RFID Migration Strategies: The Key to Electronic Product Code

1. RFID Migration Strategies: The Key to Electronic Product Code Michael Dominy Director, Enterprise Services The Yankee Group October 21, 2004

2. Agenda • RFID Basics • Implementation Strategies • Costs and Risks • Benefits • Best Practices

3. Agenda • RFID Basics • Implementation Strategies • Costs and Risks • Benefits • Best Practices

4. RFID Basics: Data and Processes Retailer Supplier ERP/SCM Apps 3 4 2 Server and Database B2Bi Tags, Readers, LAN, WLAN, Software 1 1 Manufacturer Source: The Yankee Group, 2004

5. RFID Basics: Technologies • Tags (chips) • Readers • Network (LAN or WLAN) • Reader and network Software • Integration software to database • Database • Integration software to applications • Data communication software/services Source: EPC Global PML Server ERP Applications (Inv., SCM, Planning) ONS Server EPC Savant Reader Network SCE Applications (WMS and TMS) RFID Tagged Pallet and Cases

6. EPC RFID Spending on Technology and Services Cost per Tag $0.30 $0.18 $0.09 $0.05 4,500,000 Tags 4,000,000 Services 3,500,000 Middleware 3,000,000 Cost(in Thousandsof U.S. Dollars) Database 2,500,000 WLAN 2,000,000 Scanners 1,500,000 Applicators 1,000,000 500,000 0 2004 2005 2006 2007 2008 As tag costs decline and adoption increases, the RFID market will reach $4.2 billion by 2008 Source: The Yankee Group, 2004

7. RFID Basics: The Opportunity • Reduce inventories $117-$293 billion • Increase sales $83-$166 billion • How? • Connecting, collaborating and synchronizing with the extended supply chain • RFID as a key enabler for improved SCM Source: The Yankee Group, 2004

8. RFID Basics: Key Decision Points Source: The Yankee Group, 2004

9. Agenda • RFID Basics • Implementation Strategies • Costs and Risks • Benefits • Best Practices

10. Implementation Strategies Source: The Yankee Group, 2004

11. Implementation Strategies Across Verticals Survey of 309 enterprises. Source: The Yankee Group, 2004

12. Industry Implementation Strategies: Survey Says… Committed Conservative Survey of 309 enterprises. Source: The Yankee Group, 2004

13. Hosted by What best describes your RFID implementation or migration strategy? Compliance (1-3 distribution centers) Conservative (4+ distribution centers) Committed (ALL distribution centers and some implementation in manufacturing) No plans to implement RFID

14. SAP Users Implementation Strategies: Survey Says… Survey of 76 SAP Users. Source: The Yankee Group, 2004

15. Industry Implementation Strategies: Survey Says… Committed Conservative Compliance Survey of 309 enterprises. Source: The Yankee Group, 2004

16. Agenda • RFID Basics • Implementation Strategies • Costs and Risks • Benefits • Best Practices

17. Costs and Risks Source: The Yankee Group, 2004

18. Planned RFID Spending Survey of 309 enterprises. Source: The Yankee Group, 2004

19. Hosted by How much do you plan to spend on RFID in 2005? 0 >$1 million $1–$3 million $3+ million

20. Agenda • RFID Basics • Implementation Strategies • Costs and Risks • Benefits • Best Practices

21. RFID Benefits Continuum High • Improve promotion effectiveness • Improve freshness/reduce obsolescence • Improve extended SCM • Improve on-shelf availability RFID Driving Collaborative Planning and Execution • Invoice matching • Processing efficiencies • In-transit visibility • Reduce shrink • Improve deduction management BenefitOpportunity • Reduce labor in DC operations • Improve yard management • Improve inventory management and asset management RFID Improving Extended Supply Chain Execution RFID Improving Internal Supply Chain Execution Low High Degree of Collaboration and Linkage Between Planning and Execution Source: The Yankee Group, 2004

22. Benefits Source: The Yankee Group, 2004

23. Benefits: Gaining Value from RFID Analyze, Model, Redesign, Execute Extended Supply Chain Flows Supply Chain Partner n Supply Chain Partner 1 RFID Data Transactions (EDI, XML,…) The sooner you implement technology that enables you to understand inter-enterprise supply chain flows, the faster you can improve the flow of goods through the supply chain Source: The Yankee Group, 2004

24. Hosted by Will RFID deliver ROI? Yes, for the extended supply chain but not my operations Yes, for the extended supply chain and my operations Yes, for my operations but not the extended supply chain No, ROI for my operations or the extended supply chain Don’t know

25. Benefits: Survey Says… Most (57%) of SAP Users See ROI in RFID Source: The Yankee Group, 2004

26. Agenda • RFID Basics • Implementation Strategies • Costs and Risks • Benefits • Best Practices

27. Best Practices • Get started now! Set-up a RFID lab • Target problem areas • Begin with a manageable project • Look beyond “generic” benefits • Put ROI in perspective • Ask, “What if…?” • Develop a business and migration road map Source: The Yankee Group, 2004

28. Yankee Group Recommendations • Use RFID to establish a supply chain road map • From “chains” to “networks” • View RFID as one element of your wireless supply chain strategy • Turn to the right migration manager: • Who understands supply chain networks? • Who understands RFID and complementary wireless technologies? • WHO DO YOU TRUST? • Use best practice selection and decision processes for selecting vendors Next-generation SCM marries traditional and wireless supply chains

29. Thank You! mdominy@yankeegroup.com