Equipment Selection RFID vs. UPC EGR 403 August 22, 2005 Team 3 Saul Barbosa – Equipment Research Ross Nichols – Organizer Chih-Yun Sun – Cost Analysis Greg Temple – Summarizer

Equipment differences -Parallel Bars Store Binary Code -Universal Product Code -UPC Labels UPC Barcode

Equipment differences -Requires Manual Input -Machine Readable -Provide Information UPC Labels  Product Fingerprint  Help Inventory Tracking  Identify Who Is Buying Products

Equipment differences -RFID Tags -Radio Frequency Identification RFID  Intelligent Bar Codes  Smart Labels

Equipment differences -Communicate To A Network -Automated Input -Track Products Continuously RFID Tags  Local & Regional  Incoming & Outgoing

How do we profit? Time Savings –Product Promotion/Location –Manpower –Universal Application Reduce Shrinkage –Stronger theft deterrent

Product Promotion/Location Increase of Sales –Promotional displays –Active selling locations –Promotional displays and there impact on sales

Basic Assumptions Blockbuster Corporation 1.4 Billion in annual sales –7265 Stores –2 Systems per store –$194,000 annual profit per store –75% profit from register products

Costs of Equipment UPC –$22,000 per system –$10,000 magnetic security system Other Costs –$18,000 Maintenance a year –$1,500 a year for labels Annual Costs –$207,725 –Includes Staff of 8 & 15% Shrinkage

Costs of Equipment RFID –$55,000 per system Other Costs –$18,000 Maintenance a year –$15,000 a year for labels Annual Costs –$157,800 –Including staff of 6 and 5% Shrinkage

Basic Analysis Based on Present Cost analysis with 10% interest for 5 years. NPC of UPC is $851,441 NPC of RFID is $708,186 Assume fixed output (profit) Lower net present cost will be more preferred; therefore, RFID is the better option in this analysis

Sensitivity Analysis Set NPC of UPC is $851,000 Cost of RFID increases 50% –NPC of RFID is $763,000 (chose) If RFID doesn’t improve sales or reduce shrinkage –NPC of RFID is $791,000 (chose) If RFID doesn’t cut down man power –NPC of RFID is $866,000 (not chose) –If the period extend to 9 years, RFID will be preferred.

Conclusion RFID –Improve Efficiency –Save Time –Reduce Staff Size –Expand Marketing –Increase Sales