Auto-ID (RFID) Solution Proposal Business and Technical Objectives for Low-Cost Smart Items Dr. Richard Swan SAP Corporate Research Center Palo Alto [email protected].

Auto-ID (RFID) Solution Proposal

Business and TechnicalObjectives for Low-Cost Smart

Items

Dr. Richard SwanSAP

Corporate Research CenterPalo Alto

[email protected]

Smart Items - Real World Business Visibility

•Will the right product be there when my customer wants to buy?

Smart ItemsConnecting the corporate world to digitally

enabled objects that represent their goods, services and assets

Enterprise Software Challenges• Scalable infrastructures• Effective support of existing

applications• New applications to support newly

available information

Smart Items Infrastructure - Auto-IDTracking and responding to a high volume

of products throughout the supply chain and beyond

Digitally enabled•Goods•Services•Assets •Where is it?

•What is our current inventory?

Some Core Consumer Product Goals for Auto-ID

Timely, accurate, detailed information improves the customer experience, increases sales - right product in the right location reduces costs -reduce waste and fraud Reduce overhead and allowances in supply chain aids regulatory compliance

For example:

Reduce Out-Of-Stock [2.5% of sales]

Reduce Theft (internal “shrinkage” and shoplifting) [1 - 4+ % sales]

Reduce Diversion, Gray/Counterfeit Market - [Up to 45% product]

Improve Regulatory Compliance -

RFID applies to several product and business process areas

77%

76%

57%

40%

33%

27%

19%

17%

17%

14%

6%

0% 20% 40% 60% 80% 100%

WM

APO

MM

SD

SCEM

PP

ALM/PLM

Mobile

BW

TRM

OTHER

64%

59%

58%

56%

39%

33%

33%

23%

18%

14%

0% 20% 40% 60% 80%

Ship/Receive

Inventory Mgt.

Data Quality

Visibility

Reduce OOS

Collaboration

ProductionControl

Reduce Theft

Warranty/Repair

Improve NPI

“What SAP applications and/or components do you think RFID solutions can add the most value to your business? (Multiple Responses)

“What are the key business problems you are currently, or would like to, help solve utilizing RFID solutions?” (Multiple Reponses)

http://www.sap.com/mk/get/rfid_survey

SAP survey of executive and senior-level management from over 20 industries. N=320 respondents as of 3/03.

Customers want to use RFID across multiple locations and most have no visibility across value chain

54%

48%

46%

38%

19%

14%

0% 10% 20% 30% 40% 50% 60%

Warehouses

DCs

Plants

Trucks

Retail

Field Svcs

“Where does your company currently, or plan to use, RFID technology in your organization” (Multiple Responses)

44%

38%

8%

0% 10% 20% 30% 40% 50%

No visibility

Internal Only

CompleteVisibility

“Do you currently have a complete view of your business processes and inventory flows across your value chain?”

Public Standards

Auto-ID Center

Over 550 billion different items pass through the members’ supply chains every year.

Global benefits of an integrated Smart Item network estimated to be over U.S.$240 billion annually.

Founded at MIT in October, 1999 Currently has over 100 members and new

Centers in England, Switzerland, Australia, China and Japan

SAP is founding sponsor

http://www.autoidcenter.org/

Auto-ID Center

Remarkably successful Industry Consortium Dramatically reduced cost of deploying RFID Created royalty free standards (transition to UCC - EAN)

EAN-UCC IP firm declares no patent barrier found for new Class 1 UHF Tags

Enabled new and existing suppliers Tag costs: $1.00 => $0.50 => $0.15 => $0.05 ? => ?

Gillette - Alien announce 500,000,000 unit order RFID Reader costs - new vendors

$5,000 => $1,000 => $300 => $100 => ?? Software

Interchange standards and reference implementations RFID Reader protocol for both EPC and existing readers likely to be

adopted by most vendors (structure follows proposal from SAP) Identity, Discovery, Configuration Reading, Writing Administration and Management

Core of Auto-ID – EPC – Unique Identity Required

Unambiguously globally identifies:•Manufacturer (EPC Manager)•Product Class (SKU)•Individual Item (serial#)

However common interchange information is not present Must utilize network for:

•Shipment hierarchy (Container, pallet, case, item)•Product description (class, type, shelf life, etc.)•Individual information (manufacturing date, batch, other properties, history )•Transition between GTIN and EPC [extensions under consideration]

2 21 17 24 64

2 15 13 34 64

2 26 13 23 64

8 28 24 36 96

8 32 56 192 256

8 64 56 128 256

8 128 56 64 256

Privacy Concerns

All consumer manufacturers and retailers are concerned about consumer backlash due to privacy

Many individuals ask about privacy Auto-ID Center standard provides for

permanent “killing” of tag at check-out (consumer option)

Not just into reversible hibernation

Standard has 16-bit “secret” key to kill tag

Air protocol requires full sequence of steps to invoke “kill”, that can be monitored in-store to detect malicious use of “kill”

However, significant value to keeping tag active after consumer sale in order to support returns, warrantees, in-home technology, etc.

SAP RFID Pilot Activity

US Pilot - Procter & Gamble

P&G Distribution Retailer DC Retail Store

Tote Building Cross-Dock BackroomFront roomSmart Shelf

MITSavant

SAP SII prototypeInterprets events toprovide business information

MIT-Auto-ID SavantCaptures events

AdaptiveResponse

Customer Demand

SII provides visibility(application agnostic)Traditional applicationsdrive business processes

SAP Landscape

APO SCEM R/3 BW Portal

Opening of Metro Future Store (SAP Pilot)

Rheiberg Store and Essen Warehouse

Includes RFID tagging of most goods at case and pallet level

CDs and other goods at item level

Three smart shelves for item level goods

Provide visibility at warehouse and store level

Future Store – Smart Shelves

Features

Remote control of shelf inventory

Control of reminaing shelf life

Analysis on Goods movements from and to shelf

Goods movements are tracked by RFID data capture

Gillette

Kraft Foods

Procter &Gamble

Backroom at Metro Future Store

RFID/Auto-ID Infrastructure

Core Issues for Auto-ID and Enterprise Software

Key mismatch #1 Tag readers provide notification events when tags are sighted

Locally thousands/sec, nationally millions or billions of events Enterprise Software do not want low level notification events! Business decision makers and Enterprise software want clean, stable

information about the location and status of every tagged object and the relationship of those objects to other objects and to business documents and processes.

Key mismatch #2 Tagged objects originated from many different manufacturers who expect their

own enterprises to benefit from the tag-reader beeps from throughout the supply chain.

Most Enterprise Software applications are geared to support a single enterprise and not oriented to share information with other enterprises

Key mismatch #3 Most Enterprise applications are not designed to deal with huge numbers of

serialized items. Most Enterprise Systems will fail if given 106 more data. Most Enterprise applications do not need serial number specific data but certain

core uses of RFID tags, such as item history tracking, proof of ownership and product recall depend on serial number level information.

Fully Exploit Opportunity of Auto-ID

Cross Enterprise Information The big news with Auto-ID is the opportunity to share detailed information

throughout a supply chain in a retailer driven way==> Design system from the core to share information both within an enterprise

and between enterprises to gain maximum return on auto-id investment

Recognize Variety of Landscapes Manufacturers sometimes have different Enterprise landscapes for each

brand or category Retailers also have a wide variety of landscapes and business processes

which vary by category and supplier relationship==> Must provide information in the easiest way to absorb and be Application

Agnostic

Get full information value of Auto-ID Individual items can be tracked at serial number level==> Provide distributed object system to represent each item

Support Business Continuation at each level Retail sites often lack good telecommunications and IT support==> Enable local operation through network outages and unsupervised recovery from

power and other failures

New Capabilities from Auto-ID - Item Level

What information is stored at the item level? Items are no longer generic.

Create, store and update information at the item level and make it accessible across the supply chain

Handle promotions at item level EPC# discount:$0.50 promotion code:567

Support customer loyalty, warrantee and life cycle of item EPC# sold-retail location:987 5/9/02 loyalty card:23458967 price: $350:50

Support duty, taxation and other regulatory issues: EPC# duty_paid date, ref#,R CA_tax ref#, inspected: XXX

Manage returns with convenience and minimum fraud EPC# sold-retail location:967 5/8/02 returned: 6/3/03 refund $27.50

Reduce “shrinkage” through detail tracking and legal prove of ownership EPC# missing - last seen: 2/7/03 truck-driver: J.Smith

Targeted recalls at item level EPC# anti-skid breaks, batch:345 recall 6/3/03 - unreliable electronics

Where and Auto-ID Infrastructure Fits

PhysicalWorld Manufacturer Distribution Retail

Sensors(RFID Readers,Smart shelves)

Events Events EventsData Events

Full Auto-ID InfrastructureSII

BusinessInformation

HeterogeneousLandscapes

ProductMovements

Real-TimeAuto-ID Node

Core Auto-ID Node

Wired and Wireless Network

Real time Interpretation

Association Model•Interpret Eventsin Context (rules)

Communication

Distilled information•Business Events•Significant Inventorymovements•State updates

Higher levels and Enterprise Systems

Hardware Abstraction and Device Management •Data Events

(filtered)

Each reader 200 events/ sec

PML/XML:•Master Data•Item specific data

•Distributed synchronization

•Plug-Play•Central configuration and monitoring•Filtering at reader level•Full support for writable tags

Cached on demand:•Master data•Item level information•Other related info

Basic Item level information flow

Retailer

Information from Manufacturer•Product Specs (master data)•shipment data (by serial #)•Item specific data (serial#)

•Manufacturing date•Quality data

•Recalls•Price advisories•Promotion coupons•Shelf labels•Pointers to reference material, firmware upgrades, etc.

Information from Retailer•Item queries (serial#)•Inventory movement (serial#)•Goods receipt (serial #)•Sales data (serial#)•Warrantee queries (serial#)•Recall confirmations (serial#)•Tax payments (serial#)•Returns (serial#)•Customer information

Manufacturer

SII

Cross Industry Information Flow

Manufacturer Retailer

AnotherManufacturer

AnotherRetailer

Possible Service

Does it Scale?

Brute Force Approach

Assumptions: 10,000 Stores 10 readers each 100 items/sec 100 Bytes per lookup

All taken to a Central Repository

==> 10,000,000 lookups per second==> 8 Gbits per second==> ~40 Terabytes /day (11 hours)

Wrong Approach!

Approach for High Volume Individual Item Tracking

Cache

Node Node NodeNode Node

Cache

Core Version

Node Node

Cache

Manufacturer Distribution Retail

•Caching at each level dramatically reduces data bandwidth to repository• Enables item level tracking and recording

Data Volume ( 1 billions items/year)

Assumptions: Items per year: 1,000,000,000

==> ~ 4,000,000 items per day (255 working days)

==> ~ 360,000 /hr (11 hrs/day)

==> ~ 100 items/sec sold Levels of distribution: 3 (# of sites touched by each item) 100 Bytes per update

Aggregate data bandwidth (at top level) with good caching: 100 items * 3 levels * 3 synchronization * 100 Bytes

==> 90 Kbytes/sec 0.72 Mbits/sec ( Less than 1 T1)

Store 1 KByte per Item ==> ~ 4 G Bytes/day of shipments (< $20 day )

Concluding Thoughts

World Changes One Step at a Time

Usage mode and adoption of Auto-ID will vary widely: Specific value to product categories and individual corporations Market power of beneficiaries Meeting regulatory mandates Price curves of technology

Basic Building Block for long term Architecture Core local, real time Auto-ID node Also supports traditional RFID, writable tags

Pathway for flexible adoption Single Enterprise Extended Enterprise - Cross Enterprise

Added dimension of granularity and business need Pallet Case Generic Item Individual item with full history

Billing and Reconciliation

As Auto-ID becomes accepted as reliable evidence of transfer of goods:

At case and Pallet level, large retailers will pay on goods receipt, rather than through billing

At item level, consignment sale, or pay-on-sale, will become much easier.

Retailers may merely lease out shelf space and take no other financial risk

Summary

Auto-ID can have a BIG impact on supply chains, and operating practices in warehouses and particularly at retail.

Auto-ID using inexpensive RFID technology is backed by very powerful market forces (Wal-Mart alone is $244B net sales)

The Auto-ID driven software and hardware standards will eventually drive out older, more expensive RFID products and standards(20+ billion units forecast in 5 years)

The challenge is to make effective use of the new data The SII (Smart Items Infrastructure) prototype provides the

basis for large scale Auto-ID deployment and is the core of SAP product developments.

An expansive long term vision is need to get the full business value out of Auto-ID

Thank You