Transcript Industrial Transformation and IT: RFID in the Retail

Industrial Transformation and IT:
RFID in the Retail Industry
Brad Herman
Vincent Mercadier
Madeleine Moss
Harsha Tummala
March 19, 2007
Brad Herman, Vincent Mercadier, Madeleine Moss, Harsha Tummala
UC Berkeley, March 19, 2007
Technology Overview
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RFID System Components
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Primary Advantages over Existing Technology
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Identify Products on an Item-by-Item Basis
Dynamically Update Information on Tag
Brad Herman, Vincent Mercadier, Madeleine Moss, Harsha Tummala
UC Berkeley, March 19, 2007
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Barriers to Adoption
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Cost Considerations
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“I need the cost to really drop because we're a fairly lowmargin business. Just do the math: 20 cents times hundreds
of millions of units.”
-- Gary Cooper, CTO of Tyson Foods, Inc.
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“This is the ultimate chicken-and-egg scenario. More people
won't do RFID until the tag costs come down, but the tag
costs won't come down until more people do it.”
-- Dennis Gaughan, Analyst at AMR Research Inc.
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Possible Solutions
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Standardization
Consideration of consumer-facing applications
Brad Herman, Vincent Mercadier, Madeleine Moss, Harsha Tummala
UC Berkeley, March 19, 2007
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Barriers to Adoption
Cost
Level of Reliability
Public Concern
Standards
RFID (passive)
$0.15-$2
Manufacturing failure
rates can be high,
interference issues
Privacy,
Authenticity
EPC, ISO are
emerging standards
RFID (active)
$10-$50
High
Security
EPC, ISO are
emerging standards
Barcodes
Negligible,
printed on
packaging
design
High
None
Mature technology
with almost
universally accepted
standards
Table 1: Comparing RFID and barcodes on dimensions of cost, reliability, public concerns, and standards.
Brad Herman, Vincent Mercadier, Madeleine Moss, Harsha Tummala
UC Berkeley, March 19, 2007
RFID in Retail
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In the Supply Chain
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Consumer-facing
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WalMart.
Department of Defense.
Walgreens – tracking effectiveness of in-store displays.
Japan’s Ginza district – help shoppers navigate the shopping area.
Mitsukoshi (retailer in Japan) – improve staff efficiency and customer service.
Targeted advertising.
In the future:

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Payments.
 Surveillance tags.
 Perishable inventory.
 Catalyst for differential pricing.
Complementary technologies
Brad Herman, Vincent Mercadier, Madeleine Moss, Harsha Tummala
UC Berkeley, March 19, 2007
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Strategic Considerations
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Pricing
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Smart Shelves and
Demand-based Pricing
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Improved Customer
Loyalty Programs
Supply-chain benefits, labor and waste savings
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Perishables, Increased price competition
Brad Herman, Vincent Mercadier, Madeleine Moss, Harsha Tummala
UC Berkeley, March 19, 2007
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Strategic Considerations
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Network Effects
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Significant in supply chain applications
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Automated inventory management, perishables
The value of RFID to each retailer or supplier
increases as more suppliers or retailers adopt.
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Still an immature market
Who will adopt first?
Brad Herman, Vincent Mercadier, Madeleine Moss, Harsha Tummala
UC Berkeley, March 19, 2007
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Strategic Considerations
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Lock-in

Large players can use proprietary interfaces to hold
up partners, gain negotiating power
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Retailers to suppliers; Vendors to retailers
Standards

If open and supported, can lower switching costs,
fear of lock-in, and lower barriers to entry
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Requires industry cooperation
Worked for barcodes
Brad Herman, Vincent Mercadier, Madeleine Moss, Harsha Tummala
UC Berkeley, March 19, 2007
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Retail RFID Value Net
Suppliers
Large (P&G)
●Small (Mom & pop)
●Network effects
●Lock-in
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Complementers
Competitors
Supply chain partners
●Equipment vendors
●Software vendors
●Marketing partners
●Network Effects
●Standards
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Online retailers
●Intra-industry
●Bar Codes
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Customers
Individuals, institutions
●Better information
●More choice
●Pricing
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Brad Herman, Vincent Mercadier, Madeleine Moss, Harsha Tummala
UC Berkeley, March 19, 2007
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Looking Forward
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Conclusions:
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Major challenges to avoid hold-up, incentivize
suppliers to adopt.
Industry needs to address switching costs
Can parallel to other industries who subsidize to get
lock-in (video games, digital cinema)
Consumer-facing applications can boost adoption
If these challenges can be overcome, RFID has
many opportunities.
Brad Herman, Vincent Mercadier, Madeleine Moss, Harsha Tummala
UC Berkeley, March 19, 2007
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Thank you.
Questions?
Images by Flickr users: Gwire, mayhem, thefangmonster, and stan
Brad Herman, Vincent Mercadier, Madeleine Moss, Harsha Tummala
UC Berkeley, March 19, 2007
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