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New Tool for Assessing RFID's Value
EPCglobal is offering its members a free spreadsheet application they can use to calculate business costs and gains from deploying an EPC RFID system.
May 09, 2005—Looking to provide product manufacturers with a quick understanding of the business benefits from deploying Electronic Product Code (EPC) RFID tags on cases and pallets, EPCglobal US has put together a new tool for its subscribers.
The new spreadsheet tool—dubbed the EPC Value Model—provides manufacturers with an application that can calculate potential business costs and gains from deploying an EPC system.
The tool was developed for EPCglobal US by the Stanford Global Supply Chain Management Forum and the Massachusetts Institute of Technology, with input from major manufacturers Gillette, Hewlett-Packard, Johnson & Johnson, Kimberly-Clark, Kraft Foods, Procter & Gamble, and Yuen Foong Yu, Taiwan's largest paper-making company. Retailers CVS, Metro and Wal-Mart also helped with the project.
"Part of the process in building the model was talking with individual companies that have been through at least one pilot cycle, and taking key learnings and data," says Meranda.
The resulting tool will not only prove useful for businesses starting out to look at the potential of using EPC RFID tags, but also will provide companies like those that helped in creating the tool to refine and develop their ongoing EPC RFID deployments.
"This tool will keep companies from having to reinvent the wheel. While no two RFID deployments are the same, this will help cut the process of trying to model a return on investment from EPC. What would have taken weeks will now take days," says Paul Fox, director of global external relations at Gillette. Fox says that Gillette will use the model to help it develop its own ongoing EPC RFID deployments.
To use the tool, manufacturers enter a range of company-specific data in three broad categories. The first category consists of financial data such as annual revenue, profit margin, expected business growth rate, annual cost of capital, and average inventory level as a percentage of sales. The program also requires details about business-process areas, such as out-of-stocks, shrinkage or counterfeiting, that the company wants to improve through the use of EPC RFID technology. Finally, operational areas such as production planning, inventory management and product tracking and tracing can be added.
For companies that do not have all the necessary business information to input into the tool, default values are available as well as full explanation of the assumptions on which they were created.
After the appropriate data is entered, the EPC Value Model spreadsheet generates an analysis and estimates the one-time and annually recurring benefits of an EPC RFID implementation. The summary will include the expected costs and benefits over five years, and the expected five-year discounted net-present-value of an EPC RFID implementation, as well as qualitative analysis, according to EPCglobal US.
The EPC Value Model is part of the Assessing the Value of RFID Technology and EPCglobal Standards for Consumer Goods Manufacturers report, which includes information on how to use the tool as well as the methodology employed in its creation.
Having taken nearly a year to develop the program for manufacturers, the group says it hopes to develop additional versions customized to suit other industries such as healthcare, pharmaceuticals and logistics over the next few years.
The report is available free to EPCglobal US subscribers from the EPCglobal US Web site, www.epcglobalus.org, and the organization says that it will make the report available to EPCglobal's overseas organizations to help them develop their own localized versions, if they want to.
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