Electronic Products Code

Electronic Product Code Project

Table of Contents

Executive Overview..............................................................................3

Stage 1: Determination of Scope and Objectives..............................................4

Stage 2 - Systems Investigation and Feasibility..............................................4

Stage 3 - Systems Analysis......................................................................7

UPC DFD (Legacy System)......................................................................9

Stage 4 - System Design.........................................................................9

Stage 5 - Detail System Design................................................................10

EPC DFD (New System)........................................................................14

Stage 6 - Implementation....................................................................... 14

Stage 7 - Changeover............................................................................15

Stage 8 - Evaluation and Maintenance.........................................................17

Appendix A - Cost Benefit Analysis Chart...................................................19

References..............................................................................................23

Executive Overview:

As a small grocery chain we are currently struggling to maintain our revenue stream and profitability against the competitive threats of the global warehouse chains (Costco, Wal-Mart, etc). We continue to find ourselves behind the curve in this competitive situation. These larger retailers have been able to use their greater resources and economies of scale to not only beat us on cost but also industry innovation. According to the electronic periodical Baseline, "Several dozen retailers and suppliers, including Unilever, Coca-Cola, Kraft Foods, and Wal-Mart have signed on to the next generation UPC called the Electronic Product Code (EPC)", (Mullin, 2002). With the implementation of this technology a customer will be able to virtually walk through a store, collect all their groceries, and walk out without ever having to stop for a cashier or checkout procedure. The electronic retail chain Best Buy, which sells electronic devices along with household appliances, implemented this technology in many of its stores and has increased revenue, along with customer satisfaction due to always having proper stock on hand. We believe that this innovation will have a profound effect on our customer base, especially the highly desired, short attention span, and technically astute demographic of the 20-45 year olds. There are many other large retailers looking at this technology for the same reason (increased revenue) and studies show that smaller retailers would be willing to implement this same technology if initial installation costs decreased (2002). Our grocery chain is currently using the UPC system which is pretty much the standard for all grocery retailers both large and small. We believe that by working with the EPC consortium we can implement this technology cost effectively. To be competitive, increase our revenue, and maintain a high return on that revenue we must pursue this project

Stage 1 - Determination of Scope and Objectives

The general goal of this project is to evaluate the feasibility of and outline design requirements for replacing the current Universal Product Barcode (UPC) system with a next generation Electronic Product Code (EPC) system for a small chain of grocery stores. The EPC system uses new industry standards and Radio Frequency Identification (RFID) to track inventory and gather information by embedding chips into merchandise. We will be addressing the business objectives, overview of current process (UPC), project constraints, functional requirements, new business process model, design requirements, and cost/benefit analysis. This project which is the implementation of the EPC/RFID (Electronic Product Code / Radio Frequency Identification) technology will create a leaner and more efficient process for managing our inventory, as well as, allow us to become an early adaptor of a new process that we believe will provide a competitive advantage in the very near future. The challenge for all stakeholders in this project will be to migrate from the current industry standard UPC system to the next generation EPC system.

Stage 2 - Systems Investigation and Feasibility

During the investigation we've found that many vendors are willing to help absorb the small cost of EPC embedded products since the current cost is down to $0.05 per product. The absorption rate is determined by the quantity ordered in a given time frame. This is due to the benefit they will receive on a quarterly basis, since there will be no waiting for the grocery stores order submission. Customer acceptance is another potential issue; privacy concerns and fear of new technologies may make the customer reluctant to continue to shop at our store but we feel we can curtail these issues by making the customer aware of the new technology and showing them how it provides them a more error free shopping experience in regards to speed of checkout, stock shortages, and less checkout errors.

According to the cost-benefit analysis we found that switching over from the old UPC system to the new EPC system will provide a huge cost benefit. The new system helps to eliminate the high expenditures associated with the costs from hiring inventory specialists to come in on an annual basis and complete store wide inventory audits. It will also help eliminate the enormous costs associated with the time and personnel needed to do daily, weekly, and monthly inventories and to initiate and process orders for additional product.

Using the calculator provided by AutoID and utilizing the default values provided produces a cost savings on average of 46.9 million dollars per year. This is demonstrated in the table below:

As you can see this will not only be an increase in efficiency and time savings