RFID Adoption Roadmap in Manufacturing, Transportation and ...

RFID Adoption Roadmap in
Manufacturing, Transportation and
Retail
How to Maximize Return on
Investments
Ezio Viola
Group Vice President
EMEA Insights & Vertical Markets
Lisbon, 25 February 2008

Discussion Objectives
Review of Key Study Findings
Current Penetration of RFID in Europe — Industry
Perspectives
Future investments expectations in Europe
How to address the initial concerns
Top business drivers – RFID in practice
How to maximize RFID ROI
Strategic recommendations
© Global Retail Insights 2

Current Penetration of RFID in
Europe — Industry Perspectives
Western Europe, Penetration of RFID (Percentage of Companies)
Q. Is your organisation currently piloting or implementing RFID solutions or have short-term plans to
pilot/implement RFID
Transportation
Retail
Currently using,
piloting or
Manufacturing implementing
pe e RFID
Healthcare
Number of valid respondents: 450
Data weighted by enterprise size class
Source: eBusiness Watch RFID survey, December 2007
0 10 20 30
Mostly using or
implementing, % of
pilots negligible
Bottom-line
24.5% of enterprises are currently
using, piloting or implementing
RFID
Largest adoption uptake in EU retail
© Global Retail Insights 3

Investments uptake in 2008 –
EU coming first
When do you think RFID implementation is likely to become necessary for your
company
45
40
35
30
25
20
15
10
5
0
end of
2008
end of
2009
later
Don't
Know
Industry
Average
Number of valid respondents: 450
Data weighted by enterprise size class
Source: eBusiness Watch RFID survey, December 2007
© Global Retail Insights 4

How to address initial concerns of
enterprises evaluating RFID investments
Essential “over-hyped” concerns..
– Tags & readers costs may still be perceived as potentially prohibitive
– Technical challenges like reading accuracy may hamper confidence
in the technology
– Privacy & security concerns may lead to potentially unpredictable
risks
Tangible RFID benefits achieved in many different
industries/business process areas
The technology is proven, along with its limitations
Every evaluation needs to start by assessing RFID
impact on specific use-case scenarios
© Global Retail Insights 5

Critical issues to consider
Global RFID Standard
Accelerating
EPC/GS1 Developments –
Global supply chain trials &
BAGs further driving industry
adoption
Frequencies Allocation: EU
Commission dictating “UHFliberalization”
Key Barriers to overcome
RFID Cost Structure
Shifting from…
Software &
Services
< 40%
Software &
Services
50%
Hardware
>60%
….to
Hardware
50%
Privacy -> disable tag permanently
Security -> Wireless transmission/data encryption & back-end IT security
Business Continuity –> Tag-viruses protection
Balance automation-level for increased efficiency with “trustworthy”
governance practices -> reduced risks/impact of security breaches
Mitigate health risks/concerns -> Balance read efficacy with exposure levels
© Global Retail Insights 6

RFID Payback & Cost
Components
What is the estimated payback period of your RFID investment
25%
21%
7%
21%
26%
less than 1 year
up to 2 years
up to 3 years
more than 3 years
Don't Know
Number of valid respondents: 450
Data weighted by enterprise size class
major cost component
hardware costs for RFID tags and
readers
5% 8% 33%
25%
14% 15%
software costs for RFID
middleware or RFID-enabled
applicati
the costs for business process reengineering
the costs for project
implementation and system
integration
all the same influence
Source: eBusiness Watch RFID survey, December 2007
© Global Retail Insights Don't Know
7

Top business reasons driving
RFID adoption in Europe
1. Improving the efficiency of production processes (84%)
2. Improving product and service safety or authenticity (79%)
3. Improving product track-and-trace capabilities (75%)
4. Improving asset management (69%)
5. Complying with regulation (69%)
6. Increasing supply chain efficiencies (67%)
Number of valid respondents: 450
Data weighted by enterprise size class
Source: eBusiness Watch RFID survey, December 2007
© Global Retail Insights 8

RFID in practice & benefits
Improving supply chain visibility, predictability and overall
efficiencies
Inbound logistics efficiencies, inventory management accuracy
and responsiveness, distribution centre efficiency and loss
prevention
Enabling faster operational turnarounds - production cycle times,
delivery time windows for LSPs, etc..
Augmenting asset management capabilities
– Reusable mobile asset tracking in logistics,
– Aircraft and train component tagging for improved maintenance accuracy,
– Baggage tracking at airports,
– Medical device tracking at hospitals and
– IT asset tracking
© Global Retail Insights 9

RFID in practice & benefits
Regulatory compliance – achieved in a more timely,
accurate and less resource-consuming way for all value
chain partners
Reducing out-of-stock situations — key areas of focus for
both the retailer and its suppliers.
Market-driven mandates, as opposed to regulations, may
represent one of the most significant drivers of
ubiquitous RFID deployment in the medium term.
Collaborative excellence represents both an
instrumental factor to extend supply chain efficiencies
leveraging on RFID, and the ultimate goal to maximise
RFID investment returns
© Global Retail Insights 10

Why are Companies
Increasingly Investing in RFID
Faster operational turnaround + improved assets’
visibility = smoother, less-costly and more capitalefficient
operations
Resulting service levels improvements = real benefits
to the final customer
Better-run run Regulatory Compliance = ultimately
benefits consumers and brand reputation
Market-driven mandates (most often from retailers..)
+ Collaborative Excellence = full consumer product
value network success
Top-line & Bottom-line improvements will result =
ROI discussion starts here
© Global Retail Insights 11

Case Studies Findings
METRO Group
– Efficient Direct store deliveries from over 50 suppliers tagging pallets
(targeting 150 in the short-term), across 9 METRO distribution centers in
Germany, 60 METRO Cash & Carry and 102 Real stores
– Supply process efficiencies: 12% to 17% overall improvements
– Loss/theft shrinkage: 11% to 18%
– Sales and customer service: 10% to 20% reduction of out-of-stocks
– Fashion retailing: inventory optimization and customer service enhancements,
as preliminary demonstrated by the ongoing item-level field-trial at Galeria
Kaufhof in Essen (30,000 articles were tagged)
– Cost Reduction: est. savings of €8.5 million per year with RFID&EDI
(Germany only, METRO Cash & Carry, Real, DCs only)
Futura Systems (polyethylene tubes manufacturer)
– Shipping errors were reduced from 3% to 0.5%
– Inventory tracking FTE effort down by 90%
Istituto dei Tumori (Milano) – Blood bank
– Total traceability of the transfusion process
– Improved safety of patients and medical staff
© Global Retail Insights 12

Case Studies Findings
HP – End-to-end supply chain implementation
Tags attached to printers
– 20% improvement in manufacturing lines cycle time
– 17% reduction in WIP and inventory, faster invoicing
The scale of the project…
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,.7488 Motol Hospital (Prague) – Inventory/IT asset tracking
– 6 Months ROI
– Improved IT assets visibility, in “real-context” (location, personnel..)
Europool Systems (transport packages for fresh products)
Pilot project results
– Ability to read >300 tags per pallet with >99% accuracy
– IT improvements - integrated data with the backend systems to get financial
information
– Significant cost savings from claims, deposits, reconciliation with retailers
and growers
© Global Retail Insights 13

How to maximize RFID ROI
A 5-step Guideline
Creating the business case — Calculate productivity
impact of data collection/identification automation. Breakeven
typically within 2 years
Options — Identify optimization opportunities on 5 to 10
core business processes
Compare — Calculate NPV to estimate/measure financial
impact. Be sure to compare the calculation if done without
the RFID investment.
Sanity check — Be sure the options are aligned with overall
business strategy. Take advantage of other platform
capabilities as well.
"Safe bed" — After taking the decision to invest on RFID,
allocate 10% to 15% of the total IT budget to the new
investment.
© Global Retail Insights 14

The Business-Driven RFID
Roadmap
Execution — Supply chain/operational execution
optimisation
– Quicker payback opportunity for supply chain intensive enterprises
– Combine RFID with sensor networks or real-time locating systems
Planning — Supply chain and merchandise planning
advancements..across the value chain..
– European retail 2008 focus mostly on achieving i advanced d demand
d
intelligence abilities
– Suppliers will have the opportunity to reconsider their market
positioning, both in relation to the retailers and consumers
– Consequently, CP manufacturers & retailers will drive larger
transactions, for example by synchronising promotional efforts with
supply chain planning and execution
Service — Enabling concrete benefits for the people —
The big bet for RFID to go mainstream is to be found in the
next level of consumers, patients and citizens experiences
© Global Retail Insights 15

Essential Guidance
Investments will ramp up in 2008
RFID is a strategic enabler of collaborative excellence for
profitable growth
– RFID-enabled companies can achieve 12 months competitive
advantage
– RFID will run in parallel to barcodes for many years
– RFID enables new levels of visibility, automation, efficiency, safety
compared to barcode
– RFID is NOT just a barcode with an antenna..
RFID will produce a long term ROI
– Companies must evaluate investments with an options approach
– Quicker ROI opportunities (

Questions & Answers
eviola@idc.com
iortis@idc.com
© Global Retail Insights 17