Jamison RFID - Eskimo Cold Storage RFID Implementation Case Study
Developing an RFID Business Case and Calculating the ROI · – Monitor your performance Start Your...
Transcript of Developing an RFID Business Case and Calculating the ROI · – Monitor your performance Start Your...
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Developing an RFID Business Case and Calculating the ROI
Harold BoeckYgal Bendavid
(UQAM, Academia RFID)
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Your presenter
Harold Boeck
Professor at the UQAMCo-Founder & Academic Director of ACADEMIA RFIDBAA, MSc.A., Ph.D.
Harold Boeck
Ygal Bendavid
Preconference seminar Agenda“RFID in Warehouse & Inventory Mgt”
• 9:00 RFID Best Practices for Inventory Management• 10:00 Is RFID the Right Choice for Your Business?• 10:00 Is RFID the Right Choice for Your Business?• 11:00 How to Build Your Own Inventory-Management
RFID Portal• 13:00 Getting Your Project Started & Initiate Your RFID
Business Case• 13:30 Developing an RFID Business Case and
Calculating the ROICalculating the ROI• 14:15 Preconference Seminar Ends
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Objective of the presentation• How to develop an RFID business case and justify
your investment (Qualitatively /Quantifiably)y ( y y)– Assess the financial impact (costs & benefits) of
your RFID project – Build a “Business case” based on the designed
"business" and technological scenarios– Monitor your performance
Start Your Business case!
Unlock the Business Case for RFID
RFID
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Project follow up & Operations
Implementation
RFID Business Case in the Project life cycle•Measuring performance and continuous case assessment (TCO)
RFID BPR (To Be)
POC & PilotDesign
development
•Business cases & scenarios sensitivity analysis based on different
•Revision of the Business case: Assess realistic financial impact based on experimentation (Lab & pilot) & Procurement process
Project Frontend
Project definition& Planning
RFID BPR (As-Is)
Source: Ygal Bendavid, Academia RFID, RFID PRO 2010
•High level Business case / value
analysis based on different designs
Methods & tools for ROI analysisExplored on “Is RFID the Right Choice for Your Business?”
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Quantifying the opportunities/ problemsClassic - Costs of inventory
• Carrying Costs– Facility storage
t d i ti h t
• Ordering costs– Replenishment ($/order)
• rent, depreciation, power, heat, cooling, lighting, security, taxes, insurances, etc.
– Material handling • Equipment
– Labor– Record Keeping– Borrowing to purchase
inventory
p ( )– Requisition, PO, transportation,
shipping, receiving, handling, accounting, auditing, etc.
• Shortage costs– Stockouts costs – loss of sales
& relaitve loss of profits– Customer dissatisfaction
inventory– Product deterioration
• Spoilage, breakage, obsolescence,…
– Reputations…
Quantifying the opportunities/ problems
The strategic profit model with financial data for ABC Company
Source: Source : Lambert D. and Stock J (2001). Strategic Logistics Management, chap 5. Financial Impact of Inventory
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Quantifying the opportunities/ problemslinking the business case to the Project Goals
Increase Operating
Reduced retailer claims (overages/ shortages)Reduced labor costs (e.g. receiving,
t i ki hi i
…p g
efficiency
Increase Capital
EfficiencyShareholder
Value
Reduce Operating Costs
Reduce Working Capital
put away, picking, shipping, assembling, reworking…)
Reduced inventory Reduction in returns/ unsaleableIncreased in asset utilization
Improved on-shelf availabilityReduced counterfeitingImproved customization options
Increase RevenueIncrease Market
Share
Source: Adapted from GS1 Canada, 2007 & IBM & EPC Global
Increase Volume Increase …
Improved customization options… Share
Improved promotional planning and executionImproved shrink management
Cost impacts & ROI Analysis Operations/business process performance assessment
Enterprise Management processes
Core Business Processes
Source material
& services
MakeAssemblematerial
& services
Core Business Processes
Supply chain management
PlanMaterial & services
ReturnDispose Material
& services
Product Life cycle management
Deliver material
& services
Source: Bendavid, 2007– adapted from Aris Toolset
.. .. .. ..
Customer services
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Data analysis & Sol. DevelopmentAn example – to assess the “As Is” performance
ManufacturerActivities
Assembling
DistributorsActivities
Storage & distribution
RetailersActivities
Storage & distribution
Other SCMmember
Planning
Deliver
Sourcing
Unload products Employee A
Products Unloaded
Verify BOL vs.delivered products
OK
Employee A
BOL
SignedBOL
Mismatch
•On time parts delivery percentage•% of receipt authorized by PO•% of orders released with full lead time
Supplier sys.
ERP
OK
Enter data to compareWith the PO
electronicdata
Mismatch
Source: Ygal Bendavid, MET 4261 Gestion des operations, UQAM
•Put away accuracy•Put away cycle time•Average picking time•Etc.
Other SCMmember
Data analysis & Sol. DevelopmentAn example – Design & assess the "business" and technological scenarios
Unload products Employee A
ManufacturerActivities
Assembling
DistributorsActivities
Storage & distribution
RetailersActivities
Storage & distributionUnload products Employee A
Products Unloaded
Automatically Read RFID&EPC tags
Tags Automatically
RFID&EPCdata
Reader
Tags
Planning
Deliver
Sourcing
•For any business case, ‘‘measures and metrics are needed to test and reveal the viability of strategies without which a clear di ti f i t d li ti
•Yet, “Performance measurement continues to present a challenge to operations managers as ell as
Middleware
ERP/WMS
Read
Automatically Transfer
Info. Into ERP
RFID&EPCdata
Source: Ygal Bendavid, MET 4261 Gestion des operations, UQAM
direction for improvement and realization of goals would be highly difficult’’ Gunasekaran and Ngai (2005), JOM 23(5):423–451
operations managers as well as researchers’’ Melnyk et al. (2004) JOM 22:209–217
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Data analysis & Sol. DevelopmentKPIs for RFID impact assessment
Benefits. How will your company benefit from RFID-driven visibility across the supply chain?C t H ill b th i h d t d
On time parts delivery percentagePercentage of receipt authorized by POPercentage of orders released with full lead timePut away accuracyPut away cycle timeAverage picking timeShipping accuracy
Costs. How will your company pay, both in hard costs and resources, for RFID-driven visibility? Source: 2008, Forrester Research
•What are your Priorities?
•How RFID can help you inShipping accuracy
Inventory availabilityAverage back order lengthInventory accuracyInventory turnoverObsolete inventory percentage
Source: Adapted from Bragg S. (2004), Inventory best practices
help you in addressing these challenges and opportunities
Data analysis & Sol. DevelopmentAn example – Scenarios Impact analysis & trade-off
Unload products Employee A
Products Unloaded
Automatically Read RFID&EPC tags
Middleware
Tags Automatically
RFID&EPCdata
Reader
Tags
Middleware
ERP
Read
Automatically Transfer
Info. Into ERP
RFID&EPCdata
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Data analysis & Sol. Development(Extended) Impact analysis & trade-off/ Sensitivity Analysis
• RFID Technologies– RFID tags & sensors– RFID readers &
Antennas
RFID Technologies
Antennas– RFID printers & appli.– RFID Middleware
• Wireless Network– WLAN to WWAN– Wi-fi, Zegbee…
• Enterprise Information Systems
– ERP, WMS, LES, MES
Wireless Technologies
E-Commerce Technologies
20Source: Bendavid, Academia RFID – RFID PRO 2008
ERP, WMS, LES, MES– PRM, SCM, PLM
• E-Commerce Techno.– Private IOS– Electronic market places
Enterprise InformationSystems
Project/Infrastructure Cost AnalysisCost of RFID project (1 of 2)
Project PreparationOpportunity AssessmentBusiness Case DevelopmentRFID Strategy Development
RFID Infrastructure (hardware)RFID Tags (Pallet, case, item, medical devices, staff, patients…)Readers and AntennasRFID Strategy Development
Use Case GenerationProcurement Management (planning and sourcing)Solution Architecture DevelopmentSystem Integration AssessmentBusiness Process AssessmentExperimentation/Testing (validation of the business case)
Readers and AntennasMounting AccessoriesRFID printers and label ApplicatorsAncillary devices (motions sensors, horns, lights, …)Other Infrastructure Costs (new servers and computers, infrastructure upgrade, additional points based on required location accuracy)
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Installation CostsInitial Site SurveyDesign selectionHardware installationTesting and trouble shoot…
Source: Adapted from EPC Global
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Project/Infrastructure Cost AnalysisCost of RFID project (2 of 2)
Other expensesPhysical Shop floor/warehouse Modification/Expense
RFID Software CostsRFID Middleware SolutionMiddleware System Integration (with WMS, ERP, Track& trace sol.)
Other labor related to RFID adoption:requirement for new resources: e.g. business analystsTraining for all employees including workers (shop floor clerks, security…)
WMS, ERP, Track& trace sol.)Interface CustomizationEngineering/Business Process Change including Implementation of New business processesNew Information flow, Staff & patient flow…
Ongoing System Maintenance/Admin.
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Network Management SystemReader Firmware Upgrades Damaged Readers/AntennasPerformance MonitoringEtc.
Source: Adapted from EPC Global
Project Preparation
RFID Tags4 Assess the
Financial RFID Hardware
Other infrastructure costs
Installation costs
Tag Application Costs (labor)
Impact: RFID cost: Building a
simple tool
Tag Application Costs (labor)RFID Software CostsBusiness Process ChangePhysical Plant ModificationOngoing System Maintenance/Admin.Misc. CostsEtc.
Source: EPC Global Canada
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Developing an RFID Business Case and Calculating the ROI
S l h i f kSupply chain frameworks to assess the performance
Data analysis & Sol. DevelopmentSupply chain frameworks to assess the performance
http://supply-chain.org/
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Data analysis & Sol. DevelopmentSupply chain frameworks to assess the performance
• The SCOR model includes metrics that areThe SCOR model includes metrics that are classified into:– strategic, tactical and operational. – These metrics are also distinguished as financial and
non-financial, so that suitable costing methods based on activities can be applied.
• Selected metrics have to be used at the five basic links that constitute the supply chain namely planlinks that constitute the supply chain, namely plan, source, make, deliver and return
See for instance: www.supply-chain.org/ or www.gsb.stanford.edu/scforum/
Data analysis & Sol. DevelopmentSupply chain frameworks to assess the performance
• Some Reference ModelS l Ch i O ti– Supply Chain Operation Reference Model (SCOR)(Supply chain Council, 2007 )
– Global Supply Chain Forum(Lambert et al., 2005 )
– Balanced ScoreCard (Kaplan
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et Norton,1992 )
See for instance the SCOR model on http://supply-chain.org/
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Data analysis & Sol. DevelopmentPerformance measures and RFID impact assessment
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)
1st
leve
l KPI
s
Vertical KPIse.g. days of inventory, inventory carrying cost (raw material in storage
capacity utilization,forecast accuracy,
frequency and qualityof delivery, etc.
Vertical KPIse.g. days of
inventory, inventory carrying cost;
replenishment cycle time, purchase order
cycle, put away cycle time, …
Vertical KPIs e.g. replenishment
cycle time, inventory carrying cost, product availability, OOS, etc.
Vertical KPIs e.g. XXX.
Manufacturer Distributors Retailers
“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)
Supply chain members
ManufacturerActivities
Assembling
DistributorsActivities
Storage & distribution
RetailersActivities
Storage & distribution
XXX
[1] The ROI Of RFID For Supply Chain Visibility, by Roy C. Wildeman and Patrick M. Connaughton for Business Process & Applications Professionals, July 18, 2008
Data analysis & Sol. DevelopmentKPIs for RFID impact assessment: A case
• The case of American Apparel
Source: ABI Research RFID Item-Level Tagging in Fashion Apparel and Footwear
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Data analysis & Sol. DevelopmentUsing RFID Maturity Framework
AREA ACTION Assessment Criteria
Process
Organisation
Knowledge
Technology
Performance
Aberdeen Group, Winning RFID Strategies for 2008
Conclusion• An RFID business case
h ld b li ishould be a living, breathing document
• Continuous RFID developments (↓price, ↑performance)
– “ Implementing RFID is just the start… ”
Source: GS1 Canada
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Preconference seminar Agenda“RFID in Warehouse & Inventory Mgt”
• 9:00 RFID Best Practices for Inventory Management• 10:00 Is RFID the Right Choice for Your Business?• 10:00 Is RFID the Right Choice for Your Business?• 11:00 How to Build Your Own Inventory-Management
RFID Portal• 13:00 Getting Your Project Started & Initiate Your RFID
Business Case• 13:30 Developing an RFID Business Case and Calculating
the ROIthe ROI• 14:15 Preconference Seminar Ends
Thank you!Harold [email protected]@
Ygal Bendavid [email protected]
UQAM, Management & technology Department, School of business315 Ste-Catherine est Local R-3570
Academia RFID9916 Côte de liesse,Montréal QC Canada315 Ste-Catherine est Local R-3570
Montréal (Québec) Canada H2X 3X2Tel: 514-987 3000 (x 2429)Web site: www.mantech.uqam.ca
Montréal QC CanadaH8T 1A1Tel: 514 631 8282 – Fax: 631 9696Web site: http://www.rfidacademia.com
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