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  1. 2. Wal*Mart Case Study: RFID & Supply Chain Management <ul><li>Angrish, Sangita </li></ul><ul><li>Chivukula, Venkata S. </li></ul><ul><li>DeWitt, Brendon </li></ul><ul><li>Patel, Raxesh </li></ul><ul><li>Shamsi, Shazeb </li></ul><ul><li>Yellapragada, Ramachandra </li></ul>TEAM MEMBERS
  2. 3. Agenda <ul><li>Introduction to RFID </li></ul><ul><li>Introduction to Supply Chain Management (SCM) </li></ul><ul><li>Introduction to Wal*Mart and its Business Processes </li></ul><ul><li>RFID in Wal*Mart </li></ul><ul><li>Current RFID Usage </li></ul><ul><li>Limitations and Challenges of RFID </li></ul><ul><li>Future of RFID </li></ul>
  3. 4. Introduction <ul><li>What is RFID ? </li></ul><ul><li>Why RFID over Bar-Code ? </li></ul><ul><li>RFID Working and Infrastructure </li></ul>
  4. 5. What is RFID? <ul><li>Electronic tagging technology that allows an object, place, or person to be automatically identified at a distance without a direct line-of-sight, using an electromagnetic challenge/response exchange. </li></ul>
  5. 6. RFID <ul><li>40 years old technology </li></ul><ul><li>Why being Used NOW? </li></ul><ul><ul><ul><li>right time to use the technology </li></ul></ul></ul><ul><ul><ul><li>Benefits OUTWEIGH the Deployment Costs </li></ul></ul></ul>
  6. 7. Why RFID over Barcode ? <ul><li>Ability to read without line-of-sight </li></ul><ul><li>Serialized numbering scheme enables more powerful </li></ul><ul><ul><ul><li>Understanding </li></ul></ul></ul><ul><ul><ul><li>Diagnosing </li></ul></ul></ul><ul><ul><ul><li>Controlling of Supply Chain </li></ul></ul></ul><ul><li>Serial numbers provides individual entity tracking and much more detailed behavior of SCM than UPC or EAN used in Bar codes </li></ul><ul><li>No duplicate reading of the same tag – a possibility in Bar codes </li></ul><ul><li>More powerful sensor-network and monitoring-system than bar-code systems. </li></ul>
  7. 8. RFID Components RFID Reader TAG Antenna Silicon Chip Substrate
  8. 9. Working of RFID <ul><li>Reader generate signals that are dual purpose: provide power for a tag, and create an interrogation signal. </li></ul><ul><li>Tag captures the energy from Reader and executes commands sent by the Reader </li></ul><ul><li>Tag sends back a signal containing a unique digital ID ( 96-bit serial number) that can be looked up in a database available to the reader to determine its identity, perhaps expressed as a name, manufacturer, SKU (stock keeping unit) number, and cost. </li></ul><ul><li>Tags are generally passive because they require no batteries or maintenance. </li></ul>
  9. 10. RFID Infrastructure <ul><li>Existing software systems </li></ul><ul><ul><li>UNABLE to handle serial numbers </li></ul></ul><ul><li>Solution – RFID Middleware </li></ul><ul><li>RFID Middleware : Layer between RFID readers and the application software </li></ul><ul><li>Consists of : </li></ul><ul><ul><ul><li>Lower level device and data management </li></ul></ul></ul><ul><ul><ul><li>Higher Interpretation level </li></ul></ul></ul>Device Management Data Management Context generation and Interpretation
  10. 11. RFID Infrastructure (contd.) <ul><li>Lower level devices such as motion sensors, programmable logic arrays and human interfaces fetch data and provides to Data management layer </li></ul><ul><li>Data management layer provides some functionality of filtering data due to intermittent appearances and disappearances </li></ul><ul><li>After the data management layer yields data, the Interpretation layer extracts inference from such data and forwards it to the applications that deploy RFID </li></ul>
  11. 12. Up Next…… <ul><li>Introduction to RFID </li></ul><ul><li>Introduction to Supply Chain Management (SCM) </li></ul><ul><li>Introduction to Wal*Mart and its Business Processes </li></ul><ul><li>RFID in Wal*Mart </li></ul><ul><li>Current RFID Usage </li></ul><ul><li>Limitations and Challenges of RFID </li></ul><ul><li>Future of RFID </li></ul>
  12. 13. Introduction to Supply Chain Management <ul><li>Supply Chain Management </li></ul><ul><ul><li>Coordination of a network of facilities and distribution options </li></ul></ul><ul><ul><li>Includes procurement, processing and distribution </li></ul></ul><ul><li>Five core processes </li></ul><ul><ul><li>Planning </li></ul></ul><ul><ul><li>Sourcing </li></ul></ul><ul><ul><li>Making </li></ul></ul><ul><ul><li>Delivering </li></ul></ul><ul><ul><li>Returning </li></ul></ul><ul><li>Integration of these processes to maximize benefits </li></ul>
  13. 14. Introduction to Supply Chain Management (contd.) <ul><li>Three levels of supply chain management </li></ul><ul><ul><li>Strategic – linked to corporate strategy </li></ul></ul><ul><ul><li>Tactical </li></ul></ul><ul><ul><li>Operational – involve day to day activities </li></ul></ul>
  14. 15. Introduction to Supply Chain Management (contd.) <ul><li>Overall Goal </li></ul><ul><ul><li>Optimize supply chains </li></ul></ul><ul><ul><li>Provide more accurate and time sensitive information </li></ul></ul><ul><ul><li>Maximize sales and profits </li></ul></ul>
  15. 16. Introduction to Supply Chain Management (contd.) <ul><li>RFID and Supply Chain </li></ul><ul><ul><li>Provide real time information </li></ul></ul><ul><ul><li>Better readings of customers and markets </li></ul></ul><ul><ul><li>Ability to provide right products at the right times </li></ul></ul><ul><li>Deloitte & Touché benchmark initiative </li></ul><ul><ul><li>Only 7% of companies managing supply chain effectively </li></ul></ul><ul><ul><li>These 7% are 73% more profitable than other companies </li></ul></ul>
  16. 17. Up Next…… <ul><li>Introduction to RFID </li></ul><ul><li>Introduction to Supply Chain Management (SCM) </li></ul><ul><li>Introduction to Wal*Mart and its Business Processes </li></ul><ul><li>RFID in Wal*Mart </li></ul><ul><li>Current RFID Usage </li></ul><ul><li>Limitations and Challenges of RFID </li></ul><ul><li>Future of RFID </li></ul>
  17. 18. Wal-Mart Introduction and Business Processes
  18. 19. Operations <ul><li>Wal Mart Stores </li></ul><ul><ul><li>Largest segment accounting to about 67.3% of 2005 fiscal sales </li></ul></ul><ul><ul><li>Super centers </li></ul></ul><ul><ul><li>Discount stores </li></ul></ul><ul><ul><li>Neighborhood Markets </li></ul></ul><ul><li>SAM’s Club </li></ul><ul><ul><li>Consists of membership warehouse clubs accounting to 13% of 2005 fiscal sales </li></ul></ul><ul><li>Wal-Mart International </li></ul><ul><ul><li>Accounted to 19.7% of 2005 sales </li></ul></ul>
  19. 20. Business Model of Wal*Mart <ul><li>Market Strategy of Wal*Mart </li></ul><ul><ul><li>Everyday Low prices (EDLP) </li></ul></ul><ul><ul><li>Employs both “Clicks & Bricks” and “Bricks & Mortar” strategy </li></ul></ul><ul><li>Organizational Development </li></ul><ul><ul><li>Specialty Division </li></ul></ul><ul><ul><li>Retail Division </li></ul></ul><ul><li>Competitive Advantage </li></ul><ul><ul><li>Price match guarantee </li></ul></ul><ul><li>Market opportunity </li></ul><ul><ul><li>B2B Single firm network </li></ul></ul><ul><ul><li>B2C E-Tailer Business Model </li></ul></ul>
  20. 21. Supply Chain Management at Wal*Mart <ul><li>Procurement and Distribution </li></ul><ul><li>Logistics Management </li></ul><ul><li>Inventory Management </li></ul>
  21. 22. Procurement and Distribution <ul><li>Procurement </li></ul><ul><ul><li>Procurement involves getting goods from different manufacturers </li></ul></ul><ul><ul><li>I nvolves reducing the purchasing costs as far as possible </li></ul></ul><ul><ul><li>Goods procured directly from the manufacturers, bypassing all intermediaries </li></ul></ul>
  22. 23. Procurement and Distribution <ul><li>Distribution </li></ul><ul><ul><li>Distribution centre is divided in different groups depending on the quantity of goods received </li></ul></ul><ul><ul><li>Goods to be used internally in US arrive in pallets & imported goods arrive in re-usable boxes . </li></ul></ul><ul><ul><li>Employees have access to the inventory levels of all the products </li></ul></ul><ul><ul><li>Employee makes two scans- </li></ul></ul><ul><ul><ul><li>For identifying the pallet </li></ul></ul></ul><ul><ul><ul><li>For identifying the location from where the stock had to be picked up </li></ul></ul></ul><ul><ul><li>Bar codes & RFID used to label different products, shelves & bins </li></ul></ul><ul><ul><li>The hand held computers guide employee to the location of the specific product. </li></ul></ul><ul><ul><ul><li>The quantity of the product required from the center is entered in the hand held computer, which updates the information on the main central server. </li></ul></ul></ul><ul><ul><ul><li>computers enable packaging department to get accurate information such as storage, packaging & shipping, </li></ul></ul></ul><ul><ul><ul><ul><li>Saves time in unnecessary paperwork. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Enables supervisors to monitor their employees closely </li></ul></ul></ul></ul>
  23. 24. Logistics Management <ul><li>Involves managing transportation & delivery of products </li></ul><ul><li>More than 7000 company owned trucks services Distribution centers </li></ul><ul><li>This enables shipping of goods from distribution centers to the stores within 2 days and replenish the store shelves twice a week </li></ul><ul><li>“ Private Fleet Driver handbook” – tracking drivers activities </li></ul><ul><li>“ Cross Docking” – from Manufacturer to Customer </li></ul><ul><li>Cross Docking enabled “demand chain” </li></ul><ul><li>“ Demand chain” - C ustomers ‘pull’ the products instead of retailers having to “push” them </li></ul>
  24. 25. Inventory Management <ul><li>Wal*Mart set up its own satellite system in 1983 </li></ul><ul><li>Reducing unproductive inventory as far as possible </li></ul><ul><li>Use of Bar-code & RFID technologies for easy packing and counting of the inventories, efficient picking and receiving & proper inventory control of the products </li></ul><ul><li>“ Massively Parallel Processor “ - enables easy tracking movement of goods & stock levels across all distribution centers and stores </li></ul><ul><li>Use of “Magic Wand” to keep track of inventory in stores </li></ul><ul><li>Use of sophisticated algorithm and technology infrastructure to forecast the quantities of each item to be delivered, based on inventories in the store and customer needs </li></ul><ul><li>Centralized inventory database </li></ul>
  25. 26. Up Next…… <ul><li>Introduction to RFID </li></ul><ul><li>Introduction to Supply Chain Management (SCM) </li></ul><ul><li>Introduction to Wal*Mart and its Business Processes </li></ul><ul><li>RFID in Wal*Mart </li></ul><ul><li>Current RFID Usage </li></ul><ul><li>Limitations and Challenges of RFID </li></ul><ul><li>Future of RFID </li></ul>
  26. 27. RFID in Wal*Mart <ul><li>Initiated the plan to implement RFID in its supply chain in June 2003 </li></ul><ul><li>Subsequently, reinforced the RFID standards and specifications in November 2003 </li></ul>
  27. 28. RFID in Wal*Mart <ul><li>Specification of RFID Components </li></ul><ul><li>TAGS </li></ul><ul><li>EPC </li></ul><ul><li>Why RFID? </li></ul><ul><li>EFFICIENCY </li></ul><ul><li>WAL*MART SUPPLIERS </li></ul>
  28. 29. Specification of RFID Components <ul><li>EPC </li></ul><ul><li>Type of Chip </li></ul><ul><li>TAG </li></ul><ul><li>Distribution Centers to accept RFID tagged products </li></ul>
  29. 30. Specification of RFID Components <ul><li>EPC </li></ul><ul><ul><li>96 bit unique number to identify an item in the supply chain. </li></ul></ul><ul><ul><li>Global Trade Identification Number. </li></ul></ul><ul><li>EPC data format on the chip is Class 1 Version 2 communication protocol. </li></ul><ul><li>Class 0: Factory programmable protocol </li></ul><ul><li>Class1: Provides the capability to write serial numbers on the chip </li></ul>
  30. 31. Specification of RFID Components <ul><li>TAGS </li></ul><ul><ul><li>Operates in the UHF spectrum </li></ul></ul><ul><ul><ul><ul><li>868 MHz to 956 MHz </li></ul></ul></ul></ul><ul><ul><li>Carries the 96-bit serial number </li></ul></ul><ul><ul><li>Is field programmable </li></ul></ul><ul><ul><ul><li>Allows suppliers to write serial numbers to the tags while being applied to the products </li></ul></ul></ul>
  31. 32. WHY RFID? <ul><li>OBJECTIVE: To increase the efficiency of its supply chain. </li></ul><ul><li>It will </li></ul><ul><ul><li>Enhance Transparency of supply chain </li></ul></ul><ul><ul><li>Help in minimizing cost and labor </li></ul></ul><ul><ul><li>Strengthen inventory control </li></ul></ul>
  32. 33. Efficiency <ul><li>Wal*Mart aims to reduce the practice of manually placing the order </li></ul><ul><li>Has achieved 10% reduction in the case </li></ul><ul><li>Implementation of RFID tags in Wal*Mart’s inventory has helped boost sales by keeping shelves better stocked </li></ul><ul><li>Usage of RFID has reduced out-of-stock merchandise by 16% at the stores that have implemented RFID tags for more than a year. </li></ul>
  33. 34. RFID COST <ul><li>Cost Benefit Analysis </li></ul><ul><li>Initial Research indicated cost of RFID tag was above $1 . </li></ul><ul><li>At present, TAG costs about 30 cents </li></ul><ul><li>Cost will drop to less than 5 cents, if deployed on a large scale </li></ul><ul><li>Analysts suggest that the tag should be approx. 1 cent for small ticket items </li></ul>
  34. 35. Wal*Mart Suppliers <ul><li>130 major suppliers ship merchandise to Wal*Mart distribution centers with about 5.4 million tags </li></ul><ul><li>By 2006, Wal*Mart aims to mandate RFID implementation for all its suppliers </li></ul>
  35. 36. Wal*Mart Suppliers <ul><li>Major Suppliers: </li></ul><ul><ul><li>Gillette </li></ul></ul><ul><ul><li>Hewlett-Packard </li></ul></ul><ul><ul><li>Johnson & Johnson </li></ul></ul><ul><ul><li>Kimberly Clark </li></ul></ul><ul><ul><li>Kraft Foods </li></ul></ul><ul><ul><li>Nestle </li></ul></ul><ul><ul><li>Proctor and Gamble </li></ul></ul>
  36. 37. Wal*Mart Suppliers <ul><li>Kimberly-Clark </li></ul><ul><ul><li>Manufacturer of paper goods products </li></ul></ul><ul><ul><ul><li>Eg: Kleenex, Huggies </li></ul></ul></ul><ul><ul><li>Tagged Scott paper Towels shipment with RFID tags </li></ul></ul><ul><ul><li>First supplier to use RFID – April 2004 </li></ul></ul>
  37. 38. Up Next…… <ul><li>Introduction to RFID </li></ul><ul><li>Introduction to Supply Chain Management (SCM) </li></ul><ul><li>Introduction to Wal*Mart and its Business Processes </li></ul><ul><li>RFID in Wal*Mart </li></ul><ul><li>Current RFID Usage </li></ul><ul><li>Limitations and Challenges of RFID </li></ul><ul><li>Future of RFID </li></ul>
  38. 39. Successful Implementation of RFID <ul><li>Harvard Research suggests a seven step model for successful implementation of RFID. </li></ul>
  39. 40. Seven Step Model <ul><li>Understand our visibility requirements </li></ul><ul><li>Query other end users about recommendations for trials </li></ul><ul><li>Move into the action phase in a real-world setting in a pilot/trial mode </li></ul><ul><li>Evaluate technical performance </li></ul><ul><li>Consider the economic benefits </li></ul><ul><li>Understand the impact </li></ul><ul><li>Decide whether or not to move forward with a larger scale implementation </li></ul>
  40. 41. Major Companies implementing RFID technology <ul><li>Volkswagen </li></ul><ul><li>Gillette </li></ul><ul><li>Tesco supermarket tries out smart tagging </li></ul><ul><li>Sun Microsystems sets up RFID test centre in Scotland </li></ul><ul><li>I.B.M. Expands Efforts to Promote Radio Tags to Track Goods </li></ul><ul><li>Texas Instruments </li></ul>
  41. 42. Up Next…… <ul><li>Introduction to RFID </li></ul><ul><li>Introduction to Supply Chain Management (SCM) </li></ul><ul><li>Introduction to Wal*Mart and its Business Processes </li></ul><ul><li>RFID in Wal*Mart </li></ul><ul><li>Current RFID Usage </li></ul><ul><li>Limitations and Challenges of RFID </li></ul><ul><li>Future of RFID </li></ul>
  42. 43. Limitations of RFID <ul><li>Why the implementation of a 40 year old technology is taking so long? </li></ul><ul><li>As pointed out earlier, benefits are gradually outweighing the deployment costs </li></ul><ul><li>Limitations and challenges: Barriers to Quick Deployment </li></ul>
  43. 44. Limitations and Challenges of RFID (contd.) <ul><li>Global standards </li></ul><ul><ul><li>Variety of RFID standards and technologies </li></ul></ul><ul><li>Technology problems </li></ul><ul><ul><li>Read-range distances not sufficient to allow for consumer surveillance </li></ul></ul><ul><ul><li>Defective and poorly performing RFID tags </li></ul></ul><ul><ul><li>Damaged RFID tags </li></ul></ul><ul><li>Data management </li></ul><ul><ul><li>Lack of development of right information management tools </li></ul></ul><ul><li>Cost </li></ul><ul><ul><li>Tags, Tag Readers, Databases </li></ul></ul>
  44. 45. Limitations and Challenges of RFID (contd.) <ul><li>Industry Standards </li></ul><ul><ul><li>Privacy advocates are insisting the companies to state their intended use of the technology due to lack of industry standards </li></ul></ul><ul><li>Privacy and civil liberties </li></ul><ul><ul><li>RFID tags can be embedded into/onto objects and documents without the knowledge of the individual </li></ul></ul><ul><li>Complex programming </li></ul><ul><li>Potential job losses </li></ul>
  45. 46. RFID Practices that Should be Prohibited <ul><li>Merchants must not force their customers into accepting RFID tags in the products they buy. </li></ul><ul><li>RFID must not be used to track individuals absent informed and written consent of the data subject – directly or indirectly. </li></ul>
  46. 47. Up Next…… <ul><li>Introduction to RFID </li></ul><ul><li>Introduction to Supply Chain Management (SCM) </li></ul><ul><li>Introduction to Wal*Mart and its Business Processes </li></ul><ul><li>RFID in Wal*Mart </li></ul><ul><li>Current RFID Usage </li></ul><ul><li>Limitations and Challenges of RFID </li></ul><ul><li>Future of RFID </li></ul>
  47. 48. Future of RFID
  48. 49. Future of RFID <ul><li>For Retailers ?? </li></ul><ul><ul><li>The technology will bring a revolution. </li></ul></ul><ul><ul><li>It will be widely used in retail and consumer goods, automotive, healthcare, military, postal department and other scientific uses. </li></ul></ul><ul><li>For Customers?? </li></ul><ul><ul><li>If the consumers think the technology is too complex, confusing or threat to their privacy… </li></ul></ul><ul><li>Will the technology survive? </li></ul>
  49. 50. Key Factors for RFID <ul><li>Setting up more standards in the industry </li></ul><ul><li>Bringing down the cost of RFID </li></ul><ul><li>Level of understanding and experience </li></ul>
  50. 51. Demonstration Of Wal*Mart SCM Manufacturer Wal*mart Warehouse Wal*Mart Store
  51. 52. Movie Time http://www.future-store.org/servlet/PB/- s/1rop28q1ikm3s91d05t0h15w06yt14q0kbq/menu/1004023_l2/index.html
  52. 53. THANK YOU Questions & Suggestions?