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  2. 2. <ul><li>“ NOW IS THE TIME, IT’S NOT TOO </li></ul><ul><li>LATE” </li></ul><ul><li>WHO SAID THAT? </li></ul><ul><li>YOUR TEACHER AT COLLEGE WHEN STUDYING FOR EXAMINATIONS </li></ul><ul><li>YOUR LAWYER URGING YOU TO WRITE YOUR WILL </li></ul><ul><li>UCC’S COO AT A RECENT RFID CONFERENCE </li></ul>
  3. 3. Overview <ul><li>Myth versus Reality </li></ul><ul><li>The Value Proposition </li></ul><ul><li>Real Paybacks </li></ul><ul><li>Case and Pallet RFID here now </li></ul><ul><li>How far away is item level tagging? </li></ul><ul><li>Why Tyco for RFID? </li></ul><ul><li>Privacy Concerns </li></ul><ul><li>Getting started </li></ul>
  4. 4. RFID — the Promise <ul><li>RFID will replace the bar code and EAS systems within a few years </li></ul>RFID — the Reality <ul><li>RFID complements bar codes, EAS and other auto-id technologies and they will co-exist for a long time </li></ul>
  5. 5. RFID Is a Different Business <ul><li>Not about tagging and item security, but about providing data and item visibility </li></ul><ul><li>Re-engineers the user’s core business </li></ul><ul><ul><li>That will take time to implement </li></ul></ul>
  6. 6. RFID and EAS Similarities <ul><li>RFID and EAS are technological cousins </li></ul><ul><ul><li>Short-range radio devices </li></ul></ul><ul><ul><li>Passive tags on tracked items </li></ul></ul><ul><ul><li>The same or nearby frequency bands </li></ul></ul><ul><ul><li>Experience in implementing one directly applies to the other </li></ul></ul>
  7. 7. The Co-Existence Model <ul><li>RFID gets the product to the store </li></ul><ul><li>EAS keeps it in the store until sold </li></ul><ul><li>RFID can be seen as a </li></ul><ul><li>theft predictor </li></ul><ul><li>EAS is clearly a superior </li></ul><ul><li>theft preventer </li></ul>
  8. 8. Why Co-existence Is Needed ? <ul><li>RFID enables a complex read in a collaborative environment </li></ul><ul><ul><li>Label placement & materials optimized </li></ul></ul><ul><li>EAS communicates a simple message in a hostile environment </li></ul><ul><ul><li>Booster bags, foils, mechanical defeats </li></ul></ul>
  9. 9. RFID…Myths versus Reality Tags will cost a $0.05 or less Readers will cost a $1.00 Everything will be tagged It is cheap, easy and simple Tag prices around $0.50 cents heading towards $0.10 cents Readers prices are $500 to $1,000 and will move to $250.00 Tagging will be applied based on value The applications are innovative and it takes global partners to execute Myths Reality RFID is an ‘information’ business
  10. 10. The Impact of RFID on Shareholder Value* INCREASE SHAREHOLDER VALUE INCREASE OPERATING INCOME INCREASE CAPITAL EFFICIENCY INCREASE REVENUE INCREASE MARKET INTELLIGENCE INCREASE MARKET SHARE INCREASE VOLUME REDUCE COST OF GOODS SOLD REDUCE OPERATING COSTS INCREASE FIXED CAPITAL TURNOVER INCREASE WORKING CAPITAL TURNOVER <ul><li>POTENTIAL / EXAMPLE BENEFITS </li></ul><ul><li>Increased promotion effectiveness </li></ul><ul><li>Improved available retail inventory </li></ul><ul><li>Reduce losses from theft </li></ul><ul><li>Reduced inventory handling cost </li></ul><ul><li>Reduced warehouse, distribution and transportation costs </li></ul><ul><li>Improved customer service; real time ATP </li></ul><ul><li>Reduce write-offs; reduce waste </li></ul><ul><li>Improved inventory turns </li></ul><ul><li>Improved cash flow management </li></ul><ul><li>Reduced slow moving/obs. SKUs </li></ul><ul><li>Reduced inventory/back stock </li></ul>*Source – PWC(IBM) Retail White Paper
  11. 11. RFID Value Proposition* (*Source - EDS) .5% to 1% higher margin Stolen/counterfeit merchandise is identified and rejected Returns Fraud Reduced Shrink Costs 5-7% of world sales, including counterfeiting Theft Lower Expense Reduce processing and audit expenses Data accuracy .5% to 1% higher margin Real time inventory visibility drives unified supply and demand model and improves yield Inventory Visibility 3% to 5% more sales RFID-based systems report store inventory in real time to drive restocking Out of Stocks Return RFID Impact Problem
  12. 12. RFID - Money Makers* <ul><li>Eliminate lost sales due to out-of-stocks. </li></ul><ul><li>Pallet, case, and unit level visibility throughout Supply Chain </li></ul><ul><li>Immediate identification of exceptions at check points </li></ul><ul><li>Visibility to replenish right product to right place at right time </li></ul><ul><li>Identify defective merchandise and responsible vendors </li></ul><ul><li>Elimination of errors on time sensitive products </li></ul><ul><li>Faster and more accurate inventory visibility </li></ul><ul><li>Satisfy customer request immediately by locating products on sales floor and in the backroom </li></ul><ul><li>Speed up store receiving, processing, replenishment and POS & return processing </li></ul><ul><li>Notification of units needed on sales floor upon store receipt </li></ul><ul><li>*Source - EDS </li></ul>Impact - Efficiencies Impact - Visibility
  13. 13. A best fit for RFID <ul><li>Reduce Out-of-Stocks </li></ul><ul><li>How do they occur: </li></ul><ul><li>Product does not get to the store </li></ul><ul><li>Product gets to the store but not to the shelf </li></ul><ul><li>Product gets to the shelf, but is not registered as a sale </li></ul>
  14. 14. Root Causes of OOS <ul><li>Product did not get to store </li></ul><ul><ul><li>Shipping / packing error </li></ul></ul><ul><ul><li>Transportation error </li></ul></ul><ul><ul><li>Theft </li></ul></ul><ul><li>Product got to store, but not to shelf </li></ul><ul><ul><li>In accurate back stock inventory </li></ul></ul><ul><ul><li>Receiving or back stock theft </li></ul></ul><ul><ul><li>Misplaced back stock </li></ul></ul><ul><li>The product got to the shelf, but was </li></ul><ul><li>not recognized as a sale </li></ul><ul><ul><li>POS error </li></ul></ul><ul><ul><li>RTV error </li></ul></ul><ul><ul><li>Misplaced in store </li></ul></ul><ul><ul><li>Internal / external theft </li></ul></ul>Need RFID label receiving data to confirm product receipt RFID can automatically separate back stock from floor merchandise <ul><ul><li>RFID for frequent floor checks of inventory and tighter POS accuracy </li></ul></ul>
  15. 15. Implementing RFID will be an Evolution* Evolution, not revolution Will not completely replace bar codes *Source - Gartner Group/ G2 2003 Standards Maturation Cost of Tags $0.05 High Low Supply Chain Customer Facing Today DC Pallet 2004 2008 Case Back room 2010 Shelf 2012 Item
  16. 16. At What Level Do You Anticipate Tagging Products By the End of 2004? Mfr Pallet Retailer 0% 10% 20% 30% 40% 50% 60% 70% 80% 33 % 0% Case 48% 71% Item 19% 29% Source: -EPC Forum survey -IBM Consulting services Case and Pallet is NOW
  17. 17. Five reasons why item level will take a long time <ul><li>Standards must harmonize </li></ul><ul><li>Costs must come down </li></ul><ul><li>Patent issues must be resolved </li></ul><ul><li>Exit technology must improve </li></ul><ul><li>IS integration is arduous </li></ul>
  18. 18. Potential Solution Components <ul><li>Readily available </li></ul><ul><li>Proven technology </li></ul><ul><li>Multiple instances of use </li></ul><ul><li>Read/write </li></ul><ul><li>Limited anti-collision properties </li></ul><ul><li>Short range </li></ul><ul><li>Excellent anti-collision </li></ul><ul><li>Higher read range </li></ul><ul><li>Next generation low cost tags </li></ul><ul><li>Read-only </li></ul><ul><li>Frequency and power regulations </li></ul><ul><li>Materials issues (water and metal) </li></ul>High Frequency UHF
  19. 19. The Tyco Family <ul><li>Breadth & Depth </li></ul><ul><li>Operates in 100 + countries </li></ul><ul><li>2002 Revenues: US $ 35.6 B </li></ul><ul><li>267,000 + employees </li></ul>
  20. 20. Tyco Electronics Our products are found in millions of computers, handheld devices and automobiles
  21. 21. Tyco Healthcare <ul><li>We manufacture 50,000+ different medical products annually </li></ul>
  22. 22. Tyco Engineered Products <ul><li>We are the world’s largest manufacturer of sprinklers, industrial and waterwork valves and controls </li></ul>
  23. 23. Tyco Plastics & Adhesives <ul><li>We are the world’s leading producer of plastic products </li></ul>
  24. 24. Tyco Fire & Security <ul><li>We are the global leader in electronic security </li></ul>We serve over 7.5 million customers Worldwide Trade as ADT in many parts of the world
  25. 25. Tyco Fire & Security Layers of protection
  26. 26. And we complement all these technologies with the industry’s largest support organization From 950 R&D Engineers to 33,000 Service Engineers
  27. 27. Markets Served Retail 80% of the world’s top 100 retailers Aviation 300 international airports Fire More than 26,000 fire departments Marine 80% of commercial vessels Residential More than 5m homes worldwide Commercial Over 2,000,000 commercial enterprise Defense The military in 25 countries Transportation Transportation systems on 5 continents Government Thousands of public buildings Petrochemical 75% of the top 100 refineries
  28. 28. Tyco’s Long History in RFID <ul><li>1982 RFID solutions for tracking merchandise </li></ul><ul><li>1990’s Protected Olympic & Dream Team Athletes </li></ul><ul><li>1994 Security industry sponsor—MIT Media Lab </li></ul><ul><li>1999 Charter technology sponsor—MIT Auto-ID Centre </li></ul><ul><li>2000 First in-store RFID for inventory management </li></ul><ul><li>2003 First to offer EPC-compliant RFID readers </li></ul>
  29. 29. Supply Chain Infrastructure <ul><li>Over 2.2 billion retail items source- tagged in 2002 </li></ul><ul><li>Multi-technology label readers, controllers and applicators in DCs and factories </li></ul><ul><li>11 tagging certification centers supporting 3,400 manufacturers </li></ul><ul><li>Dedicated source tagging sales and service teams </li></ul>
  30. 30. Massive Presence in Retail <ul><li>30+ years focused on retail industry </li></ul><ul><li>Broad array of integrated technology solutions (EAS, digital video, access control, and facility protection) </li></ul><ul><li>Worldwide network of dedicated sales and service professionals </li></ul><ul><li>Proven capabilities to handle national and global rollouts </li></ul><ul><li>80 of the world’s top 100 retailers use our equipment </li></ul>
  31. 31. The Building Blocks <ul><li>Solutions </li></ul><ul><li>Commitment to Open Standards </li></ul><ul><li>Solutions which are easy to integrate into the enterprise </li></ul><ul><li>Global Service and support capabilities </li></ul><ul><li>30 yrs of Engineering design and manufacturing expertise…over the broad range of frequencies </li></ul>
  32. 32. The Agile Reader…A Key component of the supply chain solution <ul><li>Description </li></ul><ul><li>Intelligent tag interrogator ,versatile and flexible </li></ul><ul><li>Gateway between the RFID tag and the data information system using DSP and network architecture </li></ul><ul><li>Applications </li></ul><ul><li>Dock / receiving door reading </li></ul><ul><li>Conveyor reading </li></ul><ul><li>POS & shelf reading </li></ul><ul><li>Benefits </li></ul><ul><li>Unit, carton, and pallet level visibility throughout supply chain and in the retail store </li></ul>
  33. 33. Designed to meet the reader market requirements RFID installations will require both flexible hardware and software that can advance with fast-developing complementary technologies <ul><li>Operate on more than one Frequency band </li></ul><ul><li>Supports Multiple Protocols </li></ul><ul><li>Software radio…Scalable and adaptable </li></ul><ul><li>Speak Internet protocols natively </li></ul><ul><li>Be part of a distributed, client-server system </li></ul><ul><li>Remote diagnostics </li></ul>Agile Reader Platform Requirements:
  34. 34. Protocol Support - Today <ul><li>By combining native development and an OEM strategy, TYCO supports the following standards: </li></ul><ul><li>EPC 1 </li></ul><ul><li>EPC 0 </li></ul><ul><li>ISO 15693 </li></ul><ul><li>ISO 18000-6 </li></ul>Our Commitment is to open standards, not technology
  35. 35. Application Software Product… RFID Works! <ul><li>Provides variety of software programs for inventory control </li></ul><ul><li>User interface allows viewing tags read and Product descriptions. Information stored in a common Microsoft Access® Database for easy extraction by the POS or other system. </li></ul><ul><li>Accepts inputs from all TYCO Auto ID readers </li></ul>Enable-ware to help customers use RFID data
  36. 36. Why Software / Middleware? <ul><li>RFID technology generates large numbers of tag events . </li></ul><ul><li>RFID implementations, over time, will include multiple readers likely from multiple manufacturers. </li></ul><ul><li>Enterprise systems (inventory control, warehouse management, merchandizing) will need to have devices managed and tag events filtered . … separation of signal from noise. </li></ul>
  37. 37. Middleware Software RFID API Sensor Device Client Sensor Sensor Sensor Sensor A P I <ul><li>Device management </li></ul><ul><li>System Management </li></ul><ul><li>Presentation management </li></ul><ul><li>Enterprise data Management </li></ul>Implementation Phase Requirements Definition Phase
  38. 38. RFID Commander <ul><li>Acquires, filters, aggregates, stores, associates and communicates high volumes of RFID tagged item data. </li></ul><ul><li>MIT / UCC Compliant </li></ul><ul><ul><li>Data Interchange </li></ul></ul><ul><ul><li>Device to enterprise system interoperability </li></ul></ul><ul><ul><li>Component level compatibility within technologies (Java vs. C#) </li></ul></ul><ul><li>Retractable / Extensible as required to match the capability of enterprise level RFID Applications. </li></ul>
  39. 39. Where Do We Add Value? Application software providers Label solutions providers Enterprise system providers Systems integrators, installers, service providers Data integration Systems providers Reader Mfgrs End user Technology Partners TYCO SensorID Development & Partner Network Tyco / ADT Enterprise providers 3 rd party integrators Air Interface Protocol providers IC Fabs Labels Hardware Software Service Key Elements
  40. 40. Software Strategy Getting Started <ul><li>API and RFID Works! provide integration toolset for initial installations </li></ul><ul><li>Rollouts require partnership/ subcontracting with ERP/WMS/SCM providers and customer IT groups </li></ul>
  41. 41. The Vision We will roll out the “last mile” of information pipeline between your enterprise system and the physical assets requiring better control and visibility
  42. 42. When will RFID be adopted? <ul><li>WalMart has announced </li></ul><ul><ul><li>Case and pallet tagging from top 100 suppliers in U.S. by 1/1/05 </li></ul></ul><ul><ul><li>EPC protocol (from MIT, not Euro/ISO standards) </li></ul></ul><ul><ul><li>Universal item-level >5 years away </li></ul></ul><ul><ul><li>UCC.EAN (barcode) are supporting strongly </li></ul></ul><ul><li>Rest of world </li></ul><ul><ul><li>Pilots in many places; rollouts slow </li></ul></ul><ul><ul><li>Item-level opportunities in firearms, video rental </li></ul></ul><ul><ul><li>Open supply chain apps’ only in infancy </li></ul></ul>
  43. 43. RFID PRIVACY CONCERNS <ul><li>Genuine concerns which must be addressed </li></ul><ul><li>Perception is greater than the reality </li></ul><ul><li>The potential issues will not surface until item level tagging appears </li></ul><ul><li>Not easy to read chips in an open environment </li></ul><ul><li>The industry must develop a consistent approach </li></ul>
  44. 44. RFID TECHNOLOGY IS VIABLE -NOW <ul><li>Get educated – it’s complex </li></ul><ul><li>Start a Pilot </li></ul><ul><li>Build your business case </li></ul><ul><li>Roll out and expand </li></ul><ul><li>The ROI is there </li></ul>
  45. 45. <ul><li>THANK YOU </li></ul>