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

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Presentation on theme: "Auto-ID (RFID) Solution Proposal Business and Technical Objectives for Low-Cost Smart Items Dr. Richard Swan SAP Corporate Research Center Palo Alto"— Presentation transcript:

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

2 Smart Items - Real World Business Visibility Will the right product be there when my customer wants to buy? Smart Items Connecting 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-ID Tracking 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?

3 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) [ % sales] Reduce Diversion, Gray/Counterfeit Market - [Up to 45% product] Improve Regulatory Compliance -

4 RFID applies to several product and business process areas 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) SAP survey of executive and senior-level management from over 20 industries. N=320 respondents as of 3/03.

5 Customers want to use RFID across multiple locations and most have no visibility across value chain Where does your company currently, or plan to use, RFID technology in your organization (Multiple Responses) Do you currently have a complete view of your business processes and inventory flows across your value chain?

6 Public Standards

7 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

8 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

9 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]

10 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.

11 SAP RFID Pilot Activity

12 US Pilot - Procter & Gamble P&G Distribution Retailer DCRetail Store Tote BuildingCross-Dock Backroom Front room Smart Shelf MIT Savant SAP SII prototype Interprets events to provide business information MIT-Auto-ID Savant Captures events Adaptive Response Customer Demand SII provides visibility (application agnostic) Traditional applications drive business processes SAP Landscape APOSCEMR/3BWPortal

13 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

14 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

15 Backroom at Metro Future Store

16 RFID/Auto-ID Infrastructure

17 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 10 6 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.

18 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

19 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: 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

20 Where and Auto-ID Infrastructure Fits Physical World Manufacturer Distribution Retail Sensors (RFID Readers, Smart shelves) Events Data Events Full Auto-ID Infrastructure SII Business Information Heterogeneous Landscapes Product Movements

21 Real-Time Auto-ID Node Core Auto-ID Node Wired and Wireless Network Real time Interpretation Association Model Interpret Events in Context (rules) Communication Distilled information Business Events Significant Inventory movements 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

22 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

23 Cross Industry Information Flow Manufacturer Retailer Another Manufacturer Another Retailer Possible Service

24 Does it Scale?

25 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!

26 Approach for High Volume Individual Item Tracking Cache Node Cache Core Version Node Cache Manufacturer Distribution Retail Caching at each level dramatically reduces data bandwidth to repository Enables item level tracking and recording

27 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 )

28 Concluding Thoughts

29 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

30 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

31 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

32 Thank You

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