BUS606: Operations and Supply Chain Management

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.