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The ROI of RFID
A Pre-Conference Seminar
All Pre-Conference Slides Copyright © 2003 Accenture, all rights reserved.
The pre-conference seminar began on Wednesday, June 11, with an informal lunch in which Accenture's Joseph Tobolski and RFID Journal's Mark Roberti spelled out some of the basics about RFID and answered questions. Then, experts from Accenture presented information of key aspects of RFID adoption.
12:40 pm -- The Value of Silent Commerce (367 KB)
David Durdan, Associate Partner, Accenture Retail/Consumer Industry Group
David Durdan, an associate partner in Accenture's Retail/Consumer Industry Group, said that silent commerce is generally defined as "intelligent and interactive objects communicating and conducting commerce with or without human interaction." Essentially, many things that require human intervention today will happen automatically because smart objects can communicate with computers and other objects.
RFID is a key technology enabling silent commerce, but there are others, including wireless sensors, low-cost interactive displays that can be integrated into packaging and other objects, and actuators that use either sensors or algorithms to respond automatically to conditions. Pumps, motors and process control systems all fall into this category.
Durdan gave an overview of what's happening in the market to drive interest in RFID, such as the development of the Electronic Product Code by the Auto-ID Center and declining hardware prices. He spelled out the challenges that remained and gave several concrete examples of companies that are already using RFID to improve their operations, including Marks & Spencer, Associated Foods Stores, and Prada.
1:35 pm -- Is RFID Really Ready for Mass Adoption? (163 KB)
Paul Schmidt, Senior Manager, Accenture
Paul Schmidt, a senior manager at Accenture, explained how RFID is evolving from purely closed-loop applications, in which companies track goods within their four walls, to tightly coupled operations, where companies share RFID information. And now we’re moving toward open systems, which can be used across the supply chain.
Schmidt spelled out some of the enormous potential benefits of these open systems, including:
– Increased revenue of up to 2 percent from reduced out-of-stocks and returns
– A reduction of up to 5 percent in the cost of goods sold from increased labor productivity and reduced shrink
– A reduction of 5 to 30 percent in working and fixed capital of from reduced inventory levels and improved utilization of assets.
He showed the expected decline in tag and reader prices as volumes ramp up, but explained that those costs are only part of the equation. There are costs related to installing and tuning reader antennas, to deploying middle ware and doing software integration, and to managing process changes.
Schmidt then spelled out some of the benefits across the value chain and who would get them. He also talked about how deploying RFID will take time. Companies can roll out the technology across regions, in different parts of their business (such as warehousing or distribution), and by product. In all likelihood, it will be rolled out in combinations of these three. For instance, you might roll out the technology to track cases of fast moving items in warehouses in one geographical region, then another, and then move on to tracking those items in stores by region, or move to tracking other items within your warehouses.
3:45 pm -- What Does This Mean for Operations? (499 KB)
Dan Adirim, Manager, Accenture Resources Operating Group
Dan Adirim, a manager in Accenture's Resources Operating Group, started by providing a 10,000-foot view of where RFID data will be gathered and how it will be used. Companies will gather RFID data to do market and industry-level trend analysis. They will aggregate data from plants, warehouses, DCs, stores. They will use near real-time data to manage the business and historical data to do planning and projections. And field services will gather a lot more data about the services provided and use the data to respond to business events.
All this data doesn't have to overwhelm a company, however. Adirim explained how companies could create a rules-based architecture that is flexible and easy to deploy. Rules can be configured locally to adapt to the situation in different areas of the company. For instance, a DC in one area might have software systems automatically replenish when stocks fall to one level, while a DC in another region might replenish much sooner because demand is higher.
Adirim went on to explain how intelligence needs to be pushed down to lower levels in order to cope with much more real-time information. For instances, software agents might respond to data from RFID readers at the point of sale to trigger a replenishment order. Adirim also explained that companies would have an increased burden in terms of maintaining a network of readers. He gave an example of an agri-business that might have 940 portal readers to take care of.
4:30 pm -- Where Are We? And How Do We Get There? (90 KB)
Joseph Tobolski, Director, Accenture Silent Commerce Center
Joseph Tobolski closed the pre-conference seminar by laying out how companies can take a phased approach to adoption. It starts with generating ideas internally. Then he suggested that companies do exercises to begin to define the value of RFID before scoping out a pilot and determining the cost. He suggested that companies start their pilot and then go through regular refinement and improvements before deploying the technology.
He stressed that the business case is critical, but that companies may have a hard time quantifying some of the benefits. He suggested that companies be conservative in their calculations and said they should expect everything will cost more than anticipated and the benefits will less than anticipated. "No one ever got fired for delivering a bigger ROI than expected," he said.
Tobolski laid out several key criteria for success
o Senior leadership and ownership
o Program management
o Communication
o Capable vendors and integration team
o Technology
o Testing, testing, testing!
"If you remember one thing from this conference," he said, "it's testing, test, testing."
Back to Main Event Report
12:40 pm -- The Value of Silent Commerce (367 KB)
David Durdan, Associate Partner, Accenture Retail/Consumer Industry Group
David Durdan, an associate partner in Accenture's Retail/Consumer Industry Group, said that silent commerce is generally defined as "intelligent and interactive objects communicating and conducting commerce with or without human interaction." Essentially, many things that require human intervention today will happen automatically because smart objects can communicate with computers and other objects.
RFID is a key technology enabling silent commerce, but there are others, including wireless sensors, low-cost interactive displays that can be integrated into packaging and other objects, and actuators that use either sensors or algorithms to respond automatically to conditions. Pumps, motors and process control systems all fall into this category.
Durdan gave an overview of what's happening in the market to drive interest in RFID, such as the development of the Electronic Product Code by the Auto-ID Center and declining hardware prices. He spelled out the challenges that remained and gave several concrete examples of companies that are already using RFID to improve their operations, including Marks & Spencer, Associated Foods Stores, and Prada.
1:35 pm -- Is RFID Really Ready for Mass Adoption? (163 KB)
Paul Schmidt, Senior Manager, Accenture
Paul Schmidt, a senior manager at Accenture, explained how RFID is evolving from purely closed-loop applications, in which companies track goods within their four walls, to tightly coupled operations, where companies share RFID information. And now we’re moving toward open systems, which can be used across the supply chain.
Schmidt spelled out some of the enormous potential benefits of these open systems, including:
– Increased revenue of up to 2 percent from reduced out-of-stocks and returns
– A reduction of up to 5 percent in the cost of goods sold from increased labor productivity and reduced shrink
– A reduction of 5 to 30 percent in working and fixed capital of from reduced inventory levels and improved utilization of assets.
He showed the expected decline in tag and reader prices as volumes ramp up, but explained that those costs are only part of the equation. There are costs related to installing and tuning reader antennas, to deploying middle ware and doing software integration, and to managing process changes.
Schmidt then spelled out some of the benefits across the value chain and who would get them. He also talked about how deploying RFID will take time. Companies can roll out the technology across regions, in different parts of their business (such as warehousing or distribution), and by product. In all likelihood, it will be rolled out in combinations of these three. For instance, you might roll out the technology to track cases of fast moving items in warehouses in one geographical region, then another, and then move on to tracking those items in stores by region, or move to tracking other items within your warehouses.
3:45 pm -- What Does This Mean for Operations? (499 KB)
Dan Adirim, Manager, Accenture Resources Operating Group
Dan Adirim, a manager in Accenture's Resources Operating Group, started by providing a 10,000-foot view of where RFID data will be gathered and how it will be used. Companies will gather RFID data to do market and industry-level trend analysis. They will aggregate data from plants, warehouses, DCs, stores. They will use near real-time data to manage the business and historical data to do planning and projections. And field services will gather a lot more data about the services provided and use the data to respond to business events.
All this data doesn't have to overwhelm a company, however. Adirim explained how companies could create a rules-based architecture that is flexible and easy to deploy. Rules can be configured locally to adapt to the situation in different areas of the company. For instance, a DC in one area might have software systems automatically replenish when stocks fall to one level, while a DC in another region might replenish much sooner because demand is higher.
Adirim went on to explain how intelligence needs to be pushed down to lower levels in order to cope with much more real-time information. For instances, software agents might respond to data from RFID readers at the point of sale to trigger a replenishment order. Adirim also explained that companies would have an increased burden in terms of maintaining a network of readers. He gave an example of an agri-business that might have 940 portal readers to take care of.
4:30 pm -- Where Are We? And How Do We Get There? (90 KB)
Joseph Tobolski, Director, Accenture Silent Commerce Center
Joseph Tobolski closed the pre-conference seminar by laying out how companies can take a phased approach to adoption. It starts with generating ideas internally. Then he suggested that companies do exercises to begin to define the value of RFID before scoping out a pilot and determining the cost. He suggested that companies start their pilot and then go through regular refinement and improvements before deploying the technology.
He stressed that the business case is critical, but that companies may have a hard time quantifying some of the benefits. He suggested that companies be conservative in their calculations and said they should expect everything will cost more than anticipated and the benefits will less than anticipated. "No one ever got fired for delivering a bigger ROI than expected," he said.
Tobolski laid out several key criteria for success
o Senior leadership and ownership
o Program management
o Communication
o Capable vendors and integration team
o Technology
o Testing, testing, testing!
"If you remember one thing from this conference," he said, "it's testing, test, testing."
Back to Main Event Report
