The Business Case for RFID in the Supply Chain Sue Hutchinson Director, Product Management FCC/OET RFID Workshop 7 October 2004.

The Business Case for RFID in the Supply Chain

Sue HutchinsonDirector, Product Management

FCC/OET RFID Workshop7 October 2004

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2004 EPCglobal US

EPCglobal• Joint venture of Uniform Code Council and EAN International

– Built on 30+ years of proven, product identification standards development expertise

• Develop technical specifications and standards• Ensure intellectual property is free and open• Facilitate mass adoption across all industries• Provide compliance and interoperability testing• Drive education and training• Provide continuing support for cutting-edge research

performed by MIT Auto-ID Labs• Over 400 companies worldwide are subscribers

– 300 companies in the US– Represent over $1Trillion commercial revenue

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2004 EPCglobal US

RFID – Why Now?• Groundbreaking MIT research

changes the economics of RFID hardware

• Mature information technologies and practices to manage the data

• Slowing growth in the economy

• Pervasive challenges in supply chain management

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Challenges -Commercial Supply Chain – Observability of goods and assets in motion – Integrity & security– Unmanned operation, 24x365– Data distribution and sharing

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Effective Bar CodeReplacement

Pervasive Reader Deployment

EPC-DrivenData Sharing

$400 BillionAMR Research

$50Mcost/yr

$1Brev/yr

$100Mcash

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Challenges in the Pharmaceutical Supply Chain

• Global pharmaceutical counterfeiting range from 2-7%, rising to 80% in some countries.3

• Out-of-stock or manufacturing problems account for the 8% of order lines that can’t be filled.1

• Returns worth $2B occur annually2 - total monthly Rx volume that is returned by customers is 4% for Distributors and 2% for Manufacturers.1

• Overstock, 49% for Distributors and 5% for Manufacturers, and outdated product, 16% for Distributors and 43% for Manufacturers, were listed as the top reasons for returned goods.1

• Tracking regulatory compliance information on products handled is a practice currently followed by 85% of Distributors and 74% of Manufacturers. 1

• Approximately 1300 recalls annually. 1

Sources:1 - 2002 HDMA Industry Profile and Healthcare Fact book2 - HDMA presentation at Auto-ID Healthcare Adoption Forum3 - RECONNAISSANCE International

Source: Accenture

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Challenges in Food Safety

• 76 Million cases of food borne disease

• 325,000 hospitalizations

• 5000 deaths*

• 91 Million tons of food disposed

• Transported to landfills

• 26% of food supply*

* United States figures

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Example: MRE SafetyResearch in using RFID and micro-sensors to promote safety inMREs for field deployment(MIT Auto-ID Labs)

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The Changing Landscape in RFID

Parameter Past Future

Frequency125 KHz

13.56 MHz900 MHz

Read Range < 1 meter > 10 meters

Read Rate Few / sec Hundreds / sec

Field Rewritability None Mandatory

Readers/Location 1 Tens / Hundreds

Tags/Location TensHundreds / Thousands

Reader Cost ~$2000 ~$200

Tag Cost ~$1.00 <$0.10

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Projected RFID Volume

Source: Deloitte & Touche, stores.org, vendor analysis

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2004 2005 2006 2007 2008 2009

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Other Uses

Supply Chain

Chip Revenue

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Key to RFID Adoption

• One worldwide standard– “Wal-Mart and other end users … are driving for one open

globally accepted communication protocol, and that is Class 1, G2.” -- Tom Williams, Wal-Mart

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2004 EPCglobal US

US Competitiveness in RFID • Industry Goal: Promote EPCglobal UHF Gen2 air interface protocol as

the worldwide standard– DoD, Wal-mart, Target, Best Buy mandates– FDA guidance on RFID– Backed by 120+ key FMCG companies

• Ex: P&G, Gillette, Kimberley-Clark, International Paper – Backed by 80+ Health Care and Pharma companies

• Abbott Laboratories, Johnson & Johnson, etc.

– Backed by key technology companies• TI, IBM, Sun, CISCO, Symbol Technology, Manhattan, etc. • Many smaller companies (Impinj, Reva Systems, Alien Technology, etc.)

• Government support: Promote RFID usage in North America– Favorable regulatory climate– Studies & analysis

• FTC RFID panel• FCC RFID panel