Case
Teaching Notes
Supplementary Resources
Abstract
This case was developed in close collaboration with a global manufacturer, GenTech, in the retail industry. The case study is directed at senior undergraduates or MBA students taking courses in innovation, information systems, or technology management. Students are introduced to the development of the electronic product code (EPC) and its network, which some believe to be the ‘next big thing’ after the internet, or the ‘internet of things’. The case provides first hand insights into the innovation process of the EPC Network since its inception in the AutoID centre based at MIT and Cambridge University. Students are asked to examine the organising vision of the EPC Network as conceptualised by different stakeholder groups, and to suggest next steps/challenges for GenTech's adoption strategy. A key aspect of this strategy is to develop and present a convincing business case to senior management for implementing EPC within GenTech.
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
Appendix I – The EPC Technology
The Auto-ID technology consists of a number of components that together provide the ability to uniquely identify and obtain real-time, global information about an object. The major components of the Auto-ID technology are:
- Electronic product code
- RFID tags
- RFID readers
- Savant
- Object name service
- Physical mark-up language
All these components together form the approach used by the Auto-ID Centre to develop a ubiquitous real-time automatic identification solution, by linking objects to data and information in a global network. Figure 1 shows how the components are linked together.
Figure 1 The Auto-ID architecture
Appendix II – Process-based Evaluation
Adapted from: Brian Subirana, B., Eckes, C., Herman, G., Sarma, S., Barrett, M., Malone, T. W. (2003) “Measuring the Value and Productivity of Auto-ID/RFID Technology using a Process-Based Approach” Auto-ID Labs, Research Paper Number: AIL-1
Value Generated by RFID – “Receive Physical Resource” Process | ||
As-Is | To-Be | |
Process duration (in seconds) | 265 | 45.00 |
Process duration (in minutes) | 4.42 | 0.75 |
Saved | 3.67 | |
% improvement | 83% | |
Pallets per hour | 14 | 80 |
Pallets per week (constant) | 7000 | |
Barcode labels per pallet | 2 | |
Hours per week to perform process | 515 | 88 |
Variable Costs | ||
Cost per hour of fork truck operator | $12.00 | |
Cost per hour of fork truck | $3.00 | |
Cost per barcode label | $0.02 | |
Cost of process – fork truck and operator | ||
Per week | $7,729.17 | $1,312.50 |
Per year | $401,916.67 | $68,250.00 |
Cost of process – barcode labels | ||
Per year | $13,104.00 | $0.00 |
Total cost of process per year | $415,020.67 | $68,250.00 |
Savings per year | $346,770.67 |
Input Variable to ROI Model – “Receive Physical Resource” Process | |
Constants | |
Cost of Capital | 8% |
Sales Growth Rate | 4% |
Tax Rate | 36% |
Tag Cost Burden | 7% |
System Integration Cost Burden | 8% |
Maintenance/Other Cost Burden | 6% |
Reader Cost Burden | 100% |
Antenna Cost Burden | 100% |
Year | |||||||
Varying year-over-year | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
Cost of Tags | $0.05 | $0.05 | $0.05 | $0.05 | $0.05 | $0.05 | $0.05 |
Number of Tags | 7,500,000 | 7,800,000 | 8,112,000 | 8,436,480 | 8,773,939 | 9,124,897 | 9,489,893 |
Cost of Readers | $1,500.00 | $1,500.00 | $1,000.00 | $700.00 | $500.00 | $400.00 | $300.00 |
Number of Readers | 3 | 0 | 0 | 0 | 0 | 0 | 0 |
Cost of Antennas | $250.00 | $200.00 | $150.00 | $120.00 | $100.00 | $100.00 | $100.00 |
Number of Antennas | 6 | 0 | 0 | 0 | 0 | 0 | 0 |
System Integration Costs | $200,000.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
Maintenance and Other Costs | $10,000.00 | $10,000.00 | $10,000.00 | $10,000.00 | $10,000.00 | $10,000.00 | $10,000.00 |
Depreciation Schedule | 33% | 33% | 34% | 0% | 0% | 0% | 0% |
Discounted Cash Flow – “Receive Physical Resource” Process | |||||||
Year | |||||||
1 | 2 | 3 | 4 | 5 | 6 | 7 | |
Value | |||||||
Receive Physical Resource | 346,771 | 360,641 | 375,067 | 390,070 | 405,673 | 421,900 | 438,776 |
Total Value | 346,771 | 360,641 | 375,067 | 390,070 | 405,673 | 421,900 | 438,776 |
Costs | |||||||
Cash Out – COGS | |||||||
Tags | 26,250 | 27,300 | 28,392 | 29,528 | 30,709 | 31,937 | 33,215 |
Readers | 4,500 | - | - | - | - | - | - |
Antennas | 1,500 | - | - | - | - | - | - |
Maintenance/Other | 600 | 600 | 600 | 600 | 600 | 600 | 600 |
Total Cash Out – COGS | 32,850 | 27,900 | 28,992 | 30,128 | 31,309 | 32,537 | 33,815 |
Cash Out – Assets | |||||||
System Integration | 16,000 | ||||||
Total Cash Out – Assets | 16,000 | - | - | - | - | - | - |
Cash Out – Taxes | |||||||
COGS | 32,850 | 27,900 | 28,992 | 30,128 | 31,309 | 32,537 | 33,815 |
Depreciation Expense | 5,280 | 5,280 | 5,440 | - | - | - | - |
Taxes @ 35% | 111,111 | 117,886 | 122,629 | 129,579 | 134,771 | 140,170 | 145,786 |
Total Cash Out – Taxes | 111,111 | 117,886 | 122,629 | 129,579 | 134,771 | 140,170 | 145,786 |
Total Costs | 159,961 | 145,786 | 151,621 | 159,707 | 166,080 | 172,708 | 179,601 |
Net Value | 186,810 | 214,855 | 223,446 | 230,363 | 239,593 | 249,192 | 259,175 |
Net Present Value | 186,810 | 197,115 | 188,070 | 177,882 | 169,734 | 161,958 | 154,538 |
Total NPV | $1,236,106.82 | ||||||
Total Investment | $881,641.59 | ||||||
ROI | 140% |
Appendix III – Privacy Concerns Emerging
The rise of sites such as
- www.stoprfid.org “Protect your privacy: Don't buy items that contain tracking devices”
- www.notags.co.uk “UK consumers against the pervasive use of RFID”
Appendix IV – Concept Change
Radiofrequency Identification (RFID) | Following decades of research and development, the 1980s saw full-scale commercial implementations of RFID, its primary use being in harsh environments where barcodes were not as effective. An RFID system consists of both RFID tags, attached to the items to be identified and contains the relevant identification number, as well as readers and antennae, used to read the tag information. |
Electronic Barcode | Often used as a simplified explanation for RFID. |
Auto-ID | Automatic identification, as a concept, has been around for a long time. In October 1999 the concept becomes part of the name of a group working towards the development of a ubiquitous automatic identification network i.e. the Auto-ID Centre. The integrated set of technologies developed at the Centre is named Auto-ID. RFID tags and readers are part of the Auto-ID technology and a wider communication infrastructure allowed the dream of global real-time tracking to become a reality. |
Electronic Product Code (EPC) | The next generation Universal Product Code, often referred to as UPC or bar code. One of the components of the Auto- ID Centre's proposed Auto-ID technology, the EPC strictly refers to the unique number used to identify a product. |
The EPC Network | The EPC Network replaces Auto-ID as the name for the integrated set of technologies developed at the Auto-ID Centre. After the Auto-ID Centre was closed down, EPCglobal was formed on 1st November 2003 to drive the further development and adoption of the EPC Network. |
Radio Barcode | Tesco refers to the RFID tags used in its automatic identification implementation as radio barcodes. |
Intelligent Label | Marks & Spencer refers to their non-EPC tags as intelligent labels in their successful pilot for men's suits |
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved