The Business Case for RFID in the Supply Chain

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

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

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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
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 cant be filled.1
• Returns worth 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  Manufacturers, and outdated product, 16 for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
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
7
Example MRE Safety
Research in using RFID and micro-sensors to
promote safety inMREs for field deployment (MIT
Auto-ID Labs)
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The Changing Landscape in RFID
Parameter Past Future
Frequency 125 KHz 13.56 MHz 900 MHz
Read Range lt 1 meter gt 10 meters
Read Rate Few / sec Hundreds / sec
Field Rewritability None Mandatory
Readers/Location 1 Tens / Hundreds
Tags/Location Tens Hundreds / Thousands
Reader Cost 2000 200
Tag Cost 1.00 lt0.10
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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
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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

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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 PG, 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