Advancing public-private partnerships for e-business standards Geneva, 18-19 September 2008 Implementation of RFID in retail Henri Barthel, GS1

GS1 in a nutshell GS1 is a not-for-profit organisation that develops global Identification, Automatic Data Capture and Communication standards for the supply chain Global standards for electronic business messaging Rapid, efficient & accurate business data exchange The environment for global data synchronisation Standardised, reliable data for effective business transactions Global standards for automatic identification Rapid and accurate item, asset or location identification Global standards for RFID-based identification More accurate, immediate and cost effective visibility of information

GS1 is a not-for-profit organisation that develops global Identification, Automatic Data Capture and Communication standards for the supply chain

GS1 Member Organisations 108 Member Organisations 140 Countries served 1,2 million member companies Countries with a GS1 Member Organisation Countries served on a direct basis from GS1 Global Office (Brussels)

IT Infrastructure RFID - Radio Frequency IDentification RFID Reader Electro- magnetic Field RFID Tag/Transponder

Passive RFID market sizing

Where are standards required? ID reader computers telemetry Query services data ID telemetry Information Services Standard data RFID tag Standard air protocol Standard software Interfaces Standard query language Standard network architecture Internet

Why are global standards important? Reduce complexity Within organizations Between organizations For H/W and S/W production and purchase decisions Reduce cost Implementation H/W, S/W and Integration Facilitate trading partner collaboration Allow organizations to focus more on how to use the information than how to get information

Reduce complexity

Within organizations

Between organizations

For H/W and S/W production and purchase decisions

Reduce cost

Implementation

H/W, S/W and Integration

Facilitate trading partner collaboration

Allow organizations to focus more on how to use the information than how to get information

Global Standards reduces complexity Manufacturers sells common goods in multiple markets Retailers are supplied by various manufacturers

EPC reduces the costs of the tags Tag Price € 0.05 € 0.20 € 0.40 € 0.60 € 0.80 € 1.00 2001 2002 2003 2004 2005 2006 launched EPC Gen 2 Standard issued Year

Supply chain visibility Potential to transform business process bar code replacement alone will not deliver ROI The power of event related information Improved customer availability Demand driven supply chain Reduced inventory Reduced counterfeit Improved ability to track and trace Shrinkage Returnable Assets Transformation of commercial relationships

Potential to transform business process

bar code replacement alone will not deliver ROI

The power of event related information

Improved customer availability

Demand driven supply chain

Reduced inventory

Reduced counterfeit

Improved ability to track and trace

Shrinkage

Returnable Assets

Transformation of commercial relationships

Tangible Examples Electronic proof of delivery Avoiding waste of resources. EPC data was able to refute received amount 80% of occasions Department of Defense Reduced order backlog form 92k to 11k orders $1.7bn ROI over 7 years Improving “confidence” in the supply chain Baggage tracking Improving control and accuracy 99% read rate helping to solve a $1.6bn problem

Electronic proof of delivery

Avoiding waste of resources.

EPC data was able to refute received amount 80% of occasions

Department of Defense

Reduced order backlog form 92k to 11k orders

$1.7bn ROI over 7 years

Improving “confidence” in the supply chain

Baggage tracking

Improving control and accuracy

99% read rate helping to solve a $1.6bn problem

Tangible Examples Apparel Improving customer availability 20% improvement in accuracy (size and colours) Prompt movement of promotional items to sales floor Retailer 19% sales lift Supplier 26% sales increase

Apparel

Improving customer availability

20% improvement in accuracy (size and colours)

Prompt movement of promotional items to sales floor

Retailer 19% sales lift

Supplier 26% sales increase

Business Case examples Metro Process efficiency - 12% to 17% (incoming merchandise & shelving) Loss/theft - 11% to 18% (depends on category) Goods availability - 9% to 14% (reduction OOS) Incoming goods - € 8.5mio (German est. only) Lemmi Fashion (SME – 1 mio garments per year) Stock turnover before tagging - 5,000 to 10,000 items per day Stock turnover after tagging - 20,000 items per day Increase of 250%-300% in receipt and shipment of goods

Metro

Process efficiency - 12% to 17% (incoming merchandise & shelving)

Loss/theft - 11% to 18% (depends on category)

Goods availability - 9% to 14% (reduction OOS)

Incoming goods - € 8.5mio (German est. only)

Lemmi Fashion (SME – 1 mio garments per year)

Stock turnover before tagging - 5,000 to 10,000 items per day

Stock turnover after tagging - 20,000 items per day

Increase of 250%-300% in receipt and shipment of goods

The Business Case and the numbers Increasing number of leading organizations are publicizing results, for example…. Gillette Improving product launches and promotion “ The Advantaged Strategy” – moving beyond an all or nothing approach Wal Mart Improving on shelf availability Broad based process improvements DoD Improving “confidence” in the supply chain Baggage tracking Improving control and accuracy Apparel Improving customer availability through improved inventory accuracy and control And many more….. 3 days 16% 89% 99% 20%

Increasing number of leading organizations are publicizing results, for example….

Gillette

Improving product launches and promotion

“ The Advantaged Strategy” – moving beyond an all or nothing approach

Wal Mart

Improving on shelf availability

Broad based process improvements

DoD

Improving “confidence” in the supply chain

Baggage tracking

Improving control and accuracy

Apparel

Improving customer availability through improved inventory accuracy and control

And many more…..

Current process to EPC-enabled process Current Process EPC Process 5 seconds per pallet 20 seconds per pallet Receiving 80 seconds to 20 minutes per pallet 20 seconds per pallet Checking 10 seconds per pallet 5 seconds per pallet Shipping

RFID benefits at METRO Group Increased process efficiency by 12% to 17% (incoming merch. and shelving) Reduction of loss/theft by 11% to 18% (depends on category) Increased goods availability by 9% to 14% (reduction OOS) Incoming goods cost reduction of € 8.5mio (German estimation only)

Increased process efficiency by 12% to 17% (incoming merch. and shelving)

Reduction of loss/theft by 11% to 18% (depends on category)

Increased goods availability by 9% to 14% (reduction OOS)

Incoming goods cost reduction of € 8.5mio (German estimation only)

Barcode business case The 1975 barcode business case proved to be too conservative Final benefits were double than anticipated Final costs were half than anticipated Source: Ahold 0.2% to 3.4% Soft Benefits Hard Benefits Costs 3.1% to 3.5% -2.5% to -1.3% Percent of Sales 1975 (McKinsey) 1997 (PwC) - Automatic reorder - Shrink control - Improved warehouse operations - Improved DSD control - Inventory reduction - Sales increase - Faster check-out - Reduced check-out errors/loss - Prevention - Elimination of price marking

The 1975 barcode business case proved to be too conservative

Final benefits were double than anticipated

Final costs were half than anticipated

Real savings A study conducted by Coopers & Librands based on the McKinsey calculations from the 70s shows that the net savings realised by the adoption of the Barcode at item level is equal to 5,69% of the retail price . Based on the 2006 figures of the global retail industry, this represents a saving of over €150 billion per year .

A study conducted by Coopers & Librands based on the McKinsey calculations from the 70s shows that the net savings realised by the adoption of the Barcode at item level is equal to 5,69% of the retail price .

Based on the 2006 figures of the global retail industry, this represents a saving of over €150 billion per year .

RFID business case The RFID business case could also be too conservative (?) Final benefits could also be double than anticipated (?) Final costs could also be half than anticipated (?) Soft Benefits Hard Benefits Costs Percent of Sales Today Future

The RFID business case could also be too conservative (?)

Final benefits could also be double than anticipated (?)

Final costs could also be half than anticipated (?)

Contact details Henri Barthel GS1 Global Office Avenue Louise 326, bte 10 B-1050 Brussels, Belgium E [email_address] T +32 2 788 78 23 W www.gs1.org Thank you for your attention!