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Equipment SelectionRFID vs. UPC
EGR 403 August 22, 2005
Team 3Saul Barbosa – Equipment Research
Ross Nichols – OrganizerChih-Yun Sun – Cost AnalysisGreg Temple – Summarizer
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Equipment differences
-Parallel Bars Store Binary Code
-Universal Product Code
-UPC Labels
•UPC Barcode
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Equipment differences
-Requires Manual Input
-Machine Readable
-Provide Information
•UPC Labels
Product FingerprintHelp Inventory Tracking
Identify Who Is Buying Products
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Equipment differences
-RFID Tags
-Radio Frequency Identification•RFID
Intelligent Bar CodesSmart Labels
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Equipment differences
-Communicate To A Network
-Automated Input
-Track Products Continuously
•RFID Tags
Local & RegionalIncoming & Outgoing
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How do we profit?•Time Savings
–Product Promotion/Location
–Manpower–Universal Application
•Reduce Shrinkage–Stronger theft deterrent
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Product Promotion/Location
•Increase of Sales– Promotional displays– Active selling locations– Promotional displays and
there impact on sales
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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
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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
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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
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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
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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.
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Conclusion
•RFID– Improve Efficiency– Save Time– Reduce Staff Size– Expand Marketing– Increase Sales