About the Author
Rob Cushman is a senior manager in the
                                              About Accenture’s Ex...
Mandates from major electronics retailers are
converging to accelerate the proliferation of
radio frequency identification...
RFID Addresses Traditional Challenges
                                       in the Consumer Technology Value Chain
What’s different about RFID?
Where Can RFID Change the Game?
Taking Measured Action —
Accenture’s Work with Best Buy’s RFID Mandate   Business Wire, 31 August 2004             “Our goal is to create a flexibl...
A Call to Action                                                                                                          ...
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Radio Frequency Identification for Electronic


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Radio Frequency Identification for Electronic

  1. 1. About the Author Rob Cushman is a senior manager in the About Accenture’s Experience in RFID Accenture is a pioneer in the area of RFID An Accenture High Tech Solutions Point of View: Supply Chain Management practice of Accenture, and is based in Boston. Rob has more than a decade of experience and electronic product codes. Accenture is a member of EPCglobal (formerly the Auto-ID Center), the group that is setting Radio Frequency Identification for with supply chain-related programs, with a primary focus in high-technology the standards for this technology around the world. For the past eight years, the Electronic & High Tech Companies operations. Rob’s functional experience and Accenture Technology Labs have been expertise is concentrated in the areas of immersed in RFID and electronic product manufacturing & distribution strategy and code research and development. Accenture operations, supply chain planning, inven- offers high-performance solutions that tory management, service management, help our clients across varied industries systems installation, business process to seize the opportunities this technology reengineering and e-supply chain capabil- offers from efficiency and profitability ity development. Rob’s industry experience to complete value chain transformation. spans the end-to-end electronics value Accenture is recognized by analysts chain including: semiconductor equipment, and the media as the leader in RFID and semiconductor manufacturing (fab and electronic product code technology and its assembly/test), contract manufacturing, impact on business environments. For more OEM operations (procurement, planning, information on Accenture and our innova- manufacturing, distribution), electronics tive research in this area, please visit fulfillment, electronics retail and wire- www.accenture.com/silentcommerce. less/RFID. Rob led the Accenture-sponsored RFID workgroup of 16 companies in the end-to-end consumer technology value chain referenced in this document. Copyright © 2005 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
  2. 2. Mandates from major electronics retailers are converging to accelerate the proliferation of radio frequency identification (RFID) technology throughout the consumer technology industry, perhaps faster than any previous technology of its kind. Rather than simply implementing “slap and ship” initiatives, now is the time to rethink fundamental business processes and strategies that can be enabled by RFID to develop high-value, game-changing application and higher-performance capabilities that will help differentiate companies in the marketplace.
  3. 3. RFID Addresses Traditional Challenges in the Consumer Technology Value Chain Channel inventory balancing Management of global product flows Distribution center and retail store product handling Replenishment execution Distribution network and store shrink/theft Promotions effectiveness validation Returns/reverse logistics processing Warranty claim management RFID: A Technology Revolution in the In June of 2003, Wal-Mart fired a After almost 50 years of incubation, Accenture believes RFID will revolu- “shot heard around the world” with RFID enablement of the global supply tionize the way that physical products, a long-awaited announcement of a chain has moved from being an people and IT systems interact across Consumer Technology Supply Chain mandate requiring its top suppliers interesting “science experiment” to the entire supply chain. Because RFID to use radio frequency identifica- a commercially viable concept as the has been architected from its inception tion (RFID) by January 2005 and all global marketplace has focused on to serve as an Internet-based, low-cost suppliers by December 2006. In the a specific variant of RFID called EPC and ubiquitous method of detailed data following months, similar mandate (Electronic Product Code). Originally exchange across companies, it is poised announcements were made by Best pioneered by MIT’s Auto-ID Center, to improve integration and execution Buy, Target, Tesco, Metro Group and and now managed as a global among trading partners at levels the United States Department of commerce standard by EPCglobal unattainable by current technologies. Defense. These announcements and (a joint venture between EAN and the building of RFID at commercial the Uniform Code Council (UCC)), EPC RFID’s particular effectiveness at scale have launched RFID capability is a low-cost, high-volume, passive bridging the information gap at development as a near-term urgency tag standard targeted to large-scale inter-organizational boundaries for electronics companies operating tagging of products in global supply creates the potential to leverage in the consumer channel. Based on chains. The retailer mandates of the technology to resolve several Accenture’s initial work with both Wal-Mart, Best Buy, Target and others long-standing supply chain challenges retailers and consumer technology are all focused on this EPC standard, in the consumer technology value companies, it is clear that RFID is now creating an opportunity for consumer chain. Accenture envisions RFID poised to enter the commercial main- technology companies to develop a will ultimately be used to link OEMs, stream just as the barcode did almost common solution to support all component suppliers, contract 30 years ago. Virtually every major major customers. Several leading manufacturers, logistics providers, player within the consumer technology global companies have already distributors and retailers at levels value chain will need to evaluate and implemented retailer-compliant currently impossible. RFID’s inherent implement RFID as an integral part of solutions using EPC, successfully ability to identify and manage discrete its business model and infrastructure proving its commercial viability. units of individual product in the in the next two to three years. pipeline holds the potential to drive a quantum leap in end-to-end value chain performance.
  4. 4. What’s different about RFID? Objects can “talk” to a network without human intervention Breaks line-of-sight requirement for product identification Establishes unique item serialization Creates low-cost, ubiquitous transactions Reduces data latency dramatically Particularly effective at inter-organizational boundaries This effort brought together 16 During this intensive four-month While the specifics of this analysis The Accenture Electronics Industry RFID Workgroup: leading companies in the consumer technology value chain, comprised of effort, the companies focused on identifying common business priorities are proprietary and confidential to the participant group, the overall five-year Proving the Impacts of RFID in the a mix of OEMs, electronics retailers, for RFID enablement. This exercise NPV in the industry was estimated at contract manufacturers, distributors focused on finding “win-win” almost $5 billion, with retailers and and component suppliers including applications for RFID that would drive manufacturers splitting the benefits Consumer Technology Value Chain Best Buy, Celestica, Dell, Texas performance improvement and value almost evenly. Instruments and others. Working creation for multiple parties in the closely together in a groundbreaking value chain. Ultimately, an extensive Key sources of benefits associated effort, this group undertook an list of RFID-enabled industry solutions with RFID enablement are expected To specifically explore the expected impacts of RFID in the consumer technology value ambitious effort to specifically identify emerged, highlighted by the following to include: cross-industry business solutions application areas: • Labor savings chain, Accenture organized and led a working group of companies from February to that would be enabled by RFID, • Inventory visibility • Out-of-stock reductions May of 2004 to explore the impacts of the technology across leading companies in the key business processes that could • Product handling productivity • Inventory reductions end-to-end value chain. The intent of this workgroup was to provide a forum for leading be optimized using the technology, (manufacturing, distribution, • Returns processing savings likely time phasing of when RFID retail store) • Promotions ROI improvements electronics companies to collaboratively explore RFID standards and capabilities as well capabilities would come online, and • Channel replenishment • Shrink reductions as prove out the RFID value proposition across the complete electronics supply chain. the industry cost/benefit analysis for • Product flow management RFID deployment. • Reverse logistics Primary areas of RFID-related • Warranty and repair management investment are anticipated to include: • Product security (in transit, in store) • RFID tags • RFID infrastructure (readers, The workgroup also specifically antennas, middleware) quantified the costs, benefits and • IT infrastructure (additional server, ultimate net present value (NPV) of router and network resources) deploying RFID-based solutions in the • Integration and deployment services consumer technology industry. (RFID software and facility hardware) • Ongoing support and maintenance
  5. 5. Where Can RFID Change the Game? Labor Efficiencies Real-Time Event Management Knowledge Acquisition by Proximity reading of multiple RFID RFID provides the ability to capture and “Listening” to the Product tags without human interaction enables process high volumes of product-related RFID improves the capability to capture large volume throughput of goods, events to facilitate real-time, tactical relationships between products and also either individually or aggregated in decision making. Every time a product is with their environments based on their cases, pallets or truckloads, even as moved, received, issued, loaded on a truck physical proximity. An RFID-tagged product they are in motion. or aggregated with other products in a that contains RFID-tagged components can vehicle or container constitutes a business identify and maintain its own configuration event that can be captured and processed. record. Processing larger amounts of RFID- Data/Process Quality Managing high volumes of real-time acquired data from multiple sources can Replacing human interaction reduces events enables new and highly responsive help characterize the behavior of various errors such as missed reads and wrong business processes. The latency problems links in the supply chain, identify trends labels scanned. The unique product associated with barcodes, such as products and needs, and create a knowledge base identification within the tag improves arriving at a location but not scanned that identifies process inefficiencies, traceability and integrity by differentiating immediately, are virtually eliminated. avoids potential problems and improves each “instance” of a product. Since products are now able to directly product forecasting. interact with their physical locations, they can facilitate their routing through manufacturing processes, warehouses and transportation vehicles, across multiple enterprises to the point of consumption. Data quality is radically improved across the entire supply chain. The breadth of this study and the Tag cost insensitivity Retailers bear the 2005 - 2006 Based on this specific experience with unparalleled mix of leading companies Compared to many consumer goods majority of costs leading companies in the industry, from across the consumer technology Broad adoption of case- and pallet- sectors, the consumer technology Much industry discussion has Accenture anticipates not only broad industry converged to generate a level tagging of electronics products. segment is largely insensitive to tag focused on justifying tag cost eventual uptake of RFID in the consumer unique level of understanding of the costs due to high product values, burdens to manufacturers; however, technology industry, but also a strong true industry dynamics that will drive 2006 - 2007 channel inventory economics and the majority of the cost will be borne likelihood that consumer technology RFID adoption. Several unprecedented Emergence of item-level tagging, moderate unit volumes. by retailers for the infrastructure will lead other industry segments in industry insights and findings emerged tracking of items from point of required at hundreds of stores. the rate of overall RFID uptake and from this effort, including: manufacture through to the retail Value is at item-level tagging ultimately be the category to move store floor. While incremental value can be Over the course of this effort, major retailers toward item-level achieved at case- and pallet-level the participant group collaborated to tagging for higher value products. 2007 - 2008 tagging, tapping the largest value develop a comprehensive understand- Deployment of RFID-enabled pool requires item-level tagging. ing of the specific opportunities and smart shelves at major retailers, constraints likely to drive uptake of manufacturer visibility to product Value proposition for RFID technologies across the consumer in the retail environment. manufacturers and retailers technology industry. Based on this analysis, the group defined the 2008 - 2009 is balanced following expected time frames for The benefits achieved for Use of RFID to track merchandising RFID capability deployment across and retail promotions effectiveness. manufacturers and retailers is trading partners: proportionally balanced based on Returns and warranty processing investments each party must make. using RFID tags embedded in electronics devices.
  6. 6. Taking Measured Action — Implementing RFID technology in Today’s interim period, while RFID itself, however, will not change the solution costs are coming down and game. Many companies are seeking the final technology standards are Smart Responses to the RFID Challenge only to comply with customer being resolved in large-scale industry mandates, such as those announced by pilots, presents a key window of Wal-Mart, resulting in “slap and ship” opportunity for forward-thinking initiatives that simply add costs and companies to begin assessing their While RFID has often been characterized by the uninitiated as merely a replacement do not provide benefits. Companies RFID strategies and plans. Identifying that are preparing to make the and achieving the benefits from RFID technology for barcoding, Accenture believes it will drive substantial change in the necessary RFID investments to achieve requires a process of objective industry business model, fundamentally changing the nature of how companies compliance with retailer mandates assessment, strategy development and interact with each other and the products moving across their combined value chains. may consider the opportunity to realistic incremental investments that extend their investments beyond provide early returns while building While RFID and barcodes may continue to co-exist through a multiyear transition, RFID minimal compliance and leverage the infrastructure and core capabilities holds inherent technological advantages over bar code-based solutions that will become new RFID capabilities to improve required for the more strategic, their bottom lines and performance. game-changing applications. increasingly attractive as the costs of RFID solutions continue to decline. In the meantime, Rethinking fundamental business Many forward-thinking companies the promise of the rapidly emerging EPC standard and multiple compliance mandates processes that can be enabled by are choosing to make measured from major electronics retailers are converging to accelerate the proliferation of this new RFID can result in value-based, investments today, often exploring game-changing transformations. the likely requirements of their key technology throughout the consumer electronics industry perhaps faster than any previous The key questions to ask are: customers, their own business case technology of its kind. What new business capabilities can for implementation and potential be realized with RFID technology? sources of competitive differentiation How can I use this new information by incorporating RFID into their to lower my cost, deliver new levels of business models. service to my customer, create higher levels of performance and be the lead- ing competitor in the marketplace?
  7. 7. Accenture’s Work with Best Buy’s RFID Mandate Business Wire, 31 August 2004 “Our goal is to create a flexible, The company also conversed with Best Buy Co., Inc. today announced the high-velocity supply chain operating suppliers and surveyed customers. Best Buy Pursues Electronic Product rollout of an electronic product code (EPC) strategy designed to increase its supply chain efficiency over the next with better product availability for customers at a lower total cost for the company,” said Bob Willett, Best Buy now plans to team with Accenture to further define its RFID program strategy, manage rollout and Code Strategy to Increase Supply Chain several years. The company plans to leverage radio frequency identification (RFID) technology to drive the change. executive vice president of operations for Best Buy. “We believe RFID technology can transform the way implementation, and assist suppliers with meeting its integration and compliance requirements. Efficiency; Major Suppliers to Tag Pallets RFID allows retailers to easily and efficiently track products as they move from the manufacturer to products are produced, distributed and merchandised. Our own operations, customers and suppliers Willett added, “Our EPC strategy should ultimately result in a better and Cases By 2006 the stores. Since RFID systems rapidly and can share in the benefits.” Best Buy’s EPC strategy supports customer experience. Customers will be able to more easily find the products they want, when they want simultaneously read tags, Best Buy the rollout of the concept to manufac- them. In the long term, we hope that believes the EPC strategy can improve turers, suppliers and customers. implementing EPC will enable us to customers’ in-store experiences The company determined this strategy enhance customer service and expedite and significantly increase the after understanding others’ perspec- processes for returns and warranties.” organization’s efficiency by increasing tives on EPC technology through product availability, reducing time its membership in EPCglobal, an Best Buy’s major suppliers are spent on processes in distribution organization working to standardize expected to begin applying EPC- centers and stores, enhancing real- the global implementation of EPC compliant tags to product cases time product information capabilities, in an ethical and responsible way. and pallets by Jan. 2, 2006, with all and increasing speed to market. In addition, Best Buy participated in product cases and pallets tagged by an Accenture-supported consortium May 2007. In preparation for these that examined the potential benefits changes, the company also expects of RFID implementation across the to test several applications of the consumer electronics supply chain. technology in select stores and distribution centers in the coming year.
  8. 8. A Call to Action Develop a business case For those companies that have yet Clearly, RFID will become an to begin exploring RFID, time is of Identify the top one or two RFID integral part of the electronics the essence. There are several actions applications and develop a comprehen- industry landscape. The “wait-and-see” companies can and should undertake sive business case that clearly outlines approach carries a much greater risk Many of Accenture’s clients have already initiated the high-performance journey toward in the short term to address the the scope and size of the investment in the long run than over-investing. challenges and opportunities of RFID: Early adopters stand to gain the most deployment of RFID capabilities as a key component of their future operating model. and defines the measurable benefits. benefits from this new technology For many companies, this process starts with an Accenture-led executive workshop on Learn the basics Pilot the technology through accelerated learning and the technology, including real-life demonstrations of the technology using prototypes Acquire knowledge and learning application experience. The call to action is clear: related to RFID technology, standards, Develop an initial RFID application companies that apply strategic from Accenture Technology Labs. Often the next step in this journey is the formulation mandates and trends. Understand who thinking to RFID will be able to to demonstrate the technology of an RFID use strategy and business case, with a focus on preparing to engage with key the major players are in hardware, capabilities in a real business develop high-value, game-changing software and services, and what they applications and higher performance customers and trading partners on RFID priorities and investments. Many top-tier suppliers have to offer. Educate a broad share environment and prove the business capabilities that will help differentiate case. Select hardware, software and to Wal-Mart and other major retailers have already deployed live technology to support of the enterprise organization. Identify integration service providers. Involve them in the marketplace. compliance requirements. potential stakeholders and champions. suppliers and customers as applicable in a co-investment arrangement. Identify the opportunities Conduct workshops to identify Plan the go-forward strategy potential RFID applications. Involve Develop the longer-term plan for potential stakeholders from all building out the pilot applications and areas of the business. Work with key launching additional RFID initiatives. suppliers, partners, customers and knowledge experts to understand and Coordinate activities define potential RFID solutions that Maintain high levels of involvement are synergistic and where value and and coordinated participation across benefits can be shared. IT and business organizations within the enterprise and with key customers, suppliers and partners.