maximizing the return from rfid - making the most of mandates

© 2006 Hewlett-Packard Development Company, L.P.The information contained herein is subject to change without notice

RFID and the potential channel opportunities

2 June 2007 © 2007 T3Ci All rights reserved

The World’s Top Brands Use T3Ci – The Leaders in RFID Analytics and Applications

• 30+ customers – Including 5 of top 7 CPG Companies– Leaders in CPG, Food and Bev, Consumer Health, Toys, Electronics

• Leading edge work at customers– Promotions, Out of Stock, Collaborative Business Processes

• Awards/Recognition – AMR, CGT, Managing Automation..

• T3Ci is the de facto standard in RFID analytics (AMR Survey)

• T3Ci has Grown 200% Per Year Since Inception and Holds >75% Market Share in Companies Over $5B

3

HP Today

$19B IT infrastructure business:

servers, storage & software

$16B services business;

consulting, support & outsourcing

$29B access devices business

#1 personal computers

#1 in mobile computing

#1 in pocket pc #1 in PDA

manufacturing

$27B imaging and printing business

#1 in inkjet printers #1 in laser printers #1 in wide-format

plotters#1 in all-in-one

devices #1 in print servers

#1 in UNIX® servers #1 in fault-tolerant

servers #1 in Windows®-based

IA-32 servers #1 in Linux®-based

servers #1 in enterprise storage

#1 mission-critical infrastructure services

#1 services for open IT environments

#1 enterprise-ready Microsoft integration & support services

4 Apr 12, 2023

HP RFID Geographic Scope

Commercial sites

Retail sites

33 sites now RFID capable

5

Areas of Focus…

• Simpler registration

• Product Regionalization practical

• Config auto @ PCC

• Automatic Reflash

• Distribution security

• Retail security

• Counterfeit protection

• Save time in assembly

• Automate lower-level receiving and part tracking

• Shipping automation

• Inventory control

• Automate lower-level receiving/ part tracking

• Proper FIFO

• Product completion improvement

• Product recalls

• Shipment tracking

• Theft control

• Counterfeit protection

• Out of Stock

• Promo Management

• Claims reconciliation

• Shrinkage

• Auto check-out

• Real-time pricing

• Returns Processing

• Correlating return to warranty terms

• Recycling

Product Features

Production Distribution

Shipping Retail Post Sale

6

Focus areas with channel

1. Closing the loop on the delivery & payment

2. Improving performance in the store

Factory DC DC Store

Products

Payments

Near term project: - OOS reporting - Promo reporting

Long term opportunities: - Reduce OOS - Improve Promo compliance - Improve Promo design - Improve store stocking - Improve store forecasting - Improve product rolls

Retailer

7




Factory DC DC Store

Products

Payments



Retailer

8

Proof of Delivery reconciliation

The size of the problem

• POD claims are increasing in quantity & cost to HP

• Process is time consuming & expensive• Case is difficult to prove

*Data is only of reason codes that RFID could help (i.e. documentation issues, etc.).

POD* driven Credit Requests (volume) for IPG NA

2005 2006

Total RequestsRequests Paid

+ 56%

+ 24%

9

Proof of Delivery reconciliation How RFID helps

• Visibility into Retailer network (DC & Store)

• How it will work..− HP sends SN# information in the ASN with each

shipment− When a claim is made

− The HP Claims will utilize a T3Ci analysis portal to search for EPC’s (linked to SN#’s) from that shipment

− The analysis portal will create a read report which we will then include in our response

• Working thru process internally & with retailer to turn this on in coming months…

10




Factory DC DC Store

Products

Payments



Retailer

11

The next frontier of Retail collabortion Store operational performance

Buy/Sell relationship

Regional Collaboration

Store collaboration1985 1998 2007 2015

•No/Limited visibility across the partners

• High volatility & poor availability• High Inventory

•Strong collaboration at regional level: - SDM for run rate volume via CPFR - Deal / Promo management

• Consistent, good availability• Improved inventory turns

•Strong collaboration into the stores to manage on-shelf availability

•Refinement of promos / deals based on improved visibility & access• Great availability

• World class inventory mgmt

12

Convergence of technologies is enabling this shift

1. Detailed daily store/SKU data visibility• Inventory levels & movements• Sell thru & pricing• Promo details

2. RFID for in-store locational visibility

3. Sophisticated & dedicated analysis tools

Store level Insights to take action on

• Promo compliance & performance*

• Out of Stock*• Promo design• Store stocking• Store forecasting• Product rolls

Near term focus

Back

room

RFID Read locations

Sales Floor

13

Context setting Enablers of the next frontier..

RFID (front / back vis)

Store Ops data (Inv, Sell

thru +)

Customized Analysis

Tools

Improving Promo compliance Reducing Shelf Out of Stocks Improving Promo design Improving store stocking _ Improving store forecasting _ Improve product rolls _

Key enabler Incremental value

Not needed for value_

Value Enablers

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Promotion Effectiveness• Promo Compliance is the #1

RFID application because…

• Timely arrival to the sales floor is key to maximizing lift but..

• Avg store performance to the start date is not great ~50%

• Front/back visibility from RFID enables OEM’s to:• Take action on stores that aren’t moving it

out• Understand the ‘perfect’ lift vs. avg

performance• Determine how to better position promos at

retailer

Promotion Execution by Case

Set-up On SF1%

Sitting in Back no SF4%

Unknown1%

Sitting in Back w SF6%

Late / Worked In19%

Stacked On SF69%

15 © 2005 T3Ci All rights reserved


Results from our pilot (inkjet printer)

• HP Compliance appears to be much better than avg

• The performance delta between good performing stores & poor ones is material

• For the 45 stores executing correctly

– 140% lift (1.7 4.2 units / wk)

– 48% sell thru of the promo qty

• For 25 stores with late to floor displays

– 38% Lift (1.8 2.5 units / wk)

– 21% sell thru of the promo qty

16

Learnings from other OEM’s

• OEM Intervention Pilots are showing real value − ~30% improvement in compliance

• OEM Merchandiser initiated action is a major constraint− Only companies that are seeing value from

interventions are those which visit a store at a minimum of once / week

• This intervention model needs to be changed to a remote alert approach to provide value beyond top CPG players..


17 Apr 12, 2023© 2005-2006 T3Ci All rights reserved

HP’s plan going forward Utilize reports

• Support management of promo to the floor (where feasible)

• Collaborate with Retailer on Promo performance drivers / issues

• Gain much better understanding on Promo lift drivers

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Shelf Out of Stock

Study details:Products / stores: 400 stores and 42 HP productstime period: ~200 days

HP Out of Stock levels

Shelf OOS

5.5%4.2%

Phantom Inv.

1.3%

3.1%

Replen Settings

1.2%0.6%

Delayed DeliveryBlocked Replen

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Ink Cons HW%

sto

re /

prod

uct d

ays

lost

Shelf & Phantom

2.6%

1.9%

Shelf OOS

Phantom Inventory

Legend

• Largest opportunity to improve is in the ‘last 100 yds’ getting it to the shelf


Out of stock example inkjet cartridge

• Lack of front / back visibility

• “Dressing of shelves”• Mechanical planning system

Sustained ‘hidden’ Out of Stock


Out of stock example inkjet printer

Phantom Inventory

Store finally adjusts On

Hand by -1 to correct problem

Retail Link PI

T3PI

• Infrequent cycle counting• Dis-incentive to adjust inventory• Mechanical planning system

• Phantom inventory• If high enough can block

replenishment


Magnitude of the Phantom Inventory problem

• Store Perpetual Inventory (PI) is more often inaccurate than accurate

• Only takes a small PI error to impact auto-replenishment for our products

• Analysis indicates that ~30% of our store/product combos have errors large enough to cause problems

Study: 370 stores / 10 productsDate: April 1st, 2006

Hiddeninventory

Phantominventory

0%10%20%30%40%50%60%70%80%90%

100%

2 1.5 1 0.5 0 0.5 1 1.5 2 2.5 3PI Error (WOS)

% o

f s

tore

s Hiddeninventory

Phantominventory

Esimate from Data Analysis Pilot( Printers & Scanners)

Actuals from a formal cycle count(Desktop PC)

22

Learnings from the T3Ci user group

• OEM Intervention Pilots are showing real value− ~50+% reduction in phantom inventory− ~20% reduction in backroom inventory

issues

• A large portion of these problems can be deduced via sophisticated ‘event mgmt’-esque data analytics− Several players are extending the use of

these techniques beyond the enabled network


HP’s plan going forward Utilize reports

• Shift the conversation from HP perf to collaboration on all drivers

• Get commitment from Retailer to take action on the data themselves or enable us to effect via remote alerts

24

Conclusions• There are business applications in FMCG for RFID

that can provide real value to OEM’s

• The big opportunity this work has turned up is the potential to extend the OEM / retailer collaboration to the store level

− See big opportunities long term to be more sophisticated in our interactions

• Getting there requires:− Daily store level data visibility being shared− Collaborative business processes to be worked out to drive

action

• This future state is getting defined now by the early adopters, so get in soon if you want to impact it..

25

Conclusions

• Retailers setting up a RFID program need to consider the collaborative business process with suppliers – what role each party will play

• RFID data is just one signal needed in data sharing – retailers also should provide daily POS, inventory, orders, etc – RFID data does not stand alone

• RFID does not have to be an all or nothing proposition – it should be considered for a category/dept where it has high value uses – and that area can be instrumented by itself.

26

Questions

maximizing the return from rfid - making the most of mandates

Business

promo compliance rfid

promo compliance performance

pricing promo details

retailer network dc

product rolls retailer

backroom rfid

rfid capable

term project