Auto-ID (RFID) Solution Proposal
Business and TechnicalObjectives for Low-Cost Smart
Items
Dr. Richard SwanSAP
Corporate Research CenterPalo Alto
Smart Items - Real World Business Visibility
•Will the right product be there when my customer wants to buy?
Smart ItemsConnecting 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-IDTracking 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?
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) [1 - 4+ % sales]
Reduce Diversion, Gray/Counterfeit Market - [Up to 45% product]
Improve Regulatory Compliance -
RFID applies to several product and business process areas
77%
76%
57%
40%
33%
27%
19%
17%
17%
14%
6%
0% 20% 40% 60% 80% 100%
WM
APO
MM
SD
SCEM
PP
ALM/PLM
Mobile
BW
TRM
OTHER
64%
59%
58%
56%
39%
33%
33%
23%
18%
14%
0% 20% 40% 60% 80%
Ship/Receive
Inventory Mgt.
Data Quality
Visibility
Reduce OOS
Collaboration
ProductionControl
Reduce Theft
Warranty/Repair
Improve NPI
“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)
http://www.sap.com/mk/get/rfid_survey
SAP survey of executive and senior-level management from over 20 industries. N=320 respondents as of 3/03.
Customers want to use RFID across multiple locations and most have no visibility across value chain
54%
48%
46%
38%
19%
14%
0% 10% 20% 30% 40% 50% 60%
Warehouses
DCs
Plants
Trucks
Retail
Field Svcs
“Where does your company currently, or plan to use, RFID technology in your organization” (Multiple Responses)
44%
38%
8%
0% 10% 20% 30% 40% 50%
No visibility
Internal Only
CompleteVisibility
“Do you currently have a complete view of your business processes and inventory flows across your value chain?”
Public Standards
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
http://www.autoidcenter.org/
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
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]
2 21 17 24 64
2 15 13 34 64
2 26 13 23 64
8 28 24 36 96
8 32 56 192 256
8 64 56 128 256
8 128 56 64 256
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.
SAP RFID Pilot Activity
US Pilot - Procter & Gamble
P&G Distribution Retailer DC Retail Store
Tote Building Cross-Dock BackroomFront roomSmart Shelf
MITSavant
SAP SII prototypeInterprets events toprovide business information
MIT-Auto-ID SavantCaptures events
AdaptiveResponse
Customer Demand
SII provides visibility(application agnostic)Traditional applicationsdrive business processes
SAP Landscape
APO SCEM R/3 BW Portal
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
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
Backroom at Metro Future Store
RFID/Auto-ID Infrastructure
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 106 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.
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
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:23458967 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
Where and Auto-ID Infrastructure Fits
PhysicalWorld Manufacturer Distribution Retail
Sensors(RFID Readers,Smart shelves)
Events Events EventsData Events
Full Auto-ID InfrastructureSII
BusinessInformation
HeterogeneousLandscapes
ProductMovements
Real-TimeAuto-ID Node
Core Auto-ID Node
Wired and Wireless Network
Real time Interpretation
Association Model•Interpret Eventsin Context (rules)
Communication
Distilled information•Business Events•Significant Inventorymovements•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
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
Cross Industry Information Flow
Manufacturer Retailer
AnotherManufacturer
AnotherRetailer
Possible Service
Does it Scale?
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!
Approach for High Volume Individual Item Tracking
Cache
Node Node NodeNode Node
Cache
Core Version
Node Node
Cache
Manufacturer Distribution Retail
•Caching at each level dramatically reduces data bandwidth to repository• Enables item level tracking and recording
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 )
Concluding Thoughts
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
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
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
Thank You