Upload
moidkhan
View
216
Download
0
Embed Size (px)
Citation preview
8/8/2019 RFID Policy 2010
1/41
1
RFIDFrom technology & economics
to business & policy
Yale BraunsteinSchool of Information
Updated April 2010
8/8/2019 RFID Policy 2010
2/41
2
Motivation
Opportunity to have policy informed byeconomics & technology
Opportunity for policy and technology todevelop in logical, coordinated manner
Todays approach:From technology & economics to business & policy
8/8/2019 RFID Policy 2010
3/41
3
Economic Background
Costs & features
One approach is to look at prior technologyfor analogs (e.g., barcodes)
Technical hierarchy
Where does RFID fit in with othertechnologies in terms of use, complexity, etc.
The next three slides portray theserelationships in different ways
8/8/2019 RFID Policy 2010
4/41
4
Y Y
Low(Line of Sight) Med-High
Y(Discount
Card)
Y(CalTrans)
12 digits(bytes) for
UPC
64 or 96 bits
$.001 $.05
Characteristics Barcode RFID
Persistence
Accessible to remotemonitoring
Link to user/consumerdatabase (example)
Bits/bytes of information
Cost per code/tag
Costs & features
8/8/2019 RFID Policy 2010
5/41
5
8/8/2019 RFID Policy 2010
6/41
6
8/8/2019 RFID Policy 2010
7/41
7
But, it is not an either-or case
Since it is likely that technologies old (barcodes)and new (RFID) can and will co-exist, it isimportant to look at the rationales and drivers for
each technology Economics Regulatory and policy issues
Each informs the other. The old approach was
to focus on optimal regulation. We now realizethis is impossible to define so we look atoptimizing strategic business decisions given theregulatory environment. (a la Michael Porter)
8/8/2019 RFID Policy 2010
8/41
8
Myth: The EPC is an RFID Replacement of the Current Bar Codes
(GTIN/UPC)
Truth: EPC used in RFID tags and bar coding are consideredcomplementary data-capture technologies. Even with large-scaleadoption of RFID, there will be a continued need for bar coding tocoexist with RFID in the future.
While current bar coding offers the same number for every case of agiven stock-keeping unit (SKU), EPC is a standard way to serialize allinventory. The unique attributes of RFID enable improved visibility intosupply chain movements and history. With RFID technology, the level ofinformation is deeper, allowing inventory to be tracked and data to be
more freely shared between suppliers and retailers.
While RFID has the potential to offer a closer technical fit as well asoperational benefits in certain applications, it will not serve as areplacement for bar codes. Both types of technology have a place intodays fast-developing business environment.
8/8/2019 RFID Policy 2010
9/41
9
Underlying economics
Potential to reduce transactions costs
Fixed cost to adopt/convert to RFIDs
Per-unit costs Other costs for adopters
Benefits for adopters
Increase capabilities to Discriminate in prices
Do versioning
8/8/2019 RFID Policy 2010
10/41
10
Standard Value Chain
- a linked set of value creating activities
- from raw material to end use product
Procurement R&D Manufacturing Marketing Distribution Service Customer
Value chain Customer Basis
8/8/2019 RFID Policy 2010
11/41
11
Redesign of the Value Chain
Redesign can create dramatic gains in:- cost structure- asset investment- speed of responsiveness to external
changes
What has to be redesigned?:- set of activities- the interfaces across the chain
We shall return to this later...
8/8/2019 RFID Policy 2010
12/41
12
8/8/2019 RFID Policy 2010
13/41
13
8/8/2019 RFID Policy 2010
14/41
14
Widely deployed;broad global freq.deployment;
minimum metalinterferences
Read rangelimited to lessthan 1.5 meters
Animal tracking
Containertracking
Antitheft systems
Widely deployed;broad global freq.deployment;
minimummoistureinterferences
Read rangelimited to lessthan 1.5 meters
Metal seriousproblem
Library assettracking
Baggage tracking
Retail producttracking
Low Freq.125 kHzto 134
High Freq.13.56 MHz
Advantages Liabilities Applications
Operating Frequencies
and Uses of RFIDs
8/8/2019 RFID Policy 2010
15/41
15
Widely deployed;read range MUCHgreater than otherstandards
Cant be used inJapan, affected bymoisture andadjacent tags
Pallet
Containertracking
Vehicle tracking
Read range isMUCH greaterthan even UH.
Not widelydeployed,compleximplementation,cant be used inparts ofEU
Vehicle accesscontrol
Ultra-high868 MHzto 928
Microwave2.45 GHz
Advantages Liabilities Applications
Operating Freq and Uses of RFIDs
8/8/2019 RFID Policy 2010
16/41
16
Supply Chain Economics
Overall ROI? Probably negative if one:
Just looks at costs
Does not restructure to take advantage of thetechnology
Competitive advantage (those with tagsworth $$ more than same quality w/o)
The haves and the have-nots
High fixed costs
8/8/2019 RFID Policy 2010
17/41
17
Myth: Replacing Bar Code-Based Processes with RFID ProcessesWill Achieve ROI
Truth: Feeling the pressure to incorporate RFID into their manufacturing andlogistics operations, some companies will tend to implement technology fortechnologys sake. Buyer beware: Implementing RFID does not instantlyguarantee a fast path to return on investment (ROI). To impact the bottom line,the decision to implement RFID must be linked to a definitive business goal.
For most companies, it is cost-prohibitive to convert to RFID on a broad scale.
And, in some cases, it doesnt make sense. For example, if your warehouse isreliably scanning bar-coded cartons on a conveyor as they are loaded onto atruck, switching this process to RFID doesnt really buy you anything. Why?Because the labor savings resulting from replacing an automated bar code scanwith RFID simply dont amount to much.However, if every carton is currently scanned manually, changing the process toautomate the data capture could reduce labor requirements and increase facility
throughput. In addition, if there are areas in which data is lacking, adding RFIDcan increase visibility and accuracy.
The reality: RFID technology isnt new. It has been around for the past decade,whereas bar code technology has surpassed three decades. The promise ofachieving greater ROI with RFID is not time-sensitive as many may believe; it isapplication-dependent.
8/8/2019 RFID Policy 2010
18/41
18
Myth: RFID Benefits Only Retailers, Not Suppliers
Truth: While the RFID spotlight has clearly illuminated major retailers (Wal-Mart, Tesco, Metro, Target and Albertsons), several major Fortune 500suppliers including Procter & Gamble, Gillette, and others are driving towardRFID implementation across the supply chain.Suppliers might not achieve incremental ROI, but there are benefits to begained. As the Wal-Marts and Metros of the world implement new RFIDrequirements, suppliersin their efforts to complymust be prepared toexecute the right technology strategy to serve their own business.
Suppliers should view RFID compliance as a means to capture moredetailed inventory information, increase visibility throughout the supply chainand reduce the number of claims. For the first time, suppliers can use
shared data to gain new insights, better source products to meet demandpatterns, take preemptive corrective actions to avoid claims and bettersatisfy their customers needs. More satisfied customers and increasedstocks in-store lead to more business.
8/8/2019 RFID Policy 2010
19/41
19
Myth: RFID is the Only Way to Automate Manual Warehouse ReceivingProcesses
Truth: In certain cases, RFID may be appropriate for warehouse automation,but it is not the only solution. In fact, one of the biggest paybacks ofevaluating potential RFID uses in the warehouse is that this investigationactually helps uncover big savings opportunities that dont require RFIDtechnology.
Savings can be significant for manufacturing companies that are looking toeliminate their labor-intensive, paper-based processes by automating thereceiving function. Tagging of cases can be done with bar code (versus RFID)technology and still yield tangible ROI because the company has eliminatedthe potential for manual intervention and thus human error.
Another example is a manufacturer that bar codes pallets and scans themonto containers. If the company discovers that it never sends the advancedshipping notice (ASN) to the receiving warehouse, theyve identified a gapthat can be rectified and this can therefore lead to improved customer service.This scenario does not require RFID; rather, it involves the addition of asimple step to close the warehouse receiving process loopan especially
important link for capable-to-promise (CTP) manufacturers.
8/8/2019 RFID Policy 2010
20/41
20
Transactions costs
Savings throughout entire supply and retailchain (shipping, inventory, pricing, etc)
RFIDs have potential to lower transactionscosts, but benefits probably will beunequally spread across the supply chain
This raises contractual supplier vs. retailer
issues
8/8/2019 RFID Policy 2010
21/41
21
Fixed costs to adopt
Readers costs appx. $1,000 4,000
Tag Printers $2,000 5,000
Middleware $25,000 200,000 More easily afforded by larger players
Large players more likely to have moredifficult logistics, with costly errors.
According to Forrester, companies mustspend as much as $100 million to see realbenefits from deployment
8/8/2019 RFID Policy 2010
22/41
22
Unit costs
At least fifty times that of barcodes(remember the comparisons chart)
But this will change (learning curve)
8/8/2019 RFID Policy 2010
23/41
23
8/8/2019 RFID Policy 2010
24/41
24
Other costs for adopters
RFID strategy and technology $50,000 -$300,000
Training and maintenance Specialized, network-connected tagging
equipment (ex: factor floor equipment)
Reoccurring fees toE
PCglobal and/orUCCnet (15%-20 of cost of system)
8/8/2019 RFID Policy 2010
25/41
25
Benefits for adopters
(Varies for every adopter) Avoided shipping errors Reduced labor costs
Accurate inventory counts and improvedforecasting demand Avoided incidents of counterfeiting (which can
also damage brand value and public confidence) EPC/RFID adoption saves between $500 million
and $1 billion/yr for pharmaceuticalmanufacturers, and between $200 million and$400 million/yr for healthcare distributors
8/8/2019 RFID Policy 2010
26/41
26
8/8/2019 RFID Policy 2010
27/41
27
Price discrimination, etc. To successfully discriminate, the seller needs to:
Identify two or more market segments
With different elasticities of demand
Prevent arbitrage
For versioning to work:
New versions need to add functionality, at least in theminds of some users
Old versions need to expire RFIDs can facilitate either of these
8/8/2019 RFID Policy 2010
28/41
28
RFID in casinos: pricediscrimination?
In the past, casinos have relied on pit bossesand dealers to continually estimate how muchgamblers were wagering, which in turn enabledthe casinos to figure out about how much a
customer spent overall, and what level ofdiscounts and freebies he or she was entitledto. With RFID, the chips are automaticallyscanned at each bettor's position, and the dataare displayed in real time on a personal
computer behind the table visible to the dealerand pit bosses -- thus eliminating the humanguesswork.
8/8/2019 RFID Policy 2010
29/41
29
Potential winners & losers - I
Who wins? Who loses?
The quick answer is that RFIDs will producesome big winners and a lot of losers. Even forthe winners, RFIDs requires so much capitaland change that the risk is very great.Successful transition management requiresinsight, finesse, and careful planning.
Smaller firms may be particularly at risk
8/8/2019 RFID Policy 2010
30/41
30
Potential winners & losers - II
Participation will be costly for the manufacturers.Nevertheless, they will have to adopt Auto-ID.Large manufacturers may see a decrease in
profitability, but many smaller manufacturers willnot have the resources to remain involved at all.
At the same time, many smaller retailers will nothave the incentive or resources to adopt Auto-
ID. This may well accelerate the split in the retailsector between "haves" and "have-nots."
8/8/2019 RFID Policy 2010
31/41
31
Issues I - Standards
Myth: There Are no Set Standards forRFID
Today
Truth: GTAG? ISO 18006.A? ISO 18006.B? Gen 2 EPC? The acronym souphas thickened into a murky layer of complexity, further complicated by somevendors claims of owning the standards. The fact is that there are severalRFID standards today.The major reason that the prior standards were never adopted on a broad
scale was that the technology companies were the main drivers of thesestandards. They had a solution and were seeking a problem to address. EPCstandards, however, were developed by end user companies to ensure thatthe technology developed addressed a specific business need.Recent rumors regarding the Global Proposal verses the Freedom Proposalwithin the EPC community, along with company lawsuits, have added to theuncertainty. EPCglobal is helping to define the standards for next-generationtechnology, but the big playersWal-Mart, Metro, the U.S. department ofDefense, and select Fortune 500 companiesare aggressively movingforward on the RFID adoption curve, and many have already implementedcurrent-generation EPC technology.Smaller businesses will likely take their cue from the industry leaders as RFIDstandards continue to evolve, emerge and ultimately become moreentrenched.
8/8/2019 RFID Policy 2010
32/41
32
Issues II - Regulation
Reasons to regulate
It may be more efficient to treat RFID as aspecial case
Reasons not-to-regulate
Avoid the problem of building a regulatorymodel based on defunct technology
General approaches to privacy, pricediscrimination, etc., may be sufficient
8/8/2019 RFID Policy 2010
33/41
33
Recently in California
California Bill Seeks to Ban Tags in IDs
California's Identity Information Protection Actwould prohibit the use of contactless integrated
circuits in government-issued identificationdocuments.
(The Identity Information Protection Act of 2005,SB 682, authored by State Senator Joe Simitian)
See: http://www.rfidjournal.com/article/articleview/1565/1/1/
and http://www.aclunc.org/pressrel/050517-rfidbill.html
8/8/2019 RFID Policy 2010
34/41
34
Consumer applications - 1
Could RFIDs be valuable once the consumerhas purchased products with them?
Clothes, DVDs, passports, car parts, etc.
Another: Pharmaceuticals
Supply chain, especially with third-party payers
Smart Medicine Cabinets
Are there consumer analogs to high reliabilitysystems such as nuclear power plants,airplanes, etc.?
8/8/2019 RFID Policy 2010
35/41
35
Consumer applications - 2
Eventually, do items w/o RFID becomeless valuable?
May not be able to return items w/o active
RFID Could not find item in home
Could not generate list of items
Could be difficult to sell per second hand ifthey also have adopted RFID (ex:textbooks)
8/8/2019 RFID Policy 2010
36/41
36
Consumer applications - 3
Potential for complementary effects
Imagine if your mobile phone had a reader
(PhillipsE
lectronics is trying to do this.) The PDA may have a revival
Innovative software that works with RFIDs
RFID jammers and protectors
8/8/2019 RFID Policy 2010
37/41
37
8/8/2019 RFID Policy 2010
38/41
38
Government applications - 1
May be useful to distinguish between:
Cases driven by economics (these can be analyzedwith similar approaches to business applications)
Cases driven by non-economic concerns National security
National identity
Government can also direct technology adoption
by its (very large) purchasing decisions Historical example: microfiche in the U.S.
8/8/2019 RFID Policy 2010
39/41
39
The Federal Highway Administrationawarded a contract to develop a 5.9 GHzRFID system to cut road fatalities in the
U.S. by 50%. New U.S. Civilian and Soldier Passports
with RFID
DoDs supply chain Satellite tracking of commercial vehicles inEU
Government Applications - 2
8/8/2019 RFID Policy 2010
40/41
40
Final Thoughts - 1
Old economics rules still apply
Dont think of just the Low Freq. chips there ismuch room for innovation with other chips as
well Try to think of what consumer pain to solve (is
an idea a pain killer or just a vitamin?)
Think of why there may be the winners and thelosers with RFIDs can we make everyonewinners?
8/8/2019 RFID Policy 2010
41/41
41
Final Thoughts - 2
RFIDs.. just an asset tracking system ?
However, in combination w/ other systems, RFIDis far-reaching capabilities
What types of implementations will beencouraged? Those that track importantresources.
What are important resources?
Either expensive (cars, razors, electronics) Dangerous (toxic wastes, drugs, weapons)
Emotional Attachment (pets, children, iPod)