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The Business Case for RFID in the Supply Chain

The Business Case for RFID in the Supply Chain. Sue Hutchinson Director, Product Management FCC/OET RFID Workshop 7 October 2004. EPCglobal. Joint venture of Uniform Code Council and EAN International Built on 30+ years of proven, product identification standards development expertise

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The Business Case for RFID in the Supply Chain

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  1. The Business Case for RFID in the Supply Chain Sue Hutchinson Director, Product Management FCC/OET RFID Workshop 7 October 2004

  2. EPCglobal • Joint venture of Uniform Code Council and EAN International • Built on 30+ years of proven, product identification standards development expertise • Develop technical specifications and standards • Ensure intellectual property is free and open • Facilitate mass adoption across all industries • Provide compliance and interoperability testing • Drive education and training • Provide continuing support for cutting-edge research performed by MIT Auto-ID Labs • Over 400 companies worldwide are subscribers • 300 companies in the US • Represent over $1Trillion commercial revenue  2004 EPCglobal US

  3. RFID – Why Now? • Groundbreaking MIT research changes the economics of RFID hardware • Mature information technologies and practices to manage the data • Slowing growth in the economy • Pervasive challenges in supply chain management  2004 EPCglobal US

  4. Challenges -Commercial Supply Chain • Observability of goods and assets in motion • Integrity & security • Unmanned operation, 24x365 • Data distribution and sharing $400 Billion AMR Research $ Effective Bar CodeReplacement Pervasive Reader Deployment $100M cash $1B rev/yr $50M cost/yr EPC-DrivenData Sharing OOS Errors Labor Inventory Shrinkage Goods Xfer Regulation  2004 EPCglobal US

  5. Challenges in the Pharmaceutical Supply Chain • Global pharmaceutical counterfeiting range from 2-7%, rising to 80% in some countries.3 • Out-of-stock or manufacturing problems account for the 8% of order lines that can’t be filled.1 • Returnsworth $2B occur annually2 - total monthly Rx volume that is returned by customers is 4% for Distributors and 2% for Manufacturers.1 • Overstock, 49% for Distributors and 5% for Manufacturers, and outdated product, 16% for Distributors and 43% for Manufacturers, were listed as the top reasons for returned goods.1 • Tracking regulatory compliance information on products handled is a practice currently followed by 85% of Distributors and 74% of Manufacturers. 1 • Approximately 1300 recalls annually. 1 Source: Accenture Sources: 1 - 2002 HDMA Industry Profile and Healthcare Fact book 2 - HDMA presentation at Auto-ID Healthcare Adoption Forum 3 - RECONNAISSANCE International  2004 EPCglobal US

  6. Challenges in Food Safety • 91 Million tons of food disposed • Transported to landfills • 26% of food supply* • 76 Million cases of food borne disease • 325,000 hospitalizations • 5000 deaths* * United States figures  2004 EPCglobal US

  7. Example: MRE Safety Research in using RFID and micro-sensors to promote safety inMREs for field deployment (MIT Auto-ID Labs)  2004 EPCglobal US

  8. The Changing Landscape in RFID  2004 EPCglobal US

  9. Projected RFID Volume 100 $2.5 90 Other Uses 80 $2.0 Supply Chain 70 Chip Revenue 60 $1.5 Chip Revenue ($ in billion) 50 Units (billions) 40 $1.0 30 20 $0.5 10 0 $- 2004 2005 2006 2007 2008 2009 Source: Deloitte & Touche, stores.org, vendor analysis  2004 EPCglobal US

  10. Key to RFID Adoption • One worldwide standard • “Wal-Mart and other end users … are driving for one open globally accepted communication protocol, and that is Class 1, G2.” -- Tom Williams, Wal-Mart  2004 EPCglobal US

  11. US Competitiveness in RFID • Industry Goal: Promote EPCglobal UHF Gen2 air interface protocol as the worldwide standard • DoD, Wal-mart, Target, Best Buy mandates • FDA guidance on RFID • Backed by 120+ key FMCG companies • Ex: P&G, Gillette, Kimberley-Clark, International Paper • Backed by 80+ Health Care and Pharma companies • Abbott Laboratories, Johnson & Johnson, etc. • Backed by key technology companies • TI, IBM, Sun, CISCO, Symbol Technology, Manhattan, etc. • Many smaller companies (Impinj, Reva Systems, Alien Technology, etc.) • Government support: Promote RFID usage in North America • Favorable regulatory climate • Studies & analysis • FTC RFID panel • FCC RFID panel  2004 EPCglobal US

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