Silent Commerce

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Seize the day:
The Silent
Commerce
Imperative
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Silent commerce is a new way of bringing

compelling business benefits to the
enterprise. By empowering physical objects
to communicate with each other and to any
enabled element in the value chain – from
manufacturing, to distribution, to retailers,
to consumers – silent commerce will enable
highly practical, but previously unimagined,
ways of increasing efficiency, improving sales
and building customer loyalty.
At Accenture, we keep close tabs on the future, looking for companies
that are implementing silent commerce technologies in both predictable
and surprising ways. In this report, we take a close look at a number
of companies (ExxonMobil, Figleaves.com, Ford Motor Company, Marks
and Spencer, Shell and others) in a wide range of industries (automobile
manufacturing, distribution, energy, retail, and others) that are currently
using a core silent commerce technology, radio frequency identification
(RFID). Our discussion gives executives a glimpse into what the years
ahead will offer to organizations that think beyond quarterly earnings
and position themselves for next-generation business capabilities.
As our examples from Asia, Europe and the United States illustrate, many
successful companies are finding innovative ways to use RFID technology
and leverage the power of resulting information to meet and create
customer demand. We believe that silent commerce will help companies
around the world do the same. Here, we offer worthwhile examples to
consider and, based on the best practices of leading companies, we also
describe sensible steps forward, ones that will help your organization forge
its own unique path in a business world where silent commerce will become
the next competitive differentiator.
Previous page Next page Seize the day: The Silent Commerce Imperative What is Silent Commerce? 03
Contents
04 Succeeding where others fail
07 What is Silent Commerce?

Silent Commerce — A Mini Primer
11 Seizing the value of Silent Commerce

Delighting Customers
Improving Operations
Transforming the Supply Chain
20 Looking into the future

Low-cost and open-standards-based systems
Intelligent objects
23 Where should companies begin?

Step One: Value targeting
Step Two: Building pilots
Step Three: Scaling to grow the benefits
27 Conclusion
28 References
www.accenture.com/silentcommerce
The hidden value of Silent Commerce

Previous page Next page Seize the day: The Silent Commerce Imperative Succeeding where others fail 04
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Succeeding
where
others fail
“...the answer lies in the
innovative use of radio
frequency identification
(RFID) tags...”

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In 2001, many famous Dot-Com companies

flamed out. Figleaves.com, a British
electronic retailer (or e-tailer) of lingerie,
undergarments and swimwear, however,
managed to do the opposite: it escaped the
Dot-Com minefield, emerging larger, stronger
and more capable. While many e-tailers of
specialty products failed to scale fulfillment
and distribution operations, Figleaves
successfully expanded its product lines from
300 to more than18,000 distinct items.
How did Figleaves manage dramatic growth

without dramatic failure? In part, the answer
lies in its innovative use of radio frequency
identification (RFID) tags to measurably
improve the accuracy of pick-and-pack
operations, ensuring customers receive the
right item at the right time.

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Ford Motor Company, too, has used

RFID tags to improve manufacturing
processes. At its Essex, Ontario
factory, which produces more than
two thousand engines per day,
RFID tags attached to each engine
assembly, store critical information
about engines traveling through the
manufacturing line.
Since each type of engine may be
installed in a wide range of vehicle
models, Ford has had to manage
complex manufacturing processes
requiring unique parts and assembly
procedures for each engine model and
type. The tags play a vital role in this
complex process by storing critical
information on specific engines'
manufacturing requirements and
status1. By reading tag-based
information at each manufacturing
step, Ford has enhanced its control
over the manufacturing process,
ensuring that the right parts are
placed in the right engine and
used correctly.
RFID tagging enables Ford to
customize engine manufacturing in
a just-in-time environment. Storing
critical information about the engine
on radio frequency tags also ensures
that manufacturing lines can build
“...a silent commerce complete engines even if servers and
communications networks fail on
revolution is under way.” the plant floor. Efficiencies from

RFID-enabled manufacturing make
it possible to use assets optimally
and improve productivity, while
making it easier for Ford to justify
expanding RFID use across global
manufacturing operations.
From Figleaves to Ford, whether
you're a start-up or a Fortune 500
company, a silent commerce
revolution is under way. By uniting
RFID tags and related technology
infrastructure to produce intelligent,
interactive objects, companies are
employing silent commerce to
create new value for customers
and realize remarkable new
operational efficiencies.

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What is
Silent
Commerce?
Silent commerce creates and captures value by deploying intelligent,
interactive objects and machines that communicate with one another
without human intervention. Today, silent commerce is enabled by
technologies ranging from global positioning systems (GPS) to radio
frequency identification (RFID). RFID systems, a central silent
commerce technology, identify objects with embedded or attached
RFID tags, which combine an electronic chip, a radio frequency
transponder and an antenna. Strategically placed tag readers
(transceivers) retrieve information about objects without direct
contact or sight lines by emitting a radio signal to query the RFID
tags associated with each object.

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Currently, RFID tags and readers are While eCommerce transforms how Leading consumer products
widely available from various vendors, people communicate within and manufacturers and retailers, in
but the technology is fairly expensive. across firms, the intelligent particular, are looking for the prices
Today's least expensive RFID tags sell interaction enabled by silent of core RFID technologies to drop
for approximately forty US cents each commerce between machines, parts, dramatically. Significant price drops
while the most economical readers assemblies — or any other item in will make it feasible to tag the
cost between $300 and $500. In the any value chain — is potentially as billions of consumer products
near future, by 2006 according to revolutionary as the Internet and produced each year while widespread
some estimates, simple RFID tags World Wide Web. This revolution technology adoption will enable
may cost five US cents or less, is already taking place with many new cross-company applications,
making them a potential alternative companies worldwide; they are driving down costs and increasing
to barcodes, that is, economical for leveraging proprietary RFID responsiveness across the value chain.
widespread use. technologies to transform customer These farsighted leaders are getting
In combination with sensors built interactions or better manage assets. ready to seize the value — and
upon micro-electromechanical In addition, leading companies are competitive advantage — that silent
systems (MEMs), RFID tags will be supporting open standards and commerce offers. Given the rapid
able to track and confirm the state of technology development efforts that evolution of new, open-standards-
any item as it moves through a value promise to carry their industries based RFID systems that will support
chain. Milk cartons equipped with forward into the next generation of widespread adoption, it is imperative
RFID tags and sensors could offer silent commerce. for every company to prepare for a
benefits by communicating, for silent commerce revolution.
example, whether the milk is close to
its expiration date or has been stored
at temperatures that aren’t ideal
for freshness.
“In the near future, by 2006 according

to some estimates, simple RFID tags may
cost five US cents or less, making them a
potential alternative to barcodes, that is,
economical for widespread use.”

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Silent Commerce:
A Mini Primer
How silent Anti-theft systems in stores use very
simple passive tags that communicate
commerce works with readers at doorways to indicate
Silent commerce is the result of whether products leaving the store
several converging technologies that have been purchased.
make it possible for enabled objects
to be information-rich, aware and
Sensors and MEMs
even active in responding to their Sensors can detect and store
environment. RFID tags, sensors information about environments.
and micro-electromechanical devices, Sensors and RFID combinations
can transmit that information
for example, make it possible for any
automatically, enabling systems
object or device to be smart and
or people to respond appropriately
contribute to silent-commerce- to changing conditions over time.
enabled enterprise value chains. Recent advances in manufacturing
and engineering have produced
RFID sensors that are more precise,
RFID tags communicate by radio accurate and inexpensive than
signals with RFID readers to form earlier versions.
wireless networks. RFID tags can be Technological advances have also
as small as matchsticks, holding as given us micro-electromechanical
little as a unit of basic identifying systems (MEMs), a class of tiny
information, or as large as bricks, sensors and actuator systems with
storing vast amounts of data. both electrical and mechanical
These tags and readers allow components. If sensors give objects
companies to track items as diverse a sense of feel, sight, smell and
as library books, roving animals and sound, then actuators call them to act
expensive hospital equipment. on what they sense. The device that
RFID tags may or may not have their operates the air bag in automobiles
own power source. Active tags have is a micro-electromechanical device:
onboard batteries that can power an accelerometer (sensor) detects an
sensors and increase the range at automobile’s sudden deceleration and
which their signals can be read. the MEMs activate the air bag. MEMs
A well-known example is the battery- use the same fabrication technology
powered commuter transit pass that as computer chips but can be adapted
allows commuters to drive through to sense and respond to many
freeway tollbooths, be billed toll fees different physical phenomena.
automatically, and avoid line-ups that
force them to stop and count out
change. Passive tags use the power
of the reader’s radio signal to process
information and send back a response.

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Location-based When distances are relatively large,

more technology comes into play.
capabilities Mobile phones, for example,
Many silent commerce applications communicate their identities on
require knowing precisely where cellular networks, allowing them
an object is so that the object's to be located according to the cell
movement can be tracked or so the they're in, or via their triangulated
object can respond appropriately position among several cells.
to its surrounding environment. For objects that move across even
An object's location can be sensed in more substantial distances, location-
several ways, over varying distances. tracking can be accomplished using
At close range, passive RFID tags the Global Positioning System (GPS),
can indicate their location by being a worldwide satellite–based radio
read as they pass by well-placed navigation system, long used by the
RFID readers. Marathon runners, military, in which radio signals are
for example, now wear tagged shoes transmitted from satellites,
so that race officials can ensure triangulated by a receiver, and used
individual runners have passed every for positioning and timing. The
station on the course. commercial potential of GPS results
from a May 2000 US presidential
Active RFID tags can transmit their
directive that made the pinpoint
identity a bit further. Emerging
accuracy of GPS fully available to
wireless technologies, such as
companies and consumers alike.
Bluetooth, let smart, RFID-enabled
objects know when they're close Always-on connectivity
to another smart object so
communications can occur. When we log on to the Internet or
Bluetooth-enabled vending machines, pick up a telephone, we’re preparing
for example, would allow people to to transmit data for a finite length
make purchases without fumbling of time. Now, usage doesn’t have to
for change. Consumers could walk be so limited. An increasing number
up to vending machines, make of communication protocols, including
selections and pay for soft drinks the Internet itself and new broadband
with a few quick keystrokes on wireless standards such as 2.5G, allow
their mobile phones. devices to be always on. As a result,
large numbers of devices, from mobile
At intermediate distances (up to 250 phones to MEMs, are continuously
meters), Real Time Locating Systems aware of their environment, ready to
(RTLS) use an array of readers to send and receive information
triangulate signals from active RFID whenever needed.
tags. By knowing the physical position
of the readers — and recording when All of these technologies, well-
a signal from a particular tag was established or in development,
received by each reader — RTLS can are making it possible for everything
locate individual tags within ten feet. to be continuously connected.

Previous page Next page Seize the day: The Silent Commerce Imperative Seizing the value of Silent Commerce 11
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Seizing
the value
of Silent
Commerce
Many private and public sector organizations
aren't waiting to seize the value of silent
commerce. Many are already using silent
commerce to create new value for customers,
to improve the efficiency and performance of
existing operations, and to transform the
supply chain.

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As the following examples of ExxonMobil,

Shell, Rehoboth Beach, Delaware and the
Chicago Marathon demonstrate, silent
commerce enables new ways to delight
customers by providing real convenience,
efficiency and trust.
ExxonMobil is currently rolling out the Speedpass of sale and use EasyPass wherever Shell
system to four hundred stores. builds the appropriate partnership
ExxonMobil is one of the world's largest arrangements. (As an aside, ExxonMobil
energy companies. In 1996, Mobil Oil For ExxonMobil, there are important
is also considering a watch transponder
introduced Speedpass2, an RFID-based benefits. Speedpass subscribers, on
and will be conducting a pilot test with
system for payment. Customers average, visit Mobil gas stations one
Timex in the United States.6)
subscribe to Speedpass for free and more time each month and spend two
to three percent more each month
provide a credit card number for
than other customers. The company
Rehoboth Beach,
making gasoline purchases. In return,
they receive a small transponder also notes that incremental revenues Delaware
attached to a key ring3. When a from Speedpass easily justify the Silent commerce can also delight
customer swipes the transponder in $15,000 that service station operators customers with relevant information,
front of the gas pump, it authorizes must invest to implement Speedpass reducing their uncertainties and
the pump to release gasoline and scanners at their Mobil stations. increasing their sense of trust and
charges the customer's credit card. comfort. In transportation, for
Shell4 example, surveys have shown that
Speedpass creates a number of
conveniences for customers. Shell, another of the world's major despite the posting of schedules at
First, Speedpass gasoline purchases energy companies, has introduced bus stops, waiting commuters often
take about fifteen percent less time EasyPass to bring speed and feel angst and frustration about when
than credit card purchases. Second, convenience to its customers in their buses will arrive.
Speedpass purchases are more reliable: Europe and North America. EasyPass5 Using silent commerce to provide
magnetic credit card stripes are prone also supports existing customer loyalty customers with accurate information
to damage which can make purchasing programs such as AirMiles, which greatly relieves the traveling public’s
inconvenient for customers whose enable customers to earn points anxiety. In Rehoboth Beach, Delaware,
damaged cards can’t be read by gas with gasoline purchases, deepening the bus company equipped buses
station terminals. Speedpass goes customer relationships. What is more, running along its scenic beach route
even further, allowing easier checkout Shell’s innovative thinking has led to with a GPS-enabled unit7 that
at gas station convenience stores and a partnership with Swatch, which is identifies the location of the bus at
now at McDonalds' outlets in and embedding EasyPass transponders in any time. Using this information,
around Chicago, where — after a their watches, enabling customers to computers calculate when a given bus
successful pilot in 2001 — the company purchase spontaneously at the point will arrive at its next scheduled stop.

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“Shell has introduced EasyPass to bring

speed and convenience to its customers...
it also supports existing customer loyalty
programs... which enable customers to earn
points with gasoline purchases, deepening
customer relationships.”
Expected arrival times are then posted Chicago Marathon’s previous practices, sometimes suffered from cramps while
on the Internet and on electronic staff guided all runners who they waited in the chutes for official
displays at key stops. Now, even successfully crossed the finish line finishing times, an experience that led
though fewer buses are in service and into chutes where race numbers and many to visit medical tents. With
the company has never in its history elapsed times were recorded by the RFID system in place, however,
had more than a three percent annual officials. When runners completed the runners don't have to wait in finishing
increase in riders, the newly installed race very close to one another, these chutes and can begin cooling down
system is being credited with boosting chutes would sometimes get backed immediately, leading fewer runners
the number of riders by thirteen and a up, making it difficult for officials to experience medical problems after
half percent, generating on an to record runners’ times accurately the race and allowing the Chicago
annualized basis an additional $75,000 (or at all), causing frustration for Marathon to use its medical resources
in revenue8. race participants and staff alike. more efficiently.
The Chicago Marathon9 Enter the ChampionChip, an RFID tag Another beneficial silent commerce
attached to the running shoes of all service offered by the Chicago
The possibilities of silent commerce
race participants. With a few readers Marathon is MarathonMessenger, an
can inspire unique applications of
strategically placed along the route, e-mail service that provides its
RFID technologies. At the Chicago
Chicago Marathon10 staff can now subscribers with information on split
Marathon, an event with more than
record the precise start, finish and split and completion times, allowing
thirty-seven thousand runners in 2002,
times of each runner, giving them an friends, family and marathon fans
it used to be difficult to track runners
accurate account of their performance. who aren't attending to stay abreast
over the race course and provide them
What’s more, readers along the route of events. It appears to be a popular
with accurate running times. Why? At
ensure that all runners follow the service: in its first year of use,
typical marathons, many thousands of
correct course, dissuading those who MarathonMessenger sent sixty
runners stand behind each other at the
might be tempted to cheat. thousand updates on runner times
starting line. When the starter’s pistol
to fifteen thousand subscribers.
signals a race’s beginning, only a few In the Chicago Marathon’s case,
runners cross the starting line in synch silent commerce also had a surprising, By providing new, meaningful
with the timekeeper. This means that unintended benefit: ChampionChip conveniences, silent commerce
these few runners, the race leaders, reduces the need for post-race medical can delight and surprise customers,
are the only ones who receive accurate services. How? Before ChampionChip, delivering increased sales and
split and finishing times. Under the runners who had completed the race efficiencies for organizations.

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While some applications touch the customer,

most silent commerce initiatives occur
invisibly within the company, improving
operational performance and efficiency.
Figleaves.com11 accurate picking and packing,

Figleaves tags each of the totes
A major consumer
As a start-up, Figleaves.com had with an RFID tag. Readers scan RFID products company
high customer acquisition costs tags on the trolleys, associating Companies across a wide range of
and, as such, couldn’t afford customer specific orders with each of the industries are using silent commerce
dissatisfaction and loss because of eight distinct slots in the tote. to improve safety and control access,
incorrect product delivery. Further To ensure that pickers place the right improve asset utilization, boost quality
downstream, it was also business- item(s) in the right slots, reader- and enable process efficiency,
critical that Figleaves avoided the high collected information is automatically effectiveness and quality.
costs of handling returned products. transferred to the touch screens.
At a major consumer products company,
To resolve these challenges, Figleaves At packing stations, more readers for example, paper placards that
implemented an RFID order fulfillment ensure that the right labels are identified ingredient containers in the
system12. Pickers in a Figleaves printed for each order in a tote, production process sometimes fell into
warehouse use trolleys equipped with reducing errors and ensuring that factory feeders and assembly machines,
touch-screen computers that map out customers get exactly what they've fouling up machinery and large product
which items to pick from warehouse ordered. This enables Figleaves to batches. With each machine creating
shelves, enabling them to fill as many increase the efficiency of the pick- $40,000 worth of product every hour —
as twenty-four orders at a time. and-pack process and has helped and requiring three hours to repair —
Pickers check off collected items them reduce picking errors to fewer twelve contamination incidents in 2001
on the touch screens and then place than one in ten thousand. created three to four million dollars in
them in slots on one of three totes. costs from lost capacity — along with
Each tote holds up to eight distinct the significant investment required for
orders in different slots. To ensure product recalls and recycling. And there
were other expensive incidents:
incorrect ingredient blends were
sometimes mixed during product
making, leading to product recalls.
When incorrect ingredients were mixed
for two hours, for example, recall costs
were as high as $250,000.

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“Enhanced, RFID-enabled process

control will help avoid costly
blending and contamination errors
and is expected to save millions of
dollars each year.”
Given the losses, the company changed Associated that must be matched to product type
tack, aiming to stop errors and and retailer infrastructure (a loading
accidents in the first place. To do so, Food Stores (AFS)13 bay may require a trailer with a side
the company invested approximately Making objects smart and visible door, for example), it's important for
$600,000, modifying its processes and also enables better asset utilization, company workers to know what they
systems using RFID. increased efficiency and asset need and where to find it.
Here's how the proactive cost-cutting optimization. Associated Food Stores To enable this real-time asset
plan works: RFID tags are attached to (AFS), based in Salt Lake City, Utah, location, various tags flash status
all the critical ingredient containers is a major wholesale distributor of reports to nineteen antennae installed
and on key locations on the floor of the groceries cooperatively owned by in a grid across the distribution yard
factory. The company attached RFID member supermarkets and stores. every four minutes. Operating in real
readers to forklifts and filling stations It operates a one-million-square-foot
time, the grid of antennae allows yard
where ingredients were deposited for warehouse and a one-square-mile
managers to know the location of
blending into final products. When distribution center that serves more
each asset within ten feet at all
forklifts fill containers with a particular than six hundred supermarkets in an
times, a vast improvement over
ingredient, container tags are initialized eight-state region in the western
processes for manual inventories
with information indicating correct United States.
that can take an hour and still yield
product contents. Forklift operators use AFS uses silent commerce to
touch-screen displays with instructions inaccurate results.
dramatically improve the use of assets
on which containers to collect and and improve efficiency. In August In addition to reducing time required
move to particular feeders. 2001, as part of its silent commerce for equipment searches, the RTLS
Finally, RFID tags on the floor verify initiative, AFS incorporated a Real enables a location-based status
that forklifts are moved toward the Time Locating System (RTLS) into its monitoring system: drivers park their
correct feeder while tag readers verify operations. The RTLS includes RFID vehicles in different areas in the yard
that containers are filled with the right tags and readers to monitor each of depending on whether the equipment
ingredient. All in all, enhanced, RFID- its tractors, trailers and dollies in the is ready for turnaround or needs
enabled process control will help this yard located at its distribution center. washing or other maintenance,
company avoid costly blending and Because AFS manages four to five allowing crews to immediately
contamination errors and is expected hundred of these assets per day and begin appropriate work on each
to save millions of dollars each year. organizes thirty-two kinds of trailers vehicle. Combined with an automatic

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“Checking incoming shipments manually

can take several days. With an RFID
system, however, shipping checks can
be completed in under an hour, reducing
labor requirements by an order of magnitude.”
RFID check-in at the gate, the AFS has also encountered other Adam Opel AG
RTLS has increased yard throughput benefits from silent commerce.
dramatically, enabling AFS to Spoilage is reduced because sensors Silent commerce can also improve
receive additional benefits from in refrigerated trucks notify the operations by enabling greater safety
streamline programs (financial central distribution center about and access control. RFID based cards
incentives given by consumer goods temperatures in different food are already widely used to access
manufacturers to distribution centers compartments, fuel levels inside buildings. Now they're increasingly
that meet stringent goals for just-in- refrigeration units, and whether being used to authenticate users and
time delivery). refrigerator doors are open or closed.
their privileges for using or modifying
When any truck sensors indicate
Having precise information on an equipment on production lines.
any problem, a person can be rapidly
item, its location and history of use
dispatched to examine and fix it. At Adam Opel AG's Russelsheim
also helps AFS better optimize its
asset use. A separate truck-based Silent commerce also enables the factory in Germany, the car
system, for example, allows the distribution center to recover more manufacturer uses silent commerce
company to know the exact location efficiently from other problems such for process control, but also as a
of trucks on delivery routes. Over as system-wide power outages. Before central element in its safety system14.
approximately eighteen months, the the RTLS system, it could take an All employees are equipped with a
company has increased asset entire week to fully recover from a glass-encased transponder attached
optimization by reducing the number major power outage. With the RTLS to key chains. Transponders authorize
of drivers from 123 to 83 and tractors system in place, however, the different levels of access to control
from 92 to 62. distribution center recovered from panels and equipment in different
a recent outage in just two days.
Trailer utilization has also improved parts of the manufacturing process.
The wide variety of advantages
with this new system, but in a If a code isn't authorized, access is
enabled break-even benefits to
different way: even though AFS still denied, reducing the possibility for
accrue to AFS within one year of
needs its entire fleet of trailers for individuals to use equipment unsafely
RFID implementation.
its three peak months during the or make operating errors.
summer, the company can rely on its
primary fleet (twenty percent of the
trailers) for the other three-quarters
of the year. During the non-peak
periods, AFS places its secondary
fleet on a backlist with insurance
and maintenance contracts based
on actual miles driven (zero during
off-peak periods), reducing insurance
and maintenance costs, saving the
company an estimated $22,000
to $30,000 each year.

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Transforming the
Supply Chain
While companies have used silent commerce to delight
customers and improve operations within the company,
silent commerce shows tremendous promise for
transforming the supply chain across organizations. It
promises to increase transparency and visibility into the
flow of material from suppliers and distributors, improve
asset productivity, and reduce waste and delay in the
supply chain.
Goldwin shipment confirms that all individual

orders have been correctly assembled.
Sportswear Europe On arrival in the European distribution
center in Italy, shipments are scanned
Goldwin Sportswear Europe, the
again, verifying that they are correct
European branch of one of the largest
and complete and that no shrinkage
branded sportswear companies in
has occurred. Checking incoming
Japan, leverages greater supply-chain
shipments manually can take
visibility to track and monitor products
several days. With an RFID system,
from the warehouse to the store to however, shipping checks can be
speed up shipments, and reduce completed in under an hour, reducing
shrinkage and distribution into labor requirements by an order
unauthorized geographical areas of magnitude.
or "grey markets"15.
Tagging individual garments also
During garment production, RFID allows Goldwin to know which
tags are sewn under normal labels distributors receive particular products
and encoded with their unique and where they're distributing them.
information including product ID, The initial RFID pilot quickly identified
batch number, color and size. At the a distributor that marketed Goldwin
distribution center in China, pick lists products outside its authorized region.
incorporate the product ID, helping This data allowed Goldwin to contact
workers correctly choose items for the distributor, make its displeasure
each order, while a final scan of each known and correct the transgression.

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Marks and Spencer Before silent commerce pilot testing, Adding silent-commerce-enabled
Marks and Spencer required its RFID read/write tags for Marks and
In contrast to proprietary applications suppliers to attach a unique barcode Spencer's food products operations,
at Goldwin Sportswear Europe, most to each tray, using specialized however, is far less than current
cross-supply-chain applications software and printers. To track barcode-related costs. The capital
operate across entire firms, and inventory and control materials flow, cost for using RFID read/write tags for
require value-chain partners to the trays would then be scanned by three million containers, which would
conform to technology standards and readers at important areas in the be used repeatedly and depreciated
deploy readers inside their companies. distribution channel — when they over ten years, is about three million
Silent commerce promises to improve were dispatched by suppliers or euros, in other words just one-tenth
supply chain visibility while reducing arrived at depots, for example. of Marks and Spencer's annual costs
efforts required to take stock of for the creation of their individual
inventory and shipments. The fact Marks and Spencer has discovered
barcode labels.
that RFID tags are reusable, for new efficiencies in its silent
example, can make the technology commerce pilot projects. It saves Given these internal estimates — and
more cost-effective than traditional money on printing labels, reduces the success of Marks and Spencer's
item-tracking methods. labor costs related to attaching and pilot projects in silent commerce —
reading labels, and has overcome the company's decision to scale
As materials flow from company to various barcode-related inefficiencies. up the use of silent commerce is
company in supply chains, orders Keith Mahoney, logistics controller self-explanatory.
must be checked against items for the food division, notes that
delivered while payments and for a retailer with four hundred CHEP
settlement must be reconciled stores, eight distribution centers CHEP, a provider of reusable pallets
numerous times. Marks and Spencer, and three hundred suppliers with and containers, has also run pilot
a major European retailer with annual a just-in-time policy, these savings tests of silent commerce in the supply
sales of more than 4.5 billion Euro, can be significant. chain. Working with a major
is undergoing an evolutionary shift,
supermarket chain in the United
migrating from using barcodes to
Mahoney estimates that annual Kingdom and chilled ready meals
implementing silent commerce and
fixed costs for their current manufacturer linked together by a
RFIDs so that it can improve control
barcode-related inefficiencies are distribution chain, CHEP estimates
over its food products supply chain16.
approximately: that tagging trays led to overall
Marks and Spencer food products distribution-chain savings of more
Cost (in Euro): Required for:
are made to specification by suppliers than fourteen percent, equaling
3,000,000 300 million individual
and sold under the company’s brand. barcode labels, using on-site twenty-five percent of the total profit
Of the 120 million cases of food printers and variable data in the value chain. CHEP attributes
such as best before dates
products delivered to stores, eighty- and other relevant the majority of these benefits to
five million are sold in returnable information, at ten Euro per reduced spoilage and product waste
plastic trays that suppliers deliver to thousand
along with higher sales caused by
six distribution depots. The trays are 2,000,000 Labor to affix labels, at a increased on-shelf product availability.
rate of twenty per minute
carried in interconnectable plastic and eight Euro per hour
dollies, paired together at depots 2,000,000 300 million individual
and split into singles when they barcode scans
arrive at stores. 500,000 Inventory and accounts
payable errors due to
defaced or non-readable
labels
250,000 Replacement of damaged
labels
7,750,000 Total

Table of contents
ExxonMobil’s Speedpass
• Gasoline purchases take about 15% less time than credit card purchases
• Subscribers visit Mobil gas stations 1 more time each month and spend
2–3% more each month than other customers
Bus Company at Rehoboth Beach, Delaware

• Boosted the number of riders by 13%
• Additional annualized revenue of $75,000
Figleaves.com
• RFID order fulfillment system increased efficiency of the pick-and-pack process
• Helped Figleaves reduce picking errors to fewer than 1 in 10,000
Associated Food Stores

• Over 18 months, increased asset optimization by reducing the number
of drivers from 123 to 83 and tractors from 92 to 62
Transforming the Supply Chain

Marks and Spencer
• Capital costs for using RFID read/write tags for 3 million containers is just
1/10 of costs for the retailer’s barcode labels
CHEP
• Tagging trays led to overall distribution-chain savings of 14.1%, equaling
25% of the total profit in the value chain

Previous page Next page Seize the day: The Silent Commerce Imperative Looking into the future 20
Table of contents
Looking into
the future
Two areas of innovation will drive Low-cost and
increased benefits from silent commerce. open-standards-based
systems
Contributing factors include the A low-cost, open-standards, RFID-based
development of a low-cost, open- Auto-ID system is being developed by
the Auto-ID Center, a research
standards, RFID-based automatic collaboration between MIT in Boston,
Cambridge University in the United
identification (Auto-ID) system, and the Kingdom, and Adelaide University in
Australia, with the support of over forty
coupling of RFIDs with sensors enabled by leading companies across several
micro-electromechanical systems (MEMs). industries. Initially sponsored by large
consumer products companies and
A standard Auto-ID system will stimulate retailers, the Center envisions a system
that can tag and identify individual
further widespread adoption of silent items as they're produced and track
them through the value chain to the
commerce while coupling RFIDs with retail store shelf and out the door.
sensors and other technologies will enable This kind of silent commerce system
would enable efficiency benefits for
objects to interact more effectively with individual processes at various points
along the value chain, but it would also
their environment. Development of these provide a new level of visibility into
product location and movement that
systems is well under way, and RFIDs have would reduce uncertainty across the
already been combined with sensors for value chain. This more accurate and
timely information would allow
selective commercial use. companies to become more responsive

Table of contents
“As sensors and RFID tags

are further miniaturized,
we expect groundbreaking
applications...”
to demand while at the same time pallets) or high-value items (such as The EPC is similar to the Universal
reducing safety stocks and attendant sportswear), but low-cost tags are Product Code (UPC) in that it can
inventory carrying costs. The Center necessary for applications involving identify not product categories and
is in the process of piloting the most consumer packaged goods such types, but contains enough data bits
technology with the cooperation of as laundry detergent or food. to uniquely identify all individual
several key consumer goods and retail • Standards — Today’s RFID consumer items produced for the
companies, and estimates that technologies are proprietary and, foreseeable future.
widespread adoption could occur as except for systems from a few • Software — Widespread adoption
early as 2006. cooperating vendors, will not work of the Center’s Auto-ID system will
Several hurdles remain to achieving with other vendors’ products. If an produce (by orders of magnitude)
the Auto-ID Center’s vision, and RFID-based Auto-ID system is to work more information about product
companies considering the benefits of across the value chain in many location and movement throughout
an Auto-ID system should pay attention different companies, systems within
industry value chains. Managing this
to efforts being made to overcome those companies must be compatible.
information across company
these challenges: At one level, this means that tags put
boundaries and integrating it
on products by manufacturers must
• Cost — Today, the least expensive with legacy applications will be
be readable by the RFID systems used
RFID tags are about forty US cents extremely complex. The Center
by logistics providers and retailers.
each, far above the penny-level cost At another level, the data identifying is working with sponsors to
of barcodes. With improvements individual items must be standardized develop an information services
in manufacturing technology, so that every company shares a infrastructure that will scale
currently being demonstrated, and common understanding of what the efficiently, but individual software
increased scale with widespread information means. The Center is vendors will likely need to develop
adoption, the Center believes that the addressing both of these issues: it interfaces to link the infrastructure to
cost per tag can be brought down to is developing open standard ERP systems and other business
five US cents or less. As the price of specifications for RFID tags and software. New applications to take
RFID tags drops, different applications readers that any vendor can use, and advantage of the rich Auto-ID data
become economically viable. Higher- it is working with the Uniform Code will also need to be developed.
cost tags, for example, are fine for Council (UCC) to develop the
reusable objects (such as shipping Electronic Product Code (EPC).

Table of contents
Intelligent objects CookTek17 iGlassware

RFID technologies allow objects to CookTek, a manufacturer of induction Consider iGlassware, a project
communicate automatically with their cooking and heated delivery systems, developed by Paul Dietz, a researcher
environment. Combining RFID tags uses RFID technology to make smart at Mitsubishi Electric Research Labs
with embedded algorithms or sensors pizza delivery bags. An RFID tag (MERL) in Cambridge, Massachusetts.
allows objects to interact with a embedded in every bag’s heating This technology provides a very clever
degree of intelligence. As noted earlier disk uses a heat and time algorithm to way of sensing the level of liquid in
in this report, for example, Associated calculate when it should tell a a glass and using an attached RFID
Food Stores uses sensors linked to base unit to stop charging the disk. to communicate information to
RFIDs to track the cooling A thermal switch connected to the restaurant staff so that they know
of its refrigerated trucks and signal for RFID tag provides an additional when a glass is almost empty and
human intervention when the fail-safe stop to the timing algorithm. requires a refill of water, wine or any
temperature gets too high. To date, This intelligence has allowed CookTek other beverage. Given the potential
most of these applications have to replace metallic heating disks with sales lift and the fact that beverages
been used exclusively in high-value ones made from a new, non-metallic are high-margin restaurant items,
commercial situations because material. The change has made the beverage manufacturers and vendors
they have required sensors to be pizza bags fifty percent lighter, sixty have already expressed an interest
built alongside customized RFID percent quicker to heat, and in the technology.
technologies and have required custom significantly less expensive — literally
As sensors and RFID tags are further
integration of sensor better, faster and cheaper.
miniaturized, we expect
and RF technologies. As these
groundbreaking applications — in
technologies reduce in cost,
security, healthcare and entertainment,
however, they will become
for example — that promise to improve
ubiquitous, proliferating to a wide
interactions between consumers,
set of commercial applications
machines and their business, leisure
aimed at consumers.
and social environments.

Previous page Next page Seize the day: The Silent Commerce Imperative Where should companies begin? 23
Table of contents
Where
should
companies
begin?
Silent commerce and RFID technologies have been proven in
commercial settings. The technology is advancing rapidly to make
very inexpensive RFID tags and electronic product codes (EPC) a reality.
Just as data networks and the Internet connected internal business
applications, companies, and consumers to create the eCommerce
ecosystem, falling costs and emerging standards for RFID tags and
EPCs will enable greater connectivity and applications that extend this
ecosystem to physical objects.

Table of contents
We suggest the
following three-
step process:
Figure 1 below, maps the examples cited in this report onto

an opportunity curve based on connectivity and potential
value, but the real picture is not quite so static: the
McDonalds’ pilot of ExxonMobil’s Speedpass, for example,
is clearly a move toward creating a wider RFID payment
network. Many of the other companies are likewise looking
to capture additional value by extending the reach and
1: Value targeting
The first step is to identify opportunities for realizing
value from silent commerce in your company and industry
through a value-targeting exercise. The sidebar, which
includes Table 1 on page 26, provides a framework
developed by Accenture that helps identify silent commerce
opportunities in the value chain from a consumer goods
capabilities of their current RFID applications.
manufacturer to retailer. This framework can be adapted to
Current value opportunities and the rapidly developing other industries to categorize and identify the most
infrastructure for widespread adoption make it imperative promising types of potential applications and benefits from
for executives to assess the potential benefits their RFID tags and emerging EPC technologies.
companies can achieve through silent commerce right
now and to prepare for the next stage of the silent For specific applications, it's important to develop a more
commerce revolution. detailed cost-benefit analysis and business case. In retail,
for example, these may include applications to reduce
shrinkage, monitor counterfeiting, and accurately track
stock to reduce stock levels and improve the effectiveness
• CHEP
of merchandising strategies and promotions. Effective
• ExxonMobil
• Goldwin value targeting requires detailed data-driven analyses
Value of
• Marks and
Spencer
that generate clear hypotheses about how companies
• AFS
Application
• Figleaves.com
• Shell can realize value from specific applications.
• Chicago
Marathon • Ford
• Rehoboth
• CookTek
Beach
• iGlassware
• Opel
Stand Single Single Value Multiple

Alone Organization Chains Value Chains
Figure 1 Degree of Connectivity

Table of contents
2: 3:
Building pilots
The second step toward the deployment of systems is
to build a pilot application to test and refine hypotheses
about benefits, costs and work processes after
implementation. As managers at CHEP and Marks and
Spencer note, pilot applications provide vital, realistic
assessments of any given application's potential benefits
Scaling to grow the benefits
If pilot tests show great promise, the third step is to scale
the deployment of the application across the company and,
if appropriate, with key buyers or suppliers. As illustrated by
many of the examples in this report, we expect companies
will initially roll out proprietary applications to delight the
customer or improve operations. As the costs of deploying
along with key process changes required for silent commerce solutions fall, companies will implement
implementation. A number of companies are already industry-wide applications.
undertaking pilot implementations before low-cost RFID We believe that most of these supply-chain initiatives
and EPC tags and readers are available so they can explore will be implemented two years from now, as technical and
how the technology will improve processes and identify business uncertainties surrounding widespread deployment
requirements for integrating silent commerce technologies of silent commerce technologies are resolved. To prepare
with legacy applications and processes. for this supply-chain revolution, companies should develop
Pilots are critical for learning how to effectively realize pilots, participate in forums that develop industry-wide
value from silent commerce. When conducted early, pilots standards, and develop architectures that can easily take
offer companies insight into issues such as categories advantage of technological innovation. As we have
most frequently out-of-stock or ways of improving specific noted, leading companies are already undertaking silent
operations and processes. This learning, which occurs before commerce initiatives, moving their enterprises closer to
full-scale deployment, allows companies to refine business implementation and the resulting first-mover advantages.
cases for specific applications, select the most productive
applications, and lower overall implementation costs.

Table of contents
Table 1
Function/Activity Potential Benefits Reader Tags

Requirement P C I
Cross-Supply Chain
Demand planning Reduced or eliminated out-of-stocks F,S,M l m
Decreased order lead time
Automated planning tied to consumer purchases
Increased inventory turns
Decreased safety stock
Item/batch/lot Reduced sale of counterfeit products F,S,M l
tracking Increased compliance w/distribution contracts
Increased product quality
Security Decreased unauthorized access to facilities
Decreased chances for product tampering
Manufacturing
Procurement & Reduced order lead time S,M m m
materials storage Increased raw material availability
Higher capacity utilization
Production Higher capacity utilization S s l
Reduced order cycle time
Increased quality
An Accenture team analyzed Warehousing
the opportunities for using silent Receiving Decreased unloading times F s l s

Increased accuracy of accepted shipments
commerce in the consumer goods Order selection Increased accuracy of orders S,M s l s
value chain. The opposite table Increased order fill rate
categorizes different application Exception product Fewer misplaced items M s l s
location Decreased time to locate specific items
areas and the types of benefits Loss prevention Reduced shrink F,S,M m s
companies can expect. The table
also illustrates the different level Transportation
of tagging required to implement Asset management Increased productivity of assets F,S l l

Reduced loss of assets
value-creating applications. Cases Pricing based on actual use of assets
generally require nearly 40 times the Yard management Increased productivity of assets F,S m m
Increased visibility of drop shipments
number of tags required of pallets,
Contract compliance Decreased exceptions management F,S m m
and item-level tagging generally Increased customer satisfaction
requires 40 times the number of tags Routing Dynamic routing S m m
required of cases. The opposite table
Store operations
can be adapted for use in nearly
Receiving Decreased unloading times F s l
every industry and be used to Increased accuracy of accepted shipments
identify potential silent commerce Store planning & Increased margin M s l
planogramming
applications and conduct a
Exception Increased goods on shelf F,M m l
focused value-targeting exercise. merchandise
Loss prevention Reduced theft F,M l
Checkout Increased accuracy of checkout S l
Increased productivity of checkers
Reduction in numbers of checkers (w/self checkout)
Returns & reverse Increased accuracy of returns acceptance F,S l
logistics Increased accuracy of refund amounts
More efficient disposal
Post-sales service Increased warranty compliance F l
Faster warranty and repairs processing
Reader Requirements Tags

Level Marginal Benefits
F–Few (e.g., at doors) P–Pallet s–Small
S–Some (e.g., at workstations) C–Case m–Medium
M–Many (e.g., on shelves) I–Item l–Large

Previous page Next page Seize the day: The Silent Commerce Imperative Conclusion 27
Table of contents
Conclusion
The silent commerce revolution is already under way. Its
applications and impact promise to expand dramatically
as RFID and sensor technologies become standards-based
and drop in price. Executives should act immediately to
gain the competitive advantages silent commerce offers.
In addition, they should begin value-targeting, developing
business cases and deploying pilots to help their
companies determine the most effective ways to leverage
these rapidly-maturing technologies.

Previous page Next page Seize the day: The Silent Commerce Imperative Conclusion 28
Table of contents
References
1 Sharp, Kevin. "Lessons From the Front." Technology Edge, May 1999.
http://www.idsystems.com/reader/1999_05/less0599.htm
2 Hammond, Keith. "Pay as you go." Fast Company Online, November 2001.
http://www.fastcompany.com/online/52/speedpass.html
3 Krakow, Gary. "Credit on your key ring." MSNBC Home Page, July 17 2001.
http://www.msnbc.com/news/600159.asp
4 Interview with J. R. Bibb, Innovation Advisor, Shell on May 1, 2002.
5Shell Press Release, February 26, 2001. "Shell first to launch fast, simple and convenient
cardless payment technology at the pumps."
http://www.shell.ca/code/library/news/2001/01nr_feb26_cardless.html
6 ExxonMobil Press Release, February 27, 2002. "Just released in test, Timex watch first ever to feature
revolutionary Speedpass system."
http://www2.exxonmobil.com/Corporate/Newsroom/Newsreleases/xom_nr_270202.asp
7 Nextbus Press Release, December 27, 2001. "Beach bus shows a 13.5% increase
in ridership after installation of Nextbus system."
http://www.nextbus.com/corporate/press/releases.htm#beachBusIncrease
8 Interview with Bill Hickox, Operations Director, Delaware Department of Transportation on May 22, 2001.
9 Interview with Elizabeth Stapleton, Information Technology Director, Chicago Marathon on April 9, 2002.
10 Marousis, Kostas. "2001 LaSalle Bank Chicago Marathon: Mobility Solutions."
http://www.diamondcluster.com/Work/cases/case23.asp
11 Interview with Daniel Nabarro, Chairman and Founder, Figleaves.com on April 12, 2002.
12 "Software…., Hardware…., Underwear…., Everywhere….!." Microlise Case Study.
http://www.microlise.com/logistics/case/figleaves.htm
13 Interview with Tim Van de Merwe, Logistics Controller, Associated Food Stores on April 19, 2002.
14 Texas Instruments Press Release, March 27, 2002. "Opel enhances smart production safety."
http://www.ti.com/tiris/docs/news/news_releases/rel3-27-02.htm
15Texas Instruments Press Release, March 20, 2001. "TI's RFID Smart Labels Track Leading Brand Sportswear
Through Production, Shipping, and Distribution - and Reduce Shrinkage and 'Grey' Importing."
http://www.ti.com/tiris/docs/news/news_releases/rel3-20-01.htm
16Mahoney, Keith. "Opportunities for RFID in the supply chain — A Marks and Spencer case study."
Intellident Ltd Case Study, April 2002.
http://www.intellident.co.uk/Solutions/SupplyChainDistribution/MSRollOut/
17 Interview with Patricia Cleary, Director of Marketing, CookTek on April 17, 2002.

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Next page

Silent commerce is a new way of bringing

07 What is Silent Commerce?

11 Seizing the value of Silent Commerce

20 Looking into the future

23 Where should companies begin?

The hidden value of Silent Commerce

The hidden value of Silent Commerce

In 2001, many famous Dot-Com companies

How did Figleaves manage dramatic growth

The hidden value of Silent Commerce

Ford Motor Company, too, has used

revolution is under way.” the plant floor. Efficiencies from

The hidden value of Silent Commerce

The hidden value of Silent Commerce

“In the near future, by 2006 according

The hidden value of Silent Commerce

The hidden value of Silent Commerce

Location-based When distances are relatively large,

The hidden value of Silent Commerce

The hidden value of Silent Commerce

As the following examples of ExxonMobil,

The hidden value of Silent Commerce

“Shell has introduced EasyPass to bring

The hidden value of Silent Commerce

While some applications touch the customer,

Figleaves.com11 accurate picking and packing,

The hidden value of Silent Commerce

“Enhanced, RFID-enabled process

The hidden value of Silent Commerce

“Checking incoming shipments manually

The hidden value of Silent Commerce

Goldwin shipment confirms that all individual

The hidden value of Silent Commerce

The hidden value of Silent Commerce

Bus Company at Rehoboth Beach, Delaware

Associated Food Stores

Transforming the Supply Chain

The hidden value of Silent Commerce

The hidden value of Silent Commerce

“As sensors and RFID tags

The hidden value of Silent Commerce

Intelligent objects CookTek17 iGlassware

The hidden value of Silent Commerce

The hidden value of Silent Commerce

Figure 1 below, maps the examples cited in this report onto

Stand Single Single Value Multiple

Figure 1 Degree of Connectivity

The hidden value of Silent Commerce

The hidden value of Silent Commerce

Function/Activity Potential Benefits Reader Tags

An Accenture team analyzed Warehousing

the opportunities for using silent Receiving Decreased unloading times F s l s

of tagging required to implement Asset management Increased productivity of assets F,S l l

Reader Requirements Tags

The hidden value of Silent Commerce

The hidden value of Silent Commerce

The hidden value of Silent Commerce

Copyright © 2002 Accenture.

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