BRIDGE WP07 Textile Industry - Business Case

Building Radio frequency IDentification for the Global
Environment
Supply Chain Management in the European

Textile industry
Business Case
Authors: GS1 Germany & WP7 partners
December 2007
This work has been partly funded by the European Commission contract No: IST-2005-033546
About the BRIDGE Project:
BRIDGE (Building Radio frequency IDentification for the Global Environment) is a 13 million
Euro RFID project running over 3 years and partly funded (€7.5 million) by the European
Union. The objective of the BRIDGE project is to research, develop and implement tools to
enable the deployment of EPCglobal applications in Europe. Thirty interdisciplinary partners
from 12 countries (Europe and Asia) are working together on : Hardware development, Serial
Look-up Service, Serial-Level Supply Chain Control, Security; Anti-counterfeiting, Drug
Pedigree, Supply Chain Management, Manufacturing Process, Reusable Asset
Management, Products in Service, Item Level Tagging for non-food items as well as
Dissemination tools, Education material and Policy recommendations.
For more information on the BRIDGE project: www.bridge-project.eu
This document:
The focus of this report is the whole textile supply chain – beginning at the manufacturer’s
warehouse and ending at the point of sale (POS). Carrefour, gardeur, Kaufhof, and
Northland have calculated a business case for EPC/RFID item level tagging taking into
account their real business processes and data. Since in this document they cannot reveal
most of the actual data due to the sensitive nature of this information, we substantiate our
claim with exemplary calculations in three scenarios using typical input values where
possible. The exemplary calculations closely follow the actual cases from Kaufhof, gardeur,
Carrefour, and Northland, without revealing any sensitive data.
Disclaimer:
This document results from work being done in the framework of the BRIDGE project. It does
not represent an official deliverable formally approved by the European Commission.
Copyright 2007 by GS1 Germany, GS1 Spain, AIDA Center, Universitat Politecnica de Catalunya, Kaufhof
Warenhaus AG, El Corte Inglés, Gardeur AG, COSG (Carrefour)., All rights reserved. The information in this
document is proprietary to these BRIDGE consortium members
This document contains preliminary information and is not subject to any license agreement or any other
agreement as between with respect to the above referenced consortium members. This document contains only
intended strategies, developments, and/or functionalities and is not intended to be binding on any of the above
referenced consortium members (either jointly or severally) with respect to any particular course of business,
product strategy, and/or development of the above referenced consortium members. To the maximum extent
allowed under applicable law, the above referenced consortium members assume no responsibility for errors or
omissions in this document. The above referenced consortium members do not warrant the accuracy or
completeness of the information, text, graphics, links, or other items contained within this material. This document
is provided without a warranty of any kind, either express or implied, including but not limited to the implied
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Revision History
Version Date Author/Revisers Summary of changes

1.0 24 Aug. 07 GS1 Germany Initial Draft
1.1 10. Sept. 07 GS1 Germany, Kaufhof, Adjustment of Business Case
gardeur, Northland calculations
1.3 19 Sept. 07 GS1 Germany, Carrefour Adjustment of Business Case
calculations
1.4 27 Sept. 07 GS1 Germany Revisions of scenario calculations
2.0 24. Oct. 07 AIDA Centre, Kaufhof, Additions to draft and confirmation of
gardeur, Northland, GS1 scenario data
Spain
3.0 9. Nov. 07 AIDA Centre, Kaufhof, Further edits and revisions to create
gardeur, Northland, GS1 final document by GS1 Germany
Spain
4.0 16 Nov.07 BRIDGE Review Further additions and comments
Committee:
Oliver Kasten
Business Case 2/49

Index
1 Introduction...................................................................................................................6
1.1. Objective................................................................................................................ 6
1.2. Working Approach ................................................................................................. 7
1.3. Focus..................................................................................................................... 7
2 Dimensions of a Business Case Calculation..............................................................9
2.1 General company parameters................................................................................ 9
2.2 Collection of actual data in the textile supply chain ...............................................10
2.3 Identification of individual process steps ...............................................................11
2.4 EPC/RFID Implementation Costs..........................................................................12
2.4.1 Hard- and software costs...............................................................................12
2.4.2 Further costs related to an EPC/RFID implementation ..................................14
2.5 Requirements of the calculation tool .....................................................................14
3 Approach for the Business Case Calculation...........................................................16
3.1 Development of Scenarios ....................................................................................16
3.2 Process selection and data input requirements.....................................................16
3.3 Definition of expected results: ...............................................................................18
3.3.1 Cost savings in processes (hard facts) ..........................................................18
3.3.2 Quality improvements through EPC/RFID .....................................................18
3.3.3 Expected effects on business volume (soft facts) ..........................................19
3.3.4 Overall expected financial results ..................................................................22
4 Business Case Calculation ........................................................................................23
4.1 Cost parameters and assumptions........................................................................23
4.2 Definition and calculation of different scenarios.....................................................24
4.2.1 Scenario I: Department Store ........................................................................25
4.2.1.1 General parameters...................................................................................25
4.2.1.2 EPC/RFID installations ..............................................................................27
4.2.1.3 Results ......................................................................................................31
4.2.2 Scenario II: Hyper- and supermarket.............................................................33
4.2.2.3 Results ......................................................................................................36
4.2.3 Scenario III: SME manufacturer.....................................................................38
4.2.3.3 Results ......................................................................................................41
5 Discussion and conclusion .......................................................................................44
5.1 Discussion of all scenario results ..........................................................................44
5.2 Conclusion ............................................................................................................47
6 References ..................................................................................................................48
Business Case 3/49

Abbreviations:
DC Distribution Center
DSD Direct Store Delivery
EAS Electronic Article Surveillance
EPC Electronic Product Code
HW Hardware
NPV Net Present Value
OOS Out of Stock
OSA On Shelf Availability
POS Point of Sale (in this document the cash desk)
RFID Radio Frequency Identification
ROI Return of Investment
SME Small and Medium Sized Enterprises
SW Software
Business Case 4/49

List of tables:
Table 1: Status quo of process efficiency .............................................................................17
Table 2: Soft facts – possible sources for research ..............................................................20
Table 3: General calculation parameters ..............................................................................23
Table 4: Average labour costs in regions..............................................................................23
Table 5: General cost estimations for hardware and software (without tags) ........................24
Table 6: Estimations of lump sum and miscellaneous costs .................................................24
Table 7: General parameters of a department store .............................................................25
Table 8: Tag costs – department store .................................................................................26
Table 9: Implementation progress EPC/RFID.......................................................................26
Table 10: Calculation of installation costs for the department store ......................................27
Table 11: Example of RFID investments in a medium sized department store .....................28
Table 12: Example Process step analysis by the EHI retail institute– store level ..................30
Table 13: EPC/RFID benefits – department store.................................................................31
Table 14: Final results – department store............................................................................31
Table 15: General parameter – hyper- and supermarket ......................................................33
Table 16: Tag costs – hyper- and supermarket ....................................................................34
Table 17: Installation costs – hyper- and supermarket..........................................................35
Table 18: EPC/RFID benefits – hyper- and supermarket ......................................................36
Table 19: Final results – hyper- and supermarket.................................................................37
Table 20: General parameters – SME manufacturer ............................................................38
Table 21: Tag costs – SME manufacturer.............................................................................39
Table 22: EPC/RFID installation costs – SME manufacturer ................................................40
Table 23: EPC/RFID benefits – SME manufacturer ..............................................................41
Table 24: Final results – SME manufacturer.........................................................................42
Table 25: Value of garments and the effects on the payback period.....................................43
List of Figures:
Figure 1: Working Approach.................................................................................................. 7
Figure 2: Process step analysis – time verification store processes and potential benefits ...11
Figure 3: Additional cost next to hard- and software .............................................................14
Figure 4: payback period SME manufacturer........................................................................42
Figure 5: Incoming and outgoing cash flow...........................................................................42
Business Case 5/49

1 Introduction
The clothing sector seems to be one of the most suited industries for EPC/RFID on item
level. The high turnover of garments in the DC, the short time-to market processes, the
continuously changing assortments and finally the different designs, cuts and colours require
an efficient coordination in supply chain processes. Also the average price of each garment
is comparatively high. With an adequate implementation of RFID technology, a positive
return of investment is possible for different business models. Not only large retailers can
profit from EPC/RFID, but also SME manufacturers and retailers. In this report several
business cases are analysed.
The focus of this report is the whole textile supply chain – beginning at the manufacturer’s
warehouse and ending at the point of sale (POS). Carrefour, gardeur, Kaufhof, and
Northland have calculated a business case for EPC/RFID item level tagging taking into
account their real business processes and data. Since in this document they cannot reveal
most of the actual data due to the sensitive nature of this information, we substantiate our
claim with exemplary calculations in three scenarios using typical input values where
possible. The exemplary calculations closely follow the actual cases from Kaufhof, gardeur,
Carrefour, and Northland, without revealing any sensitive data.
The scenarios are based on an implementation of EPC/RFID technology in the whole

company and not only a single EPC/RFID pilot. All required parameters and data were
calculated with an excel-based calculation tool, which was developed by the Research
Center of the University of Dortmund.1
The results show that textile companies have several implementation options in the supply
chain, which can provide benefits. For all three scenarios a positive return on investment in 2
to 3 years could be achieved. This certifies that EPC/RFID is an important technology for the
textile sector in future.
However this report also demonstrates that the adoption of EPC/RFID requires a detailed
analysis of the companies’ processes, particularly the process steps. Also the current
prerequisites of the textile companies’ structure and further developments of the technology
will influence the results of the business case—whether there is a return on investment or
not.
1.1. Objective
The objective of this report is a detailed business case analysis for three selected business
models. It shall give clothing companies an overview of the extent of an EPC/RFID
deployment in the company – whether in a department store, a hyper- and supermarket, or a
manufacturer. These calculations will show, where in the supply chain and in which
processes quantitative and qualitative benefits can be achieved. In addition the report shall
serve textile companies as a general guideline for the execution of such an analysis as the
necessary parameters are identified and described.
The results in the scenarios will not only be applicable to the selected business models but
also to other models such as vertically integrated companies. This is due to comparable
business structures and processes, which makes an adaptation possible.
1
Mannel, A. 2006
Business Case 6/49
1.2. Working Approach
For the business case calculation different parameters were defined. As shown in the
following figure 1 those contain general aspects such as the tagging level and the company
type, but also process related information to identify the “as is” situation of the company. To
determine the EPC/RFID implementation costs will be defined, a detailed process analysis
will be done and the RFID impact will be analysed with a calculation tool. The final results
contain the cash flow, the Net Present Value (NPV), the Return on Investment (ROI) and a
break-even analysis.
Figure 1: Working Approach
This structure will be used to calculate three different scenarios based on the data of different
representative textile companies, which participate in the BRIDGE project. The different set-
ups of the business models and also the dimensions of an EPC/RFID implementation will be
finally evaluated.
1.3. Focus
The focus of this Business Case is a full implementation of EPC/RFID for a textile company.
Thus, this is not a calculation for only one pilot, which would not be feasible and only show a
part of the opportunities of an EPC/RFID implementation. In order to reflect different
business models with their distinct characteristics as identified in the D7.1 Report, three
different business models were selected:
• Department store (Retailer)

• Hyper- and supermarket (Retailer)
• SME clothing manufacturer
For each business model, a scenario with different calculation parameters was developed.
The whole supply chain from the manufacturing warehouse/outgoing area (excluding
production processes) to the POS was considered. The processes with the highest potential
Business Case 7/49
benefits were selected at the manufacturer, the DC, and the stores. In addition, soft benefits,
that will have impact on the turnover of the company were identified and analysed.
Business Case 8/49

2 Dimensions of a Business Case Calculation
For a business case calculation a multitude of different criteria and parameters as well as the
selected processes and the related costs for an EPC/RFID implementation are influencing
the results of the analysis. In this chapter these general influences on the business case
calculation are described. It will give a comprehensive overview which information is used in
the business case analysis conducted in chapter 3.
2.1 General company parameters

This chapter explains the general procedure using a calculation model. Before the whole
supply chain structure of a company will be critically analysed, the following basic
parameters should be defined:
Company type
The analysed company can be a manufacturer, retailer, or a logistics provider.
EPC/RFID tagging level
EPC/RFID can be tagged on items, cases, and pallets. Thus the tagging level needs to be
selected.
Definition of cost calculation parameters
Before the calculation can be carried out, some financial inputs should be defined:
• considered period (in years)

• depreciation period (in years)
• Interest rate (base value)
• Reinvest after expiration of the deprecation period.
Labour Costs for the calculation
The use of EPC/RFID can optimise labour intensive work, which will speed up the lead times.
Due to the global textile supply chain, different wage rates in different countries or regions
should be considered. Depending on the manufacturing sites it could be advisable to
calculate with different wages for the companies main markets, for example headquarters in
Europe and Asia.
Supply Chain structure
The supply chain can be more or less complex, which can be considered by providing some
figures such as
• The volume of items per year passing through the supply chain
Business Case 9/49
• The number of manufacturing sites
• The number of suppliers
• The number of DCs
• The percentage of hanging and lying garments (as they typically require different
processes)
2.2 Collection of actual data in the textile supply chain

The report 7.1 Problem Analysis2 identified challenges at the manufacturer, DC/warehouse
and the store that could be solved or improved with EPC/RFID. For the business case the
actual data of different parameters should be identified in order to calculate qualitative and
quantitative effects of EPC/RFID in the supply chain. Thus the company should provide
percentage figures or numerical values of the following parameters.
Average stock
The actual average stock of items at the warehouses, DCs and stores should be identified.
Inventory Control
The annual number of inventory controls should be identified at the manufacturer, the
DC/warehouse, and the store.
Quality and Quantity control
The percentage of items of the quality and/or quantity controls at the outgoing area of a
manufacturer and the DC/warehouse should be considered.
Returns
Returns of garments occur at the DC/warehouse and the store. The time-consuming process
should be considered by providing the number of items, which are returned.
Shipping accuracy
The commissioning at all levels in the supply chain (manufacturer, DC/warehouse, store) is a
critical process and therefore the percentage of the shipping accuracy should be provided.
Exchange between stores
The yearly exchange rate of garments between stores can be given.
2
BRIDGE 7.1 Report, 2007
Business Case 10/49
2.3 Identification of individual process steps
When the collection of data is done, the company has to investigate their detailed process
steps. A company should carry out a detailed process step analysis of the current work flow.
This is important in order to analyse the potential of EPC/RFID compared to common
processes and can be the most time intensive part. One of the most important criteria will
certainly be the time required for each process step, as they will affect required manpower
and costs. The following table 1 gives an example of the depth in process steps for time
verifications for the “store processes”3.
Figure 2: Process step analysis – time verification store processes and potential benefits
The process steps have to be analysed according to the potential of EPC/RFID. An

improvement cannot be expected in every process step. The process steps with the potential
to reduce the time should be verified, and then the actual time required has to be
researched. Afterwards the current cost and time can be compared to the “possible RFID”
cost reduction (see table 1 “process factors and units”).
3
Mannel, A. 2006
Business Case 11/49
2.4 EPC/RFID Implementation Costs
The costs of an EPC/RFID implementation comprise hard- and software costs and costs not
directly related to the technology such as personnel trainings and possible changes in
processes.
2.4.1 Hard- and software costs
For an EPC/RFID set-up different technical devices should be taken into account. The
following example gives an overview of devices, which could be required for typical
EPC/RFID applications:
Hardware – Item level, e.g.: Hardware – Case, pallet level, e.g.:

• Gate with motion or photo sensors • Gate with photo or motion sensor
• Shock-proof shielding of EPC/RFID • Shock-proof shielding of EPC/RFID
gates gates
• Desk reader • EPC/RFID mobile reader
• Cash desk reader/antenna • Tags (see below)
• Fitting room reader/antenna • EPC/RFID printer
• EPC/RFID printer • Absorption material
• EPC/RFID mobile reader
• Shelf reader/antenna
• Tags (see below)
• Absorption material
General IT-Hard- and software, e.g.:

• Server
• Installation, wires
• Interface customization
• Data analyser tool
• User applications and front end application
• Integration into ERP system
• Databases
• Event management system
Tags:
Business Case 12/49

Tag costs represent a major cost factor as they have to be supplied in high quantities.
These costs must either be covered by the manufacturer or the retailer and will affect the
business case of the company significantly. Another option could be the splitting of costs
between SC partners.
As described in detail in the 7.2 Requirements Analysis report4, tags can either be
disposable or reusable. The costs of these tags vary significantly.
Disposable tags:
The costs for disposable tags are comparatively low compared to reusable tags. They will
be used for one garment along the supply chain and disposed at the POS. Thus the quantity
of tags equals the volume of the tagged garments, which can be very high.
Reusable tags:
Reusable tags can be used again and are more robust. The costs are considerably higher.
When using reusable tags, the company has to take into account the lead times and volume
shipped across the supply chain in order to estimate the quantity of tags. In addition the
expected service life should be identified in order to replenish worn out tags.
Decrease of tag costs:
The costs of tags are still decreasing. Therefore an annual percentage decrease should be
considered in order to reflect the actual market prices of tags in the calculation.
Lump-sum costs:
The costs mentioned above mainly cover the new investments of hard- and software.
However further lump sum costs should be considered such as
• hardware maintenance. It can be provided in a percentage figure.

• The percentage or overall costs of the middleware due to the integration of the
system.
• Middleware maintenance, which will also emerge in the following years and should
be provided in a percentage or quantitative figure.
• IT-Infrastructure
The overall installation costs for a company are highly dependent of the quantity of
EPC/RFID applications. Therefore costs can vary significantly. A company should sum up
the quantity and overall costs for each installation at the manufacturer, DC/warehouse and
store.
4
BRIDGE 7.2 Report, 2007
Business Case 13/49
2.4.2 Further costs related to an EPC/RFID implementation
Next to the EPC/RFID related hard- and software costs, a company has to consider further
costs related to an RFID implementation. The following figure lists additional costs on top of
the hardware and software investments.5
Figure 3: Additional cost next to hard- and software
Personnel costs occur for the project management starting with the planning, development
and realization of the EPC/RFID project.6 Also costs for personnel trainings in order to
educate the personnel, and build up RFID know how - especially the staff responsible for the
shipments in the DCs, outgoing areas and stores.
Further costs could occur for investments for an EPCglobal membership. This membership is
due to the usage of EPC/RFID across the supply chain by different logistic providers,
retailers and manufacturers. The fee is split in a one-time admission fee and an annually fee,
which is dependent on the company’s turnover. The fee has to be paid to the GS1/EPCglobal
organisation in the country of the companies headquarter.
2.5 Requirements of the calculation tool

For the business case calculation an extensive calculation tool is required. As already
identified in chapter 2.1 the following data and parameters have to be analysed with the
calculation tool:
5
Schmidt, J., 2006, p. 163
6
Mannel, A. 2006, p. 53
Business Case 14/49
• General company parameters (e.g., company type, tagging level)
• Hard- and software costs (e.g., tags, reader, server)
• Process-related data input (e.g., inventory, stock)
• Additional potential benefits (e.g., increase of turnover)
The values and data will partly be general data, such as company sizes, volumes, wages
and hardware costs. This data can be entered in the beginning. Other data will be directly
connected to the processes and may change at different locations, such as inventory taking
and OOS.
In this business case analysis the whole supply chain shall be analysed. The calculation tool
should consider the distinct requirements for each business model. The processes and
required features can differ significantly, when a manufacturer, a logistics provider or a
retailer is analysed.
The business case calculations in the next chapter have been performed with the calculation
tool rfid-cab which was developed in a research project at the department of logistics
(Technical University of Dortmund). With the help of the software tool rfid-cab, which is used
for the calculation of profitability, it is possible to make a substantiated statement about the
ratio between achievable potential values and the costs incurred. This is accomplished by
entering or varying different parameters and by considering individual company processes. 7
7
For further information contact André Mannel: andre.mannel@dematic.com
Business Case 15/49
3 Approach for the Business Case Calculation
Once the dimensions of a business calculation and the data requirements are understood, a
business case analysis can be carried out. Within work package 7 the data of the end user
companies Carrefour, gardeur, Kaufhof, and Northland was collected and generalized. Thus
different scenarios were identified and the processes were selected.
3.1 Development of Scenarios

The following characteristics of three business models were identified. A detailed description
of the scenarios is made in chapter 4.
Scenario I: Department store
In this scenario a retailer/department store is analysed. The volume of garments passing

through the identified supply chain processes is comparatively high (see 7.2). The retailer
does not have its own manufacturing sites and the number of DC is average. The retailer has
a high number of stores and belongs to one of the leading companies in a special region and
country. The supply chain processes are quite extensive and require a certain degree of
automated identification. Therefore the IT-infrastructure is already good; however manual
handling in different processes still exists. The visibility of the supply chain is good, but the
quotas for theft, shrinkage, returns, etc. may lead to considerable additional costs.
Scenario II: Hyper- and supermarket
In scenario 2 the textile supply chain of a hypermarket, is analysed. The range of garments is
limited. The turnover of textiles is only one (small) product category of the hyper- and
supermarket. The hypermarket does not have own manufacturing sites and mostly source
outside Europe. The volume is high; however the range of garments is more limited. The
hypermarket has a few large textile distribution centers, which supply a high number of
supermarkets in a given region or country. The automation degree is high and enables high
supply chain efficiency and minimizes manual handling processes. The IT-Infrastructure
allows a good information flow and SC visibility.
Scenario III: SME manufacturer
The third scenario displays the view of a SME clothing manufacturer. The volume of
garments passing through the identified supply chain processes is low to average with only a
few number of DCs. The manufacturer supplies retailers and usually does not have own
stores. The automation degree is moderate and leads to a lack of supply chain visibility
caused by an inferior information flow. The tracking and tracing of garments is done on
case/pallet level at different process steps along the supply chain.
3.2 Process selection and data input requirements

Once the general parameters of the supply chain have been identified, a company should
select the processes with the expected highest benefits. It has to describe the processes in
detail, identify relevant processes and then verify where RFID can be beneficial. For this
Business Case 16/49

business case calculation we have selected processes based on the results of task 7.1
report8 in order to analyse the status quo of the process efficiency.
For each process step, relevant parameters have been identified for the actual process
efficiency analysis. For example, at the DC or warehouse the required time of handling
processes at the reception of garments were identified:
The required data should be collected for hanging and lying garments due to the different
processes. This approach has been carried out for all identified processes and are listed in
table 1: The table gives only an overview of the main processes. An example of individual
process steps can be found in chapter 2.3.
Location Process Time verification with EPC/RFID

Effects in %
Hanging Lying Hanging Lying
garments garments garments garments
Production Tag application &
Site assignment
Manufac. level
Garments entering DC
Inventory
Suppliers
Handling of garments
Warehouse
Picking of garments
Garments leaving DC
Garments entering DC
Inventory
DC Level
Distribution
Handling of garments
Center
Picking of garments
Garments leaving DC
Garments entering back
Backstore
store
Garments entering sales
floor
Sales Floor Placing garments
Store Level
Inventory
Customer information
Cash Desk
Payment / Cash
(POS)
Table 1: Status quo of process efficiency
When the data for all parameters and processes have been identified, the company should
be able to make an estimation of the expected effect, when EPC/RFID would be
implemented.
A percentage estimation of the time saving effect (e.g., faster verification of garments, faster
replenishment) will affect costs (e.g., through faster inventory takings, less theft and
shrinkage) and also the quality (e.g., less late deliveries or less discrepancies in stock).
Attention:
This estimation is very sensitive and often difficult to measure. For reliable results the
company has to evaluate each process critically, as the final results of the business case
can vary significantly regarding the estimations and the data input.
8
7.1 Problem Analysis and expected EPC/RFID opportunities
Business Case 17/49
3.3 Definition of expected results:
The business case calculation shall provide the expected results achieved through the
EPC/RFID implementation in different processes and also different supply chain levels
(manufacturer, DC/warehouse, store). The effects can be divided in
• Cost savings in processes (hard facts)

• Quality improvements by using EPC/RFID (hard facts)
• Expected effects on business volume (soft facts)
• Overall expected financial results
In the end a company will make their decision towards an EPC/RFID implementation
dependent on the final financial results. Here the overall costs and benefits of all identified
and evaluated impacts will be summarized. This positive or negative result will strongly
influence the company’s decision whether to implement EPC/RFID in their supply chain.
3.3.1 Cost savings in processes (hard facts)
Once a company has selected the processes for possible EPC/RFID installations, the
process has to be analysed and actual data, for instance time required for this process step,
should be collected. The processes will differ for hanging and lying garments. Therefore the
company shall provide data for both processes. The processes for the analysis are defined
and explained in chapter 2.3 and 3.2.
The expected measurable results, the so called hard facts, can be calculated in quantitative
and qualitative figures. Thus a company shall estimate their expected benefits regarding the
• Time effects in seconds or percentage figures

• And/or monetary effects in Euro or percentage figures
• And quality effects in percentage figures, e.g. lower error rate
A precondition is an objective estimation of the potential effects. The accumulated effects

through the whole supply chain can finally be evaluated and provide figures for time savings,
costs and other quality effects.
3.3.2 Quality improvements through EPC/RFID
While implementing EPC/RFID in the supply chain, a company can estimate various
improvements in their processes, which will be realised, amongst other things, through
higher transparency. Through this overall process optimisation across the whole supply
chain, a company can expect additional benefits. For these kinds of hard facts general
supply chain assumptions for the estimation of benefits should be made.
General assumptions
Business Case 18/49
The following various improvements can be expected at the manufacturer level,
DC/warehouse level and store level. For an accurate estimation a company should make
estimates such as the business turnover, the average stock per item and the margin to
calculate qualitative figures for the following potential benefits. The statements give an
overview and are not completed. Different companies might have different points of view and
might see different effects.
Potential reductions in stock, erroneous shipments, theft & shrinkage
Potential reductions through EPC/RFID can be realised at the manufacturer, the

DC/warehouse and the store:
Reduced stock:
The actual average stock should be provided at each SC level. The company can estimate a
potential percentage of a stock reduction through EPC/RFID. This will permanently lower the
capital costs. In addition a “one time stock reduction” in the beginning of an EPC/RFID
implementation can also be considered. Through EPC/RFID, required stock levels can be
estimated much more accurately compared to traditional estimations. Thus overstocking can
be avoided.
Reduced returns due to reduced erroneous shipments:
A company can evaluate a potential percentage reduction of the returns at each SC level.
Reduced theft and shrinkage:
RFID can also lower shrinkage and theft, especially in combination with EAS. By providing
the quota of theft or shrinkage at each SC level, a company can also estimate the expected
percentage reduction.
Miscellaneous
A company may have other positive impacts, which have not been considered yet. Those
could lead to an additional cost reduction.
3.3.3 Expected effects on business volume (soft facts)
EPC/RFID does not only optimise processes but will also have effects on the business
volume of a company. The plus in turnover is difficult to estimate and can vary significantly.
They are therefore called soft facts. To date no representative comparable figures are
publicly available. However the following assumptions could potentially increase the turnover
and are based on the experiences of different international companies:
• Higher OSA
• Higher customer satisfaction
• Optimised assortments
Soft facts – sources for input

Business Case 19/49
Input for the definition of soft facts can be achieved through different internal and external
sources. Internal sources can be different departments such as the IT and logistics
departments. External sources can be the experiences of other company studies or RFID
or/and textiles studies. The following table lists sources, which can provide helpful input for
the further research of soft facts:
Internal research External research

• Department store (shop staff, head of • Master thesis
department store)
• Questionnaires
• IT department
• RFID and/or textile studies
• Controlling department
• Experiences of other companies
• Sales department
• Logistics department
• Purchasing department
Table 2: Soft facts – possible sources for research
Increase of turnover through higher OSA
A positive effect can be the better product availability along the supply chain. The percentage
of “out of stock” (OOS) can be reduced by the better visibility and higher accuracy of
inventory data. Thus a company can evaluate their expected improvements in “on shelf
availability” (OSA) in percentage figures.
This can be achieved through the following:
• The early detection of short falls, wrong quantities, higher ability to supply as well as
replenish.
• A higher stock turnover.
• More inventories, which will lead to a better stock quality.
• More reliable data through the better inventory accuracy combined with the higher
data quality.
• Better garment tracking due to real time information - generated in the EPCIS - about
their location and
• A better replenishment of the front store and a better shelf placement.
All these effects will have an impact on the turnover on a higher or lower level. Though the
impact on each of the above mentioned points often does not seem to be significant on first
sight, in summary these points can increase sales. If the company calculates for instance
with a 0.2% increase of turnover for each of the bullet points, the accumulated increase of
turnover can be calculated with about 1.2% by better on shelf availability.
Increase of turnover through higher customer satisfaction
Business Case 20/49

In addition to the better on shelf availability, a company can increase the turnover by higher
customer satisfaction. A customer may built up higher customer loyalty due to the increased
service provided in the store:
• Shorter waiting periods, when the customer asks the salesperson for garments not
available in the right size, colour, etc.
• The shop assistant can offer their services to a higher number of customers due to
less time consuming processes (e.g., searching for garments, inventory taking).
• In addition, the shop assistant needs less time to service the customer due to faster,
more detailed, and more reliable information about stock availability and garment
information.
• Stores are better organised and more tidy because wrong placed garments can be
detected faster.
• The shop assistant will get more reliable inventory information for their customers.
• The customer can get more product information such as availability of colours, sizes
and cuts and also information about material.
• The unique identification of each individual garment through EPC enables tracking
and tracing and therefore can provide more reliable product authenticity. Thus an
increased security against counterfeits through the unique identification and
throughout the supply chain is possible.
• Due to more service and information, the buying decision of the customer could be
easier.
• Possible shelf check-outs could avoid long queues at cash desks.
Though customer satisfaction is very difficult to measure, the above mentioned bullet points
could justify some positive effects in turnover for a company. Therefore a company should
consider these positive impacts in their business case calculation. With a conservative view
the company can estimate for instance with a 1.5% increase in turnover in one of their shops
for all the above mentioned aspects.
Increase of turnover by optimised assortments
The tracking and tracing of garments on the sales floor do not only provide a much higher
visibility, but it also leads to further conclusions, which could be useful for marketing and
design proposes.
• Maybe some garments will be barely picked up from the shelf. Reasons could be
related to the garment itself but also to the placement in the shop. This could help the
company to detect parts of the sales floor, which are rarely visited. All this information
can be used for the optimisation of the assortment and product placement.
• It could also occur that garments may be taken to the fitting room several times, but
never get sold. In this case the cut might not be appropriate.
• Also the acceptance of new collections and new store concepts such as changes in
store design and garment placement can be analysed and used for further marketing
strategies.
The above mentioned aspects will help to analyse the costumer behaviour and the launching
of new collections or shop concepts. Even if they might not impact the company’s turnover in
the short term, they could help to optimise its store strategies in future.
Business Case 21/49
Benefits for the manufacturer
Of course also the manufacturers will profit from higher turnover in the retail stores. In
addition. More service to their suppliers can improve the customer relationship. For instance
manufacturers can share store-relevant data through EPCIS, optimise their assortments, and
gain higher customer satisfaction and on-shelf availability.
EPCIS will also enable the manufacturers to gather detailed information from the sales floor,
even the shelf. If they use shop-in shop models they can optimise the assortments and
product placements etc. in order to achieve higher customer satisfaction and thus higher
loyalty and turnover. Further customer service can provide cross selling and up selling
information. In addition he can optimise the replenishment and store-to store transfers, when
garments are not sold well in some stores but better in others. Here he can react directly to
the customers’ demands.
3.3.4 Overall expected financial results
The final results of the business case calculation will summarise all EPC/RFID investments
discussed in chapter 2.4 and the identified financial improvements.
The results of the business case calculation highly influence the company’s decisions
whether or not EPC/RFID will be implemented. Therefore the business analysis shall provide
the main operational key data. These operating figures are not explained in detail, but can be
found in corresponding literature, e.g., T. Reichmann. 9
• Cash flow
• Net present value
• Return on investment
• Break even analysis
9
“Controlling mit Kennzahlen und Managementberichten”, 7. Auflage, Verlag Vahlen, München
Business Case 22/49
4 Business Case Calculation
For the business case analysis one manufacturer, one SME retailer, one large retailer and
one hyper- and supermarket were considered. Their input in combination of the general
values of the industry was the foundation of the analysis of different scenarios. All scenarios
were calculated with the rfid-cab calculation tool. The tool considers cost- and process
assumptions as well as the dimensions of an EPC/RFID implementation. In order to compare
the scenarios some general assumptions were made, which are described below.
4.1 Cost parameters and assumptions
General cost parameters for all scenarios

For the analysis the following prerequisites have been defined (see table 3).
Calculation parameters figure

Considered period (years) 7
Depreciation period (years) 3
Interest (base value) 7%
Reinvest after expiration of DP? Y
Reinvest (%) 60%
Table 3: General calculation parameters
The calculation is based on a period of 7 years, a 7% interest (base value) and a

depreciation period of three years. It assumes that the company will also have to reinvest in
new hardware/software after three years. As the costs for RFID technology is still
decreasing, the reinvest costs are estimated to be only 60% of the initial costs in the first
year.
Labour costs
Three different average wage costs per hour were considered for different regions. These
regions are on the one hand the most important sourcing regions for the European textile
market and on the other hand important markets in Europe (table 4).10
Labour costs Region Wage per hour (€)

(average wage Central Europe 20,00 €
per hour) Eastern Europe, Mediterranean 6,00 €
region
Asia 1,00 €
Table 4: Average labour costs in regions
Hardware/Software costs (without tag costs):
10
A clothing market analysis was conducted in the task 7.1 report of the BRIDGE project.
Business Case 23/49
For all scenarios hardware and software costs were identified and calculated with future
prices for the mass market of RFID technology. They are estimations and will vary according
to the degree (required quantity of hard- and software) of the EPC/RFID implementation and
therefore can differ considerably. Costs for installations and wires and interface
customisation are not mentioned because these costs can vary significantly, e.g., between a
large scale and a small scale implementation. Below costs for HW/SW are estimated for high
quantities (see table 5).
General costs (assuming mass market Euro

prices in future) (each device)
Item Level hanging garm. gate 2.500,00 €
Item Level lying garm. desk reader/antenna 2.000,00 €
Cash desk reader/antenna 1.000,00 €
fitting room reader/antenna 2.000,00 €
RFID printer 2.000,00 €
Mobile reader 1.500,00 €
Event management 15.000,00 €
Server 12.000,00 €
Table 5: General cost estimations for hardware and software (without tags)
Lump sum costs/Miscellaneous:
Lump sum costs contain the costs for the maintenance of the hardware and middleware
installations. In addition companies may have miscellaneous costs, which will vary from
company to company. An estimation was made as followed (see table 6):
Description Percentage
of costs
Miscellaneous costs 10%
Lump Sum Hardware maintenance 12%
Costs Middleware 25%
Middleware Maintenance 18%
Table 6: Estimations of lump sum and miscellaneous costs
4.2 Definition and calculation of different scenarios

The business cases for the three scenarios are calculated for a complete implementation of
EPC/RFID in the companies. The calculations are complex and some data used in the
scenarios could not made public in this report due to confidentiality reasons. A complete
reconstruction of the whole calculation is therefore not possible.
Business Case 24/49

Please note:
For the successful implementation of RFID for textiles, discussions between retailer and
the supplier are required. A common understanding and cooperation is necessary and
RFID can provide benefits for both.
4.2.1 Scenario I: Department Store
Department stores are usually based in the city centers with several floors. As rental costs
are comparatively high, these stores often have little back stores. Therefore (bi-) daily
deliveries are usually placed directly on the sales floor.
Department stores also have a high number of suppliers and a very diverse product
assortment. The supplier dispatches the garments to the distribution center, where they are
commissioned and delivered to each store. The “direct store delivery” (DSD) concept is only
used in exceptions. If a department store wants to implement EPC/RFID, all suppliers should
tag their garments, which will not be feasible in the short term. An implementation period is
therefore necessary.
4.2.1.1 General parameters
The first scenario is for a medium sized retail company with a volume of 50.000.000 items.
The following fictitious parameters were taken into account:
Description Figure
SC figures Volume per year 50.000.000 items
DC 4
Stores 80
Hanging garments 15%
Lying garments (%) 85%
Logistic parameters Average stock of items 25%
(DC and store) Number of inventories per year 1-2
Returns from store 20%
Incoming quantity control 10% of all incoming items
Volume Business Volume per year 1 billion Euros

Average stock value per item 20 Euros
Margin usual textile margin
Table 7: General parameters of a department store
In this scenario the retailer has 4 distribution centers and 80 stores (see table 7). The
average stock in the DC and in the store amounts about 25%. Also given is the return rate
Business Case 25/49

from the store (20%) and the number of inventory controls, which affect the outcome. The
company has only an incoming quantity or quality control of 10%.
The business volume and average stock value will impact the final results of the business
case significantly. With an average stock value of 20€ and 1 billion € of business volume the
value is quite high. The margin complies with the common textile margin in the European
Textile industry.
Tags, additional costs and labelling
Only the extra costs for the RFID inlay were considered for the tag costs because the whole
price label costs are already paid today, either by the manufacturer or the retailer. In this
scenario, the label costs are mainly paid by the retailer, because the retailer has about 50%
of own brands in its assortment. The company uses contract manufacturer to produce the
garments and therefore will pay for the labels anyway.
Description Figure
Tags Extra costs for RFID UHF inlay 0.08 Euros
vs. label today
Amount 50.000.000
Reduction price per year (%) 5%
Share of tag costs in % for 100%
retailer (rest manufacturer)
Share of tag cost in % for 0%
manufacturer
mounted at production site (%) 100%
Table 8: Tag costs – department store
The implementation periods for other suppliers were considered for the seven years. If the
retailer decides to implement EPC/RFID, not all of its suppliers will be able to equip the
garments with EPC tags. Thus the retailer has to attach the tags in the own DCs. For this
calculation a step by step increase of implementation was expected. The table below shows
the degree of implementation for the seven years considered in this calculation:
Implementation Degree of items tagged by

progress EPC/RFID supplier
1. year 57%
2. year 70%
3. year 80%
4. year 85%
5. year 90%
6. year 95%
7. year 100%
Table 9: Implementation progress EPC/RFID
Preferably the tags are attached to the garments at the manufacturer site, e.g., at the
production site in Asia because the processes in the distribution center and the store benefit
from EPC/RFID. In addition, the attachment of the label and the personnel costs is less
expensive than at the European distribution centers.
Business Case 26/49

4.2.1.2 EPC/RFID installations
The EPC/RFID installations can have different dimensions. For this scenario the optimal
business case is calculated for option 1 in detail. However two other options are described,
which may suit SME retailers or can be considered for special promotion proposes.
Option 1: EPC/RFID gates, mobile readers, printers, POS

The retailer has installed RFID gates at the incoming and outgoing area and also desk
readers in the distribution center. The processes for the verification of garments at the
reception area and the outgoing area can be improved as well as the handling processes. In
addition mobile readers improve inventory processes.
At the store EPC/RFID gates are installed at the reception area and all necessary
intersections, for example, between back and front stores. The number of EPC/RFID gates in
a department store depends on the processes and the number of floors and back stores.
Mobile readers can be used for regular inventory controls, searching garments and additional
information. EPC/RFID printers are also necessary. This allows the staff to reprint EPC/RFID
labels in the store, in case they got lost or the tags are not readable.
Calculation of installation costs for the department store
Department Store (retailer) Installation costs
HW investment number Unit price Total in Euro

11
RFID/gates 1616 2.500€ 4.040.000€
(Stores*gates + DCs*gates)*price
Desk reader 16 1.200€ 19.200€
Cash desk antenna 560 1.000€ 560.000€
(Stores*antenna)*price
RFID printer 320 1.500€ 480.000€
(stores*printer)*price
Mobile reader 728 2.000€ 1.456.000€
(DCs*reader + stores*reader)*price
SW investment
Event management 88 15.000 € 1.320.000€
Server 88 12.000€ 1.008.000€
Additional costs (including 4.164.254€
installation, wires, interface
customisation, Analyser,
middleware, etc.)
Total costs (investment) 13.047.454€
Total costs per year (statically, 9.049.619€
12
e.g., maintenance HW/SW)
Table 10: Calculation of installation costs for the department store
11
Costs could also be up to 10.000 Euros for each gate depending on the quantity and quality of the gate.
12
See chapter 4.1 on page 24
Business Case 27/49
Hardware investments
The hardware investments in the four distribution centers and 80 stores are calculated with
the price estimations identified in chapter 4.1. As shown in table 10 a high number of
EPC/RFID gates (1616) is necessary. Mainly this is caused by the number of stores and
floors, which need to be equipped with RFID gates. This also applies to the mobile readers,
which amount 728 in total. Desk readers will only be installed in the four DC´s for handling
processes. These will not be necessary at the store. At the stores also RFID printers and
POS antennas/readers are required. They enable staff to reprint lost or damaged tags and
improve the cashing processes at the POS.
The tag costs consider a step by step implementation of EPC/RFID at the suppliers and also
a reduction in costs for inlay during the next six years. They are included in the annually total
costs (9 million €, see table 10)
Below an example cost calculation for only one department store is shown (table 11).
Example of RFID investments in a medium sized department store:
HW investment number Unit price in Euro

RFID/gates 20 2.500€ 50.000€
Cash desk antenna 7 1.000€ 7.000€
RFID printer 4 1.500€ 6.000€
Mobile reader 9 2.000€ 18.000€
SW investment
Event management 1 15.000 € 15.000€
Server 1 12.000€ 12.000€
Additional costs (including Calculated by dividing 47.320€
installation, wires, interface the additional costs into
customisation, Analyser, the number of locations
middleware, etc.) (stores and DC)
Total costs (investment) 155.320€
Table 11: Example of RFID investments in a medium sized department store
Software costs
The software costs contain one event management system and one server at each store and
distribution center. Moreover costs emerge for the installation and wires, interface
customisation, analyser, the middleware, and further additional costs such as reconstructure
of the stores and the DC.
Total Costs of hard and software: Implementation costs and annually costs
The results of the cost calculation above show the total costs of 13 million Euros for the
installation of the hard and software in the first year. In the following six years the total costs
Business Case 28/49
per year are estimated with 9.049.619 Euros. These yearly costs contain the deprecation
rate (assuming a depreciation period of 3 years), which covers nearly half of the yearly costs.
In addition it contains the interest rate of 7%, the annual inlay costs, miscellaneous cost and
the maintenance of hard and software during a year.
Though the initial investments seem to be high, the retailer will also have comparatively high
benefits. Those include process benefits and soft benefits.
Processes
The following main processes at the DC and the stores can be improved with these
installations:
DC/warehouse Store
• Garments entering • Garments entering
• Inventory/handling garments • Inventory/handling garments
• Picking garments • POS
• Garments leaving
The following table 12 shows an example of a detailed process step analysis. The time
effects were estimated by the EHI Retail Institute as the real company data could not be
shown for confidentiality reasons.13 The results of this table have not been used in this
scenario. They should only give the reader an example of such an analysis. The final figure
of process effects in this scenario is given in table 13 with 3.6 million Euros.
13
EHI Retail Institute 2003, not public
Business Case 29/49
Store process Description Potential Effects (assuming wage of
20 Euros/hour)
Time saving Quality improvement validation Hours/year Euro/year
Incoming goods
SSCC Lying garments: only SSCC scanning Counting of hangers Complete quantity control 2 sec. 4.167 83.333
confirmation Hanging garments: SSCC scanning and (7.500.000/year) (hanger a year x Ø time x wage)
counting hangers
DSD (direct Scanning SSCC seldom
store delivery)
Outgoing goods
Store to store Many process steps, but few items Searching label for Complete quantity control 1 sec. 417 8.333
delivery scanning (only large (store to store deliveries x Ø time
quantities x wage)
Dispatch In cases of wrong deliveries, poor Detaching EAS Complete quantity control 9 sec. (no. dispatches x items x Ø 870 17.400
supplier quality, wrong labelling, etc. time x wage)
Dispatch black End of season Complete quantity control at
box the end
Dispatch DC Deliveries to DC Complete quantity control at
the end
Inventory
Stock control Additional processes (items x Ø time x wage)
preparation
Stock control hanging garments Time savings through bulk Higher accuracy, no double 10 sec. 59.028 1.180.556
Lying garments readings registration, less discrepancies 5 sec. 5.208 104.167
Store processes
Stock Manuel adjustments ERP system – Not necessary when RFID
adjustments incorrect stock is used
Stock control Additional processes, often before other Time effects possible Open for further analysis
processes
Window display Manuel identification garments in Can be neglected
documentation window display
Negative stock Clarification and adjustment of negative Time effects possible Open for further analysis
analysis stock
Search of item Search of item in the store/back store Time effects possible Open for further analysis
POS
Item scanning Barcode scanning Time saving by bulk Less errors 2 sec. (no. sales x Ø item(each 27778 555.556
readings sale) x Ø time x wage)
EAS Detachment of EAS Only with combined Open for further analysis
RFID/EAS tag
Potential costs savings 1.949.345
Table 12: Example Process step analysis by the EHI retail institute– store level
Business Case 30/49

For the retailer no reduction in stock is expected at this stage.
Reasons are the already high turnover of garments in the DCs, the non-replenishment
approach for high fashion and the high number of collections each year. In overall this means
that the stock of garments is already comparatively low. At this stage also shrinkage is not
expected to decrease significantly. In future however RFID/EAS labels could achieve
reductions.
Soft benefits
The soft benefits, which were described in chapter 3.3 in more detail, have been calculated
with an increase of turnover for 3%, which is also based on experiences of different
international companies14. This contains the increase of turnover through better on-shelf-
availability, better customer service, and optimised assortments.
Benefits figures
Process effects 3.620.546€
Reduction of stock -
Reduction of shrinkage -
Increase of business volume ~9.000.000€
Table 13: EPC/RFID benefits – department store
In this scenario process benefits are accounted 3.6 million Euros. The business volume was
estimated to increase by 9.000.000 Euros (3% increase turnover). A retailer can especially
achieve benefits by the so called “soft benefits”. Though the estimated figures for an increase
in turnover are low, the monetary effect is considerably high. This is due to the high volume
of garments and the high turnover of the company.
The processes can be improved in the distribution center and also in the store. In the
distribution center the time for the verification of incoming goods could be speed up
significantly due to completely automated processes. Further a decrease in time between 40
to 80% for inventory taking could be realized. The effects will vary significantly for lying and
hanging garments, as much more time is required for the inventory of lying garments.
4.2.1.3 Results
The final results show that an investment in EPC/RFID can lead to a positive business case
in this scenario:
Cash Flow Figures

Initial Investment 13.047.454€
Ø outgoing cash flow 6.537.494€
Ø incoming cash flow 12.382.206€
Net cash flow 5.844.711€
Ø ROI 45%
Dynamic payback period 2.07 years
Table 14: Final results – department store
14
Company references could not be given as these figures are not public.
BRIDGE – Building Radio frequency IDentification solutions for the Global Environment
The net cash flow amounts 5.8 million €, which means that the dynamic payback period will
be around 2 years for the retailer. As shown above the average outgoing cash flow is
calculated with 6.5 million € (yearly costs without depreciation) and the incoming cash flow
with 12.4 million €, which is generated by the annually savings and benefits realized through
EPC/RFID.
Option 2: Same EPC/RFID installations in DC, but only mobile readers in

the front stores
Another option could have the same installations in the distribution centers as described in
option 1, but fewer installations in the stores. An EPC/RFID gate can be installed in the
reception area of the store. In the stores, for examples at the different floors and between
front and back stores, mobile reader will replace the gates for verification. This option would
decrease the RFID installations significantly. The initial investment costs could be decreased
by about 3 Million Euros in this scenario. But the benefits would also be affected. The
processes will not improve as much as analysed in option 1. Furthermore the handling and
verification of garments would increase. Currently the quantity controls at the stores only
amount an average of 10%. If a 100% verification is done with mobile readers, more time
and thereby more personnel is required.
For this scenario the volume of garments of this retailer is too high to achieve a positive
business case. For smaller retailers however, whose shipments of garments to the stores are
manageable, a solution with mobile readers in stores is certainly an option and could lead to
a positive business case.
Option 2 could be a solution for SME retailers, as investment costs are low and the
volume of garments shipped to the stores will be manageable.
Option 3: Same EPC/RFID installations in DC, RFID gates and additional

smart fitting rooms, shelves and displays in front stores
The installation of smart fitting rooms, shelves and displays is expected to increase the
turnover significantly. Permanent inventory, better on shelf availability, and higher customer
service through product and cross selling information on displays will affect the sales in the
front stores. Still these installations would also explode the investment costs, when all
shelves and fitting rooms are equipped with readers and antennas. For instance in a
department store with about 1600 product carriers, additional investment costs of 480.000
Euros in each store arise. Thus a positive business case calculation is not possible with
current hardware costs.
A retailer may decide to use smart shelves and fitting rooms for special advertising
campaigns, promotions etc. at selected parts of the department stores. Also brand
manufacturers using the shop-in-shop model in department stores may be interested in using
this technology.
Smart fitting rooms and shelves equipped with displays can be used for special
promotion purposes in selected areas or assortments of a department store.
Business Case 32/49

4.2.2 Scenario II: Hyper- and supermarket
In hyper and supermarkets, the textile turnover is only one part of the whole sales volume.
Usually the proportion does not exceed 15% of the overall turnover. In addition the average
item costs are comparatively low. The number of stores is also higher and the supermarket
could have up to 100 check-outs (POS). All these preconditions affect the degree of an
EPC/RFID implementation.
In order to achieve a positive ROI in the textile sector of a hypermarket, investment costs
play an important role in the calculation and thus should be kept low, e. g. by installing only 2
EPC/RFID gates at the outgoing area of the DC and the reception areas of a store and only 1
to 2 gates between front and back store. Another prerequisite is the common understanding
and cooperation between the supplier and the hypermarket.
The following business case calculation for a hyper- and supermarket demonstrates the
payback period under the following conditions (table 15):
Description Figure
SC figures Volume (items) 18.000.000
Textile share of overall volume (%) 10%
DC 1
Stores 50
Hanging garments (%) 20%
Logistic parameters Average stock of items(DC) 25%
(DC and store) Number of inventories per year 2
Incoming inventory controls of itms 10%
Average stock of items(store) 33%
Returns to DC 5%
Volume Business volume 165.750.000€
Average stock value per item 8€
Table 15: General parameter – hyper- and supermarket
The hyper- and supermarket has a volume of 18.000.000 garments, which represents a
share of 10% of its overall sales. The company has one DC for garments and delivers to 50
stores. The logistic processes at a supermarket differ in some ways to traditional textile
retailers. They usually deliver less often but higher volumes to the store. Therefore an
average stock value of 33% in the store is higher than the average stock of a common
retailer. Also the returns are considerably low. Due to the lower average stock value of an
item, return costs would be too high and the supermarket normally sells transitions with
(high) mark downs and special sales to the customers.
Tags, additional costs, and labelling:
Only the extra costs for the inlay are considered because the whole price label costs are
already paid today (see table 16).
Business Case 33/49

Description Figure
Tags Extra costs for RFID UHF vs. label today 8 cent
(in Euro cent)*
Amount 18.000.000
Reduction of inlay costs per year (%) 5%
Share of tag costs in % for retailer (rest See table 21
manufacturer)
mounted at production site (%) 100%
*Inlay costs strongly depend on the volume of tags
Table 16: Tag costs – hyper- and supermarket
In this scenario the tags will also be attached at the manufacturer, e. g., in Asia, in order to
benefit from EPC/RFID at the whole supply chain. Also the costs for attaching the label are
less expensive.
As already described, the hyper- and supermarket has a different business model compared
to the department store in scenario 1 and therefore also the whole processes can be
different.
The scenario assumes that relevant processes for EPC/RFID could be adjusted according to
an EPC/RFID implementation. This means that only selected dock doors will be used for the
reception of textiles at the distribution center and the stores.15 This will be necessary
because DCs and stores will have numerous dock doors, which could not all be equipped
with EPC/RFID gates.
The following installation costs were estimated for a hyper- and supermarket with 50 stores
and 1 distribution center. The hardware investments are based on the price estimations
identified in chapter 4.1.
Hyper- and supermarket: Installation costs
HW investment number Unit price Total (in €)

(in €)
RFID/gates 171 2.500€ 427.500€
Desk reader 10 1.200€ 12.000€
(DC*reader)*price
Cash desk antenna 0 1.000€ -
RFID printer 102 2.000€ 153.000€
Mobile reader 156 2.000€ 312.000€
SW investment
15
At the outgoing area the processes are more complex and require further studies.
Business Case 34/49

Event management 53 15.000€ 795.000€

Server 26 12.000€ 312.000€
Additional costs (including 1.933.286€
installation, wires, interface
customisation, analyser,
middleware, etc.)
Total costs (investment) 3.944.786€
Total costs per year (statically, 2.630.583€
16
e.g. maintenance HW/SW)
Table 17: Installation costs – hyper- and supermarket
Table 17 shows the necessary hardware equipment. The scenario calculates with EPC/RFID
gates for the reception of garments in the stores and between the back stores and front
stores. As the supermarkets (usually) have one floor and one or two back stores, the number
of necessary gates are manageable. For the DC and the 50 supermarkets this will be 171
EPC/RFID gates. Desk readers will only be used for handling processes at the DC. Further
costs occur at the stores for mobile readers (total of 153) for stock controls and RFID printers
(total 103) in order to reprint lost or damaged tags. At a hyper- and supermarket no POS
antennas/readers are considered. This is due to the very high number of POS at one store
and would explode the investment costs without a significant benefit. Here traditional sales
reports could be used for inventory management and replenishment orders. The inlay costs
are considered in the annually costs (see below)
Software costs
The software costs include one event management system for the DC and two for each
store. It was estimated that only every second store will require a server, as several stores
will already have one. Finally costs for the installation and wires, interface customisation,
analyser and middleware were also estimated with 1.9 million €.
Total costs for hard- and software: Implementation costs and annually costs
The results of the total cost calculation show the total costs of 4 million € for the EPC/RFID
installations in the first year. In the following years annually costs of 2.63 million € are
estimated. These costs contain depreciation costs (assuming a depreciation rate of 3 years),
interest and maintenance of hard- and software and annual inlay costs, when paid by the
supplier.
Calculation of benefits
The initial investment in this scenario for the hyper and supermarket is less expensive than
for the retailer in scenario 1. But the benefits are also lower. This is mainly due to lower
estimations of expected soft benefits.
Processes:
The following processes in the DC and the stores can be improved with EPC/RFID.
16
See chapter 4.1 on page 24
Business Case 35/49

DC/warehouse Store
• Garments entering • Garments entering
• Inventory/handling garments • Inventory/handling garments
• Picking garments
As mentioned before, the hyper- and supermarket has an average stock of 33% in the
stores, which is higher than the stock at the retailer in scenario 1. This is due to the fact that
the hyper- and supermarket usually has more back store space and in addition delivers
textiles less frequently to the stores than a retailer17. It is expected that EPC/RFID can
reduce the average storage at the stores and DCs by 2%. Furthermore a reduction of
shrinkage was estimated with 10% due to the higher visibility of logistic processes. The final
figures are mentioned in table 19.
Benefits:
For hyper- and supermarkets the soft benefits (described in chapter 3.3) will not lead to such
high benefits as analysed in scenario 1. Here the improvement of the out-of-stock situations,
given with 15%, is expected to decrease by one-fourth. This can be achieved through the
better replenishment processes from the back store.
Benefits Figures
Process effects 1.049.437€
Reduction of stock 204.343€
Reduction of shrinkage 432.000€
Increase of business volume 1.864.688€
Table 18: EPC/RFID benefits – hyper- and supermarket
The process benefits are calculated with 1 million €, which could be generated by a reduction
of time in the processes mentioned above. Furthermore the better accuracy of data and the
higher visibility in the supply chain lead to a reduction of stock (204.343€) and also a
reduction in shrinkage (432.000€).
4.2.2.3 Results
For the hyper- and supermarket four different business cases were calculated in order to
demonstrate the effects and possibilities of a hypermarket (see table 19):
a. Calculation with full inlay and HW/SW costs

b. Calculation with only the HW/SW costs
c. Calculation with inlay costs, but only 50% of HW/SW costs
d. Calculation with no inlay costs and only 50% of HW/SW costs
17
see Report 7.1 Problem Analysis and expected EPC/RFID opportunities
Business Case 36/49

a) Clothing b) Clothing c) Clothing & d) Clothing &

only, inlay only, no inlay other other products,
costs costs products, no inlay costs
inlay costs
Inlay costs 100% 0% 100% 0%

HW/SW costs 100% 100% 50% 50%
Unit costs 8 Euro 8 Euro 8 Euro 8 Euro
Initial Investment 3.944.786 € 3.944.786 € 1.972.393 € 1.972.393 €

Ø outgoing cash flow 2.447.610 € 1.268.540 € 1.912.246 € 733.176 €
Ø incoming cash flow 2.892.184 € 2.892.184 € 2.892.184 € 2.892.184€
Net cash flow 444.573 € 1.623.644 € 979.937 € 2.159.008€
Ø ROI 11% 41% 50% 109%
Dynamic payback
-- (negative) 2.36 years 2.78 years 1.05 years
period
Table 19: Final results – hyper- and supermarket
a) Clothing only (including inlay costs)
In the first example the supermarket pays 100% for the inlay costs and also 100% for the
hard- and software costs. The initial investment amounts about 4 million Euros in the first
year. The outgoing cash flow is calculated with 2.5 million Euros and an incoming cash flow
of 2.9 million Euros. This means the hyper- and supermarket has a net cash flow of about 0.5
million Euros and thus a ROI of 11%. The dynamic payback period is too high (> 6 years)
and an investment can not be recommended. It shows that this scenario is not profitable for
the supermarket. Therefore an EPC/RFID implementation would not be suggested.
b) Clothing only (without inlay costs)
In the second example the inlay costs are not paid by the supermarket. Reasons can be that
the manufacturers pay for the additional costs in the long term. The manufacturer could
include the tag costs in the price of goods, given that it can use RFID for its internal
processes. In this case no additional costs incurred for the hypermarket. This example also
calculates with the same initial investments. However the incoming cash flow increases up to
2.9 million € with a considerably high reduction in the outgoing cash flow down to 1.3 million
€ and lead to a net cash flow of 1.6 million €. With this calculation the dynamic payback
period is 2.36 years while the return on investment is 41%.
c) Clothing and another product category (with inlay costs)
For a hyper- and supermarket the best results can be achieved with a decision to expand the
implementation of EPC/RFID to other product categories. In this case the investment costs at
each hyper- and supermarket could be split between these categories, e.g. cultural products
or consumer electronics.
The third example is calculated with only 50% of the initial investment of hard- and software
and 100% for the inlay costs. The initial investment for the textile category will be only about
2 million € with an outgoing cash flow of 2 million €. The incoming cash flow will still be the
same as in the other example with 2.9 million €. Due to the lower investment costs the ROI
now is up to 50%, which means that the dynamic payback period is only 2.78 years.
Business Case 37/49

d) Clothing and another product category (no inlay costs)
In this last scenario the tag costs are not considered and the HW/SW costs were only
considered with 50% as these costs are again split between other product categories. Here
the ROI with 109% and a payback period with about 1 year show the best results.
Conclusion of these examples
The best results could be achieved in the fourth example. Here the profitability of EPC/RFID
is the best. When considering EPC/RFID in a hyper- and supermarket these four examples
show that especially inlay costs will have a strong impact on the results and on the
achievement of a positive business case can be achieved. But on the other hand it is
anticipated that hyper- and supermarkets will expand the implementation of EPC/RFID on
item level to other categories such as books, DVD´s, and consumer electronics. For
groceries the implementation of EPC/RFID on case and pallet level is already expected in
the near future.
4.2.3 Scenario III: SME manufacturer
A manufacturer can use RFID technology for the tracking of items in the production and for
its logistics. The focus in this scenario is the open loop system of the textile supply chain.
This includes the outgoing area of the production site and the warehouses and distribution
centers of the manufacturer. The production is usually in Asia or in the Mediterranean region,
where labour costs are considerably low.
The SME manufacturer has a volume of 5.000.000 garments per year. The following
parameters are considered:
Description Figure
SC figures Volume 5.000.000
Manufacturing sites 25
DC 3
Hanging garments (%) 99%
warehouse
Logistic parameters Average stock 10%
Number of inventories 1
Returns 1%
Incoming quality control 10%
Volume Business volume 208.000.000€
Average stock value per item 32 €
Table 20: General parameters – SME manufacturer
Business Case 38/49

In this third scenario the SME manufacturer has 25 production sites and 3 DCs. About 99%
of the garments are hanging garments with an average stock value of 32€. The different
processes and the higher stock value also affect the business case calculation.
Tags, additional costs, and labelling
The manufacturer only considered the inlay costs in this calculation. The inlay costs were
calculated with 12 cent for each label because the volume of garments is much lower than
those of the department store scenario or the hyper- and supermarket. The quantity of inlays
will affect the inlay costs significantly and discounts will only be possible for large volumes.
As in the previous scenarios, a yearly decrease of inlay costs of 5% is expected.
The tags are attached at the production site, e.g. in Asia. Thus the processes at the outgoing
area of the production site, the warehouses and the DCs of the manufacturer and also the
retailers (DCs and stores) can benefit from RFID in their processes.
Description Figure
Tags Extra costs for RFID vs. label 12 cent
today (in Euro cent)*
Amount 5.000.000
Reduction per year (%) 5%
Share of tag costs for 100%
manufacturer in %
Mounted at production site (%) 100%
Table 21: Tag costs – SME manufacturer
Form the manufacturer’s point of view the objective in this scenario is the optimisation of
logistic processes in the supply chain with a better transparency.
Calculation of the installation costs
Retailer Installation costs
HW investment number Unit price In Euro

RFID/gates 12 2.500€ 30.000€
Desk reader 25 1.200€ 30.000€
Cash desk antenna 0 1.000€ 0€
RFID printer 54 1.500€ 81.000€
Mobile reader 150 2.000€ 300.000€
SW investment
Event management 4 15.000€ 60.000€
Business Case 39/49

Server 4 12.000€ 48.000€

Additional costs (including installation, 376.156€
wires, interface customisation,
analyser, middleware, etc.)
Total costs (investment) 925.156€
Total costs per year (statically, e.g., 1.213.243€
maintenance HW/SW)
Table 22: EPC/RFID installation costs – SME manufacturer
The manufacturer has calculated with one desk reader and two EPC/RFID printers at the
production site. The printer writes and prints the EPC on the labels, which are attached to the
garments and verified by desk readers for lying garments and two mobile readers for hanging
garments.
At the warehouse and also at the distribution center the same installations were considered.
The manufacturer needs 1 gate at the reception area and two RFID gates at the outgoing
area. For the inventory checks and the handling and picking of garments 25 mobile readers
for each DC and warehouse are considered.
As the manufacturer only has 25 production sites, three warehouses and one distribution
center, the total investment costs are comparatively low. With only 12 RFID gates (36.000€)
and 25 desk readers (50.000€) the costs for fixed readers only amount 86.000€. Most of the
processes are handled with the 150 mobile readers, which cost 225.000€.
Software investments
The software costs include costs for event management systems, servers, installation and
wires, middleware, and interface customisation. For each production site, costs for an event
management system and further installation costs occur. At the warehouse and the
distribution centers a server (for 12.000€) is included as well as an event management
system (in all 60.000€). Altogether the different software installations at all three locations
amount up to 0.5 million €, which is nearly half the amount of the overall EPC/RFID
installation costs.
Total costs for hard- and software: Implementation costs and annualcosts
The results of the cost calculation above show the total costs of 0.9 million € for the
installation of the hard- and software in the first year. During the following 6 years the
annually costs are estimated with 1.2 million €, which includes the depreciation rate (three
years). The costs also include interest and the maintenance of the middleware and hardware
as well as miscellaneous costs and the annually inlay costs.
Calculation of benefits
The investment costs for the SME manufacturer are comparatively low due to the few
warehouses and distribution centers. Nevertheless benefits in the processes and the
turnover of the manufacturer can be achieved.
Processes
Business Case 40/49

With the installations described above the company can optimize the following processes:
Production site Warehouse/Distribution Center

• Garments • Garments entering
leaving
• Inventory/handling garments
• Picking garments
The manufacturer expects benefits across the supply chain. Many processes executed with a
mobile reader also require staff and are not as efficient as with RFID gates. The expected
process benefits amount to 0.6 million € (see table 23). The company does not expect further
reduction in stock or shrinkage.
Benefits
The manufacturer will be able to react to the retailers’ demands faster then usual, which can
also increase the business volume by the better and faster service. The higher reliability and
faster order executions can be achieved through a better transparency of inventory. This
affects the turnover and has been considered with a 1% increase in turnover (624.000€).
Benefits Figures
Process effects 596.243€
Reduction of stock -€
Reduction of shrinkage -€
Increase of business volume 624.000€
Table 23: EPC/RFID benefits – SME manufacturer
The overall benefits are sum up to 1.22 million €. As described above, higher transparency in
inventory and faster processes reduce the costs significantly while the investment costs are
manageable also for an SME.
4.2.3.3 Results
Based on the investments and the benefits, the manufacturer can achieve a positive
business case as the following table shows in more detail:
Business Case 41/49

Cash Flow Figures

Initial Investment 925.156 €
Ø outgoing cash flow 889.974 €
Ø incoming cash flow 1.223.993 €
Net cash flow 334.019 €
Ø ROI 36%
Dynamic payback period 2.40 years
Table 24: Final results – SME manufacturer
This scenario for an SME manufacturer demonstrates that not only large companies can
benefit from an EPC/RFID implementation. With initial investment of 0.9 million € an
incoming cash flow of 1.2 million € can be realized. For the company this means that the
payback period would be about 2 years with an ROI of 36%. The following figures show the
payback period (figure 4) and the cash flow over the next seven years (figure 5).
years
Figure 4: payback period SME manufacturer
Figure 5: Incoming and outgoing cash flow
Value of items affect payback period
Business Case 42/49

The previous example has considered high-priced items with a stock value of 32€ per item.
This means the whole value of stock and along the whole supply chain is quite high. The
impacts of the value of items are important for the final results of the business case.
If a company offers lower value items the payback period increases accordingly. This is due
to the benefits, which are related to the turnover. Assuming that the same company offers
garments with lower prices the following payback periods were calculated.
Value of garments Payback period

35€ 2.11 years
32€ 2.40 years
25€ 5.01 years

20€ -- (negative)
Table 25: Value of garments and the effects on the payback period
For instance the payback period would be 5 years for garments priced with 25€. If they would
only cost 20€ no positive ROI could be achieved. In both cases an RFID implementation
cannot be recommended.
Business Case 43/49

5 Discussion and conclusion

All these scenarios demonstrate that such a calculation has to consider various aspects.
Sometimes some minor changes in costs can lead to a negative or positive business case.
The main criteria, which significantly affect the return on investment, are described in this
chapter. In the end the conclusion reflect the final results of this report.
5.1 Discussion of all scenario results
Impacts of inlay costs – price development and cost absorption
Inlay prices have dropped considerably during the last years. However they are still one of
the main cost factors when implementing RFID. As a result of the high quantities which are
needed for the item level tagging of garments, the costs of tags are dependent on the volume
bought in one year. The required quantities of tags and thus the resulting high costs make
the calculation more sensitive towards tag prices. An increase of inlay costs by 1 or 2 cent
could increase the payback period by several months and even years.
Inlay prices are also dependent on the tag requirements (e.g. user memory, security
features), the current technical research development and the above mentioned required
quantities. SME companies require only small amounts of inlays in a year. They will not be
able to negotiate such low inlay prices as big companies. Therefore the third scenario (SME
manufacturer) was calculated with a 4 cent higher inlay price.
Naturally the question arises, who shall pay for the inlays. Of course retailers would prefer it
when the manufacturer will attach and pay for the inlays. This way, they would not have to
cover the inlay costs and can use RFID throughout their complete supply chain. But
manufacturers certainly will not accept these costs when they do not use RFID in their own
processes and will not have any benefits. Also the manufacturer will supply other retailers,
which makes the requirement more complex. Here a discrepancy between retailer and
manufacturer arises. An exception might be when the retailer has contract manufacturers for
its own brands. In this case the retailer will pay for the inlay costs anyway.
Collaboration with suppliers and third parties
In the future more benefits for all parties involved in the textile supply chain could be
achieved when the partners collaborate. It is important that they work together in order to
improve the overall logistics. Issues such as inlay costs, implementation, etc. should be
discussed together. Companies can share their RFID experiences. In most cases this is
required to get a positive ROI. If an industry will adopt an innovative technology such as
RFID, they have to get to a common understanding and act together. This can also mean
that textile associations may promote this technology and provide support such as training
and seminars to their members.
Collaboration is also required, when integrating an EPCIS in an open loop system. Though a
retailer or a manufacturer can use an EPCIS internally, additional benefits could be achieved
for both when sharing the EPCIS data. This requires trust and a close relationship to the
supply chain partner as confidential information is exchanged.18
18
The benefits of sharing data between a supplier and a department store will be analysed in task 7.4 Empirical
study.
Business Case 44/49

If companies do not work together, a positive business case may not be possible. The
adoption of RFID could also be slowed down when partners do not agree to share
confidential data.
Degree of an EPC/RFID implementation
A company will have to define its objective of an RFID implementation. RFID offers a wide
range of different applications for the textile industry. But not all applications are beneficial for
each company. Here the costs play an important role. An SME company can improve its
processes with low investments, e. g. by using mobile readers. A manageable small volume
of garments does not always require RFID gates at all intersections. On the other hand large
companies will require these gates at several points in order to guarantee the transparency
they favoured.
Also installations such as smart shelves and smart fitting rooms should be observed critically.
These installations will not make sense for all companies. Moreover the objective has to be
defined clearly because such applications will increase costs significantly. In cases of
promotional objectives the company may want to install such applications only in special
areas.
When talking about the dimension of an implementation the company also has to decide to
what degree the implementation takes place. For instance, a mixture of RIFD tagged and un-
tagged assortments in the same area is not useful. Product categories and areas need to be
defined in order to avoid this.
RFID is for all business models – from an SME to large companies
The business case calculations suggest that EPC/RFID can be beneficial for all business
models. According to the size and the structure of a company, adequate EPC/RFID
installations can be chosen. As already mentioned above, the objective and dimension of
such an implementation play an important role. The requirements differ according to the
business model of a company and EPC/RFID is quite flexible regarding the applications and
also the costs.
Soft facts – important in different ways
The soft facts of EPC/RFID have not been extensively researched so far. Nevertheless it is
expected that EPC/RFID can increase the turnover as shown in all three scenarios. In this
business case report the soft facts are one of the main identified benefits. With a comparably
low increase of turnover from 1 – 3 percent (e.g. due to better customer service, higher
OSA), meaningful results could be achieved. In the future especially these soft facts bear a
lot of potential and certainly require more intensive research.
Impact of the average costs of garments
The average costs for each garment is another criterion relevant for the calculation. As
shown in scenario 3 SME manufacturer, the payback period increases significantly, when the
average garment price declines. Here the estimated increase in turnover is responsible for
such an effect.
For example a company with high value items can achieve a positive ROI faster or with less
volume. On the other hand a company with low cost garments require a higher volume to
achieve a positive business case.
Business Case 45/49

Future costs of RFID hard- and software
For a widespread implementation of EPC/RFID in the textile sector the costs for hard- and
software plays a considerable role. These costs are likely to decrease and certainly will
decrease in future. The growing demand of RFID hard- and software and the increase of roll-
outs will lead to high price reductions. The high volumes of hard- and software required in
future19 will assure competitive mass market prices. In addition, further developments in the
technology will optimise the installation requirements.
Outlook: Combination EAS and RFID
A combination of EAS and EPC/RFID in one tag will certainly be one of the main drivers for
an EPC/RFID implementation. As EAS is a considerable cost factor in the textile industry a
combined EAS/RFID tag would positively affect the business case calculation. Extra
processes at the manufacturing sites, DCs, and the stores could be saved.
Besides sourcing costs of EAS tagging, also theft can be reduced. Today not all garments
have an EAS tag attached, thus theft in the store is not always detected. With a combined
solution, every single garment would have an EAS tag. Therefore a decrease in theft could
also be expected.
For the use of such tags a standard is required, which can be read across the supply chain.
To date no open EAS/RFID standard is available, but EPCglobal has already created an
EAS discussion group in October 2007, where an EAS/RFID standard will be defined.20 This
means the efforts are done to provide the textile sector with such a standardized RFID
solution in future.
19
See BRIDGE: „European Passive RFID Market Sizing 2007 – 2022”
20
See EPCglobal website: http://www.epcglobalinc.org/members
Business Case 46/49

5.2 Conclusion
The European textile industry is one of the most promising industries for item level tagging
and can provide a positive business case. The report demonstrates that across different
business models a return of investment can be achieved – for SME as well as big
companies. In three different scenarios the project partners tried to figure out in which cases
and company structures RFID can be implemented beneficially.
Kaufhof, gardeur, Carrefour, and Northland have each calculated a business case for RFID
item-level tagging taking into account their very business realities. They all arrived at the
same positive & consistent conclusion: RFID can be successfully adopted today. An initial
ROI calculation yield to a ROI in 2-3 years. This has to be verified in real live. Since the four
companies represent a broad spectrum of business models, the authors believe that RFID
item-level tagging is generally well suited and very promising for the EU textile retail industry.
The report also draws the attention to the dimension of necessary data, which is required in
order to calculate an accurate business case. Necessary parameters have to be collected
and process steps have to be analysed in detail, which can be time consuming and involves
different departments. The results depend on the parameters that are given in a company or
might be estimated, especially the soft facts. Here it is very important to make realistic
estimations and be honest.
Finally the report also indicates that not in all cases a positive ROI can be achieved. The
perquisites play an important role – such as inlay prices, hardware costs, average stock
value, and the expected benefits based on the current processes that can be improved via
RFID. All these parameters considerably affect the calculation.
In the end a company has to do an own business case calculation and will decide to
implement RFID when the company can achieve a positive business case. In the future, with
declining HW/SW prices and the already existing reliability of the technology, a widespread
roll-out in the textile sector is likely to make progress in the near future.
The results of this report show that the technology opens many possibilities to the textile
sector, which can be economical justified and certainly will increase the profitability in future.
But not only textile companies benefit from EPC/RFID. Customers will profit from the
increased service. Different new RFID applications in the store will make shopping an
“adventure”. It remains to be seen what the customer can expect in future. The textile
industry will most likely push this innovative technology in this sector.
Business Case 47/49

6 References
EHI Retail Institute, 2003: „Wirtschaftlichkeitsbetrachtung – RFID Potenziale: Grunddaten“
Mannel, A, 2006: “Prozessorientiertes Modell zur Bewertung der ökonomischen

Auswirkungen des RFID-Einsatzes in der Logistik”, Deutscher Fachverlag GmbH, Frankfurt
am Main
Schmitt, J., 2006: „Das Transit-Modell zur Entscheidungsunterstützung für den RFID-
Technologie-Einsatz in der textilen Kette. Dissertation, University of Dortmund, Departement
of Logistics”, Deutscher Fachverlag, Frankfurt am Main
Universität Dortmund, Fachgebiet Logistik 2006 “rfid-cab – costs and benefits analyzer”,
www.flog.mb.uni-dortmund.de
BRIDGE 2007: „European Passive RFID Market Sizing 2007 – 2022”, www.bridge-
project.eu
EPCglobal 2006: website: http://www.epcglobalinc.org/members
BRIDGE 7.1 Report, 2007: Problem Analysis and expected EPC/RFID opportunities,
www.bridge-project.org
BRIDGE 7.2 Report 2007: Requirements Analysis, www.bridge-project.eu
Business Case 48/49

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Building Radio frequency IDentification for the Global

Supply Chain Management in the European

For more information on the BRIDGE project: www.bridge-project.eu

Version Date Author/Revisers Summary of changes

Business Case 2/49

Business Case 3/49

DSD Direct Store Delivery

EAS Electronic Article Surveillance

EPC Electronic Product Code

NPV Net Present Value

OOS Out of Stock

OSA On Shelf Availability

POS Point of Sale (in this document the cash desk)

RFID Radio Frequency Identification

ROI Return of Investment

SME Small and Medium Sized Enterprises

Business Case 4/49

Business Case 5/49

The scenarios are based on an implementation of EPC/RFID technology in the whole

Figure 1: Working Approach

• Department store (Retailer)

Business Case 8/49

2.1 General company parameters

The analysed company can be a manufacturer, retailer, or a logistics provider.

EPC/RFID tagging level

Definition of cost calculation parameters

• considered period (in years)

Labour Costs for the calculation

Supply Chain structure

2.2 Collection of actual data in the textile supply chain

Quality and Quantity control

Exchange between stores

The yearly exchange rate of garments between stores can be given.

The process steps have to be analysed according to the potential of EPC/RFID. An

2.4.1 Hard- and software costs

Hardware – Item level, e.g.: Hardware – Case, pallet level, e.g.:

General IT-Hard- and software, e.g.:

Business Case 12/49

Decrease of tag costs:

• hardware maintenance. It can be provided in a percentage figure.

Figure 3: Additional cost next to hard- and software

2.5 Requirements of the calculation tool

3.1 Development of Scenarios

Scenario I: Department store

In this scenario a retailer/department store is analysed. The volume of garments passing

Scenario II: Hyper- and supermarket

Scenario III: SME manufacturer

3.2 Process selection and data input requirements

Business Case 16/49

Location Process Time verification with EPC/RFID

• Cost savings in processes (hard facts)

3.3.1 Cost savings in processes (hard facts)

• Time effects in seconds or percentage figures

A precondition is an objective estimation of the potential effects. The accumulated effects

3.3.2 Quality improvements through EPC/RFID

Potential reductions in stock, erroneous shipments, theft & shrinkage

Potential reductions through EPC/RFID can be realised at the manufacturer, the

Reduced returns due to reduced erroneous shipments:

Reduced theft and shrinkage:

3.3.3 Expected effects on business volume (soft facts)

Soft facts – sources for input

Internal research External research

Increase of turnover through higher OSA