Transcript
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The EPC/RFID Revolution

Matt Maddox

Internet Business Solutions Group

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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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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

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Which Brings Us to Wireless Security…

Transactional information

Sophisticated attacks

Edge vulnerability

Ubiquity of wireless access


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