Effectiveness and Efficiency of RFID in Supply Chain Management
Read this article. Sixteen different types of supply chains are presented in Figure 2. Select one type from the High Complex / High Business Impact quadrant, what are some benefits and challenges associated with it?
Supply Chain Management Processes and RFID applications
RFID
may be used in demand management, order fulfillment, manufacturing flow
management, and return management. In this section, we discuss these
four supply chain management processes in detail.
Demand management and RFID
One
of the main difficulties in demand planning is a lack of reliable data
and adopting RFID would produce accurate information related to the
inventory of finished goods, work-in-progress, and in-transit stages
with reliable due dates. Data obtained from RFID can eliminate
inaccuracies in data due to human error or absence of data. Consumer
demand for lower price and higher quality are the driving forces for
companies to make their supply chain more effective and efficient.
Timely data ai the item-level and in aggregate about the market demand
for any product/service would help to develop more successful strategies
in production, marketing and distribution. The forecast provides the
input for matching demand with supply in the form of aggregate planning.
This aggregate planning can be enhanced by accurate data using RFID
thereby avoiding costly buffer stocks while demand planning.
Order Fulfillment and RFID
Order
fulfillment is a key process in meeting customer requirements and
improves the effectiveness of supply chain. RFID will enable
process automation in picking, shelving, cross-docking, implementing
consolidation operations and reduce costly logistics mistakes such as
sending an item to a wrong destination and not dispatching the right item at the right time. Such process changes will reduce the cost of
operations. RFID technology enables suppliers to accurately determine
the location of a pallet, to track its journey through the supply chain,
and to make instantaneous routing decisions. . For instance, RFID portions, mounted in strategic points in the distribution center, can be
used to read tags and automatically update inventory quantities as
tagged cases and pallets enter the center. The incoming merchandise will
be matched against the correct purchase order and discrepancies will be
identified much more easily. The process freedom will be attained in
freeing up labor-intensive manual labor involved in the quantity
check-in and receiving processes.
Manufacturing Flow Management and RFID
In
manufacturing, assembly line operations may get streamlined by using
RFID. This automation in the production line will certainly reduce cycle
time and increase production throughput. With enhanced process
automation and tracking capabilities enabled by RFID, the velocity and
visibility of products in the supply chain will likely improve. This
process will help manufacturers with their just-in-time (JIT) assembly
lines. Procter & Gamble (P&G) believes that RFID technology can
help the company to track where every item is in the manufacturing
process and supply chain. P&G expects the cost saving of up to $1
billion in working capital and $200 million in inventory carrying costs
with its RFID implementation. Lee and Ozer believe that the
bottom-up approach, Le., starting with the operating characteristics of
the processes, is a sound way to assess the value of RFID.
Returns Management and RFID
The
reverse logistics product recall and return of detective products
is common in supply chain operations. The return track could be traced
back very easily using RFID in the return process. RFID technology,
through its smart Electronic Security Marker (ESM) can also facilitate
return management by helping retailers know if they sold the item being
returned. An ESM ties the relationship of a particular product to a
given sale and then to the return. Manufacturers could benefit from the
elimination of fraudulent products being returned to retailers by
placing item-level RFID tags on their high end products and components. Customer returns will add to the inventory pile as opposed to
depleting it. These returns can be viewed as RFID providing downstream
visibility of negative demands.
Figure 3 illustrates the
challenges and values of RFID in the supply chains of firms. Infernal
process integration and interdependence in firms as well as external
variables such as security, privacy, and standards play a vital role in
moderating the effectiveness and efficiency of RFID. We discuss these
factors in detail in the next section.