WalMart Case Study: RFID

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(No Transcript)
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WalMart Case Study RFID Supply Chain
Management
TEAM MEMBERS

• Angrish, Sangita
• Chivukula, Venkata S.
• DeWitt, Brendon
• Patel, Raxesh
• Shamsi, Shazeb
• Yellapragada, Ramachandra

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Agenda

• Introduction to RFID
• Introduction to Supply Chain Management (SCM)
• Introduction to WalMart and its Business
  Processes
• RFID in WalMart
• Current RFID Usage
• Limitations and Challenges of RFID
• Future of RFID

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Introduction

• What is RFID ?
• Why RFID over Bar-Code ?
• RFID Working and Infrastructure

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What is RFID?

• Electronic tagging technology that allows an
  object, place, or person to be automatically
  identified at a distance without a direct
  line-of-sight, using an electromagnetic
  challenge/response exchange.

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RFID

• 40 years old technology
• Why being Used NOW?
• right time to use the technology
• Benefits OUTWEIGH the Deployment Costs

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Why RFID over Barcode ?

• Ability to read without line-of-sight
• Serialized numbering scheme enables more powerful
  
• Understanding
• Diagnosing
• Controlling of Supply Chain
• Serial numbers provides individual entity
  tracking and much more detailed behavior of SCM
  than UPC or EAN used in Bar codes
• No duplicate reading of the same tag a
  possibility in Bar codes
• More powerful sensor-network and
  monitoring-system than bar-code systems.

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RFID Components
RFID
Reader
TAG
Antenna
Silicon Chip
Substrate
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Working of RFID

• Reader generate signals that are dual purpose
  provide power for a tag, and create an
  interrogation signal.
• Tag captures the energy from Reader and executes
  commands sent by the Reader
• Tag sends back a signal containing a unique
  digital ID (96-bit serial number) that can be
  looked up in a database available to the reader
  to determine its identity, perhaps expressed as a
  name, manufacturer, SKU (stock keeping unit)
  number, and cost.
• Tags are generally passive because they require
  no batteries or maintenance.

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RFID Infrastructure

• Existing software systems
• UNABLE to handle serial numbers
• Solution RFID Middleware
• RFID Middleware Layer between RFID readers and
  the application software
• Consists of
• Lower level device and data management
• Higher Interpretation level

Context generation and Interpretation
Device Management
Data Management
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RFID Infrastructure (contd.)

• Lower level devices such as motion sensors,
  programmable logic arrays and human interfaces
  fetch data and provides to Data management layer
• Data management layer provides some functionality
  of filtering data due to intermittent appearances
  and disappearances
• After the data management layer yields data, the
  Interpretation layer extracts inference from such
  data and forwards it to the applications that
  deploy RFID

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Up Next

• Introduction to RFID
• Introduction to Supply Chain Management (SCM)
• Introduction to WalMart and its Business
  Processes
• RFID in WalMart
• Current RFID Usage
• Limitations and Challenges of RFID
• Future of RFID

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Introduction to Supply Chain Management

• Supply Chain Management
• Coordination of a network of facilities and
  distribution options
• Includes procurement, processing and distribution
• Five core processes
• Planning
• Sourcing
• Making
• Delivering
• Returning
• Integration of these processes to maximize
  benefits

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Introduction to Supply Chain Management (contd.)

• Three levels of supply chain management
• Strategic linked to corporate strategy
• Tactical
• Operational involve day to day activities

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Introduction to Supply Chain Management (contd.)

• Overall Goal
• Optimize supply chains
• Provide more accurate and time sensitive
  information
• Maximize sales and profits

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Introduction to Supply Chain Management (contd.)

• RFID and Supply Chain
• Provide real time information
• Better readings of customers and markets
• Ability to provide right products at the right
  times
• Deloitte Touché benchmark initiative
• Only 7 of companies managing supply chain
  effectively
• These 7 are 73 more profitable than other
  companies

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Up Next

• Introduction to RFID
• Introduction to Supply Chain Management (SCM)
• Introduction to WalMart and its Business
  Processes
• RFID in WalMart
• Current RFID Usage
• Limitations and Challenges of RFID
• Future of RFID

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Wal-Mart Introduction and Business Processes
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Operations

• Wal Mart Stores
• Largest segment accounting to about 67.3 of 2005
  fiscal sales
• Super centers
• Discount stores
• Neighborhood Markets
• SAMs Club
• Consists of membership warehouse clubs accounting
  to 13 of 2005 fiscal sales
• Wal-Mart International
• Accounted to 19.7 of 2005 sales

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Business Model of WalMart

• Market Strategy of WalMart
• Everyday Low prices (EDLP)
• Employs both Clicks Bricks and Bricks
  Mortar strategy
• Organizational Development
• Specialty Division
• Retail Division
• Competitive Advantage
• Price match guarantee
• Market opportunity
• B2B Single firm network
• B2C E-Tailer Business Model

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Supply Chain Management at WalMart

• Procurement and Distribution
• Logistics Management
• Inventory Management

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Procurement and Distribution

• Procurement
• Procurement involves getting goods from different
  manufacturers
• Involves reducing the purchasing costs as far as
  possible
• Goods procured directly from the manufacturers,
  bypassing all intermediaries

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Procurement and Distribution

• Distribution
• Distribution centre is divided in different
  groups depending on the quantity of goods
  received
• Goods to be used internally in US arrive in
  pallets imported goods arrive in re-usable
  boxes.
• Employees have access to the inventory levels of
  all the products
• Employee makes two scans-
• For identifying the pallet
• For identifying the location from where the stock
  had to be picked up
• Bar codes RFID used to label different
  products, shelves bins
• The hand held computers guide employee to the
  location of the specific product.
• The quantity of the product required from the
  center is entered in the hand held computer,
  which updates the information on the main central
  server.
• computers enable packaging department to get
  accurate information such as storage, packaging
  shipping,
• Saves time in unnecessary paperwork.
• Enables supervisors to monitor their employees
  closely

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Logistics Management

• Involves managing transportation delivery of
  products
• More than 7000 company owned trucks services
  Distribution centers
• This enables shipping of goods from distribution
  centers to the stores within 2 days and replenish
  the store shelves twice a week
• Private Fleet Driver handbook tracking
  drivers activities
• Cross Docking from Manufacturer to Customer
• Cross Docking enabled demand chain
• Demand chain - Customers pull the products
  instead of retailers having to push them

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Inventory Management

• WalMart set up its own satellite system in 1983
• Reducing unproductive inventory as far as
  possible
• Use of Bar-code RFID technologies for easy
  packing and counting of the inventories,
  efficient picking and receiving proper
  inventory control of the products
• Massively Parallel Processor - enables easy
  tracking movement of goods stock levels across
  all distribution centers and stores
• Use of Magic Wand to keep track of inventory in
  stores
• Use of sophisticated algorithm and technology
  infrastructure to forecast the quantities of each
  item to be delivered, based on inventories in the
  store and customer needs
• Centralized inventory database

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Up Next

• Introduction to RFID
• Introduction to Supply Chain Management (SCM)
• Introduction to WalMart and its Business
  Processes
• RFID in WalMart
• Current RFID Usage
• Limitations and Challenges of RFID
• Future of RFID

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RFID in WalMart

• Initiated the plan to implement RFID in its
  supply chain in June 2003
• Subsequently, reinforced the RFID standards and
  specifications in November 2003

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RFID in WalMart

• Specification of RFID Components
• TAGS
• EPC
• Why RFID?
• EFFICIENCY
• WALMART SUPPLIERS

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Specification of RFID Components

• EPC
• Type of Chip
• TAG
• Distribution Centers to accept RFID tagged
  products

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Specification of RFID Components

• EPC
• 96 bit unique number to identify an item in the
  supply chain.
• Global Trade Identification Number.
• EPC data format on the chip is Class 1 Version 2
  communication protocol.
• Class 0 Factory programmable protocol
• Class1 Provides the capability to write serial
  numbers on the chip

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Specification of RFID Components

• TAGS
• Operates in the UHF spectrum
• 868 MHz to 956 MHz
• Carries the 96-bit serial number
• Is field programmable
• Allows suppliers to write serial numbers to the
  tags while being applied to the products

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WHY RFID?

• OBJECTIVE To increase the efficiency of its
  supply chain.
• It will
• Enhance Transparency of supply chain
• Help in minimizing cost and labor
• Strengthen inventory control

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Efficiency

• WalMart aims to reduce the practice of manually
  placing the order
• Has achieved 10 reduction in the case
• Implementation of RFID tags in WalMarts
  inventory has helped boost sales by keeping
  shelves better stocked
• Usage of RFID has reduced out-of-stock
  merchandise by 16 at the stores that have
  implemented RFID tags for more than a year.

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RFID COST

• Cost Benefit Analysis
• Initial Research indicated cost of RFID tag was
  above 1.
• At present, TAG costs about 30 cents
• Cost will drop to less than 5 cents, if
  deployed on a large scale
• Analysts suggest that the tag should be
  approx. 1 cent for small ticket items

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WalMart Suppliers

• 130 major suppliers ship merchandise to WalMart
  distribution centers with about 5.4 million tags
• By 2006, WalMart aims to mandate RFID
  implementation for all its suppliers

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WalMart Suppliers

• Major Suppliers
• Gillette
• Hewlett-Packard
• Johnson Johnson
• Kimberly Clark
• Kraft Foods
• Nestle
• Proctor and Gamble

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WalMart Suppliers

• Kimberly-Clark
• Manufacturer of paper goods products
• Eg Kleenex, Huggies
• Tagged Scott paper Towels shipment with RFID tags
  
• First supplier to use RFID April 2004

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Up Next

• Introduction to RFID
• Introduction to Supply Chain Management (SCM)
• Introduction to WalMart and its Business
  Processes
• RFID in WalMart
• Current RFID Usage
• Limitations and Challenges of RFID
• Future of RFID

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Successful Implementation of RFID

• Harvard Research suggests a seven step model for
  successful implementation of RFID.

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Seven Step Model

• Understand our visibility requirements
• Query other end users about recommendations for
  trials
• Move into the action phase in a real-world
  setting in a pilot/trial mode
• Evaluate technical performance
• Consider the economic benefits
• Understand the impact
• Decide whether or not to move forward with a
  larger scale implementation

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Major Companies implementing RFID technology

• Volkswagen
• Gillette
• Tesco supermarket tries out smart tagging
• Sun Microsystems sets up RFID test centre in
  Scotland
• I.B.M. Expands Efforts to Promote Radio Tags to
  Track Goods
• Texas Instruments

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Up Next

• Introduction to RFID
• Introduction to Supply Chain Management (SCM)
• Introduction to WalMart and its Business
  Processes
• RFID in WalMart
• Current RFID Usage
• Limitations and Challenges of RFID
• Future of RFID

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Limitations of RFID

• Why the implementation of a 40 year old
  technology is taking so long?
• As pointed out earlier, benefits are gradually
  outweighing the deployment costs
• Limitations and challenges Barriers to Quick
  Deployment

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Limitations and Challenges of RFID (contd.)

• Global standards
• Variety of RFID standards and technologies
• Technology problems
• Read-range distances not sufficient to allow for
  consumer surveillance
• Defective and poorly performing RFID tags
• Damaged RFID tags
• Data management
• Lack of development of right information
  management tools
• Cost
• Tags, Tag Readers, Databases

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Limitations and Challenges of RFID (contd.)

• Industry Standards
• Privacy advocates are insisting the companies to
  state their intended use of the technology due to
  lack of industry standards
• Privacy and civil liberties
• RFID tags can be embedded into/onto objects and
  documents without the knowledge of the individual
  
• Complex programming
• Potential job losses

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RFID Practices that Should be Prohibited

• Merchants must not force their customers into
  accepting RFID tags in the products they buy.
• RFID must not be used to track individuals absent
  informed and written consent of the data subject
  directly or indirectly.

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Up Next

• Introduction to RFID
• Introduction to Supply Chain Management (SCM)
• Introduction to WalMart and its Business
  Processes
• RFID in WalMart
• Current RFID Usage
• Limitations and Challenges of RFID
• Future of RFID

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Future of RFID
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Future of RFID

• For Retailers ??
• The technology will bring a revolution.
• It will be widely used in retail and consumer
  goods, automotive, healthcare, military, postal
  department and other scientific uses.
• For Customers??
• If the consumers think the technology is too
  complex, confusing or threat to their privacy
• Will the technology survive?

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Key Factors for RFID

• Setting up more standards in the industry
• Bringing down the cost of RFID
• Level of understanding and experience

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Demonstration Of WalMart SCM
WalMart Store
Manufacturer
Walmart Warehouse
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Movie Time
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THANK YOU
Questions Suggestions?