1. 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

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

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

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

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

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

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

8. 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

9. 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

10. 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

11. 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

12. 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.

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