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What’s the Frequency? The Future of RFID for the Retail Supply Chain

Christopher Boone Program Manager U.S. IT Opportunity: Retail/Wholesale/CPG. What’s the Frequency? The Future of RFID for the Retail Supply Chain. Massachusetts Software Council. May 20, 2004 . Agenda. Overview of major RFID announcements Promise vs. reality RFID ecosystem

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What’s the Frequency? The Future of RFID for the Retail Supply Chain

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  1. Christopher Boone Program Manager U.S. IT Opportunity: Retail/Wholesale/CPG What’s the Frequency?The Future of RFID for the Retail Supply Chain Massachusetts Software Council May 20, 2004

  2. Agenda • Overview of major RFID announcements • Promise vs. reality • RFID ecosystem • Adoption of RFID for retail supply chain • Essential guidance

  3. What Is RFID? • RFID = Radio Frequency Identification • RFID tags: chips, antenna, inlay • Multiple frequency ranges • Low (125KHz) • High (13.56MHz) • UHF (868-954 MHz; 915MHz in N. America) • Microwave (2.45GHz) • Common uses of RFID today include: • Security access cards • Mobil Speedpass • Toll road transponders

  4. What Is RFID for Retail Supply Chain? • Tagging pallets, cases, and items with RFID • Today, focus on pallets and cases • Electronic Product Code (EPC) • UHF • N. America: 915MHz • Europe: 865.5–867.6MHz • Japan: 950–956MHz (likely) • Passive tags • Read-only, read-write • Item-level tracking: second wave, not first

  5. Major RFID Initiatives • 2005, 2006 mandates • 2005–2010 phase-in • Spring 2005, 2007 • April 2005 • Nov 2004 mandate • April 2004, Sept 2004

  6. Agenda • Overview of major RFID announcements • Promise vs. reality • RFID ecosystem • Adoption of RFID for retail supply chain • Essential guidance

  7. Reality High costs Standards in flux Lack of end-user knowledge Interference Inability to read 100% of cases on pallet One frequency and tag design does not fit all “Slap-and-ship” compliance vs. long-term business cases Promise Reduce out-of-stocks Reduce safety stocks Reduce manual inventory management tasks Identify and reduce shrinkage Improve efficiencies Improve asset management Authenticate products against counterfeiting Improve responsiveness to product recalls RFID: Promise vs. Reality

  8. RFID Standards in Progress • EPC • Class 0 (today) • Class 1 (today) • Class 1 Generation 2 (mid-late 2004) • ISO • 18000-1, -2, -3, -4, -5, -6, -7

  9. Agenda • Overview of major RFID announcements • Promise vs. reality • RFID ecosystem • Adoption of RFID for retail supply chain • Essential guidance

  10. Merchandise Planning & Allocation Forecasting, Buying, Replenishment Inventory Management Warehouse Mgmt, Logistics & Distribution, Loss Prevention, Salvage Store Operations POS, Labor scheduling, Open and Close Non-store Customer Channels Internet/eCommerce Call Center Customer Care Sales & Marketing Brand management, Promotions, Advertising, Signage Business Process Layer Customer Relationship Management Supply Chain Management & Execution Enterprise Applications Enterprise Application & System Integration Layer EAI Database Database Database Database RFID Middleware (Savant) Global Data Synchronization PML Server RFID Layer Edge Server (Savant) UCCnet Global Registry ONS Server Reader Reader Antenna Antenna Antenna Antenna Tag Tag Tag Tag Tag Tag Tag Tag Tag Tag Tag Tag RFID Ecosystem in Retail Source: IDC, 2004

  11. The Matrioshka Process • Russian nesting dolls • RFID deployed in analogous phases • Matrioshka 1: Inside the four walls • Matrioshka 2: Just beyond the four walls • Matrioshka 3: The retail supply chain • Matrioshka 4: The retail supply network • Matrioshka 5: Beyond the retail supply network • Companies will only make it to Matrioshka 1–3 in next five years Source: IDC, 2004 (Document #30311, The RFID Ecosystem for the Retail Supply Chain)

  12. CPGManufacturer Logistics Provider Wholesaler/Distributor Retailer Enterprise Application & System Integration Layer Enterprise Application & System Integration Layer Enterprise Application & System Integration Layer Enterprise Application & System Integration Layer Data Pools UCCnet Global Registry PML Server PML Server PML Server PML Server RFID Middleware (Savant) RFID Middleware (Savant) RFID Middleware (Savant) RFID Middleware (Savant) Edge Server Edge Server Edge Server Edge Server ONS Server ONS Server ONS Server ONS Server Reader Reader Reader Reader Antenna Antenna Antenna Antenna RFID Ecosystem for the Retail Supply Chain Business Process Layer Business Process Layer Business Process Layer Business Process Layer Partner Exchange/Portal Tag Tag Tag Tag Tag Tag Tag Tag Tag Tag Tag Tag Source: IDC, 2004 (Document #30311, The RFID Ecosystem for the Retail Supply Chain)

  13. Agenda • Overview of major RFID announcements • Promise vs. reality • RFID ecosystem • Adoption of RFID for retail supply chain • Essential guidance

  14. Pilots • Metro Future Store • Auto-ID becomes EPCglobal • Wal-Mart mandate, supplier mtg • DoD announcement • Passive EPC tag costs range between $0.50-$1.00 • Business cases and pilots • More retailer mandates • First C1G2 tags available late 2004 • Passive EPC tag cost average $0.50 • Holiday shipping/ shopping season blackouts • Matrioshka 1 & 2 • Jan: partial compliance with Wal-Mart • Best practices from 2004 identified & adopted • C1G2 tags more widely available • Reader and tag costs drop • Passive EPC tag cost average $0.35 • Holiday blackouts • Matrioshka 1, 2, & 3 • Majority compliance with Wal-Mart 2005, limited compliance across all suppliers • More retailers deploy RFID • Early deployments broadened • Firmware upgrades • Passive EPC tags cost average $0.15 • Holiday blackouts • Matrioshka 1, 2, & 3 • Wal-Mart close to 100% compliance from all suppliers • 25-30 additional retailers have RFID capabilities for pallet & case tracking • Reach early majority phase • Partial refresh of hardware from 2004 • Passive EPC tag cost average $0.10 • Matrioshka 1, 2, & 3 • RFID spending flattens • Major deployments for pallet, case tracking complete • Spending on tags continues • Cost, technical limitations still too high for broad item-level tracking • Passive EPC tag cost average $0.05 • Matrioshka 1, 2, & 3 Timeline 2003–2008 2004 2005 2006 2007 2008 2003 Source: IDC, 2004 (#30490, U.S. RFID for the Retail Supply Chain Spending Forecast and Analysis, 2003–2008)

  15. U.S. RFID for the Retail Supply Chain, 2002–2008 $M $1.3B $1.27B $91.5M Source: IDC, 2004 (#30490, U.S. RFID for the Retail Supply Chain Spending Forecast and Analysis, 2003–2008)

  16. Item-level Takes Off Item-level Begins Pallet & Case Level Peak Pallet & Case Level Boom U.S. RFID for the Retail Supply Chain, Long View Source: IDC, 2004

  17. RFID and Privacy • Top-of-mind concern • Reality vs. fantasy • What vendors should NOT do with RFID as important as what they should do

  18. Agenda • Overview of major RFID announcements • Promise vs. reality • RFID ecosystem • Adoption of RFID for retail supply chain • Essential guidance

  19. Essential Guidance • Educate, educate, educate • Address consumer privacy concerns • Collaborate to create viable business cases • Recognize RFID bubble and plan accordingly

  20. Contact InfoQuestions? Please email me at cboone@idc.com

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