Effectiveness and Efficiency of RFID in Supply Chain Management

RFID technology has been promising to enhance support supply chain management efforts. The future success of RFID and other mobile services will be strongly affected by the ability of businesses to offer the right products and services to consumers. RFID has the potential in other areas of operations, such as manufacturing, after-sales service support, and total product life cycle management. An RFID system can be used to identify many types of objects, such as manufactured goods, animism, and people. RFID technologies support a wide range of applications—everything from asset management and tracking to manufactured products and related customer services to access controls and automated payments. Each RFID system has different components and customizations so that it can support a particular business process for an enterprise. Depending on the application in an industry and the enterprise within an industry, A RFID system can be very complex, and its implementations may vary greatly. Conceptually, RFID system may be composed of three subsystems as shown in Figure 1: (1) An RF subsystem, which performs identification and related transactions using wireless communication, (2) An enterprise subsystem, which contains computers running specialized software that can store, process, and analyze data acquired from RF subsystem transactions to make the data useful to a supported business process, and (3) An inter-enterprise subsystem, which connects enterprise subsystems when information needs to be shared across organizational boundaries. Every RFID system contains an RF subsystem, which is composed of tags and readers. In many RFID systems, the RF subsystem is supported by an enterprise subsystem that is composed of middleware, analytic systems, and networking services. However, in a supply chain application, a tagged product is tracked throughout its life cycle, from the manufacture to final purchase, and sometimes even afterwards (e.g., to support targeted product recalls or related service), and thus its RFID systems has to share information across organizational boundaries. Thus, the RFID systems supporting supply chain applications have also an inter-enterprise subsystem.

The enterprise subsystem is the computer system and software that utilizes information stored on RFID tags. It is the glue that integrates an RFID system. Depending on the industry context, but usually a front end component manages the readers and the antennas and a middleware component routes this information to servers that run the backbone database applications. For example, in a manufacturing context, the enterprise software will need to be made aware of RFID ai various levéis depending on how far downstream into manufacturing and out into the supply chain RFID is implemented. The middleware technologies are categorized into three levels: (1) software applications which solve connectivity problems and monitoring in specific vertical industries, (2) application managers that connect disparate applications within an enterprise, and (3) device brokers that connect applications to devices like shop-floor machines and RFID readers. The Auto-ID Center ai MIT developed a software program named 'Savant' to manage the enormous amount of data expected to be generated by RFID readers. In a typical manufacturing scenario, for example, readers will be picking up a continuous stream of tag data, which might contain errors such as dupltcate reads and phantom-reads. The Job of a savant is to filter and manage this data and forward only clean data in order to avoid overwhelming enterprise applications. Applications vary in how they interact with RFID. Some treat RFID reads like keyed data or bar-code scans, and others work specifically with RFID tags.

The application of RFID ranges from manufacturing and distribution of physical goods such as automobiles and its various components to minting bank notes, oil exploration, shipping and port operations and pharmaceutical package processes, among others. RFID is a form of automatic identification and data capture (AIDC) technology that uses electric or magnetic fields at radio frequencies for identification, authentication, location, or automatic data acquisition and transmit, and support a wide range of applications—everything from asset management and tracking to access control and automated payment. RFID systems have the capability of sharing information across organizational boundaries, such as supply chain applications. Reno GmbH, one of Europe's largest shoe companies, operating more than 700 stores in 15 countries, plans to embed wireless RFID chips in shoes sold at stores across the continent. Reno has been using RFID technology to track product shipments from its factories to its stores for several years but has not yet used the technology to track individual products inside each store. These wafer-thin RFID chips are designed especially for shoes from its Asian production facilities. By having the RFID tags integrated into its shoes, Reno aims to curb theft for boxed products, fhose on display, and the shoes customers try on inside the stores.

In Japan, the RFID chip has become a de fació standard in the last five years, and credit cards containing RFID are used by millions of people every day to make railway travel and e-money purchases. In 2004, the RFID chip by Sony's FeliCa, started getting integrated in cell phones and today owners of those cell phones can make credit card purchases in stores. Tokyo's subway and private railway and bus operators are launching a common travel card based on the FeliCa plafiorm. The Pasmo system will be interoperable with East Japan Railway Co.'s (JR East's) Suica card, allowing the 35 million people who live in the Tokyo Metropolitan área the ability to travel on more than 100 railway lines and hundreds of bus routes with a single card. The touch-and-go payments it supports work over a distance of a few centimeters and take 0.1 seconds for each to complete. In addition to Japan, the technology provides the base for the Octopus subway card in Hong Kong, which has also morphed into an e-money payment system, and the ez-Link transport card in Singapore. FeliCa is also used in Shenzhen's TransCard, India's TravelCard and Bangkok's Metro Card but has yet to break significantly into European or North American markets.

Schiff Nutrition International, a midsize company based in Salt Lake City, maker of vitamins and nutritional supplements, is in the process of a deployment of the RFID technology in order to continue doing business with Wal-Mart. In 2003, Wal-Mart began setting deadlines for suppliers to start using RFID tags on their shipments. While it was argued that the RFID tags weren't resulting in the savings that Wal-Mart expected, many suppliers were complaining about the cost of implementing the technology. However, it is expected that the project will ultimately help to build stronger supply chains that cut costs and improve efficiencies.

The International Data Corporation (IDC) has estimated that the RFID market for related consulting, implementation, and managed services was expected to grow 47% in 2004 and reached $2 billion worldwide by 2008. It was also estimated that two-third of enterprise organizations considering RFID applications in 2004 indicated that they would rely on external resources in implementing RFID. The Yankee group estimates that RFID technology will be a $4.2 billion market by 2008. By some estimates, over 1.3 billion RFID tags were produced in 2005, and that figure is estimated to soarto 33 billion in 2010, and by farthe biggest segment is accounted for supply chain. However, for a successful deployment of RFID, it is importantto have a set of widely accepted standards and regulations. According to McCathie and Michael, the progression of barcode standards from proprietary to globally accepted open standards had played a pivotal role in a world wide acceptance of the technology. Therefore, in orderto be effective, there has to be standards and regulations in the case of RFID as well. For example, many companies, particularly small-medium enterprises, have reported that RFID is extremely costly in their supply chain. The cost of acquiring, installing, and maintaining an RFID system has been a major and often determining factor in the deployment of RFID in the commercial sector.