BEA White Paper

RFID for Retail: Blueprints for Bottom-Line Benefits

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Table of Contents
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Business challenges facing retailers today . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Forces driving adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Benefits for early adopters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Qualifying questions for retailers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Building a business case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Blueprints for implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Electronic proof of delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Improving retail promotional execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Capitalizing on an information ecosystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Keys to successful RFID implementations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 HP: Lessons from the leading edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 The retail store of the future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 About BEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Executive Summary
1. More than half of European retailers and U.S. organizations surveyed have implemented radio frequency identification (RFID) or plan to do so before the end of 2006. RFID is a technology whose time has come, and it is here to stay. 2. Volatile demand, intense competition, and the use of collaborative supply chains for strategic and competitive advantage are raising the pressure for retailers to integrate RFID into their operations. 3. Some of the forces driving adoption of RFID include continuing mandates from business and government, falling prices, technological advances, and growing acceptance in nearly every aspect of daily life. 4. Early adopters report 63 percent quicker elimination of out-of-stocks, 29 percent improvement in promotional execution, on-shelf availability of products increasing to 93 percent, and reduction in the amount of time it takes to introduce a new item from 10 12 days to one or two. 5. Retailers can realize the greatest gains by applying RFID to inefficient manual processes, blind spots, and high turnovers. 6. RFID can be used to increase efficiency, revenue, and service; reduce labor, inventory, and out-of-stocks; and redesign business processes. Implementations range from simply tagging cases or pallets to deriving sophisticated business analyses from detailed tracking data. 7. Blueprints for implementation include MIT studies reported by worldwide standards group EPCglobal on electronic proof of delivery and improvements in retail promotional execution. Wal-Marts Retail Link information system shows the benefits of RFID-enabled supply chain collaboration. 8. To successfully implement RFID, retailers need to recognize the paradigm shift that this new technology represents, focus on strategic business results, choose the right solution partners, and take a phased approach. 9. Hewlett-Packards use of RFID in the electronics industrys largest supply chain has yielded a 23 percent reduction in supply-chain costs, a 40 percent improvement in logistics turnaround times, and a 50 percent reduction in reconciliation staff. 10. Retailers can use RFID for market differentiation, competitive cost advantage, to retain customers, and to become truly demand-driven.

BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Introduction
Industry experts agree: RFID1 is a technology whose time has come, and it is here to stay.2 Seventy percent of European retailers3 and over 50 percent of North American organizations4 surveyed in 2005 said they already had implemented RFID or planned to do so in the next 1218 months. A recent study by The Freedonia Group, Inc. forecast that by 2014, RFID labels, which were around 10 percent of total smart label demand in 2004, will account for more than 85 percent of the market.5 Analyst Gartner Group predicts that worldwide spending on RFID will increase six-fold over the next five years, from $504 million in 2005 to more than $3 billion by 2010, with the technology gaining momentum in late 2006 and 2007.6 Many retailers already are using RFID to maximize top-line revenues, cut cycle time and costs, improve customer relationships, and customize merchandising. Market leaders are using RFID to improve business processes and gather new levels of business intelligence, raising the bar for everyone. The call to action from competitors and industry experts is clear. The information and resources in this paper will help retailers identify ways they can use RFID to maximize return on investment (ROI), better serve customers, and develop strategic and competitive advantage by elevating supply-chain management to new levels of efficiency and effectiveness.

Business challenges facing retailers today

The fundamentals of retailing have not changed in over a century. The goal is to have the right products at the right place at the right timewhen the customer is ready to buy. To do that, the retailers three overarching business imperatives are to:
Increase revenues Cut costs Attract, satisfy, and retain customers.

A number of factors are making those requirements more difficult to achieve. These include complex global supply chains, greater need for visibility across many different organizations and locations, volatile demand, intense competition, and a new collaborative business model. As a result, retailers must make continuous innovations and improvements in data collection, analysis, business processes, and business intelligence.

Global playing field

Retailers today are the customer point of contact sitting on top of incredibly complex, interwoven, worldwide supply chains. They sell consumer products that are produced, assembled, packaged, shipped, and distributed all over the world. In the U.S. alone, manufacturers and retailers are importing goods at the rate of $1.12 trillion per year.7

BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Volatile demand, intense competition

More than half of all retail business today is being driven by sales, special offers, coupons, targeted advertising campaigns, and other promotions designed to get customers into the store or to try a new product or brand.8 This makes demand more volatile and inventory requirements less predictable. As a result, retailers need greater visibility throughout the entire supply chain, and greater agility in responding to spikes and troughs in consumer demand. Multi-channel retailingwhich includes online, in-store, wireless, and other purchase optionsintensifies competition by offering alternatives that can be easily enjoyed without ever leaving home. Fully automated options like online shopping amplify the impacts of negative in-store experiences such as out-of-stocks, rain checks (vouchers to purchase out-of-stock items at the sale price in the future), and confusing or missing displays.

Supply-chaining: A world-changing force

Retailers across the world have a greater need than ever to know where their inventory is, what condition its in, where and how losses are occurring, how they can improve in-store operations, and what merchandising is most effective in which stores. Radio frequency identification (RFID) technology offers one answer to this need. Industry analyst Aberdeen Group says: For the first time ever, [RFID] offers companies the opportunity to monitor and manage the location, state, status, and condition of products, assets, and even people, bringing process automation to a level unthinkable just a few years ago.9 In this context, a new paradigm has emerged: a retail supply chain that is an interconnected web of organizations working together to deliver consumer goods to retail customers. In his best-selling business book The World Is Flat: A Brief History of the Twenty-First Century, Pulitzer Prize-winning New York Times columnist Thomas L. Friedman10 identifies supply-chaining as one of 10 key forces that have flattened the world just since the year 2000.11 He writes: Supply-chaining is a method of collaborating horizontallyamong suppliers, retailers, and customersto create value.12 The bad news, he reports, is that making these chains work is much harder than it looks and requires constant innovation and constant adjustment.13 Retailers and suppliers share many of the same priorities. In a report on the benefits of using electronic product codes (EPCs, the method of storing information gathered and transmitted by RFID technology), 11 of the 15 benefits listed for retailers are exactly the same as those for manufacturers:14
Reduces time spent on complaints/disputes Simplifies and enhances category reporting Reduces product information lead time Reduces promotion lead time Reduces time for new item introduction Eliminates the need for cross-reference tables Reduces invoice disputes Reduces order defects Simplifies corporate reporting Eliminates IT system redundancy Opportunity for shared service creation

BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Forces driving adoption

Three primary factors drive the adoption of RFID technology:
Increasing mandates Falling prices and technological advances Growing acceptance.

Increasing mandates
According to a 2005 report by CNET News, 13 federal government agencies are currently using or plan to use RFID technology.15 That includes recommendations from the U.S. Food and Drug Administration (FDA) that all pharmaceutical producers, wholesalers, and retailers begin developing plans to place RFID tags on pallets, cases and unit items by 2007.16 The U.S. Department of Agriculture (USDA) is pushing to give every cow in the U.S. its own unique ID number, to be tracked and monitored through RFID technology, in order to more easily trace diseases back to the originating farm.17 Perhaps the best-known mandates are those from Wal-Mart and the Department of Defense, which required suppliers to tag cases and pallets using RFID starting in 2005.18 More than 18 months into these initiatives, both organizations are pressing ahead. Michael Butler manages the DoDs smart card office, which issues about 10,000 RFID cards each day. Despite early resistance, he said, No one ever comes back and complains anymore.19 Wal-Marts new CIO, Rollin Ford, said in early 2006, There will be no slowing down. RFID will transform the way we do business. He confirmed that Wal-Mart already has made second-generation (Gen2) RFID technology its standard. From the start of 2007the number of suppliers required to tag their goods will rise to 600.20

Falling prices and technological advances

Adoption also is being driven by continuing product innovation, dropping prices, the evolution of global standards, and new methods to assure consumer privacy and security. Wal-Mart, Hewlett-Packard, and others are already using Gen2 technology, which brings a number of benefits including greater accuracy, more information, and better security. In addition, tag prices are coming down faster than anticipated. Costs of 20 to 40 cents per tag in 200421 were projected to drop to 16 cents by 2008.22 However, in early 2006, Hewlett-Packard vice president of operations Didier Chenneveau said that HP planned to move in April to second-generation EPC tags, which should cost less than 10 cents each.23

BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

In early 2006, Dutch-based electronics giant Philips announced that its researchers have created the first plastic-electronics based RFID tag capable of transmitting codes at the industry-standard radio frequency.24 Theyve also developed a code generator to build circuits with the complexity required for item-level tagging. Performance results for these circuits were presented at an international conference in early 2006, and the breakthrough was hailed as a precursor for wide-scale market acceptance.25 Because RFID technology can be used in dirty, harsh, and hazardous environments and can survive extreme temperatures, it is beginning to create an internet of things that will create communication and interoperability among virtually all products and individuals.25

Growing acceptance
A recent survey of North American organizations commissioned by the Computing Technology Industry Association found that 46 percent of consumer goods makers, 34 percent of food and beverage makers, and 24 percent of textile and apparel manufacturers are implementing RFID.27 Despite the legacy of forced adoption created by the early Wal-Mart mandate, a 2005 survey by Aberdeen Group found that almost 60 percent of senior management said the technology holds great potential value for their companies, and two-thirds also feel RFID would help them create significant differentiation in their business processes.28 In addition, a 2006 Aberdeen Group survey of companies, over 40 percent of which were in retail and consumer goods, forecasts significant expansion of RFID deployments over the next five years. Almost 50 percent of companies surveyed said they plan to have two to 10 geographically separate RFID-enabled sites in their networks by 2008, increasing to an estimated 20 to 100 sites by 2011.29

Lifecycle tracking technology Worldwide, some 40 million farm animals already carry an RFID chip that helps track health hazards such as mad cow disease. Automakers have put chips in the keys of about 100 million cars to prevent theft.30 About 3 million dogs and cats each year are tagged with RFID chips, and a proposal is on the table to tag a sampling of the worlds 25 billion chickens as an early warning system for avian influenza.31 RFID literally is becoming a lifecycle tracking technology. It has been credited with preventing the kidnapping of a baby from a hospital nursery,32 is being used as a means to return Hurricane Katrina victims to their families33 and has been proposed as a replacement for U.S. soldiers dog tags.34

BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Benefits for early adopters

A survey of 616 supply-chain managers across Europe reported that RFID already has delivered improved customer service, increased profitability, greater compliance with customer mandates, and faster sales cycles.35 Results reported at the 2006 RFID ROI Summit included faster product replenishment by a lubricant manufacturer and improved service performance measurement by UKs Royal Mail. BP Lubricants said their Collaborative Strategy, of which RFID is a part, is leading to business growth not otherwise attainable.36 Boeings studies show that fat fingering causes one error in every 30 keystrokes during manual data entry in its receiving operation. With Boeing receiving 50,000 parts a day, that error rate was unacceptable,37 and the company is deploying RFID as its hands-off solution to this problem.

ROI at Wal-Mart
When Wal-Mart came out with its original RFID mandate, eWeek published the companys estimated returns below.

Table 1: Example: Wal*Mart estimates $8B in annual savings from their RFID initiatives.

Function
Scanning Out-of-Stock Shrinkage Tracking Product Visibility

RFID Implementation
Eliminating bar code scanning on pallets and cases in the supply chain and on items in-store can reduce labor costs by 15% Smart shelves monitor on-shelf product availability Real-time product monitoring reduces warehouse shrink, administrative errors and vendor fraud Improved tracking of the more than 1 billion pallets and cases moving through DCs annualy Improved visibility of where products are in the supply chain in Wal-Marts DCs and suppliers warehouses offers reduced inventory and costs of carrying this inventory

Savings
$6.7 billion $600 million $575 million $300 million $180 million

Total Potential Annual Savings

Source: eWeek, September 15, 2003

$8.355 Billion

Simon Langford, Wal-Marts director of RFID programs, said in early 2006 that Wal-Mart has tracked a 29 percent improvement in promotional execution and 63 percent quicker elimination of out-of-stocks.38 Reducing out-ofstocks increases revenue directly and improves customer satisfaction by delivering a better shopping experience and a better return on the customers investment of time. Sharing RFID data with suppliers via its proprietary data warehouse, Retail Link, Wal-Mart has also been able to reduce the time it takes to introduce a new item from 1012 days to only one or two.39

BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

ROI at Best Buy 40

Using RFID, retail electronics chain Best Buy has seen improvements in the sourcing of its product offerings, price calibration, product forecasting, and on-shelf availability which has soared from the mid-80 percent up to 93 percent, with promotional availability even higher. With up to 70 percent of DVD revenue recorded during the first week that a new movie title hits the shelves, prompt display and replenishment are essential to take advantage of that high-volume sales period. Best Buy is also investigating the benefits of item-level tagging, which can include both increased sales and theft deterrence.

Food and Drug Retailers

In May 2006, Walgreen Co., the largest drugstore chain in the U.S., announced that it would install an RFID tracking system in more than 5,000 stores to monitor the effectiveness of in-store display systems. Working initially with 15 consumer packaged goods manufacturers, Walgreens will capture real-time point-of-sale data along with information on in-store displays so it can design and implement displays that are proven to drive sales.41 A large food and drug retailer in the U.S. with almost 20 distribution centers, more than 2,500 stores, and annual revenues of more than $30 billion is working with BEA to implement an RFID solution that:
Reduces out-of-stocks Maximizes revenues from suppliers product promotions Decreases shrinkage Improves promotional effectiveness

More accurately tracks inventory in stock. The first-stage installation was completed in only three weeks with no software issues. More than 1 million RFID events have been collected and distributed, and suppliers are updated weekly on product movements.

Reusable asset tracking

Hewlett-Packard is working with a major European returnable crates provider to improve management and visibility of these reusable assets throughout their supply chain. Research shows that for many organizations, reusable asset operations account for 5 percent of annual revenues, and 35 percent of organizations surveyed said they lost or had to replace 10 percent of their assets annually.42 HP has worked with the crates provider to create a leading-edge strategic solution that delivers quantifiable cost savings and increased revenues. Challenge
Automate crates management Reduce claims with retailers Speed up reconciliation process (return of deposits) Implement EPC Class 1 Gen2 technology.

RFID solution
Phased approach (internal, pilot, full deployment) Tracking using 2D video recognition Technology implementation coupled with business process re-engineering.
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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Results
Cost savings from improved deposit return, fewer claims, and faster and easier reconciliations with retailers

and growers
Increased visibility throughout the supply chain Integration of data with back-end systems to deliver financial information.

Finland Post43
Another example of reusable asset tracking is BEAs work with Finland Post, which relies on more than 200,000 trolleys or roll cages as the backbone of its service. The trolleys are used on vehicles, in distribution depots, and to distribute mail between sites. Finland Post had no means of accurately monitoring and managing these reusable assets, and was spending 1 million each year to replace them. Challenge
Evaluate RFID technologies in a pilot project Understand impacts on daily operations Derive analytic information from tracking data Explore performance and availability of RFID technologies in the production process.

RFID solution
Determine technology and business process strategies in advance to maximize benefits With Capgemini and BEA consultants, design and test the solution Conduct eight-week pilot involving 30 customers, 200 cages, mobile data collection terminals, long-range

readers, and a robust, flexible, standards-based server. Results

Achieved 100 percent reception with every long-range reader tested Reduced total cost of asset ownership by improving control, availability, and maintenance Reduced operational costs, decreased turnaround times, and eliminated manual errors Enhanced customer service through undisputed proof of delivery Provided analytic information including asset cycle times, dwell times, utilization rates, and shrinkage points.

Item-level tagging: Smart suits

In April 2003, British retailer Marks & Spencer (M&S) began experimenting with RFID by tagging all of its mens suits, shirts, and ties at one of its stores. A year later, M&S expanded suit-tagging to nine stores and in early 2005, announced that it would extend the practice to 53 stores in 2006.44 Item-level tagging can help keep the right styles and sizes on the store floor, more effectively meet consumer demand, increase customer satisfaction, improve the quality of the shopping experience, and enhance security

BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Qualifying questions for retailers

When considering any IT implementation, it is important to determine how it will impact sales, profits, turnovers, markdowns, and margins. In addition, retailers need to bear in mind how RFID will impact their relationships with their customers and supply-chain trading partners. To evaluate the potential benefits of RFID in retail, it is important to ask:
Where are we using inefficient, manual processes? Do we have any blind spots? What are our turnover rates?

Inefficient, manual processes

How many times a day do associates have to leave the sales floor to try to find something in the back

room? How often are those sales lost?

Are promotional displays going up on time? How would a bigger revenue boost from suppliers promotions

impact the bottom line?

How would reduced dwell time impact revenues? What percentage of deliveries is late or incorrect? How accurate is barcode and inventory data? Could time, labor, and errors be reduced in receiving, shipping, and reconciliation? How many people in the audit department deal with suppliers on a day-to-day basis?

Inventory tracking or inventory lacking? At 9:00 on the first morning of a two-day sale, a hardware store was out of stock on one of 26 promotional items pictured in its newspaper flyer. The store manager was apologetic. The computer said he had four more in the back room, but hed already spent more than 15 minutes checking and couldnt find any. He explained that the computer was often wrong because his company uses blind receiving, which means individual stores dont waste time counting merchandise when it arrives. One truck typically delivers to about 12 stores, and the errors are spread equally among them all. He assured the customer that whatever errors there are dont account for more than .001 percent of profit per store.

BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Blind spots
What is the out-of-stock rate? Is revenue lost because of slow replenishment? Do stores rely on customers to tell checkout clerks when shelves are empty? What is the out-of-stock rate for promotional items? What are the cycle times from the back room to the sales floor? Is there limited visibility of where goods are within the fulfillment processshipped, in-transit, and received?

Do store managers know whats on the floor and whats in the back room on an hourly basis?
How much shrinkage is occurring at each point in the supply chain? How much is due to expiration dates

or spoilage? How much is due to loss or theft? Where, when, and why are losses occurring?

Piecemeal promotion A store was running a special discount on computer printers and monitors for customers who bought both. After two days, not one customer had taken advantage of the special offer. It turned out that, while the promotional signs were up, the products were shelved back-to-back on two different aisles and customers hadnt been able to make the connection. Once the products were displayed together, sales took off. But two days of sales had been lost, revenues fell short, unsold merchandise was consigned to storage for future markdowns, and relationships with both customers and suppliers had been strained.

Turnover rates
Higher turnover rates create more volatility, uncertainty, errors, and lost opportunities.
What is the employee turnover rate? How experienced and well-trained is the staff that handles receiving,

stocking, merchandising, and customer service?

How frequent are stock turns? Are turnover rates meeting revenue targets? How do turnover rates

compare with competitors rates?

What impact do turnover rates have on errors and inefficiencies? How do they impact out-of-stock rates

and customer dissatisfaction?

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Building a business case

Benefits documented by early adopters of RFID include a 29 percent improvement in promotional execution, 63 percent quicker elimination of out-of-stocks, an increase in on-shelf availability of more than 10 percent, and use of item-level tagging to improve customer satisfaction, stocking, and security. (See Benefits for early adopters, above.) Studies have also shown that using RFID to generate electronic proof of delivery can save at least $0.01 to $0.03 per case and can provide a 19 percent sales lift when used to help execute special promotions (See Blueprints for implementation, below).

Increase efficiency, revenue, and service

As summarized in the table below, consultants and analysts have identified significant impacts that RFID can make in three key areas of measurement: operational efficiency, revenue, and service.
Table 2: RFID can make a significant impact on supply chain operational efficiency, revenue, and service.

Operational Improvement
12% increase sales due to reduced Out-of-Stock Improve retail promotion effectiveness and ROI Reduce shrinkage by 10% 20% Warehouse labor cost reduction 10 30% Reduction in inventory due to lower safety stock Improved internal processes Business transformation to a demand-driven enterprise
Source: AMR Research, Accenture, PWC

Business Benefit
Increased sales Improved customer service Raise sales, reduce write-offs Lower operational costs Lower inventory carrying costs, Raise ROI Leaner operations and higher service levels

Reduce labor, inventory, and out-of-stocks

MIT professor David Simchi-Levi writes, Retailers are expected to be the main beneficiaries of RFID implementation.45 He quotes a study by AT Kearney46 saying that retailers can expect three primary benefits: Reduced inventory: A one-time cash savings of about 5 percent of total system inventory is achieved by reducing order cycle time and improving visibility, which leads to more accurate forecasts. A shorter order cycle time yields a reduction in both cycle stock and safety stock. An improved forecast reduces the need for safety stock. Store and warehouse labor reduction: An annual 7.5 percent reduction in store and warehouse labor expenses. Reduction in out-of-stock items: A yearly recurring sales gain of 7 cents per dollar caused by fewer out-of-stock items and less theft. According to the AT Kearney study, a retailer with a wall-to-wall RFID system, which includes readers and actionable real-time information that feeds corporate databases, can save 32 cents on every dollar in sales, after taking into account the cost of implementation.47

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Redesign business processes

Business process redesign is the hidden treasure of RFID. Process redesign can eliminate unnecessary work, maintain an uninterrupted flow of goods through the supply chain, identify the location of items in more processes with less effort, analyze the actual movement of goods, and identify and remove choke points. RFID deployments that support compatibility, interoperability, and integration provide compelling business value propositions attributable to the many business processes they improve,48 including:
Invoice reconciliation Electronic proof of delivery Track and trace New item introduction Promotions management Out-of-stocks Inventory management Product recall Reusable asset tracking Counterfeit protection Warehouse operational effectiveness Improved demand forecasting Product allocation management Theft deterrence and detection Obsolescence and remnant management Diversion management Supply chain latency reduction.

According to Gartner Group, the main business cases for [the retail] industry revolve around complex processes such as store operations management, invoice reconciliation, in-store merchandising management and vendor managed inventory.49 Statistics bear the Gartner statement out. A survey of about 60 companies and 75 different supply chains concluded that companies with mature business processes have 28 percent lower inventory levels than companies with immature processes. The survey found that, for companies to be as efficient and profitable as possible, they need to invest in both IT infrastructure and business process improvement. Without mature business processes, even companies with the top 20 percent, best-in-class IT setups were found to have 26 percent higher days of supply, 28 percent higher inventory-carrying costs, and 7 percent lower profit. An analysis of the survey data concluded that implementing just IT systems without their supporting business processes is a waste of money.50

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Blueprints for implementation

Blueprint #1: Electronic proof of delivery 51
A team of researchers from the Massachusetts Institute of Technology (MIT) analyzed seven months worth of receiving information provided by Wal-Mart and several of its top 100 suppliers, determining that pennies per case of cost can be eliminated from the RFID-enabled supply chain. Their research, reported on EPCglobals Web site (www.epcglobalinc.org), concluded that:
Fifty-eight percent of receiving discrepancies were due to incorrect identification of the product at receipt. EPC data could refute the received amount over or short 53 percent of the time. The average EPC read rate was 89 percent, so the EPC data is adding value without having to achieve

100 percent read rates at each read station.

The value of using EPC technology to reduce discrepancies can vary from $0.01 to $0.03 per case at least.

Retailer benefits
Reduced downstream supply impacts, including fewer out-of-stocks Greater accuracy in shipping, leading to better customer satisfaction Fewer hours spent administering claims.

Supplier benefits
Fewer freight deductions due to more accurate receipt and payment for goods Less ambiguity in reconciliation evidence leading to greater recovery of funds Faster reconciliation leading to decreased working capital Lower threshold for identifying deductions, leading to greater recovery of funds Improved shipment accuracy on both pallets and trucks.

Blueprint #2: Improving retail promotional execution 52

An MIT study of a promotional collaboration between Wal-Mart and Gillette found that stores that execute promotions on time experience 19 percent sales lift over stores that dont. Situation The study Secondary promotional displays are a key element to driving impulse, incremental sales, which is reported on EPCglobals Web site, notes that a lack of timely movement of displays from the back room to the sales floor:
Hinders expected sales lifts and store profit Jeopardizes on-shelf, in-stock levels Makes inefficient use of time-sensitive, premium-priced products and real estate Delays replenishment ordering Increases idle, non-productive inventory.

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

How EPC meets the challenge

The experiments by Gillette and Wal-Mart showed how retailers and suppliers can collaborate to significantly increase sales and improve processes by using RFID technology to expand supply-chain visibility. Obtaining read rates between 97 and 100 percent, they used Wal-Marts Retail Link information system to monitor the movement of promotional displays through the supply chain from the distribution center to the back room and the sales floor. They also tracked whether inventory and displays remained in the back room past the promotional start date. The EPC data enabled supplier retail operations (SRO) representatives to better allocate resources to make specific store improvements, resulting in immediate sales increases. These strong results enable robust inventory tracking, especially at the store level, as well as efficient movement of products from the distribution center to the store. They found that the improved execution of retail promotions benefited the customer, the retailer, and the supplier. Consumer benefits
Satisfying shopping experience Good return on consumer investment of shopping time No rain checks or return visits required.

Retailer benefits
Nineteen percent sales lift for stores that execute promotions on time Reinforces store loyalty Improves utilization of inventory and capital.

Supplier benefits
Nineteen percent sales lift, driving brand and category growth Reinforces brand loyalty Speeds up replenishment cycles Improves forecasting and execution measurement, which can be applied to future promotions.

Process enablers
The authors concluded that the benefits described above can be obtained with relatively low-level investments in EPC technology, including the following: Retailers: Retailers need read points that provide information on the location of the promotional items at the distribution center, the store back room, the sales floor, and the store trash compactor. Retailers need to make this EPC information available to suppliers. Suppliers: Suppliers (or third-party packagers) need to tag promotional cases or displays, capture the data from all shipped promotional items, obtain access to EPC reads from the retailers EPC network, and track the location of promotional items using a simple spreadsheet.

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Process changes: Retailers and suppliers need to share EPC data with supplier retail operations representatives. The SRO staff need to use the data to check the location of promotional inventory, assist in the movement of non-compliant items, and adapt their store visit schedules to focus on improving promotional execution. Potential future benefits: More fully automated promotional monitoring systems could deliver a number of additional benefits, including:
Measurement of execution performance and monitoring of key performance indicators (KPI) Development of trend analyses to identify low performers and recommend process changes to increase

sales and profits

Tracking of items that are out of synch with promotion start and end times Provision of decision support regarding proper inventory push for future promotions and product launches.

Blueprint #3: Capitalizing on an information ecosystem

RFID can be used to create intelligent physical assets ranging from cases and pallets to smart suits and smart shelves, but retailers and suppliers alike need to collaborate in order to achieve maximum benefit from these innovations.53

IT infrastructure as competitive advantage

In The World Is Flat, Thomas Friedman points out that when Wal-Mart started out in the 1960s, it was just 4 or 5 percent the size of Sears and Kmart.54 Wal-Mart itself acknowledges that its low prices are derived from efficiencies Wal-Mart has invested in.55 Friedman says, By investing early and heavily in cutting-edge technology to identify and track sales on the individual item level, [Wal-Mart] made its IT infrastructure a key competitive advantage that has been studied and copied by companies around the world. We view Wal-Mart as the best supply chain operator of all time, says Pete Abell, retail research director at high-tech consultancy AMR Research Inc. in Boston.56

Unprecedented support from suppliers

Retail Linkwhich is central to Wal-Marts supply chain managementhas approximately 100,000 registered users who work at 40,000 companies and run 350,000 weekly queries of the 583-terabyte data warehouse that contains a rolling 104 weeks worth of point-of-sale information.57 A whole community of users has grown up around Wal-Marts information ecosystem, a self-contained universe of symbiotic, synergistic data that nourishes the enormous number of organizations that access it. Retail Link is an organic system that continues to grow and evolve as new streams of data and users are added and new forms of output and analysis evolve.58 Of all the ways Wal-Mart has distinguished itself within the retail industry, one of the most fascinating and truly unique is how the existence of its Retail Link system and the desire of suppliers to leverage the data it provides spawned a worldwide network of user groups, writes DSN Retailing Today. A total of 49 user groups are spread around the world, and more are forming. The Northwest Arkansas chapter alone has 600 member companies, with an average monthly meeting attendance of 120 to 150. In addition, Wal-Mart gets input on the

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

system from a steering committee, CIO summits, and a presidents group that meets with Retail Link administrators twice a year.59 Whats really significant is the amount of time suppliers devote to better understanding and utilizing this information system. The reason is simple: Use Retail Link and it will grow your business at Wal-Mart, says Dan Phillips, Wal-Marts vice president of merchandising systems.60

Benefits of collaboration
To understand how an RFID-enabled information system like Retail Link can benefit other retailers, consider what kinds of financial impacts could be generated by:
Streamlining new product introductions from 10 12 days to one or two Preformatted reports on sales, in-stocks, margins, and goods in transit Helping suppliers focus on managing exceptions Understanding products sales performance on a store-by-store basis Seeing when merchandise arrives at a store and when it is taken to the sales floor Better understanding and managing sales discrepancies between stores Having supplier user groups, CIO summits, and an advisory board devoted to maximizing sales through

your stores. Wal-Mart is not alone in reaping the benefits of RFID-enabled collaboration throughout the supply chain. Best Buy: In spring 2005, Best Buy brought representatives from movie studios and suppliers together to communicate its RFID strategy and make sure their trading partners were on board with plans to maximize revenues from anticipated spikes in consumer demand. We needed to make them aware as a community and as an industry, so that they are fully supporting us, said CEO Robert Willette. You cannot do it alone. Best Buy got a fantastic reception from suppliers, has increased on-shelf availability about 10 percent, and is in a stronger position to capture the 70 percent of revenues that can be generated by movie titles during the first week they are available on DVD.61 Pharmaceuticals: Even the pharmaceutical industry, which has been reluctant to share information in the past, is moving forward with cooperative plans. Drug makers recognize that RFID offers new levels of assurance in product integrity, security, and theft prevention. The technology also provides faster and easier tracking and greater consumer protection in case of a product recall, such as the Tylenol scare more than two decades ago.62 Analysts including Aberdeen Group63 and Forrester,64 and even RFID component manufacturers,65 have recognized that RFID is, at its essence, a collaborative technology. It offers retailers and their trading partners an unprecedented window into their own unique internet of things. This expanded universe of accurate, specific, real-time information creates new opportunities to manage the flows of objects, work, information, and revenue for maximum profitability and customer satisfaction.

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Keys to successful RFID implementations

To create strategic RFID implementations that yield bottom-line business benefits, retailers need to:
Recognize the paradigm shift this technology represents Focus on business results Choose the right solution partners Take a phased approach.

Recognize the paradigm shift

The most fundamental shift represented by this technology is the opportunity to transform business processes and build collaborative relationships with trading partners. Much has been written about the volume of data to be generated, but the bigger challenges lie in capturing the data consistently under all conditions and making appropriate views of it available to users throughout the extended enterprise, ranging from employees to trading partners to customers. To successfully implement RFID, organizations must be able to capture new data in new ways at the edge of the network under all sorts of real-world conditions, including high humidity and rain, extremes of heat and cold, air turbulence, movement, and even loss and accident. This in turn means assuring the health of those remote tags and readers, ensuring they are operating consistently, and effectively administering all these unique nodes. A 2006 survey of companies across multiple industries indicated that while strengthening the technical infrastructure on which RFID sits is a critical element of wide scale deployment, implementation strategies must also account for differences in processes and workflows, even within the same function in different locations. In addition to managing, analyzing, and distributing large streams of data, companies must consider potential impacts on corporate strategies driving network design, enterprise application integration, and business intelligence. 66 The reports recommendations for action 67 include:
Align plans for broad deployment with technical infrastructure strategies. Reevaluate the role and deployment of RFID middleware, which is evolving rapidly. Select technologies that provide flexibility and scalability. Integrate RFID to benefit multiple organizations and applications. Use RFID strategies as the first step in enterprise integration of edge technologies such as sensory,

identification, and mobile devices.

Investigate technologies that can automate administrative tasks across large-scale RFID deployments.

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Focus on business results

It takes vision and teamwork to capitalize on the potential benefits of this new technology. Aberdeen Group recommends that both business-side and IT departments be involved in pilot projects.68 As described in HP: Lessons from the leading edge (see below), Hewlett-Packard took a strategic view and a collaborative approach that have improved processes and business results from the manufacturing plant to the retail floor. To maximize ROI, it is important to carefully analyze current business processes and technology, figure out how to leverage current investments, and determine where the technology can have the greatest bottom-line impacts. Each retailer is unique, and there is no one-size-fits-all application in the retail sector. Whats essential is to get top-quality consulting and integration services in the initial phases in order to capture the data and analyze the processes that can deliver maximum returns to your organization.

Choose the right solution partners

Select vendors for resilience and a strong track record. It would be a mistake to base RFID decisions on the lowest cost of a particular component or a fascinating bit of technology that does not comply with global standards or legacy systems. Choosing vendors based on a best-of-breed niche solution or low-price component misses the opportunity to take business processes to new levels of efficiency, effectiveness, and profitability. Retailers need complete edge-to-enterprise solutions that run on different hardware systems and are part of an integrated, adaptive IT infrastructure that will be a durable foundation for future developments. RFID solution partners need a global view of both business and technology. Ideally, partners should be innovators who work with the latest technologies in tags, antennas, readers, sensors, security, privacy, and systems management. Its important that solution partners actually use RFID in their own operations, collaborate with other trading partners in their own global supply chains, and have a track record of providing successful RFID solutions for other companies. The best solution partners have a thorough understanding of business process design and implementation. Anything less than an integrated consulting engagement is likely to fall short of satisfactory results, and be a costly detour in terms of both time and money.

Take a phased approach

Hewlett-Packard, which is continuously refining RFID implementations in its own supply chain as well as providing solutions to customers around the world, recommends a four-phase approach: RFID discovery and assessment: In this phase, HP helps customers build a vision and strategy, defines business value to be gained, and develops a roadmap for implementation. RFID proof of concept: The second phase includes at least one pilot project, training and support, identifying and responding to concerns, and defining a research and development strategy to produce the desired business results.

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

RFID implementation: The third phase includes development of infrastructure options, managing compliance concerns, installation, integration, and implementation. RFID lifecycle services: Ongoing support helps fine-tune implementations as experience reveals new ways to increase revenues, cut costs, better satisfy customers, refine business processes, and collaborate to capitalize on supply-chain synergies.

HP: Lessons from the leading edge

In 2002, several months before the Wal-Mart and DoD mandates, Hewlett-Packard began its first proof of concept using RFID in its own operations, which constitute the electronics industrys largest supply chain. Hewlett-Packard is:
Number 1 in material spending ($43 billion per year) Number 1 in seven major components Number 1 in contract manufacturing spending ($5 billion per year) Number 1 in electronics industry global logistics procurement ($2.5 billion, representing 545 million boxes

shipped per year). HP has 1 billion customers in 178 countries. Every day, the company delivers an average of 1.3 million inkjet cartridges, 110,000 printers, 75,000 personal systems, and 3,500 servers.

Initial objectives
HP started with three objectives: Increase supply chain efficiency: Reduce cycle time and costs. Improve data collection: Collect information more easily, efficiently, and accurately than manual data entry or barcode scanning. Strengthen customer relationships: Respond to retailer requirements, take the pain out of interactions, and focus on customer-centric activities. HP also wanted to integrate RFID into existing processes, so if they decided in the future to tag 100 percent of a group of products, they wouldnt have to go back and re-engineer. The first two pilots were implemented at product completion sites for consumer printers and inkjet cartridges in Tennessee and Virginia. Because HP does not own these sites, they had to get their business partners to buy in from day one.

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

Real-world implementations
One integrated label: At its printer completion site, HP created one label that includes both the product serial number and the RFID EPC code. They added the new technologyand the information it provides within the existing process at no extra time or labor cost. Full and partial pallets: The time needed to load pallets and confirm and verify orders has been reduced 30 40 percent on full pallets and even more on partial pallets, where orders are verified and confirmed at the same time the pallets are shrink-wrapped. Case-level tagging: HP has tested case-level tagging on inkjet cartridges, its worst-case scenario because ink is a perishable product in a liquid form contained in metal cartridges. In May 2006, they implemented their first Gen2 technology pilot, and with the very first trial got a 100 percent accurate read on their most difficult SKU. While HP needs to perform more testing and evaluation, this technology clearly shows great promise. Item-level tagging: HP is tagging printers at its facility in So Paolo, Brazil, including information on inkjet cartridge expiration dates. HP is testing how this information can improve on current manual processes and verify the FIFO (first in, first out) system currently in place. HP wants to use RFID data to make sure that perishable inkjet cartridges are moved throughout the supply chain on a FIFO basis so they arent losing precious shelf life in a darkened warehouse, destined to become a mark-down or write-off instead of a money-maker.

Bottom-line benefits
HP has achieved significant benefits through implementing RFID, including:
23 percent reduction in supply chain costs over the past two years 40 percent improvement in logistics turnaround times 50 percent reduction in reconciliation staffs at both retailers and suppliers.

Overall, 80 percent of the reconciliation claims that HP receives from retailers turn out to be erroneous. In other words, 80 percent of the time and money HP and its retailers spend resolving shipping and receiving discrepancies can be freed up for more customer-centric activities when they have access to the same accurate data throughout the supply chain. HP also discovered that workers actually compete to get RFID orders to work on because those pallets are so much simpler and easier to build, label, count, verify, and load.

Transformative technology
HP approached the introduction of this technology as a fundamental business process they wanted to seamlessly integrate into their other business processes. They viewed it as strategic, not tacticaland it has turned out to be not just strategic, but synergistic: a change in which the sum is truly greater than the parts.

Ongoing innovation
HPs So Paolo facility performs the companys first full-range RFID implementation including the manufacturing and completion processes, inbound and outbound distribution, warranty repairs, and returns. The company is tagging printer chassis before assembly and gathering RFID data during the building process, creating what HP refers to as the product DNA. This will help identify and correct problem components and is expected to speed up repairs and improve customer satisfaction.

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

The company is continuing to fast-track RFID implementations throughout its global supply chain, which extends from Asia to South America, Europe, and the U.S.

The retail store of the future

In the future, the internet of things will inhabit sentient environments69 that are conscious of the location, condition, and movement of things and can respond to those changes in appropriate ways. For example, a retail manager will be able to monitor real-time sales from the store floor and know precisely why a promotional product isnt moving. Is it because merchandise is still in the back room? Was the display mistakenly taken to the trash compactor? Or did a stocker bury the items in the hardware section instead of transferring them to the seasonal area? When key decision-makers have real-time access to key performance indicators, they can quickly diagnose a problem, take appropriate action to solve it, and free front-line employees to focus on customer-centric activities. So, instead of sales associates scouring the back room in response to customer requests for out-of-stocks, they can show customers the exact location of the product on the sales floor and use the opportunity to sell related products along the way. RFID can achieve market differentiation by assuring customers of disease-free meat, the pedigree of pharmaceuticals, and other aspects of product safety and security.

METROs store of the future 70

The Extra supermarket in Rheinberg, Germany, is one of about 2,370 operated by METRO Group, Germanys largest retailer and the fifth-largest worldwide. At METROs Future Store in Rheinberg, tablet PCs and PDAs connect wirelessly to the companys back-office systems, enabling staff on the sales floor to answer even the most arcane customer question. Tablet PCs on shopping carts help customers find what they want on their own. These personal shopping assistants (PSAs) can display maps of the stores layout, show prices, suggest complementary products, and even display a shopping list the customer created on the stores Web site before leaving home. Because each PSA is aware of its own location at all times, messages can highlight desired items literally within the shoppers reach. When customers want to buy produce, an electronic scale automatically distinguishes between apples and oranges by sensing the items color, size, and texture. At checkout, the total purchase can be wirelessly transferred to a payment terminal. METRO Group CIO Zygmunt Mierdorf says, If the shopping event becomes more adventurous and more attractive, we assume that one benefit is customer retention. He adds that RFID technology also offers clear competitive advantage with regard to cost. 71

Becoming demand-driven
When retailers collaborate with trading partners and profit from the information ecosystem, they are on the road to becoming a demand-driven enterprise, in which they are no longer pushing products on customers but are

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

providing merchandise in response to the pull of customer demand. RFID technology allows retailers to know exactly which product from which manufacturer with what expiration date is inside every pallet and box at every point throughout the entire supply chain. The day is not far off when suppliers will manage their own inventories at the store level, and even shelf-by-shelf. Author Thomas Friedman writes, RFID technology and sophisticated order analysis tools that monitor even the most minute market activity are rapidly leading us toward industrys holy grailabsolute balance in supply and demand.72

Conclusion
The economic potential and social benefits of RFID technology have been acknowledged by experts from academia, business, and politics.73 In a 2004 survey by RFID manufacturer Intermec of 616 supply chain managers across Europe, more than 50 percent of the managers reported that RFID already had delivered improved customer service, increased profitability, greater compliance with customer mandates, and faster sales cycles.74 RFID implementations are expanding the scope of supply chain management from internal functional excellence to collaboration with other members of the supply chain, and then to synchronization of activities across the whole supply chain.75 Beyond that, RFID has enabled a level of symbiosis and synergy among organizations that was unheard of in the past. Wal-Marts Retail Link is one example of this new level of interrelationship and mutual support. Some companies may have reluctantly begun to explore RFID technologies in response to mandates or as a frantic scramble to stay even as the competitive playing field changes underneath them. But the very best and most successfulwill realize that this is, in fact, a paradigm shift and an opportunity to take their business to a whole new level. It is retailersthe customer-facing organizations sitting on top of complex, interwoven, global supply chains that have unmatched opportunities to be in the forefront of developing new levels of business agility, adaptability, and innovation that have only become possible with the commercialization of RFID.

About BEA
BEA Systems, Inc. (NASDAQ: BEAS) is a world leader in enterprise infrastructure software, delivering standardsbased platforms for managing SOAs even in heterogeneous IT environments. Customers depend on BEA Tuxedo , WebLogic , and AquaLogic product lines to reduce IT complexity and leverage existing resourcesto achieve a state of Business LiquidITy where enterprise assets are freed up to deliver maximum business value. Find out more at bea.com.

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BEA White Paper RFID for Retail: Blueprints for Bottom-Line Benefits

References
1 RFID (Radio Frequency Identification) is an automatic identification method based on remotely retrieving information via radio waves from miniature electronic circuits called RFID tags. The tags can be attached to pallets, cases, individual items, and even animals and humans. Information from the tags is collected by readers (often the size of a pizza box) and antennas that can be installed in a wide variety of physical locations on the edge of computer networks, ranging from store shelves and trash compactors to shrink-wrap machines and moving vehicles. IT systems transmit the information for data validation, viewing, analysis, and action. The RFID Benchmark Report: Finding the Technologys Tipping Point, p. i, Aberdeen Group, December 2005. 2005 survey conducted by DT&T and Retail Systems Alert Group, reported in RFID Gazette, May 3, 2005. (Reference from the white paper HP OpenView for the RFID environment: supporting an uninterrupted supply chain at hp.com.) Research commissioned by the Computing Technology Industry Association reported in The RFID transformation: automotive, consumer goods, and transportation lead the way in Industrial Engineer 37.11, November 2005: 12(1). Thomson Gale Document Number A138815622. RFID technologys price tag decreases through standardization. In Hydrocarbon Processing 85.3, March 2006: 19(1), by Wendy Weirauch. Thomson Gale Document Number A143828344. RFID spending increases (Data Management & Analysis) R&D 48.1, January 2006: 12(1). Thomson Gale Document Number A141847227. The X Internet Unleashes Real World Awareness Services Revolution, by Navi Radjou, VP, Enterprise Applications, Forrester Research, in RFID and Beyond: Growing Your Business Through Real World Awareness, p. 244, by Claus Heinrich, Wiley Publishing, Inc. 2005. Ibid., p. 131. The RFID Benchmark Report, p. 8. In 2005, The World Is Flat: A Brief History of the Twenty-First Century received the first Financial Times and Goldman Sachs Business Book of the Year Award, and author Thomas Friedman was named one of Americas Best Leaders by U.S. News & World Report. The World is Flat: A Brief History of the Twenty-First Century, pp. vii and 7, by Thomas L. Friedman (New York: Farrar, Straus & Giroux, 2005). Ibid., p. 152. Ibid., p. 153. Complementary GS1 Solutions for Collaborative Supply Chains: Global Data Synchronisation Network (GDSN) & the EPCglobal Network, 2006. Available at www.gs1.org. Could broad anti-RFID laws cause problems? by Anne Broache, CNET News.com, July 14, 2005. The Impact of RFID on Supply Chain Efficiency, by David Simchi-Levi, MIT, Engineering Systems Division, in RFID and Beyond, p. 212. Who gains, who loses, from RFIDs growing presence in the marketplace by Knowledge@Wharton, March 14, 2005, special to SearchCIO.com. Talking RFID with Wal-Marts CIO, in online interview with BusinessWeek Online reporter Olga Kharif, Jan. 29, 2004; available at hp.com. Could broad anti-RFID laws cause problems? CNETNews.com. New Wal-Mart CIO steams ahead with RFID, by Jo Best, ZDNet News, April 20, 2006. Forrester study quoted in Radio Frequency Identification (RFID): Why Reusable Asset Tracking Is the Place to Start, p. 12, July 2005, by Dr. Andrew White, research fellow, and Dr. Hugh Wilson, senior research fellow, of the Cranfield School of Management, and Peter Cook, sector director, BEA Systems, Inc. Available at bea.com. RFID Journal projection quoted in TOSHIBA TEC launches worlds first direct print-on-tag RFID solution, in IT Reseller Magazine, Jan. 29, 2004. HP Takes RFID End to End, by Mark Roberti, RFID Journal, February 28, 2006. The big picture: Playing tag with plastic, The Engineer, February 13, 2006. Thomson Gale Document Number A142128859. Philips demonstrates world-first technical feasibility of 13.56-MHz RFID tags based on plastic electronics, press release on www.research.philips.com, February 6, 2006. RFID technologys price tag decreases through standardization, Hydrocarbon Processing. The RFID transformation: automotive, consumer goods and transportation lead the way, Industrial Engineer. The RFID Benchmark Report, p. 8. Information in this section from The RFID Benchmark Report: Scaling RFID Implementations from Pilot to Production, p. i, Aberdeen Group, June 2006. Talking RFID with Wal-Marts CIO, BusinessWeek Online. RFID tags for chickens? Digital Angel says tracking temperature of poultry could be early warning system for avian flu, by Ephraim Schwartz, InfoWorld.com, Dec. 5, 2005. Thomson Gale Document Number A139448448. RFID saves baby, Industrial Engineer 37.11, November 2005. Thomson Gale Document Number A138815623. RF-IDing the dead, by Alorie Gilbert, CNET News.com, January 12, 2006. RFID tags for chickens? InfoWorld.com. Radio Frequency Identification (RFID): Why Reusable Asset Tracking Is the Place to Start, pp. 12, 18. Recap of the RFID ROI Summit, by Joe McKinney, RFID Update, Feb. 8, 2006. Ibid. Ibid. Refining retail link, by Mike Troy, DSN Retailing Today, September 12, 2005.

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40 Information in this section taken from Best Buy affirms commitment to item-level tagging, by John R. Johnson, RFID Watch Weekly in DCVelocity, May 10, 2006. 41 Retailer rolls out RFID: drugstore chain is the first, Industrial Engineer 38.2, February 2006: 21(1). Thomson Gale Document Number: A142480918. 42 Radio Frequency Identification (RFID): Why Reusable Asset Tracking Is the Place to Start, p. 14. 43 Information in this section is from Finland Post: Reusable asset tracking for major Finnish logistics company, November 2005. Available from bea.com. 44 Who gains, who loses, from RFIDs growing presence in the marketplace, Knowledge@Wharton. 45 The Impact of RFID on Supply Chain Efficiency, p. 214. 46 Ibid., p. 215. 47 Ibid., p. 215. 48 Complementary GS1Solutions for Collaborative Supply Chains, p.2. 49 Positions 2005: RFID is Set to Redefine Industry Processes, p. 10, by Jeff Woods, Gartner Research. ID Number: G00130292. 50 RFID and Beyond, p. 121. 51 Information in this section is from the EPCglobal Web site paper EPC Changing the CPG Industry: Electronic Proof of Delivery (EPOD), 2006, at www.epcglobalinc.org. 52 Information in this section is from the EPCglobal Web site paper EPC Changing the CPG Industry: Improving Retail Promotional Execution, 2006, at www.epcglobalinc.org. 53 Radio Frequency Identification (RFID): Why Reusable Asset Tracking Is the Place to Start, p. 10. 54 The World Is Flat, p. 159. 55 Ibid., p. 158. 56 Ibid., pp. 155156. 57 Refining retail link, DSN Retailing Today. 58 At Wal-Mart, Worlds Largest Retail Data Warehouse Gets Even Larger, by Evan Schuman, eweek.com, Ziff Davis Internet, October 13, 2004. 59 Refining retail link, DSN Retailing Today. 60 Ibid. 61 Information in this section taken from Best Buy affirms commitment to item-level tagging, RFID Watch Weekly. 62 An Eye on RFID ROI, by Colin C. Haley, internetnews.com, June 7, 2004. 63 The RFID Benchmark Report, p. 9. 64 Recap of the RFID ROI Summit, RFID Update. 65 The failure of RFID, by Sandra Gittlen, computerworld.com, June 15, 2006. 66 Information in this section from The RFID Benchmark Report: Scaling RFID Implementations from Pilot to Production, p. i, Aberdeen Group, June 2006 67 Ibid., p. ii. 68 The RFID Benchmark Report, p. 21. 69 Sentient environments are described in Sensing and Sensibility, by Jamie Beckett, hp.com, April 2004. 70 RFID and Beyond, pp. 5759. 71 Ibid., p. 119. 72 The World Is Flat, p. 161. 73 Viewpoint: Identifying a need, p. 23, The Engineer, March 27, 2006. Thomson Gale Document Number A143799563. 74 Radio Frequency Identification (RFID): Why Reusable Asset Tracking Is the Place to Start, pp. 12, 18. 75 Ibid., p. 18.

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BEA Systems, Inc. 2315 North First Street San Jose, CA 95131 +1.800.817.4232 +1.408.570.8000 bea.com CWP1396E0706-1A