41344/A 27

28 RFID Feeds Enterprise System Transport Mgmt Warehouse Mgmt Order Mgmt Visibility Systems Production Scheduling POS Shelf Inventories Enterprise Systems XML Data Appliance Enterprise Application Interface Feature Implementation Reader Interface Enterprise Application Interface Feature Implementation Reader Interface Matrics Visibility Manager Middleware antenna antenna RS485 RS485 READER READER READER Readers antenna antenna antenna antenna antenna antenna Antennas RFID Tags A.T. Kearney 7/41344/A 28

29 The Supply Chain Challenge Key Benefits of EPC RFID Better Visibility Reduced Supply Chain Shrink Reduced Inventory Labor Saving Fewer Out of Stocks Product Integrity Manufacturer Distributor Drug Store Supplier Ingredient Provider Distribution Center Healthcare facility Supplier Mass merchant Supplier Customer A.T. Kearney 7/41344/A 29

30 Factors Affecting Performance Tag Sensitivity: The ability of a chip to be energized and to maximize the signal strength to send its identifier back to the reader. The greater the chip sensitivity, the longer the read range. Tag Size: larger generally means longer range. Tag Shape: Different tag antenna shapes provide remarkably different levels of performance. Number of tag antennas attached to the chip: Two dipole antennas attached to a single chip results in tag performance that less sensitive to orientation important for random reading environments. Speed: the rate at which a reader collects tag identifiers. Rapid rates: (1) Increase the reliability of tag reads; and (2) Are less likely to impose burdens on business processes. Tight Tag Stacking: When stacked closely together, tags may interfere with one another. The best tags available today work effectively when even when situated within onehalf inch of one another. A.T. Kearney 7/41344/A 30

31 Goods That Talk Guest Speaker Comments John Thorn General Manager Checkpoint Systems

32 Making RFID Useable EPC Solutions source to shelf Converting RFID tags into labels Associating the label with the asset Deploying infrastructure to track & trace asset Integrating infrastructure into business systems A.T. Kearney 7/41344/A 32

33 Lets Get Clear About Risks EPC Solutions source to shelf Technical Radio Frequency Technology Interoperability Infrastructure Network Scalability Data Management and Usage Business Risks Re-engineering of Business Processes Runaway Costs Slow, Thin or Fractional ROI Choice of Business Partner A.T. Kearney 7/41344/A 33

34 EPC Solutions source to shelf How do I get started? The best way to build the value model is via a business focused pilot project A.T. Kearney 7/41344/A 34

35 Characteristics of a Successful EPC Pilot Supported from the top and across the organization Intra-company teams with a business vision Structured to validate a specific business premise Engage business & trading partners Designed to achieve specific, measurable and verifiable goals Benchmark current process Define criteria for success Determine methodology for evaluation Phased to mitigate impact on organization Controlled trial engineered to replicate real-world conditions Live trial deployed in the production environment leading to phased roll-out Designed to be scaleable EPC Solutions source to shelf A.T. Kearney 7/41344/A 35

36 What to Look for in an EPC Pilot Partner Proven capability in RF-technology Track record in developing enterprise-level solutions Proven enterprise-wide deployment and integration skills Broad shoulders: ability to function as single source provider Global capability EPC Solutions source to shelf A.T. Kearney 7/41344/A 36

37 Goods That Talk Panel Q&A