RFID & The Supply Chain Mandate Presented By: Pratik Mehta

Agenda What is RFID? Benefits & Drawbacks Successful Implementations RFID & C-Suite Executives RFID & the CA Profession

What is RFID? Components  Tag  Reader  Antenna/Coil Types of tags  Active  Semi- active  Passive

Benefits of RFID Technology Cost savings along the supply chain  Reduced labour costs  Savings of 7.5% in warehouses and 5-40% in a distribution center  Reduction in stock outs, leading to an increase in revenues  3-4% increase in sales  Restock 3 times quicker  Lose approximately 20% of customers due to stock outs

Benefits of RFID Technology (continued) Reduction in theft & shrinkage of inventory  Shrinkage cause retailers over $30 billion a year Reduction of errors due to manual input  Cost $2 million for every $1 billion in sales Reduction in inventory storage costs  Savings of 20% due to lowering the inventory levels

Drawbacks of RFID Technology Significant capital investment required  Costs range from $500K-$20M  Readers cost $2k-$3K each  Maintenance costs are approx % a year Privacy concerns  Tags can be tracked continuously  unauthorized individuals can intercept transmission  Location tracking

Drawbacks of RFID Technology (continued) Processing requirements  Large volumes of data  System crashes  Slower processing speeds Data integrity issues  Clone tagging  Active attacks  Passive attacks

RFID Implementation Wal-Mart  $287M in cost savings due to 10% reduction in misplaced inventory  Mandated their top 100 suppliers to adopt the technology  Reduce stock outs by 8% worldwide  Improved perpetual inventory by 20% American Apparel Inc.  14.3% increase in revenue due to RFID implementation

RFID & C-Suite Executives CIO  Sufficient processing requirements  Analyzing benefits & advantages  Addressing privacy & data integrity issues CFO  Capital budgeting  Allocation of financial resources  ROI  Cost savings

RFID & C-Suite Executives (continued) CEO  Ensure process of implementation goes smooth  Ultimately responsible for success/failure of project  Convince board

RFID & the CA Profession Internal controls  Stronger vs. weaker controls Audit Approach  Substantive vs. combined approach SOX compliance  SOX 409

Conclusion Inventory accuracy rate is 65% without RFID Expected growth of RFID tech worldwide is 28% from $1 billion tags to be used in 2011 (retailers) Every business is different