Building Your RFID Business Case · Harold Boeck& YgalBendavid(ESG UQAM; Academia RFID), Building Your RFID Business Case @RFID Journal live Tenth Annual Conf. - Preconf. seminar

Harold Boeck & Ygal Bendavid (ESG UQAM; Academia RFID), Building Your RFID Business Case@ RFID Journal live Tenth

Annual Conf. - Preconf. seminar Warehouse & Inventory Management in the RFID Supply Chain, April 03 2012, Orlando, FLA.

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Building Your RFID Business Case

Evaluating RFID's marginal impacts and benefits over existing technologies

Harold Boeck,Ygal Bendavid

(UQAM, Academia RFID)



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Your presenter

Harold Boeck

Ygal Bendavid

� BAA, MSc.A., Ph.D.

� Professors at the UQAM

� Co-Founders of ACADEMIA RFID

� RFID certified

Preconference seminar Agenda“Warehouse & Inventory Mgt in the RFID Supply Chain”

• 11:30 Linking RFID to Inventory Management Best Practices

• 12:15 Targeting the Correct RFID Technology for the Right Project

• 13:45 Key Steps in Building an Inventory-Management RFID Solution: Build Your Own RFID Portal

• 14:30 Designing Your RFID Solution

• 15:30 Building Your RFID Business Case

• 16:15 Preconference Seminar Ends



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Objective of the presentation

• How to develop an RFID business case and justify your investment (Qualitatively /Quantifiably)

– Assess the financial impact (costs & benefits) of your RFID project

– Build an RFID “Business case” based on the selected technologies and solution design

– Assess & Monitor your performance

Start Your Business case!

Unlock the Business Case for RFID

RFID

Don’t sell RFID as a

technology but as a

solution to business

problems or as a

mean to leverage

on new

opportunities!



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Project Front

end

Project definition

& Planning

RFID BPR

(As-Is)

RFID BPR

(To Be)

Project follow up

& Operations

Source: Ygal Bendavid, Academia

RFID, RFID PRO 2010

POC & Pilot

Design

development

Implementation

RFID Business Case in the Project life cycle

•High level Business

case / value

•Business cases & scenarios

sensitivity analysis based on

different designs

•Revision of the Business case: Assess

realistic financial impact based on

experimentation (Lab & pilot) &

Procurement process

•Measuring performance and continuous case

assessment (TCO)

Methods & tools for ROI analysisExplored in section 2



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Quantifying the opportunities/ problemsClassic - Costs of inventory

• Carrying Costs– Facility storage

• rent, depreciation, power, heat, cooling, lighting, security, taxes, insurances, etc.

– Material handling • Equipment

– Labor

– Record Keeping

– Borrowing to purchase inventory

– Product deterioration • Spoilage, breakage,

obsolescence,B

• Ordering costs– Replenishment ($/order)

– Requisition, PO, transportation, shipping, receiving, handling, accounting, auditing, etc.

• Shortage costs– Stockouts costs – loss of sales

& relaitve loss of profits

– Customer dissatisfaction

– ReputationsB

Quantifying the opportunities/ problemslinking the business case to the Project Goals

Source: Adapted from GS1 Canada, 2007 & IBM & EPC Global

Increase Operating efficiency

Increase Capital

Efficiency

Shareholder Value

Reduce Operating Costs

Reduce Working Capital

Increase Volume

�Reduced retailer claims (overages/ shortages)

�Reduced labor costs (e.g. receiving, put away, picking, shipping, assembling, reworkingB)

�Reduced inventory

�Reduction in returns/ unsaleable

� Increased in asset utilization

Increase 2

� Improved on-shelf availability

�Reduced counterfeiting

� Improved customization options2

Increase RevenueIncrease Market

Share

2

� Improved promotional planning and execution

� Improved shrink management



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Cost impacts & ROI Analysis Operations/business process performance assessment

Source: Bendavid, 2007– adapted from Aris Toolset

Source

material

& services

Make

Assemble

material

& services

Enterprise Management processes

Core Business Processes

Supply chain management

Plan

Material &

services

Return

Dispose

Material

& services

Product Life cycle management

Deliver

material

& services

.. .. .. ..

Customer services

Data analysis & Sol. DevelopmentAssess the “As Is” performance

Source: Bendavid Y. (2011) Academia RFID – RFID PRO

Source

material

& services

Make

Assemble

material

& services


Plan

Material &

services

Return

Dispose

Material

& services

Deliver

material

& services

Unload products Employee A

Products Unloaded

Verify BOL vs.

delivered products

Supplier sys.

ERP

OK

Enter data to compare

With the PO

electronic

data

Employee A

BOL

Signed

BOL

Mismatch

De

live

r

Pla

n

So

urc

e

•On time parts delivery percentage

•% of receipt authorized by PO

•% of orders released with full lead time

•Put away accuracy

•Put away cycle time

•Average picking time

•Etc.



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De

live

r

Data analysis & Sol. DevelopmentAssess the “to Be” business performance

Source: Bendavid Y. (2011) Academia RFID – RFID PRO

Source

material

& services

Make

Assemble

material

& services


Plan

Material &

services

Return

Dispose

Material

& services

Deliver

material

& servicesP

lan

So

urc

eUnload products Employee A

Products

Unloaded

Automatically Read RFID&EPC tags

Middleware

ERP/WMS

Tags Automatically

Read

Automatically

Transfer

Info. Into ERP

RFID&EPC

data

RFID&EPC

data

Reader

Tags

•For any business case, ‘‘measures and metrics are needed to test and reveal the viability of strategies without which a clear direction for improvement and realization of goals would be highly difficult’’ Gunasekaranand Ngai (2005), JOM 23(5):423–451

Data analysis & Sol. DevelopmentKPIs in the RFID Maturity Framework

AREA ACTION Assessment Criteria

Process

Organisation

Knowledge

Technology

Performance

Aberdeen Group, Winning RFID Strategies for 2008



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Data analysis & Sol. DevelopmentKPIs and RFID impact assessment

• With respect to previous experience on the impact

of RFID in supply chain contexts, multiple KPIs are

used, such as

– level of inventory (reduction),

– service level (improvement),

– (out-of) stock level, storage,

– space (minimum), handling costs,

– process improvement (automation, cancellation), etc.

Data analysis & Sol. DevelopmentKPIs for RFID impact assessment

� On time parts delivery percentage

� Percentage of receipt authorized by PO

� Percentage of orders released with full lead time

� Put away accuracy

� Put away cycle time

� Average picking time

� Shipping accuracy

� Inventory availability

� Average back order length

� Inventory accuracy

� Inventory turnover

� Obsolete inventory percentage

� Benefits. How will your company benefit from RFID-driven visibility across the supply chain?

� Costs. How will your company pay, both in hard costs and resources, for RFID-driven visibility?

Source: 2008, Forrester Research

Source: Adapted from Bragg S. (2004), Inventory best practices

•What are your Priorities?

•How RFID can help you in addressing these challenges and opportunities



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Project/Infrastructure Cost AnalysisCost of RFID project (1 of 2)

� Project Preparation

� Opportunity Assessment

� Business Case Development

� RFID Strategy Development

� Use Case Generation

� Procurement Management (planning and sourcing)

� Solution Architecture Development

� System Integration Assessment

� Business Process Assessment

� Experimentation/Testing (validation of the business case)

� Installation Costs� Initial Site Survey

� Design selection

� Hardware installation

� Testing and trouble shoot…

� RFID Infrastructure (hardware)

� RFID Tags (Pallet, case, item, medical devices, staff, patients…)

� Readers and Antennas

� Mounting Accessories

� RFID printers and label Applicators

� Ancillary devices (motions sensors, horns, lights, …)

� Other Infrastructure Costs (new servers and computers, infrastructure upgrade, additional points based on required location accuracy)

Source: Adapted from EPC Global

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Project/Infrastructure Cost AnalysisCost of RFID project (2 of 2)

Other expenses

� Physical Shop floor/warehouse Modification/Expense

� Other labor related to RFID adoption:

� requirement for new resources: e.g.

business analysts

� Training for all employees including

workers (shop floor clerks,

security…)

� RFID Software Costs

� RFID Middleware Solution

� Middleware System Integration (with WMS, ERP, Track& trace sol.)

� Interface Customization

� Engineering/Business Process Change including Implementation of New business processes

� New Information flow, Staff & patient flow…

� Ongoing System Maintenance/Admin.

� Network Management System

� Reader Firmware Upgrades

� Damaged Readers/Antennas

� Performance Monitoring

� Etc.

Source: Adapted from EPC Global



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Project Preparation

RFID Tags

RFID Hardware

Other infrastructure costs

Installation costs

Tag Application Costs (labor)

RFID Software Costs

Business Process Change

Physical Plant Modification

Ongoing System Maintenance/Admin.

Misc. Costs

Etc.

4 Assess the

Financial Impact:

RFID cost: Building

a simple tool

Source: EPC Global Canada

Assess & Monitor your performance

Supply chain frameworks to assess the performance



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Data analysis & Sol. DevelopmentSupply chain frameworks to assess the performance

http://supply-chain.org/

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• Some Reference Model– Supply Chain Operation

Reference Model (SCOR)(Supply chain Council, 2007 )

– Global Supply Chain Forum(Lambert et al., 2005 )

– Balanced ScoreCard (Kaplan

et Norton,1992 )

See for instance the SCOR model on http://supply-chain.org/



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“SCOR is a management tool. It is a process reference

model for supply-chain management, spanning from the

supplier’s supplier to the customer’s customer”

Source: Supply Chain Council

Plan

Develop a course of

action that best

meets sourcing,

production and

delivery

requirements

Source

Procure goods

and services to

meet planned

or actual

demand

Make

Transform

product to a

finished state to

meet planned

or actual

demand

Deliver

Provide products

to meet demand,

including order

management,

transportation

and distribution

Return

Return

products,

post-delivery

customer

support


SCOR MetricsPerformance Attribute

Performance Attribute Definition Level 1 Metric

Delivery Performance Fill Rates

Supply Chain Delivery Reliability

The performance of the supply chain in delivering: the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer.

Perfect Order Fulfillment

Supply Chain Responsiveness

The velocity at which a supply chain provides products to the customer.

Order Fulfillment Lead Times

Supply Chain Response Time Supply Chain Flexibility

The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage.

Production Flexibility

Cost of Goods Sold Total Supply Chain Management Costs Value-Added Productivity

Supply Chain Costs The costs associated with operating the supply chain.

Warranty / Returns Processing Costs Cash-to-Cash Cycle Time Inventory Days of Supply

Supply Chain Asset Management Efficiency

The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital.

Asset Turns

See for instance the SCOR model on http://supply-chain.org/



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Supply chain members

Data analysis & Sol. Development in the SCPerformance measures and RFID impact assessment

1st

leve

l K

PIs

Vertical KPIse.g. days of inventory, inventory carrying cost (raw material in storage

capacity utilization,forecast accuracy,

frequency and qualityof delivery, etc.

Vertical KPIs

e.g. days of inventory, inventory

carrying cost; replenishment cycle time, purchase order

cycle, put away cycle time, B

Vertical KPIs

e.g. replenishment cycle time, inventory carrying cost, product availability, OOS, etc.

Vertical KPIs

e.g. XXX.

Horizontal KPIs (Collective performance optimization)Reliability (e.g. quality of deliveries), responsiveness to urgent deliveries, (e.g. order fulfillment lead time); flexibility (e.g. Supply chain response time); asset management efficiency (e.g. cash-to-cash cycle time)

Manufacturer

ActivitiesAssembling

Distributors

ActivitiesStorage & distribution

Retailers

ActivitiesStorage & distribution

XXX

Source: Adapted from Bendavid et al., “Key Performance Indicators for the evaluation of RFID enabled B-to-

B eCommerce applications..” Information Systems and E-Business Management, Vol. 7, No 1, pp. 1-20, 2009.

“manufacturers, distributors, and retailers have markedly different perspectives

— as well as mutual dependence — on the value from the RFID-enabled

visibility. These varying perspectives can make the financial outlook of each

organization’s individual costs, benefits, and risks very blurry”. (Forrester, 2008)

Forrester (2oo8) The ROI Of RFID For Supply Chain Visibility,

Data analysis & Sol. DevelopmentKPIs for RFID impact assessment- leverage on existing

cases

The case of American Apparel

Source: ABI Research RFID Item-Level Tagging in Fashion Apparel and Footwear



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Conclusion

• An RFID business case should be a living, breathing document

• Continuous RFID developments (↓price, ↑performance)

– “ Implementing RFID is just the start3 ”

Source: GS1 Canada

Preconference seminar Agenda“Warehouse & Inventory Mgt in the RFID

Supply Chain”

• 11:30 Linking RFID to Inventory Management Best Practices

• 12:15 Targeting the Correct RFID Technology for the Right Project

• 13:45 Key Steps in Building an Inventory-Management RFID Solution: Build Your Own RFID Portal

• 14:30 Designing Your RFID Solution

• 15:30 Building Your RFID Business Case

• 16:15 Preconference Seminar Ends



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Thank you!

UQAM, School of business

315 Ste-Catherine est Local R-3570

Montréal (Québec) Canada H2X 3X2

Tel: 514-987 3000 (x 2429)

Web site: www.mantech.uqam.ca

Academia RFID9916 Côte de liesse,

Montréal QC Canada

H8T 1A1

Tel: 514 631 8282 – Fax: 631 9696

Web site: http://www.rfidacademia.com

Ygal Bendavid

[email protected]

Harold Boeck

Boeck. [email protected]

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Documents

Building Your RFID Business Case · Harold Boeck& YgalBendavid(ESG UQAM; Academia RFID), Building Your RFID Business Case @RFID Journal live Tenth Annual Conf. - Preconf. seminar