Description
RFID technology is classified as a wireless Automatic Identification and Data Capture (AIDC) technology that can be applied to the identification and tracking of entities. An RFID device called RFID tag or transponders can be attached to a product as a means of identification.
18
Improvement of Supply Chain Performances
Using RFID Technology
Cornel Turcu, Cristina Turcu and Adrian Graur
Stefan cel Mare University of Suceava
Romania
1. Introduction
As markets become more global and competition intensifies, firms are beginning to realize
that competition is not exclusively a firm versus firm domain, but a supply chain against
supply chain phenomenon (***a, 2008). Under these circumstances, an increasing strategic
importance to any organization independent of size or of sector, is to deliver information,
goods and services in full, on time and error-free to customers.
From demand forecasting, to the sourcing of raw materials, right through to manufacture
and dispatch- visibility in the supply chain is becoming an important facet of any modern
operation (Coltman et al., 2008). But at this moment, the interconnectivity between various
links in the supply chain is incomplete and inaccurate, every link in the chain being an
individualistic entity with different processes. This leads to poor product visibility and stock
transparency across the supply chain. For companies looking at multiple markets, the lack
of visibility in their supply chain can lead to tremendous loss of revenue.
But even if information technology is used within a supply chain to share information on
end-customer demand and inventory levels, there is still often a discrepancy between this
information and the real physical flow of products. This discrepancy frequently derives
from the missing real-time or near real-time data in concordance with the physical flow of
goods. The result is inaccurate inventory information. Reasons why information system
inventory records are inaccurate include external and internal theft, unsaleables (e.g.
damaged, out-of-date, discontinued, promotional, or seasonal items that cannot be sold any
longer), incorrect incoming and outgoing deliveries (Raman et al., 2001; Fleisch & Tellkamp,
2003), as well as misplaced items (Raman et al., 2001). Thus, even when inventory records
are accurate, misplaced items mean that they were not out of stock, but rather misplaced in
storage areas or in the wrong location within the store.
The phenomenon of inventory inaccuracy is well-known. As Raman et al. (Raman et al.,
2001) show in their case study, most retailers cannot precisely identify the number of units
of a given item available at a store; thus for more than 65% of stock keeping units (SKUs) in
retail stores, information on inventory in the inventory management system was inaccurate
(i.e. the information system inventory differed from physical inventory). The difference was
on average 35% of the target inventory. In a second case study, the authors found that a
median of 3.4% of SKUs were not found on the sales floor although inventory was available
O
p
e
n
A
c
c
e
s
s
D
a
t
a
b
a
s
e
w
w
w
.
i
n
t
e
c
h
w
e
b
.
o
r
g
Source: Supply Chain, The Way to Flat Organisation, Book edited by: Yanfang Huo and Fu Jia,
ISBN 978-953-7619-35-0, pp. 404, December 2008, I-Tech, Vienna, Austria
www.intechopen.com
Supply Chain, The Way to Flat Organisation
340
in the store. In the first case, inventory inaccuracy reduced profits by 10 %, while in the
second case, misplaced items reduced profits by 25%.
Inventory record inaccuracy and misplaced items can lead to a substantial decrease in
profits due to lost sales, additional labor costs, and higher inventory carrying costs. All these
problems may also have a long-term negative impact on firm image.
RFID technology can be a solution to these problems by tracking and tracing products at
any point across the supply chain. Thus, RFID will have a significant impact on every facet
of supply chain management—from the mundane, such as moving goods through loading
docks, to the complex, such as managing terabytes of data as information about goods on
hand is collected in real time (Caton, 2004).
For the perishable goods industry, demand management is crucial. In the United States, up
to 20 per cent of foods are discarded due to spoilage in the supply chain (Rangarajan et al.,
2005). Monitoring and control of time-sensitive products can be facilitated by the application
of RFID technology.
2. RFID and supply chain
2.1 RFID technology overview
RFID technology is classified as a wireless Automatic Identification and Data Capture
(AIDC) technology that can be applied to the identification and tracking of entities. An RFID
device called RFID tag or transponders can be attached to a product as a means of
identification. This tag contains an integrated circuit for storing information (including serial
number, configuration instructions, activity history, etc.), modulating and demodulating a
(RF) signal, and other specialized facilities. The circuit is attached to a miniature antenna
within a set upon a label to permit attaching the tag to the desired physical object. The RFID
tag transmits their data in response to an interrogation received from a read-write device
called RFID reader or interrogators. This device decodes the tag signal and transfers the data
to a computer through a cable or wireless connection. The tags and readers are designed
with a specific operating frequency. Given the wireless communication between the RFID
chip and the RFID reader, all data may be read from a distance. The reading range varies in
accordance with the operating frequency, the size of the reader antenna, the orientation of
the RFID tag towards the antenna, the tag position with respect to the antenna core, as well
as with the tag type.
RFID tags come in a large variety of designs; they can be classified in many different ways
and multiple criteria could be used. Thus, RFID tags can be categorized in accordance with
the following criteria:
• power source
• operating frequency
• data storage
• memory size
Each of them is briefly presented below.
Tags use a variety of power sources:
• active tags - contain their own power source (a battery) that is used to run the
microchip's circuitry and to broadcast a signal to a reader when prompted;
• passive tags – with no internal power source. Instead, they draw power from the reader;
• semi-passive tags - which use a battery to run the chip's circuitry, but communicate by
drawing power from the reader.
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
341
Because the active and semi-passive tags contain more hardware than passive RFID tags,
they are more expensive. Active and semi-passive tags are reserved for costly items that are
read over greater distances. Yet, this flexibility does have a cost; active tags require more
maintenance and have a limited life span due to onboard power supplies (5-10 years).
Passive RFID tags have lower production costs, meaning that they can be applied to less
expensive items. In fact, improved passive tag technology is responsible for the current
wave of RFID adoption, as costs are reduced and operating ranges increase.
In some cases, active tags and tags with sensors can be used to monitor product quality.
Thus tags can record temperature, humidity, pressure, shock/vibration, leakage and other
data that could help determine the physical condition of the items monitored. For example,
companies handling fresh produce such as vegetables can ensure product freshness by
ensuring first expiry first out (FEFO) instead of the regular first in first out (FIFO).
A factor that also influences the cost of RFID tags is data storage. There are three storage
types: read-write, read-only and WORM (write once, read many) (Gibson & Bonsor, 2005). A
read-write tag's data can be added to or overwritten. Read-only tags are programmed with a
serial number or other unalterable data when they were made and cannot be added to or
overwritten. WORM tags can have a user-defined secure read-only area that may contain
additional data (like another serial number) added once, but they cannot be overwritten.
Another tag classification criterion is memory size. Generally speaking, tag memory size can
vary from 1 bit to 32 kbits and up. Active tags are able to retain more memory than passive
tags. But more data on the tag leads to increased data reading time. One of the most
challenging RFID implementation issues is the choice of the right memory capacity to
support specified requirements.
Frequency is the leading factor that determines RFID range, resistance to interference and
other performance attributes. RFID systems are available in a wide range of frequencies to
suit various performance needs and they can be classified based on the band in which they
operate. For the moment, there is no global frequency standard for RFID communication,
bandwidth availability being regulated by telecommunications authorities in each country.
RFID uses a range from 125 kilohertz (low frequency) to 5.3 gigahertz (microwave),
generally divided in four distinct categories: Low Frequency (LF), High Frequency (HF),
Ultra-High Frequency (UHF) and Microwave systems. Most commercial RFID systems
operate at either the UHF band, between 859 and 960 MHz, or HF, at 13.56 MHz. Not all
frequencies are available for use throughout the world and this is an important point to
consider when planning supply chain applications. Most RFID technology used in
warehousing and distribution operates at 13.56 MHz (HF), 860-930MHz (UHF) or the
2.45GHz (microwave) band. For material handling, logistics and supply chain applications
RFID systems are concentrated in the UHF band and 13.56MHz.
The reading range of RFID systems is given by the maximum distance between the tag and
the reader antenna that allows the reading of the information stored on the tag chip. The
reading range varies from a few centimeters to tens of meters, depending on the frequency
used, the power output, immediate physical environment and the directional sensitivity of
the antenna. For read/write tags, the reading range typically exceeds the write range. HF
range is limited to the near field only. Thus HF technology is used for short-range
applications and can be read from up to about three meters; this means it cannot be used on
cases and pallets where warehouses and distribution center logistics require longer range
RFID operations. UHF technology provides a reading range of 20 meters or more. The
www.intechopen.com
Supply Chain, The Way to Flat Organisation
342
detection range of active tags is relatively large (up to 300 feet), whereas passive tags only
operate at smaller distances (a few inches up to 30 feet).
The material composition of the tagged item and the contents of the items to be tagged can
have a serious impact on the reading performance. Tag performance generally decreases
with size, so it's advisable to use the largest size possible that fits the object. Longer ranges
require larger tags, and it's a reality of physics that with longer ranges, the read rates are
slower, and more reader power or more sensitive tags are needed. Extra range may be
required if the application calls for reading a large number of tags moving very quickly past
the antenna.
Given current tags costs, Byrne indicates that only medium to high value products should
be tagged (Byrne, 2004). Industry is hoping that tag manufacturers can hit 5 cents per unit,
and that is being regarded as a breakthrough level, and Gaughan sets the item/product cost
delineation at least $15 (Gaughan, 2005).
RFID technology is emerging as a powerful and proven tool for streamlining production at
manufacturing facilities of all sizes. As RFID is integral to the future of supply chain
management and items tracking, it is important to examine RFID in detail and to compare
its capabilities to an existing industry standard, the barcode.
2.2 RFID vs. barcode
RFID is similar to another AIDC technology, barcode technology. Conceptually, bar coding
and RFID are quite similar. In fact, an RFID tag can be attached to a product as a means of
identification, in much the same way as a barcode label. The two technologies differ in terms
of the technology employed: barcode uses optical technology, while RFID uses radio
technology. However, RFID tags have numerous advantages over barcodes.
The major advantage is that RFID has the capacity to store larger amount of information.
Barcode is based on WORM (write once read many) technology, which means that once
printed, a barcode cannot be modified. But an RFID tag can be read and written with a
reader for thousands of times, acting as a portable database. In fact, RFID-enabled supply-
chains can generate 10 to 100 times more information than traditional barcode technology.
Another advantage of RFID technology is that information gathering is faster than in the
case of barcodes, while the read/write operations can be performed through different
materials such us paper, plastic or wood, with the exception of metals.
RFID also allows easy, uninterrupted and upon-request access to the tag data. Unlike the
barcode where identification is limited by line-of-sight, RFID technology requires neither a
line of sight for identification, nor a straight-line alignment between the tags and readers.
This means that packaging never needs to be opened to read a product tag. RFID tags are
also sturdier than barcodes, allowing for use in adverse conditions (including exposure to
dirt, outdoors, etc.), and tags can be affixed or embedded on the product packaging or
inside the item. Barcodes are scanned one at a time, requiring much more time and effort to
scan than RFID tags, when a large number of items are to be counted or tracked. The
barcode is generally used to identify a product family, not the single item. The RFID tags
can track items more precisely than traditional barcodes, and they can be read faster with
less human intervention, thus allowing for more rapid product movement. Furthermore, by
anti-collision mechanisms, several RFID tags in the field of a writer/reader can be addressed
at the same time. For example, if a large amount of pallets are being unloaded into a
warehouse, they can simply be crossed through docking doors attached with RFID readers
instead of being unpacked and scanned manually.
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
343
Barcode presents some privacy and security issues. Although the data encoded on the
barcode could be encrypted, there is no protection to prevent the barcode data from being
copied and decrypted using commercial tools. Thus barcodes may be duplicated and
attached to products. RFID tags allow more sophisticated forms of data protection and
encryption than barcode. Each RFID tag has its own unique identity code or serial number
from the manufacturer embedded on the tag. This number may never be modified making
the tags counterfeit proof.
Barcodes are cheaper than RFID tags; a barcode label costs fractions of a penny instead of
RFID tags cost that vary from 20 cents to a couple of dollars (for specialized tags). But, as
time passes, it is estimated that RFID tags costs will decrease due to an increase in demands
and lower costs from suppliers. On the other hand, barcode costs would are likely to remain
the same because companies have already invested enough in the technology and its
corresponding equipment.
Table 1 summarizes these aspects and provides a brief comparison between RFID and
barcodes technologies (Vempati, 2004; ***b, 2007).
Characteristic RFID Barcode
Reads Per Second 40-200 1-2
Read Range Up to 25 feet for passive RFID
and up to 100’s of feet or more
for active RFID
Several inches
Read/Write Yes No
Anti-collision capabilities
(simultaneously read
capabilities)
Yes No
Cost More (>$.20) Less (pennies)
Reusability More Less
Human Intervention Less More
Line of Site Required No Yes
Read Speed Milliseconds > second
Dirt Influence No effect Very high
Security More Less
Reader Interoperability Limited, but growing Yes
Table 1. RFID versus Barcodes
Speaking in enterprise terms, it is evident that the usage of RFID tags in a supply chain
system enjoys considerable benefits (***c, 2007): high efficiency in collecting, managing,
distributing and storing information on inventory, business processes, and security controls;
increased productivity; products are processed at high speeds, so the time allotted to
product scanning is considerably reduced; the time involved in product handling is
reduced; inventory activities are simplified and data accuracy increases. Thus, various
studies have proved that all inventory procedures may be performed faster than those
involving barcodes (Davis & Luehlfing, 2004). Moreover, if one user gets near the products
holding a mobile reading system, the handheld device will immediately collect and store
data; product management is improved thanks to the re-programmable memory which also
allows instant product location; customer services are considerably improved; RFID will
allow receiving authorities to verify the security and authentication of shipped items.
www.intechopen.com
Supply Chain, The Way to Flat Organisation
344
RFID technology is not likely to replace barcodes in the near future. In fact, since barcode
and RFID technology exchange data in different ways, nowadays the two technologies
complete each other in real applications. They are both valuable in different situations, and
can often be used together effectively for many purposes. In such a hybrid solution, a tag
may be linked with a preprinted barcode.
But the differences in data exchange between the RFID and barcodes can help the user to
decide where each technology can be most effective. The implementation of RFID
technology will focus initially on pallets and crates containing products. Only when passive
RFID tag prices are sufficiently low and adoption is more widespread, will the barcode be
under threat in the retail industry. However, in the coming years, RFID tags and barcodes
will still coexist.
2.3 ISO standards
The International Organization for Standardization (ISO) has developed RFID standards for
automatic identification and item management that tried to solve the compatibility
problems. This standard, known as the ISO 18000 series, deals with the air interface protocol
(the way tags and readers communicate) for systems likely to be used to track goods in the
supply chain. They cover the major frequencies used in RFID systems around the world.
There are seven parts:
18000–1: Generic parameters for air interfaces for globally accepted frequencies
18000 - Part 2: Parameters for Air Interface Communications below 135 KHz (ISO standard
for Low Frequency)
18000 - Part 3: Parameters for Air Interface Communications at 13.56 MHz (ISO standard for
High Frequency)
18000 - Part 4: Parameters for Air Interface Communications at 2.45 GHz (ISO standard for
Microwave Frequency)
18000 - Part 5: Parameters for Air Interface Communications at 5.8 GHz
18000 - Part 6: Parameters for Air Interface Communications at 860 – 930 MHz (ISO standard
for UHF Frequency)
18000 – Part 7: Parameters for Air Interface Communications at 433.92 MHz.
ISO has also created standards that define how data is structured on the tag. For example,
ISO 11784 and 11785 describe the structure and the information content of the codes stored
in the tag for RF identification of animals.
There are also standards that deal with supply chain applications (i.e. how standards are
used in different domains):
• ISO 17358 - Application Requirements, including Hierarchical Data Mapping
• ISO 17363 - Freight Containers
• ISO 17364 - Returnable Transport Items
• ISO 17365 - Transport Units
• ISO 17366 - Product Packaging
• ISO 17367 - Product Tagging (DoD)
• ISO 10374.2 - RFID Freight Container Identification
The usage of RFID to track items in open supply chains is relatively new and fewer
standards have been finalized. For example, ISO has proposed standards for tracking 40-
foot shipping containers, pallets, transport units, cases and unique items. These are at
various stages in the approval process (***a, 2008).
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
345
2.4 RFID privacy & security
RFID data must be used in compliance with clear regulations concerning IT security as well
as consumer and data protection (Heintz, 2005). A primary RFID security concern is the
illicit tracking of RFID tags. Unauthorized readout of the RFID tag memory content has
raised privacy concerns from both retailers and consumers. The issue of consumer privacy
in RFID applications has received a great deal of attention from consumer groups and has
garnered high visibility through the media. Therefore, it is necessary to provide counter
measures which enhance consumer privacy and eliminate the concerns when consumer-
sensitive data like pharmaceuticals are involved. In fact, RFID technology, when combined
with a secure tag and data infrastructure, can assure both package authenticity and pedigree
while creating new revenue opportunities.
A method of defense against unauthorized readers uses cryptography to prevent tag
cloning. Thus, some tags use a form of “rolling code” scheme, wherein the tag identifier
information changes after each scan, thus reducing the usefulness of observed responses.
Nevertheless, cryptographically-enabled tags typically have dramatically higher cost and
power requirements than simpler equivalents, and as a result, deployment of these tags is
much more limited (***d, ****).
2.5 RFID applications
The RFID technology has been available for decades, but given the current significant
lowering of tag costs, it is expected that their usage will be considerably increased. RFID
allows the identification, location, tracking and monitoring of individual physical entities
such as people, individual products or palleted goods. RFID may be viewed as a means of
explicitly labeling objects to facilitate their “perception” by computing devices; thus, real-
time information about these objects can be easily obtained from the factory, through
shipping and warehousing, to the retail location (Finkenzeller, 2003). In fact, the RFID term
is often used to describe the entire system of supply chain management using RFID, from
the physical tags to the processing of information on electronic databases.
Almost all industries have used automatic identification (Auto-ID) in many applications:
access and security systems, item tracking systems, inventory management and simplified
checkout at retail stores. For example, automatic identification technology offers the
potential to achieve inventory accuracy and thus reduce supply chain costs as well as the
out-of-stock level. The relatively new technology, RFID upgrades the Auto-ID capabilities
and enhances implementation in various industries with significantly hard and soft savings.
Employed in a wide range of applications, RFID technology has become an indispensable
asset.
RFID technology will benefit lots of industries and applications are constantly being
developed and refined as the technology advances. The potential applications of RFID
technology in supply chain are vast and refer to any organisation engaged in the
production, movement or sale of physical goods. This includes retailers, distributors,
logistics service providers, manufacturers and their entire supplier base, hospitals and
pharmaceuticals companies, and the entire food chain. For example, the logistical tracking
of goods will increase efficiency and will make available accessible supply chain transport
and route information to everyone involved from the producers to the consumers. RFID tags
in car sub-assemblies will make safety checks and recalls faster and easier. Tags in sub-sea
structures like oil and gas pipelines will make maintenance and repair simpler. Hospitals
www.intechopen.com
Supply Chain, The Way to Flat Organisation
346
will be able to maximise their return on assets by tracking the whereabouts of expensive and
life-saving equipment at all times. The pharmaceutical industry will be able to reduce or
even eliminate counterfeiting by giving each unit of dosage a unique EPC number. This will
allow pharmaceutical data to be properly recorded. In fact the location of certain drugs will
be made accessible to all supply chain partners; they will know the exact location of any
drug and historical locations, the time spent for to transport it from one place to another, as
well as the environmental storage conditions from its production to its usage.
Perhaps the most significant sign of transition to RFID was Wal-Mart’s announcement in
June 2003 of its intention to have top suppliers begin using RFID tags on pallets and cases by
January 2005. In USA, the Department of Defense, Target, Best Buy, Albertson’s, and others
followed with their own RFID initiatives.
In retail industry, it is imperative that perishable products remain within a fixed
temperature range across the entire supply chain. Temperature levels can be monitored in
real-time by a temperature sensor connected as an additional device on an RFID tag
attached, for example, to a shipping container, an individual product or a vehicle. In the not
too distant future RFID tags will offer seamless product temperature records from point of
manufacture to the time of purchase (Smith, 2005).
RFID, with its expected advantages, has currently been a major trend in many industries.
Ranging from commercial to military uses, RFID technology is a modern resource which has
not exhausted yet its applicability potential.
2.6 Integrating RFID technology into supply chain
An important application of RFID technology is supply chain management, where RFID
helps close information gaps by enabling real-time supply chain visibility. By placing RFID
tag on a product, users can track the product throughout the supply chain- from the
manufacturer all the way to the customer.
In most cases the RFID tag can be written and rewritten so that the information in the tag
doesn't remain static. For instance, at first, the tag may only contain manufacturing
information; later on, additional information from the distributor may be added. RFID can
enable the vision of real-time, multidimensional coordination for all the players in the
supply chain (Grackin, 2004).
In fact, RFID is considered the most intelligent technology for managing and collecting
product data or tracking it as it moves through the supply chain.
Today, companies looking to adopt RFID have to deal with three key challenges:
1. RFID Hardware - Selecting tags, readers, and antennas; placing RFID tags on the
products; placing and configuring readers and antennas in the stores, warehouses, and
other locations.
2. Software Infrastructure - Capturing and managing data from the RFID readers,
integrating the data into different levels of enterprise information systems, and sharing
data with trading partners for business collaboration.
3. Evolving business processes - Supporting finer granularity, more real-time product data,
automating supply chain execution, and developing new business processes for
exploiting RFID technology.
The non-line of sight capability of RFID makes it a perfect supply chain technology (Gibson
& Bonsor, 2005). Passive tags operating under the ultra high frequency (UHF) band are
common to supply chain applications because tag costs are low and the read range and rate
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
347
is adequate (Tajima, 2007). In the case of supply chain management (SCM), RFID is not just
about the identification of an individual pallet, case or item but about the relationships
between objects, between organizations, between space and time. RFID is about process
level change that can streamline business-to-business (B2B) operations and bring about
major changes to organizational policies, culture, performance and structure (Lefebvre et al.,
2007).
2.7 Electronic Product Code (EPC)
The use of RFID in supply-chain application is based on EPC. The EPC was conceived as a
means to uniquely identify all physical entities. In fact EPC is a numbering scheme that
provides unique identification for physical objects, assemblies, components and systems.
Information is not stored in the code, but serves only as a reference to on-line – or Internet-
based – information (Brock, 2007).
EPC ID numbers assigned to an entity are used with RFID tags in the same way that UPC
(Universal Product Code) numbers are used with barcodes. In fact, the EPC is considered
the electronic equivalent of the UPC barcode and a possible successor to the barcode. An
RFID tag stores a single EPC number in its memory, just as a barcode holds a UPC number.
Barcodes have been in use for over 30 years and have become an integral part of product
identification. Product identification is performed differently by RFID tags and conventional
barcodes. A UPC refers to an object class or generic category of products. For example,
when a barcode gets scanned at a store checkout counter, it will return product information
such as product name and price; the same information is valid for every product in the same
category. An EPC refers to a specific instance of product, allowing the unique identification
of any tagged item. Thus, an EPC makes it possible to automatically track individual items,
for example, products from the manufacturing line that reach the shelves.
The current version of the specification comprises encodings for EPCs of 96 to 202 bits
length. But EPC codes are typically 96 bits in length (24 four-bit characters) divided into four
fixed length components (header, Domain Manager Number, Object Class Number and
Serial Number), each part containing specific information.
The first section consists of an 8-bit header indicating the number, type and length of
subsequent data sections. Practically this header provides a real extensibility for future,
unanticipated data requirements.
The second section of EPC code identifies the company or entity responsible for maintaining
the subsequent codes. This entity is known as the EPC manager. Its responsibility is to
maintain both object type codes and serial numbers in their domain. The EPC manager
section covers a 28-bit section, encoding a maximum of 228 = 268,435,456 companies.
The next section of the EPC code, called the object class, occupies the next 24-bits. The object
class number is used to identify a class of product, meaning a group of products sharing
similar characteristics. When applied to retail products, the object class is often considered
the skew or stock keeping unit (SKU), lot number or any other object-grouping scheme
considered by the EPC manager. For each organization is allowed more than 16 million
object types, so this section could encode all the current UPC SKUs and many other object
classes. This allows expanding beyond retail applications into general supply chain.
The final section of the EPC code encodes a unique object identification number that serves
to identify a particular item belonging to the specified object class. It is the managing entity
responsibility to assign unique serial number for every instance within each object class. For
www.intechopen.com
Supply Chain, The Way to Flat Organisation
348
all objects of a similar type, the EPC serial number provides 36-bits, or 236 = 68,719,476,736,
unique identifiers. Together with the product code, this provides 1.1x10
18
unique item
numbers for each company – currently beyond the range of all manufactured products.
In January 2008, 1347 companies from different industries were EPCglobal subscribers
(Schmitt & Michahelles, 2008).
2.8 Benefits
The RFID technology will bring benefits to a wide range of industries, but one of the main
domains of RFID adoption has been the supply chain for retail sector. RFID technology can
help improve efficiency and visibility; it will cut management costs, influence considerably
the production of higher quality goods and enhance the utilization of products; it will also
reduce shrinkage and counterfeiting, and increase sales by reducing out-of-stocks.
For example, RFID technology has the potential to:
• reduce the time taken to re-order shipments;
• minimize warehouse discrepancies by validating the accuracy of deliveries and
shipments;
• reduce product shrinkage and theft;
• improved tracking of pallets, cases and individual products;
• provide better planning and optimization of inventory and reusable products;
• allow more efficient use of labor by automation data handling and reading multiple
products;
• monitor expiration dates of an organization’s complete inventory list;
• automate supplier receiving and billing procedures;
• reduce manual entry errors (e.g. data typing mistakes);
• allow more efficient transport and distribution;
• allow information sharing to better collaboration between partners;
• increase visibility and lead to better decision making capabilities.
The main benefit of RFID integrating in supply chain process is to allow the constantly
monitoring and improving the whole system by using all the available data.
But to maximize competitive advantage in a supply chain context, RFID needs to be used by
multiple companies to do all sorts of things, creating widespread advantages for all supply
chain participants (Coltman et al., 2008). RFID is expected to be worth billions of dollars in
new investments. According to IDTechEx, a leading market research and advisory firm, the
RFID market will increase from US$4.96 billion in 2007 to US$26.88 billion in 2017 (Das &
Haropp, 2007).
2.9 Obstacles
The path to RFID technology integration in supply chain is not without some obstacles and
they can be enumerated briefly:
• tags, infrastructure and implementation costs are still high;
• unclear cost/benefit sharing models;
• the integration in existing systems;
• readers can't always read all the cases on a pallet;
• technology incompatibilities: inability for a single reader to read tags from multiple
frequencies;
• standards are in a state of flux;
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
349
• some of RFID standards are not globally accepted; different standards coexist in parallel
and there are a lot of them incompatible one with other;
• tag reliability can be impacted by humidity, liquid or metals;
• radio interference can upset even the best-laid plans: in close proximity to one another,
tags may seriously affect performance. Antenna placement and orientation can also
negatively impact the RFID solution;
• end-users lack real RFID knowledge.
3. RFID@B2B
3.1 Business to Business (B2B)
Twenty-first century technology has revolutionized the way companies do business with
each other and with their customers. The Internet has connected companies around the
world and changed the global economy as a whole. Indeed, the Internet has emerged as a
most cost-effective means of driving supply chain integration. A new concept has been
devised: e-business - as the marriage between the Internet and supply chain integration
(Johnson & Whang, 2002). Following today’s economic globalization, e-business has become
a necessity for companies to remain competitive. As one major component of e-business,
business to business (B2B or B-to-B) includes all applications intended to enable or improve
relationships within firms and between two or more companies (***e, ****). In fact, B2B is
commonly used to describe any electronic business transaction occurring between two
separate business entities. This includes the exchange of both products and service.
Examples of exchanged products and services might include the selling of raw material
inputs from one firm to another, the sale of capital equipment, the purchasing of commercial
insurance or the contracting of one firm with another for the procurement of accounting
services. B2B is all about product and materials procurement and the supply chain is the
vehicle through which business-to-business is ultimately achieved. In fact, a B2B
infrastructure links buyers, suppliers and logistics service providers into a global trading
network. One of the new concepts that will further define traditional B2B Internet commerce
is RFID (Gerhards, 2006).
3.2 Integrating RFID technologies in B2B applications for enterprise supply chain
In the case of B2B, RFID is supposed to benefit not only the identification of individual
pallets, cases or items, but also the relationships between/among objects, between/among
organizations, between space and time. RFID is about process level change that can
streamline business-to-business operations and bring about major changes to organizational
policies, culture, performance and structure (Lefebvre et al., 2006). In fact, according to S.F.
Wamba et al. (Wamba et al., 2007), RFID technology and the EPC are enablers of intelligent
B2B e-commerce supply chain management.
Our research team has developed an RFID_B2B integrated system which combines the
advantages of B2B with those of RFID technology and which presents itself as a viable
solution for the problems raised by globalization. The software system deals with business
relations between corporations, big companies and groups of companies, in order to
optimize the flow of materials among them and the supply chain management inside every
company. To identify both parts and finite products, our system uses passive 13.56 MHz
tags. Unique IDs are used to control and trace every part of a finite product. The RFID_B2B
www.intechopen.com
Supply Chain, The Way to Flat Organisation
350
system could be tailored to the diverse needs of the companies and the different roles of
employees in each company. If this system is embraced by the entire supply chain
management, final consumers will be able to follow the entire production chain of a finite
product. And this is possible if the traceability information is memorized on each tag
attached to some part of the final product.
The RFID_B2B system architecture is flexible and easily extensible. The research team
chooses to design a layered architecture arranged in such a way that the lower layers
support and enable the upper layers. This architecture has some advantages: divide the
complex system into several more manageable components, allow different groups to work
on different layers concurrently etc. The RFID_B2B system is structured on three levels: the
corporation level, the local level and data collection level at the material control departments
(Figure 1).
Fig. 1. The RFID_B2B system architecture
At the platform’s corporation level, the following achievements have been made:
• services are offered to ensure the support for concluding contracts, along with the
agreements, the conventions at the board level of the corporations, the firm groups or
the representatives of the firm groups;
• informational management of the group/corporation enterprises, ensuring supervision
of the material flows (with effects on the establishing of supply and sales strategies), as
well as of the good functioning of the internal network of the group/ corporation;
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
351
• supply of reports regarding the current activities within the group/ corporation,
including alarm in case of generation of specified events.
The following are provided at the local level or at the enterprise level:
• proper administration of the received, sent, defective, repaired, returned entities at the
enterprise level;
• access to the company servers network, as well as communication management along
the supply- sales main chain, providing the opportunity to manage and access the
information referring to the route followed by materials, assemblies and finite products;
• coordination of the materials/assemblies flow in order to ensure adequate distribution
to corresponding departments, as well as to deliver the order to the gates in
departments;
• documents delivery for controlling the production, materials, finite products,
assemblies, including those in the service department.
Different applications of RFID are implemented in the data collection level in order to write
and read the data from the tags attached to the materials, assemblies and finite products. At
this level, the communication is wired or wireless.
The integrated system comprises the following elements:
• an IBM-PC compatible computer which runs an OPC (OLE for Process Control) server
with two main components: communication and data acquisition;
• an IBM-PC compatible computer which runs an OPC dedicated client; in fact one and
the same computer may be used to run both the server and the dedicated client;
• a network comprising several low-resource embedded devices that have attached low-
cost RFID readers; these device processes the local data and are capable of connecting
and controlling other devices;
• PDA devices with attached RFID readers;
• an IBM-PC compatible computer which runs the local B2B server (Giza & Cerlinca,
2007);
• an IBM-PC compatible computer which runs the central B2B server (Giza & Cerlinca,
2007).
3.3 Improving supply chain management with RFID mobility solution
Enterprise supply chain systems can offer access to desired tasks (for example, inventory
management, demand projections, production planning) from handheld computers, such as
Pocket PCs.
Inefficient manual data-handling process in supply-chain management is a common
problem with serious repercussions that affected the whole supply-chain, product
traceability etc. There are needed solutions that could automate data handling.
Integrating a mobile solution in an RFID-based supply chain system is the answer (Cerlinca
et al., 2008). Handheld computers can perform many of the tasks that are commonly
executed on a desktop computer or standard laptop. In fact, these devices can be used to
extend the capability and reach of an existing information infrastructure by enabling
workers to collect, access and analyze desired data at any time from anywhere. Thus, the
RFID labeled product can be read and tracked through the entire supply chain with
handheld mobile devices (for example, PDA-Personal Digital Assistant) endowed with RFID
readers. The collected data is stored on the mobile device using a mobile database software
technology. This data is transferred between the mobile device database and PC database
www.intechopen.com
Supply Chain, The Way to Flat Organisation
352
whenever it’s necessary. For security reasons, the data stored in the handheld device
memory can be transferred to a PC, for instance, when the handheld device is placed in a
docking station. But, for integration in our complex enterprise application, encrypted data
can be securely transferred across any kind of Internet-connected network. The users can
also set up a virtual private network. These solutions are less expansive than mobile
communications infrastructure.
The visual space on the handheld screen is far too small; the low display resolution and
small display screen have inhibited information to be displayed completely and clearly. But
the windows of RFID-based mobile application can be adapted to display a plurality of
RFID tag information.
With an efficient RFID-based supply chain solution with integrated mobile support, the
companies can reduce errors and cut costs. Implementing a mobile solution helps
companies improve efficiency, extending the power of enterprise computing to new
processes, people and places. Employees are more productive and businesses are more
competitive.
3.4 RFID_B2B system benefits
The presented system offers a high degree of flexibility and helps companies of all sizes
enable their customers to do business on demand — when they want, where they want and
how they want. Other system benefits are:
• Assures realtime inventories so the users can always receive accurate, up-to-date
inventory information;
• Offers the possibilities to share meaningful data with supply chain partners;
• Permits strengthening customer and partner relationships with collaboration;
• Speeds and simplifies the deployment and management of e-commerce sites;
• Maximizes performance, scalability and adaptability of partners systems;
• Provides rich, ready capabilities for products catalog and content management;
• Permits a greater visibility through realtime product updates, availability and pricing
information;
• Offers personalization capabilities.
3.5 Future improvements
With the growing number of B2B sites available through Internet, a useful addition to the
RFID_B2B system would be an intelligent software agent for information gathering. The
agent will be able to perform semantic query optimization and to offer data mining facilities.
It will dynamically plan for alternative information source when a source or a B2B site goes
down. This agent will organize the results and display them in an easily interpreted manner
to the user. To face the new global market and to provide an effective collaborative
relationship between trading partners, an environment to support the semantic integration
could help. Another useful feature would be a special section that enhances the
management of production planning to ensure good deliveries and productive efficiencies.
Transition to B4B (Business for Business) – next evolution in B2B communication (Jones,
2007) is the following aspect that might be taken into account as future direction for system
development.
The Internet, electronic business and RFID technology are changing the history of supply
chains, and modifying the way that consumers select, purchase, and use products and
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
353
services of partners. The result will be the surfacing of new business-to-business supply
chains that are consumer-focused rather than product-focused.
4. Conclusion
This chapter helps to improve readers understanding of the RFID and EPC potential for
business processes. RFID technology is classified as a wireless AIDC technology that uses
digital data encoded into a radio tag embedding a microchip with an antenna. The data
stored on the tag is collected by a reader using radio waves. There are a large variety of
RFID tags designs; they also have many different functional characteristics such as power
source, carrier frequency, read range, data storage capacity, operational life, cost etc.
RFID has immediate benefits over barcodes. Thus RFID tags are an improvement over
barcodes because the tags have read and write capabilities. The data stored on RFID tags can
be changed, updated and locked. RFID technology offers a better way to track items with
minimal human intervention, for stocking and marketing purposes. Benefits come in the
form of inventory, shrinkage and labor reduction on the one hand, and sales increasing due
to reducing out-of-stock and getting real-time demand information on the other hand.
RFID technology represents one of a number of possible solutions to enhance supply chain.
It is therefore important to do a cost-benefit analysis to evaluate each alternative solution.
The majority of the costs of integrating RFID in supply chain application come from IT, tags,
hardware and services. But due to the actual relative high cost of integrating RFID
technology, each company needs to evaluate its own business processes to determine where
and if RFID can be applied (incorporated) to provide substantial business benefits. Thus, all
RFID solutions have to evaluate different performance and cost factors, including the
operating environment, on-tag memory storage, and signal transmission restrictions. Each
of these issues has significant cost impacts on both tags and readers. The costs of RFID
readers have already fallen to a considerable extent. The cost of tags is expected to decrease
over time and as quantities increase. Passive tags are undoubtedly less expensive than active
tags and most companies are focusing on passive tags. The different studies proves that at a
lower quantity the barcode is the cheapest alternative for supply chain, but, as quantity of
product increase the optimum choice is RFID. In some applications, RFID and barcodes
system will still coexist and this redundancy cost must be considered. However, to realize
maximum return on investment (ROI) for RFID integration, the enterprises need to leverage
their information architecture strategically.
Any industrial domain may benefit from RFID technology, and the number of applications
is on the rise. Thus, RFID technology is applied in a vast area of industrial, commercial and
military domains, including manufacturing and logistics, retail, animal tracking, etc. This
chapter focuses on how RFID technology can be used to solve problems faced by supply
chain. In fact, RFID has the potential to radically change the entire supply chain by
improving inventory management, asset visibility, and interoperability in an end-to-end
integrated environment. The ability to track, at item level, material flows among partners
until they reach the consumer, while maintaining the data accuracy advantages of various
types of automatic identification technology (AIT), is the perfect solution to the many issues
of enterprises in the past. RFID technology permits the unique identification of each
container, pallet, case and item to be manufactured, shipped and sold, thus allowing an
increased visibility throughout the supply chain. Thus the RFID has the potential of helping
www.intechopen.com
Supply Chain, The Way to Flat Organisation
354
retailers provide the right product at the right place at the right time, allowing maximizing
sales and profits.
The EPC represents a low-cost method of tracking products using RFID technology. The
EPC is a short, simple and extensible code designed for the unique identification of
individual physical objects such as spare parts and whole products; the identification
process may be extended to cover further information related to container, packages,
shipments or manufacturers. The EPC can provide up to 268,435,456 companies identifiers,
more than 16 million object types and 1.1 x 10
18
unique item numbers for each company.
In a global market where change is continuous, companies require tools that allow them to
respond quickly to new opportunities. The presented RFID_B2B system can be considered
as a viable solution for potential problems raised by globalization process, contributing to a
significantly more efficient business process. Thus, the presented system helps small,
medium and enterprise organizations to improve productivity and provide better service to
their customers by providing a flexible solution for all of a company's B2B needs. Many
mobile systems already employed in supply chain management have proved their
importance through significant return on investment. Not only can they extend corporate
data outwards to mobile devices for viewing and querying, but users can use any mobile
device endowed with an RFID reader for data collection. In this way, manual entry data has
been eliminated. Moreover, users can read the tags wherever the items are placed, which
enables a more flexible storage environment and an efficiency increase of supply chains. The
RFID_B2B system is so adaptable that many types of businesses can use it and allows
enabling new business opportunities and growth. Using the developed system may help
customers sharpen data accuracy, process supply chain transactions faster, and improve
supply chain and inventory management. Given slim profit margins, companies are looking
for ways to save on costs while remaining globally competitive. RFID@B2B may be their
answer.
5. References
Brock, D. (2003), The Electronic Product Code (EPC) as a Meta Code, Massachusetts Institute
of Technology, Available at: http://www.autoidlabs.org/uploads/media/MIT-
AUTOID-WH020.pdf
Byrne, P. M. (2004), Supply Chain Rfid: Lessons from a Leader, Logistics Management, 43(5),
2004, pp. 31-32
Caton, M. (2004), RFID Reshapes Supply Chain Management, http://www.eweek.com/
c/a/Mobile-and-Wireless/RFID-Reshapes-Supply-Chain-Management/
Cerlinca, T.; Turcu, C.E. & Cerlinca, M. (2008), Integrating Mobile Applications into RFID
Based B2B Systems, 22nd International Conference on Advanced Information Networking
and Applications, 25-28 March, 2008, Gino-wan, Okinawa, Japan, pp. 1341-1345,
ISSB/ISBN: 978-0-7695-3096-3
Coltman, T.; Gadh, R. & Michael, K. (2008), RFID and Supply Chain Management:
Introduction to the Special Issue, Journal of Theoretical and Applied Electronic
Commerce Research, (3)1, pp. iii-vi, Available at: :http://works.bepress.com/
kmichael/27
Das, R. & Harrop, P. (2007), Complete RFID analysis and forecasts 2007-2017, RFID Forecasts,
Players & Opportunities 2007-2017, IDTechEx Available at: www.idtechex.com/
products/en/view.asp?productcategoryid=119
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
355
Davis, H. & Luehlfing, M. (2004), Radio Frequency Identification: The Wave of the Future,
Journal of Accountancy, Online Issues, Available at: http://www.aicpa.org/
PUBS/JOFA/nov2004/davis.htm
Finkenzeller, K. (2003), RFID Handbook: Fundamentals and Applications in Contactless
Smart Cards and Identification, Second Edition, John Wiley & Sons
Fleisch, E. & Tellkamp, C. (2003), The Impact of Inventory Inaccuracy on Retail Supply
Chain Performance: A Simulation Study, Auto-ID Center, University of St. Gallen,
Institute of Technology Management, Switzerland, Available at
http://www.autoidlabs.org/single-view/dir/article/6/206/page.html
Gaughan, D. (2005), RFID Hype Collides with Reality, Supply Chain Management Review, 9(2),
2005, pp. 14-15
Gerhards, E. (2006), Latest developments in the field of B2B e-markets, B2B group Meeting,
Available at: http://ec.europa.eu/enterprise/ict/studies/b2b_2006_05_10_dev.pdf
Gibson, C. & Bonsor, K. (2007), How RFID Works, Available at:
http://electronics.howstuffworks.com/ rfid3.htm
Giza, F., Cerlinca, T., A N-Tier Application Architecture for B2B Systems, Distributed
Systems, Vol: 5, September, 2007, ISSN/ISBN: 1842-6808
Grackin, A. (2004), RFID for Consumer/Retail Supply Chains, CHAINLINK Research,
http://prescient-news.com/0905/RFID_for_Consumer-Retail_Supply_Chains.pdf
Heintz, B. (2005), RFID White Paper Technology, Systems, and Applications, Bitom,
Germany, Available at: http://www.rfidconsultation.eu/docs/ficheiros/
White_Paper_RFID_english_12_12_2005_final.pdf
Johnson, M. & Whang, S. (2002), e-Business and Supply Chain Management: An Overview
and Framework, Production and Operations Management, Vol. 11, No. 4, 2002,
Available at: http://mba.tuck.dartmouth.edu/ digital/ Research/ Academic
Publications/POMSArticle.pdf
Jones, M. (2007), Business 4 Business – ASN and Data Accuracy Drive Higher Order
Functionality and Redefinition of Retail B2B Communications, VCF & GXS,
November 2007, Available at: http://www.gxs.com/forms/
0711_B4B_wp_VCF.htm
Lefebvre, L.; Lefebvre, E.; Bendavid, Y.; Fosso, S. & Boeck, H. (2006), RFID as an enabler of
B-to-B e-Commerce and its impact on business processes: a pilot study of a supply
chain in the retail industry, Proceedings of the 39th Annual Hawaii International
Conference on System Sciences, Hawaii, 2006, pp. 1-10
Raman, A.; DeHoratius, N. & Ton, Z. (2001), Execution: The Missing Link in Retail
Operations, California Management Review, 43, 2001, pp. 136–52.
Rangarajan, T.S.; Vijaykumar, A. & Subramaniam, S. (2005), Stop Getting Strangled by your
Supply Chain. Enhancing SCM using RFID, Tata Consultancy Services Limited, 2005
Schmitt, P. & Michahelles, F. (2008), Economic Impact of RFID Report, Building Radio
frequency Identification for the Global Environment, April 2008
Smith, J.N. (2005), Specialized Logistics for a Longer Perishable Supply Chain, World Trade
Magazine, Available at: www.pressroom.ups.com/staticfiles/articles/456.pdf
Tajima, M. (2007) Strategic Value of RFID in Supply Chain Management, Journal of
Purchasing and Supply Management, vol 13, 2007, pp. 261-273
www.intechopen.com
Supply Chain, The Way to Flat Organisation
356
Vempati, S. (2004), RFID Architecture Strategy, Infosys Technologies Limited,
http://www.infosys.com/rfid/Infosys_White_Paper_on_RFID_Architecture_
Strategy.pdf
Wamba, F.; Lefebvre, L. & Lefebvre, E. (2007), Integrating RFID Technology and EPC
Network into a B2B Retail Supply Chain: a Step Toward Intelligent Business
Processes, Journal of Technology, Management & Innovation, , Vol. 2, No. 2, 2007, pp.
114-124, ISSN 0718-2724
***a (2008), A Summary of RFID Standards, RFID Journal, Available at:
http://www.rfidjournal.com/article/view/1335/1/129
***b, (2007), RFID Is A Hot Topic, Nutech Systems, Available at :
http://www.nutechsystems.com/news_rfid.html
***c, (2007), Advantages of RFID, ActiveWave Inc., http://www.activewaveinc.com/
technology_rfid_advantage.html
***d, (****), Radio-frequency identification, Wikipedia, Available at: http://en.wikipedia.org/
wiki/RFID
***e, (****), E-business Definitions, http://www.cheshirehenbury.com/ebusiness/
ebdefinitions.html
www.intechopen.com
Supply Chain the Way to Flat Organisation
Edited by Julio Ponce and Adem Karahoca
ISBN 978-953-7619-35-0
Hard cover, 436 pages
Publisher InTech
Published online 01, January, 2009
Published in print edition January, 2009
InTech Europe
University Campus STeP Ri
Slavka Krautzeka 83/A
51000 Rijeka, Croatia
Phone: +385 (51) 770 447
Fax: +385 (51) 686 166
www.intechopen.com
InTech China
Unit 405, Office Block, Hotel Equatorial Shanghai
No.65, Yan An Road (West), Shanghai, 200040, China
Phone: +86-21-62489820
Fax: +86-21-62489821
With the ever-increasing levels of volatility in demand and more and more turbulent market conditions, there is
a growing acceptance that individual businesses can no longer compete as stand-alone entities but rather as
supply chains. Supply chain management (SCM) has been both an emergent field of practice and an
academic domain to help firms satisfy customer needs more responsively with improved quality, reduction cost
and higher flexibility. This book discusses some of the latest development and findings addressing a number of
key areas of aspect of supply chain management, including the application and development ICT and the
RFID technique in SCM, SCM modeling and control, and number of emerging trends and issues.
How to reference
In order to correctly reference this scholarly work, feel free to copy and paste the following:
Cornel Turcu, Cristina Turcu and Adrian Graur (2009). Improvement of Supply Chain Performances Using
RFID Technology, Supply Chain the Way to Flat Organisation, Julio Ponce and Adem Karahoca (Ed.), ISBN:
978-953-7619-35-0, InTech, Available from:
http://www.intechopen.com/books/supply_chain_the_way_to_flat_organisation/improvement_of_supply_chain_
performances_using_rfid_technology
doc_391130126.pdf
RFID technology is classified as a wireless Automatic Identification and Data Capture (AIDC) technology that can be applied to the identification and tracking of entities. An RFID device called RFID tag or transponders can be attached to a product as a means of identification.
18
Improvement of Supply Chain Performances
Using RFID Technology
Cornel Turcu, Cristina Turcu and Adrian Graur
Stefan cel Mare University of Suceava
Romania
1. Introduction
As markets become more global and competition intensifies, firms are beginning to realize
that competition is not exclusively a firm versus firm domain, but a supply chain against
supply chain phenomenon (***a, 2008). Under these circumstances, an increasing strategic
importance to any organization independent of size or of sector, is to deliver information,
goods and services in full, on time and error-free to customers.
From demand forecasting, to the sourcing of raw materials, right through to manufacture
and dispatch- visibility in the supply chain is becoming an important facet of any modern
operation (Coltman et al., 2008). But at this moment, the interconnectivity between various
links in the supply chain is incomplete and inaccurate, every link in the chain being an
individualistic entity with different processes. This leads to poor product visibility and stock
transparency across the supply chain. For companies looking at multiple markets, the lack
of visibility in their supply chain can lead to tremendous loss of revenue.
But even if information technology is used within a supply chain to share information on
end-customer demand and inventory levels, there is still often a discrepancy between this
information and the real physical flow of products. This discrepancy frequently derives
from the missing real-time or near real-time data in concordance with the physical flow of
goods. The result is inaccurate inventory information. Reasons why information system
inventory records are inaccurate include external and internal theft, unsaleables (e.g.
damaged, out-of-date, discontinued, promotional, or seasonal items that cannot be sold any
longer), incorrect incoming and outgoing deliveries (Raman et al., 2001; Fleisch & Tellkamp,
2003), as well as misplaced items (Raman et al., 2001). Thus, even when inventory records
are accurate, misplaced items mean that they were not out of stock, but rather misplaced in
storage areas or in the wrong location within the store.
The phenomenon of inventory inaccuracy is well-known. As Raman et al. (Raman et al.,
2001) show in their case study, most retailers cannot precisely identify the number of units
of a given item available at a store; thus for more than 65% of stock keeping units (SKUs) in
retail stores, information on inventory in the inventory management system was inaccurate
(i.e. the information system inventory differed from physical inventory). The difference was
on average 35% of the target inventory. In a second case study, the authors found that a
median of 3.4% of SKUs were not found on the sales floor although inventory was available
O
p
e
n
A
c
c
e
s
s
D
a
t
a
b
a
s
e
w
w
w
.
i
n
t
e
c
h
w
e
b
.
o
r
g
Source: Supply Chain, The Way to Flat Organisation, Book edited by: Yanfang Huo and Fu Jia,
ISBN 978-953-7619-35-0, pp. 404, December 2008, I-Tech, Vienna, Austria
www.intechopen.com
Supply Chain, The Way to Flat Organisation
340
in the store. In the first case, inventory inaccuracy reduced profits by 10 %, while in the
second case, misplaced items reduced profits by 25%.
Inventory record inaccuracy and misplaced items can lead to a substantial decrease in
profits due to lost sales, additional labor costs, and higher inventory carrying costs. All these
problems may also have a long-term negative impact on firm image.
RFID technology can be a solution to these problems by tracking and tracing products at
any point across the supply chain. Thus, RFID will have a significant impact on every facet
of supply chain management—from the mundane, such as moving goods through loading
docks, to the complex, such as managing terabytes of data as information about goods on
hand is collected in real time (Caton, 2004).
For the perishable goods industry, demand management is crucial. In the United States, up
to 20 per cent of foods are discarded due to spoilage in the supply chain (Rangarajan et al.,
2005). Monitoring and control of time-sensitive products can be facilitated by the application
of RFID technology.
2. RFID and supply chain
2.1 RFID technology overview
RFID technology is classified as a wireless Automatic Identification and Data Capture
(AIDC) technology that can be applied to the identification and tracking of entities. An RFID
device called RFID tag or transponders can be attached to a product as a means of
identification. This tag contains an integrated circuit for storing information (including serial
number, configuration instructions, activity history, etc.), modulating and demodulating a
(RF) signal, and other specialized facilities. The circuit is attached to a miniature antenna
within a set upon a label to permit attaching the tag to the desired physical object. The RFID
tag transmits their data in response to an interrogation received from a read-write device
called RFID reader or interrogators. This device decodes the tag signal and transfers the data
to a computer through a cable or wireless connection. The tags and readers are designed
with a specific operating frequency. Given the wireless communication between the RFID
chip and the RFID reader, all data may be read from a distance. The reading range varies in
accordance with the operating frequency, the size of the reader antenna, the orientation of
the RFID tag towards the antenna, the tag position with respect to the antenna core, as well
as with the tag type.
RFID tags come in a large variety of designs; they can be classified in many different ways
and multiple criteria could be used. Thus, RFID tags can be categorized in accordance with
the following criteria:
• power source
• operating frequency
• data storage
• memory size
Each of them is briefly presented below.
Tags use a variety of power sources:
• active tags - contain their own power source (a battery) that is used to run the
microchip's circuitry and to broadcast a signal to a reader when prompted;
• passive tags – with no internal power source. Instead, they draw power from the reader;
• semi-passive tags - which use a battery to run the chip's circuitry, but communicate by
drawing power from the reader.
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
341
Because the active and semi-passive tags contain more hardware than passive RFID tags,
they are more expensive. Active and semi-passive tags are reserved for costly items that are
read over greater distances. Yet, this flexibility does have a cost; active tags require more
maintenance and have a limited life span due to onboard power supplies (5-10 years).
Passive RFID tags have lower production costs, meaning that they can be applied to less
expensive items. In fact, improved passive tag technology is responsible for the current
wave of RFID adoption, as costs are reduced and operating ranges increase.
In some cases, active tags and tags with sensors can be used to monitor product quality.
Thus tags can record temperature, humidity, pressure, shock/vibration, leakage and other
data that could help determine the physical condition of the items monitored. For example,
companies handling fresh produce such as vegetables can ensure product freshness by
ensuring first expiry first out (FEFO) instead of the regular first in first out (FIFO).
A factor that also influences the cost of RFID tags is data storage. There are three storage
types: read-write, read-only and WORM (write once, read many) (Gibson & Bonsor, 2005). A
read-write tag's data can be added to or overwritten. Read-only tags are programmed with a
serial number or other unalterable data when they were made and cannot be added to or
overwritten. WORM tags can have a user-defined secure read-only area that may contain
additional data (like another serial number) added once, but they cannot be overwritten.
Another tag classification criterion is memory size. Generally speaking, tag memory size can
vary from 1 bit to 32 kbits and up. Active tags are able to retain more memory than passive
tags. But more data on the tag leads to increased data reading time. One of the most
challenging RFID implementation issues is the choice of the right memory capacity to
support specified requirements.
Frequency is the leading factor that determines RFID range, resistance to interference and
other performance attributes. RFID systems are available in a wide range of frequencies to
suit various performance needs and they can be classified based on the band in which they
operate. For the moment, there is no global frequency standard for RFID communication,
bandwidth availability being regulated by telecommunications authorities in each country.
RFID uses a range from 125 kilohertz (low frequency) to 5.3 gigahertz (microwave),
generally divided in four distinct categories: Low Frequency (LF), High Frequency (HF),
Ultra-High Frequency (UHF) and Microwave systems. Most commercial RFID systems
operate at either the UHF band, between 859 and 960 MHz, or HF, at 13.56 MHz. Not all
frequencies are available for use throughout the world and this is an important point to
consider when planning supply chain applications. Most RFID technology used in
warehousing and distribution operates at 13.56 MHz (HF), 860-930MHz (UHF) or the
2.45GHz (microwave) band. For material handling, logistics and supply chain applications
RFID systems are concentrated in the UHF band and 13.56MHz.
The reading range of RFID systems is given by the maximum distance between the tag and
the reader antenna that allows the reading of the information stored on the tag chip. The
reading range varies from a few centimeters to tens of meters, depending on the frequency
used, the power output, immediate physical environment and the directional sensitivity of
the antenna. For read/write tags, the reading range typically exceeds the write range. HF
range is limited to the near field only. Thus HF technology is used for short-range
applications and can be read from up to about three meters; this means it cannot be used on
cases and pallets where warehouses and distribution center logistics require longer range
RFID operations. UHF technology provides a reading range of 20 meters or more. The
www.intechopen.com
Supply Chain, The Way to Flat Organisation
342
detection range of active tags is relatively large (up to 300 feet), whereas passive tags only
operate at smaller distances (a few inches up to 30 feet).
The material composition of the tagged item and the contents of the items to be tagged can
have a serious impact on the reading performance. Tag performance generally decreases
with size, so it's advisable to use the largest size possible that fits the object. Longer ranges
require larger tags, and it's a reality of physics that with longer ranges, the read rates are
slower, and more reader power or more sensitive tags are needed. Extra range may be
required if the application calls for reading a large number of tags moving very quickly past
the antenna.
Given current tags costs, Byrne indicates that only medium to high value products should
be tagged (Byrne, 2004). Industry is hoping that tag manufacturers can hit 5 cents per unit,
and that is being regarded as a breakthrough level, and Gaughan sets the item/product cost
delineation at least $15 (Gaughan, 2005).
RFID technology is emerging as a powerful and proven tool for streamlining production at
manufacturing facilities of all sizes. As RFID is integral to the future of supply chain
management and items tracking, it is important to examine RFID in detail and to compare
its capabilities to an existing industry standard, the barcode.
2.2 RFID vs. barcode
RFID is similar to another AIDC technology, barcode technology. Conceptually, bar coding
and RFID are quite similar. In fact, an RFID tag can be attached to a product as a means of
identification, in much the same way as a barcode label. The two technologies differ in terms
of the technology employed: barcode uses optical technology, while RFID uses radio
technology. However, RFID tags have numerous advantages over barcodes.
The major advantage is that RFID has the capacity to store larger amount of information.
Barcode is based on WORM (write once read many) technology, which means that once
printed, a barcode cannot be modified. But an RFID tag can be read and written with a
reader for thousands of times, acting as a portable database. In fact, RFID-enabled supply-
chains can generate 10 to 100 times more information than traditional barcode technology.
Another advantage of RFID technology is that information gathering is faster than in the
case of barcodes, while the read/write operations can be performed through different
materials such us paper, plastic or wood, with the exception of metals.
RFID also allows easy, uninterrupted and upon-request access to the tag data. Unlike the
barcode where identification is limited by line-of-sight, RFID technology requires neither a
line of sight for identification, nor a straight-line alignment between the tags and readers.
This means that packaging never needs to be opened to read a product tag. RFID tags are
also sturdier than barcodes, allowing for use in adverse conditions (including exposure to
dirt, outdoors, etc.), and tags can be affixed or embedded on the product packaging or
inside the item. Barcodes are scanned one at a time, requiring much more time and effort to
scan than RFID tags, when a large number of items are to be counted or tracked. The
barcode is generally used to identify a product family, not the single item. The RFID tags
can track items more precisely than traditional barcodes, and they can be read faster with
less human intervention, thus allowing for more rapid product movement. Furthermore, by
anti-collision mechanisms, several RFID tags in the field of a writer/reader can be addressed
at the same time. For example, if a large amount of pallets are being unloaded into a
warehouse, they can simply be crossed through docking doors attached with RFID readers
instead of being unpacked and scanned manually.
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
343
Barcode presents some privacy and security issues. Although the data encoded on the
barcode could be encrypted, there is no protection to prevent the barcode data from being
copied and decrypted using commercial tools. Thus barcodes may be duplicated and
attached to products. RFID tags allow more sophisticated forms of data protection and
encryption than barcode. Each RFID tag has its own unique identity code or serial number
from the manufacturer embedded on the tag. This number may never be modified making
the tags counterfeit proof.
Barcodes are cheaper than RFID tags; a barcode label costs fractions of a penny instead of
RFID tags cost that vary from 20 cents to a couple of dollars (for specialized tags). But, as
time passes, it is estimated that RFID tags costs will decrease due to an increase in demands
and lower costs from suppliers. On the other hand, barcode costs would are likely to remain
the same because companies have already invested enough in the technology and its
corresponding equipment.
Table 1 summarizes these aspects and provides a brief comparison between RFID and
barcodes technologies (Vempati, 2004; ***b, 2007).
Characteristic RFID Barcode
Reads Per Second 40-200 1-2
Read Range Up to 25 feet for passive RFID
and up to 100’s of feet or more
for active RFID
Several inches
Read/Write Yes No
Anti-collision capabilities
(simultaneously read
capabilities)
Yes No
Cost More (>$.20) Less (pennies)
Reusability More Less
Human Intervention Less More
Line of Site Required No Yes
Read Speed Milliseconds > second
Dirt Influence No effect Very high
Security More Less
Reader Interoperability Limited, but growing Yes
Table 1. RFID versus Barcodes
Speaking in enterprise terms, it is evident that the usage of RFID tags in a supply chain
system enjoys considerable benefits (***c, 2007): high efficiency in collecting, managing,
distributing and storing information on inventory, business processes, and security controls;
increased productivity; products are processed at high speeds, so the time allotted to
product scanning is considerably reduced; the time involved in product handling is
reduced; inventory activities are simplified and data accuracy increases. Thus, various
studies have proved that all inventory procedures may be performed faster than those
involving barcodes (Davis & Luehlfing, 2004). Moreover, if one user gets near the products
holding a mobile reading system, the handheld device will immediately collect and store
data; product management is improved thanks to the re-programmable memory which also
allows instant product location; customer services are considerably improved; RFID will
allow receiving authorities to verify the security and authentication of shipped items.
www.intechopen.com
Supply Chain, The Way to Flat Organisation
344
RFID technology is not likely to replace barcodes in the near future. In fact, since barcode
and RFID technology exchange data in different ways, nowadays the two technologies
complete each other in real applications. They are both valuable in different situations, and
can often be used together effectively for many purposes. In such a hybrid solution, a tag
may be linked with a preprinted barcode.
But the differences in data exchange between the RFID and barcodes can help the user to
decide where each technology can be most effective. The implementation of RFID
technology will focus initially on pallets and crates containing products. Only when passive
RFID tag prices are sufficiently low and adoption is more widespread, will the barcode be
under threat in the retail industry. However, in the coming years, RFID tags and barcodes
will still coexist.
2.3 ISO standards
The International Organization for Standardization (ISO) has developed RFID standards for
automatic identification and item management that tried to solve the compatibility
problems. This standard, known as the ISO 18000 series, deals with the air interface protocol
(the way tags and readers communicate) for systems likely to be used to track goods in the
supply chain. They cover the major frequencies used in RFID systems around the world.
There are seven parts:
18000–1: Generic parameters for air interfaces for globally accepted frequencies
18000 - Part 2: Parameters for Air Interface Communications below 135 KHz (ISO standard
for Low Frequency)
18000 - Part 3: Parameters for Air Interface Communications at 13.56 MHz (ISO standard for
High Frequency)
18000 - Part 4: Parameters for Air Interface Communications at 2.45 GHz (ISO standard for
Microwave Frequency)
18000 - Part 5: Parameters for Air Interface Communications at 5.8 GHz
18000 - Part 6: Parameters for Air Interface Communications at 860 – 930 MHz (ISO standard
for UHF Frequency)
18000 – Part 7: Parameters for Air Interface Communications at 433.92 MHz.
ISO has also created standards that define how data is structured on the tag. For example,
ISO 11784 and 11785 describe the structure and the information content of the codes stored
in the tag for RF identification of animals.
There are also standards that deal with supply chain applications (i.e. how standards are
used in different domains):
• ISO 17358 - Application Requirements, including Hierarchical Data Mapping
• ISO 17363 - Freight Containers
• ISO 17364 - Returnable Transport Items
• ISO 17365 - Transport Units
• ISO 17366 - Product Packaging
• ISO 17367 - Product Tagging (DoD)
• ISO 10374.2 - RFID Freight Container Identification
The usage of RFID to track items in open supply chains is relatively new and fewer
standards have been finalized. For example, ISO has proposed standards for tracking 40-
foot shipping containers, pallets, transport units, cases and unique items. These are at
various stages in the approval process (***a, 2008).
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
345
2.4 RFID privacy & security
RFID data must be used in compliance with clear regulations concerning IT security as well
as consumer and data protection (Heintz, 2005). A primary RFID security concern is the
illicit tracking of RFID tags. Unauthorized readout of the RFID tag memory content has
raised privacy concerns from both retailers and consumers. The issue of consumer privacy
in RFID applications has received a great deal of attention from consumer groups and has
garnered high visibility through the media. Therefore, it is necessary to provide counter
measures which enhance consumer privacy and eliminate the concerns when consumer-
sensitive data like pharmaceuticals are involved. In fact, RFID technology, when combined
with a secure tag and data infrastructure, can assure both package authenticity and pedigree
while creating new revenue opportunities.
A method of defense against unauthorized readers uses cryptography to prevent tag
cloning. Thus, some tags use a form of “rolling code” scheme, wherein the tag identifier
information changes after each scan, thus reducing the usefulness of observed responses.
Nevertheless, cryptographically-enabled tags typically have dramatically higher cost and
power requirements than simpler equivalents, and as a result, deployment of these tags is
much more limited (***d, ****).
2.5 RFID applications
The RFID technology has been available for decades, but given the current significant
lowering of tag costs, it is expected that their usage will be considerably increased. RFID
allows the identification, location, tracking and monitoring of individual physical entities
such as people, individual products or palleted goods. RFID may be viewed as a means of
explicitly labeling objects to facilitate their “perception” by computing devices; thus, real-
time information about these objects can be easily obtained from the factory, through
shipping and warehousing, to the retail location (Finkenzeller, 2003). In fact, the RFID term
is often used to describe the entire system of supply chain management using RFID, from
the physical tags to the processing of information on electronic databases.
Almost all industries have used automatic identification (Auto-ID) in many applications:
access and security systems, item tracking systems, inventory management and simplified
checkout at retail stores. For example, automatic identification technology offers the
potential to achieve inventory accuracy and thus reduce supply chain costs as well as the
out-of-stock level. The relatively new technology, RFID upgrades the Auto-ID capabilities
and enhances implementation in various industries with significantly hard and soft savings.
Employed in a wide range of applications, RFID technology has become an indispensable
asset.
RFID technology will benefit lots of industries and applications are constantly being
developed and refined as the technology advances. The potential applications of RFID
technology in supply chain are vast and refer to any organisation engaged in the
production, movement or sale of physical goods. This includes retailers, distributors,
logistics service providers, manufacturers and their entire supplier base, hospitals and
pharmaceuticals companies, and the entire food chain. For example, the logistical tracking
of goods will increase efficiency and will make available accessible supply chain transport
and route information to everyone involved from the producers to the consumers. RFID tags
in car sub-assemblies will make safety checks and recalls faster and easier. Tags in sub-sea
structures like oil and gas pipelines will make maintenance and repair simpler. Hospitals
www.intechopen.com
Supply Chain, The Way to Flat Organisation
346
will be able to maximise their return on assets by tracking the whereabouts of expensive and
life-saving equipment at all times. The pharmaceutical industry will be able to reduce or
even eliminate counterfeiting by giving each unit of dosage a unique EPC number. This will
allow pharmaceutical data to be properly recorded. In fact the location of certain drugs will
be made accessible to all supply chain partners; they will know the exact location of any
drug and historical locations, the time spent for to transport it from one place to another, as
well as the environmental storage conditions from its production to its usage.
Perhaps the most significant sign of transition to RFID was Wal-Mart’s announcement in
June 2003 of its intention to have top suppliers begin using RFID tags on pallets and cases by
January 2005. In USA, the Department of Defense, Target, Best Buy, Albertson’s, and others
followed with their own RFID initiatives.
In retail industry, it is imperative that perishable products remain within a fixed
temperature range across the entire supply chain. Temperature levels can be monitored in
real-time by a temperature sensor connected as an additional device on an RFID tag
attached, for example, to a shipping container, an individual product or a vehicle. In the not
too distant future RFID tags will offer seamless product temperature records from point of
manufacture to the time of purchase (Smith, 2005).
RFID, with its expected advantages, has currently been a major trend in many industries.
Ranging from commercial to military uses, RFID technology is a modern resource which has
not exhausted yet its applicability potential.
2.6 Integrating RFID technology into supply chain
An important application of RFID technology is supply chain management, where RFID
helps close information gaps by enabling real-time supply chain visibility. By placing RFID
tag on a product, users can track the product throughout the supply chain- from the
manufacturer all the way to the customer.
In most cases the RFID tag can be written and rewritten so that the information in the tag
doesn't remain static. For instance, at first, the tag may only contain manufacturing
information; later on, additional information from the distributor may be added. RFID can
enable the vision of real-time, multidimensional coordination for all the players in the
supply chain (Grackin, 2004).
In fact, RFID is considered the most intelligent technology for managing and collecting
product data or tracking it as it moves through the supply chain.
Today, companies looking to adopt RFID have to deal with three key challenges:
1. RFID Hardware - Selecting tags, readers, and antennas; placing RFID tags on the
products; placing and configuring readers and antennas in the stores, warehouses, and
other locations.
2. Software Infrastructure - Capturing and managing data from the RFID readers,
integrating the data into different levels of enterprise information systems, and sharing
data with trading partners for business collaboration.
3. Evolving business processes - Supporting finer granularity, more real-time product data,
automating supply chain execution, and developing new business processes for
exploiting RFID technology.
The non-line of sight capability of RFID makes it a perfect supply chain technology (Gibson
& Bonsor, 2005). Passive tags operating under the ultra high frequency (UHF) band are
common to supply chain applications because tag costs are low and the read range and rate
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
347
is adequate (Tajima, 2007). In the case of supply chain management (SCM), RFID is not just
about the identification of an individual pallet, case or item but about the relationships
between objects, between organizations, between space and time. RFID is about process
level change that can streamline business-to-business (B2B) operations and bring about
major changes to organizational policies, culture, performance and structure (Lefebvre et al.,
2007).
2.7 Electronic Product Code (EPC)
The use of RFID in supply-chain application is based on EPC. The EPC was conceived as a
means to uniquely identify all physical entities. In fact EPC is a numbering scheme that
provides unique identification for physical objects, assemblies, components and systems.
Information is not stored in the code, but serves only as a reference to on-line – or Internet-
based – information (Brock, 2007).
EPC ID numbers assigned to an entity are used with RFID tags in the same way that UPC
(Universal Product Code) numbers are used with barcodes. In fact, the EPC is considered
the electronic equivalent of the UPC barcode and a possible successor to the barcode. An
RFID tag stores a single EPC number in its memory, just as a barcode holds a UPC number.
Barcodes have been in use for over 30 years and have become an integral part of product
identification. Product identification is performed differently by RFID tags and conventional
barcodes. A UPC refers to an object class or generic category of products. For example,
when a barcode gets scanned at a store checkout counter, it will return product information
such as product name and price; the same information is valid for every product in the same
category. An EPC refers to a specific instance of product, allowing the unique identification
of any tagged item. Thus, an EPC makes it possible to automatically track individual items,
for example, products from the manufacturing line that reach the shelves.
The current version of the specification comprises encodings for EPCs of 96 to 202 bits
length. But EPC codes are typically 96 bits in length (24 four-bit characters) divided into four
fixed length components (header, Domain Manager Number, Object Class Number and
Serial Number), each part containing specific information.
The first section consists of an 8-bit header indicating the number, type and length of
subsequent data sections. Practically this header provides a real extensibility for future,
unanticipated data requirements.
The second section of EPC code identifies the company or entity responsible for maintaining
the subsequent codes. This entity is known as the EPC manager. Its responsibility is to
maintain both object type codes and serial numbers in their domain. The EPC manager
section covers a 28-bit section, encoding a maximum of 228 = 268,435,456 companies.
The next section of the EPC code, called the object class, occupies the next 24-bits. The object
class number is used to identify a class of product, meaning a group of products sharing
similar characteristics. When applied to retail products, the object class is often considered
the skew or stock keeping unit (SKU), lot number or any other object-grouping scheme
considered by the EPC manager. For each organization is allowed more than 16 million
object types, so this section could encode all the current UPC SKUs and many other object
classes. This allows expanding beyond retail applications into general supply chain.
The final section of the EPC code encodes a unique object identification number that serves
to identify a particular item belonging to the specified object class. It is the managing entity
responsibility to assign unique serial number for every instance within each object class. For
www.intechopen.com
Supply Chain, The Way to Flat Organisation
348
all objects of a similar type, the EPC serial number provides 36-bits, or 236 = 68,719,476,736,
unique identifiers. Together with the product code, this provides 1.1x10
18
unique item
numbers for each company – currently beyond the range of all manufactured products.
In January 2008, 1347 companies from different industries were EPCglobal subscribers
(Schmitt & Michahelles, 2008).
2.8 Benefits
The RFID technology will bring benefits to a wide range of industries, but one of the main
domains of RFID adoption has been the supply chain for retail sector. RFID technology can
help improve efficiency and visibility; it will cut management costs, influence considerably
the production of higher quality goods and enhance the utilization of products; it will also
reduce shrinkage and counterfeiting, and increase sales by reducing out-of-stocks.
For example, RFID technology has the potential to:
• reduce the time taken to re-order shipments;
• minimize warehouse discrepancies by validating the accuracy of deliveries and
shipments;
• reduce product shrinkage and theft;
• improved tracking of pallets, cases and individual products;
• provide better planning and optimization of inventory and reusable products;
• allow more efficient use of labor by automation data handling and reading multiple
products;
• monitor expiration dates of an organization’s complete inventory list;
• automate supplier receiving and billing procedures;
• reduce manual entry errors (e.g. data typing mistakes);
• allow more efficient transport and distribution;
• allow information sharing to better collaboration between partners;
• increase visibility and lead to better decision making capabilities.
The main benefit of RFID integrating in supply chain process is to allow the constantly
monitoring and improving the whole system by using all the available data.
But to maximize competitive advantage in a supply chain context, RFID needs to be used by
multiple companies to do all sorts of things, creating widespread advantages for all supply
chain participants (Coltman et al., 2008). RFID is expected to be worth billions of dollars in
new investments. According to IDTechEx, a leading market research and advisory firm, the
RFID market will increase from US$4.96 billion in 2007 to US$26.88 billion in 2017 (Das &
Haropp, 2007).
2.9 Obstacles
The path to RFID technology integration in supply chain is not without some obstacles and
they can be enumerated briefly:
• tags, infrastructure and implementation costs are still high;
• unclear cost/benefit sharing models;
• the integration in existing systems;
• readers can't always read all the cases on a pallet;
• technology incompatibilities: inability for a single reader to read tags from multiple
frequencies;
• standards are in a state of flux;
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
349
• some of RFID standards are not globally accepted; different standards coexist in parallel
and there are a lot of them incompatible one with other;
• tag reliability can be impacted by humidity, liquid or metals;
• radio interference can upset even the best-laid plans: in close proximity to one another,
tags may seriously affect performance. Antenna placement and orientation can also
negatively impact the RFID solution;
• end-users lack real RFID knowledge.
3. RFID@B2B
3.1 Business to Business (B2B)
Twenty-first century technology has revolutionized the way companies do business with
each other and with their customers. The Internet has connected companies around the
world and changed the global economy as a whole. Indeed, the Internet has emerged as a
most cost-effective means of driving supply chain integration. A new concept has been
devised: e-business - as the marriage between the Internet and supply chain integration
(Johnson & Whang, 2002). Following today’s economic globalization, e-business has become
a necessity for companies to remain competitive. As one major component of e-business,
business to business (B2B or B-to-B) includes all applications intended to enable or improve
relationships within firms and between two or more companies (***e, ****). In fact, B2B is
commonly used to describe any electronic business transaction occurring between two
separate business entities. This includes the exchange of both products and service.
Examples of exchanged products and services might include the selling of raw material
inputs from one firm to another, the sale of capital equipment, the purchasing of commercial
insurance or the contracting of one firm with another for the procurement of accounting
services. B2B is all about product and materials procurement and the supply chain is the
vehicle through which business-to-business is ultimately achieved. In fact, a B2B
infrastructure links buyers, suppliers and logistics service providers into a global trading
network. One of the new concepts that will further define traditional B2B Internet commerce
is RFID (Gerhards, 2006).
3.2 Integrating RFID technologies in B2B applications for enterprise supply chain
In the case of B2B, RFID is supposed to benefit not only the identification of individual
pallets, cases or items, but also the relationships between/among objects, between/among
organizations, between space and time. RFID is about process level change that can
streamline business-to-business operations and bring about major changes to organizational
policies, culture, performance and structure (Lefebvre et al., 2006). In fact, according to S.F.
Wamba et al. (Wamba et al., 2007), RFID technology and the EPC are enablers of intelligent
B2B e-commerce supply chain management.
Our research team has developed an RFID_B2B integrated system which combines the
advantages of B2B with those of RFID technology and which presents itself as a viable
solution for the problems raised by globalization. The software system deals with business
relations between corporations, big companies and groups of companies, in order to
optimize the flow of materials among them and the supply chain management inside every
company. To identify both parts and finite products, our system uses passive 13.56 MHz
tags. Unique IDs are used to control and trace every part of a finite product. The RFID_B2B
www.intechopen.com
Supply Chain, The Way to Flat Organisation
350
system could be tailored to the diverse needs of the companies and the different roles of
employees in each company. If this system is embraced by the entire supply chain
management, final consumers will be able to follow the entire production chain of a finite
product. And this is possible if the traceability information is memorized on each tag
attached to some part of the final product.
The RFID_B2B system architecture is flexible and easily extensible. The research team
chooses to design a layered architecture arranged in such a way that the lower layers
support and enable the upper layers. This architecture has some advantages: divide the
complex system into several more manageable components, allow different groups to work
on different layers concurrently etc. The RFID_B2B system is structured on three levels: the
corporation level, the local level and data collection level at the material control departments
(Figure 1).
Fig. 1. The RFID_B2B system architecture
At the platform’s corporation level, the following achievements have been made:
• services are offered to ensure the support for concluding contracts, along with the
agreements, the conventions at the board level of the corporations, the firm groups or
the representatives of the firm groups;
• informational management of the group/corporation enterprises, ensuring supervision
of the material flows (with effects on the establishing of supply and sales strategies), as
well as of the good functioning of the internal network of the group/ corporation;
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
351
• supply of reports regarding the current activities within the group/ corporation,
including alarm in case of generation of specified events.
The following are provided at the local level or at the enterprise level:
• proper administration of the received, sent, defective, repaired, returned entities at the
enterprise level;
• access to the company servers network, as well as communication management along
the supply- sales main chain, providing the opportunity to manage and access the
information referring to the route followed by materials, assemblies and finite products;
• coordination of the materials/assemblies flow in order to ensure adequate distribution
to corresponding departments, as well as to deliver the order to the gates in
departments;
• documents delivery for controlling the production, materials, finite products,
assemblies, including those in the service department.
Different applications of RFID are implemented in the data collection level in order to write
and read the data from the tags attached to the materials, assemblies and finite products. At
this level, the communication is wired or wireless.
The integrated system comprises the following elements:
• an IBM-PC compatible computer which runs an OPC (OLE for Process Control) server
with two main components: communication and data acquisition;
• an IBM-PC compatible computer which runs an OPC dedicated client; in fact one and
the same computer may be used to run both the server and the dedicated client;
• a network comprising several low-resource embedded devices that have attached low-
cost RFID readers; these device processes the local data and are capable of connecting
and controlling other devices;
• PDA devices with attached RFID readers;
• an IBM-PC compatible computer which runs the local B2B server (Giza & Cerlinca,
2007);
• an IBM-PC compatible computer which runs the central B2B server (Giza & Cerlinca,
2007).
3.3 Improving supply chain management with RFID mobility solution
Enterprise supply chain systems can offer access to desired tasks (for example, inventory
management, demand projections, production planning) from handheld computers, such as
Pocket PCs.
Inefficient manual data-handling process in supply-chain management is a common
problem with serious repercussions that affected the whole supply-chain, product
traceability etc. There are needed solutions that could automate data handling.
Integrating a mobile solution in an RFID-based supply chain system is the answer (Cerlinca
et al., 2008). Handheld computers can perform many of the tasks that are commonly
executed on a desktop computer or standard laptop. In fact, these devices can be used to
extend the capability and reach of an existing information infrastructure by enabling
workers to collect, access and analyze desired data at any time from anywhere. Thus, the
RFID labeled product can be read and tracked through the entire supply chain with
handheld mobile devices (for example, PDA-Personal Digital Assistant) endowed with RFID
readers. The collected data is stored on the mobile device using a mobile database software
technology. This data is transferred between the mobile device database and PC database
www.intechopen.com
Supply Chain, The Way to Flat Organisation
352
whenever it’s necessary. For security reasons, the data stored in the handheld device
memory can be transferred to a PC, for instance, when the handheld device is placed in a
docking station. But, for integration in our complex enterprise application, encrypted data
can be securely transferred across any kind of Internet-connected network. The users can
also set up a virtual private network. These solutions are less expansive than mobile
communications infrastructure.
The visual space on the handheld screen is far too small; the low display resolution and
small display screen have inhibited information to be displayed completely and clearly. But
the windows of RFID-based mobile application can be adapted to display a plurality of
RFID tag information.
With an efficient RFID-based supply chain solution with integrated mobile support, the
companies can reduce errors and cut costs. Implementing a mobile solution helps
companies improve efficiency, extending the power of enterprise computing to new
processes, people and places. Employees are more productive and businesses are more
competitive.
3.4 RFID_B2B system benefits
The presented system offers a high degree of flexibility and helps companies of all sizes
enable their customers to do business on demand — when they want, where they want and
how they want. Other system benefits are:
• Assures realtime inventories so the users can always receive accurate, up-to-date
inventory information;
• Offers the possibilities to share meaningful data with supply chain partners;
• Permits strengthening customer and partner relationships with collaboration;
• Speeds and simplifies the deployment and management of e-commerce sites;
• Maximizes performance, scalability and adaptability of partners systems;
• Provides rich, ready capabilities for products catalog and content management;
• Permits a greater visibility through realtime product updates, availability and pricing
information;
• Offers personalization capabilities.
3.5 Future improvements
With the growing number of B2B sites available through Internet, a useful addition to the
RFID_B2B system would be an intelligent software agent for information gathering. The
agent will be able to perform semantic query optimization and to offer data mining facilities.
It will dynamically plan for alternative information source when a source or a B2B site goes
down. This agent will organize the results and display them in an easily interpreted manner
to the user. To face the new global market and to provide an effective collaborative
relationship between trading partners, an environment to support the semantic integration
could help. Another useful feature would be a special section that enhances the
management of production planning to ensure good deliveries and productive efficiencies.
Transition to B4B (Business for Business) – next evolution in B2B communication (Jones,
2007) is the following aspect that might be taken into account as future direction for system
development.
The Internet, electronic business and RFID technology are changing the history of supply
chains, and modifying the way that consumers select, purchase, and use products and
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
353
services of partners. The result will be the surfacing of new business-to-business supply
chains that are consumer-focused rather than product-focused.
4. Conclusion
This chapter helps to improve readers understanding of the RFID and EPC potential for
business processes. RFID technology is classified as a wireless AIDC technology that uses
digital data encoded into a radio tag embedding a microchip with an antenna. The data
stored on the tag is collected by a reader using radio waves. There are a large variety of
RFID tags designs; they also have many different functional characteristics such as power
source, carrier frequency, read range, data storage capacity, operational life, cost etc.
RFID has immediate benefits over barcodes. Thus RFID tags are an improvement over
barcodes because the tags have read and write capabilities. The data stored on RFID tags can
be changed, updated and locked. RFID technology offers a better way to track items with
minimal human intervention, for stocking and marketing purposes. Benefits come in the
form of inventory, shrinkage and labor reduction on the one hand, and sales increasing due
to reducing out-of-stock and getting real-time demand information on the other hand.
RFID technology represents one of a number of possible solutions to enhance supply chain.
It is therefore important to do a cost-benefit analysis to evaluate each alternative solution.
The majority of the costs of integrating RFID in supply chain application come from IT, tags,
hardware and services. But due to the actual relative high cost of integrating RFID
technology, each company needs to evaluate its own business processes to determine where
and if RFID can be applied (incorporated) to provide substantial business benefits. Thus, all
RFID solutions have to evaluate different performance and cost factors, including the
operating environment, on-tag memory storage, and signal transmission restrictions. Each
of these issues has significant cost impacts on both tags and readers. The costs of RFID
readers have already fallen to a considerable extent. The cost of tags is expected to decrease
over time and as quantities increase. Passive tags are undoubtedly less expensive than active
tags and most companies are focusing on passive tags. The different studies proves that at a
lower quantity the barcode is the cheapest alternative for supply chain, but, as quantity of
product increase the optimum choice is RFID. In some applications, RFID and barcodes
system will still coexist and this redundancy cost must be considered. However, to realize
maximum return on investment (ROI) for RFID integration, the enterprises need to leverage
their information architecture strategically.
Any industrial domain may benefit from RFID technology, and the number of applications
is on the rise. Thus, RFID technology is applied in a vast area of industrial, commercial and
military domains, including manufacturing and logistics, retail, animal tracking, etc. This
chapter focuses on how RFID technology can be used to solve problems faced by supply
chain. In fact, RFID has the potential to radically change the entire supply chain by
improving inventory management, asset visibility, and interoperability in an end-to-end
integrated environment. The ability to track, at item level, material flows among partners
until they reach the consumer, while maintaining the data accuracy advantages of various
types of automatic identification technology (AIT), is the perfect solution to the many issues
of enterprises in the past. RFID technology permits the unique identification of each
container, pallet, case and item to be manufactured, shipped and sold, thus allowing an
increased visibility throughout the supply chain. Thus the RFID has the potential of helping
www.intechopen.com
Supply Chain, The Way to Flat Organisation
354
retailers provide the right product at the right place at the right time, allowing maximizing
sales and profits.
The EPC represents a low-cost method of tracking products using RFID technology. The
EPC is a short, simple and extensible code designed for the unique identification of
individual physical objects such as spare parts and whole products; the identification
process may be extended to cover further information related to container, packages,
shipments or manufacturers. The EPC can provide up to 268,435,456 companies identifiers,
more than 16 million object types and 1.1 x 10
18
unique item numbers for each company.
In a global market where change is continuous, companies require tools that allow them to
respond quickly to new opportunities. The presented RFID_B2B system can be considered
as a viable solution for potential problems raised by globalization process, contributing to a
significantly more efficient business process. Thus, the presented system helps small,
medium and enterprise organizations to improve productivity and provide better service to
their customers by providing a flexible solution for all of a company's B2B needs. Many
mobile systems already employed in supply chain management have proved their
importance through significant return on investment. Not only can they extend corporate
data outwards to mobile devices for viewing and querying, but users can use any mobile
device endowed with an RFID reader for data collection. In this way, manual entry data has
been eliminated. Moreover, users can read the tags wherever the items are placed, which
enables a more flexible storage environment and an efficiency increase of supply chains. The
RFID_B2B system is so adaptable that many types of businesses can use it and allows
enabling new business opportunities and growth. Using the developed system may help
customers sharpen data accuracy, process supply chain transactions faster, and improve
supply chain and inventory management. Given slim profit margins, companies are looking
for ways to save on costs while remaining globally competitive. RFID@B2B may be their
answer.
5. References
Brock, D. (2003), The Electronic Product Code (EPC) as a Meta Code, Massachusetts Institute
of Technology, Available at: http://www.autoidlabs.org/uploads/media/MIT-
AUTOID-WH020.pdf
Byrne, P. M. (2004), Supply Chain Rfid: Lessons from a Leader, Logistics Management, 43(5),
2004, pp. 31-32
Caton, M. (2004), RFID Reshapes Supply Chain Management, http://www.eweek.com/
c/a/Mobile-and-Wireless/RFID-Reshapes-Supply-Chain-Management/
Cerlinca, T.; Turcu, C.E. & Cerlinca, M. (2008), Integrating Mobile Applications into RFID
Based B2B Systems, 22nd International Conference on Advanced Information Networking
and Applications, 25-28 March, 2008, Gino-wan, Okinawa, Japan, pp. 1341-1345,
ISSB/ISBN: 978-0-7695-3096-3
Coltman, T.; Gadh, R. & Michael, K. (2008), RFID and Supply Chain Management:
Introduction to the Special Issue, Journal of Theoretical and Applied Electronic
Commerce Research, (3)1, pp. iii-vi, Available at: :http://works.bepress.com/
kmichael/27
Das, R. & Harrop, P. (2007), Complete RFID analysis and forecasts 2007-2017, RFID Forecasts,
Players & Opportunities 2007-2017, IDTechEx Available at: www.idtechex.com/
products/en/view.asp?productcategoryid=119
www.intechopen.com
Improvement of Supply Chain Performances Using RFID Technology
355
Davis, H. & Luehlfing, M. (2004), Radio Frequency Identification: The Wave of the Future,
Journal of Accountancy, Online Issues, Available at: http://www.aicpa.org/
PUBS/JOFA/nov2004/davis.htm
Finkenzeller, K. (2003), RFID Handbook: Fundamentals and Applications in Contactless
Smart Cards and Identification, Second Edition, John Wiley & Sons
Fleisch, E. & Tellkamp, C. (2003), The Impact of Inventory Inaccuracy on Retail Supply
Chain Performance: A Simulation Study, Auto-ID Center, University of St. Gallen,
Institute of Technology Management, Switzerland, Available at
http://www.autoidlabs.org/single-view/dir/article/6/206/page.html
Gaughan, D. (2005), RFID Hype Collides with Reality, Supply Chain Management Review, 9(2),
2005, pp. 14-15
Gerhards, E. (2006), Latest developments in the field of B2B e-markets, B2B group Meeting,
Available at: http://ec.europa.eu/enterprise/ict/studies/b2b_2006_05_10_dev.pdf
Gibson, C. & Bonsor, K. (2007), How RFID Works, Available at:
http://electronics.howstuffworks.com/ rfid3.htm
Giza, F., Cerlinca, T., A N-Tier Application Architecture for B2B Systems, Distributed
Systems, Vol: 5, September, 2007, ISSN/ISBN: 1842-6808
Grackin, A. (2004), RFID for Consumer/Retail Supply Chains, CHAINLINK Research,
http://prescient-news.com/0905/RFID_for_Consumer-Retail_Supply_Chains.pdf
Heintz, B. (2005), RFID White Paper Technology, Systems, and Applications, Bitom,
Germany, Available at: http://www.rfidconsultation.eu/docs/ficheiros/
White_Paper_RFID_english_12_12_2005_final.pdf
Johnson, M. & Whang, S. (2002), e-Business and Supply Chain Management: An Overview
and Framework, Production and Operations Management, Vol. 11, No. 4, 2002,
Available at: http://mba.tuck.dartmouth.edu/ digital/ Research/ Academic
Publications/POMSArticle.pdf
Jones, M. (2007), Business 4 Business – ASN and Data Accuracy Drive Higher Order
Functionality and Redefinition of Retail B2B Communications, VCF & GXS,
November 2007, Available at: http://www.gxs.com/forms/
0711_B4B_wp_VCF.htm
Lefebvre, L.; Lefebvre, E.; Bendavid, Y.; Fosso, S. & Boeck, H. (2006), RFID as an enabler of
B-to-B e-Commerce and its impact on business processes: a pilot study of a supply
chain in the retail industry, Proceedings of the 39th Annual Hawaii International
Conference on System Sciences, Hawaii, 2006, pp. 1-10
Raman, A.; DeHoratius, N. & Ton, Z. (2001), Execution: The Missing Link in Retail
Operations, California Management Review, 43, 2001, pp. 136–52.
Rangarajan, T.S.; Vijaykumar, A. & Subramaniam, S. (2005), Stop Getting Strangled by your
Supply Chain. Enhancing SCM using RFID, Tata Consultancy Services Limited, 2005
Schmitt, P. & Michahelles, F. (2008), Economic Impact of RFID Report, Building Radio
frequency Identification for the Global Environment, April 2008
Smith, J.N. (2005), Specialized Logistics for a Longer Perishable Supply Chain, World Trade
Magazine, Available at: www.pressroom.ups.com/staticfiles/articles/456.pdf
Tajima, M. (2007) Strategic Value of RFID in Supply Chain Management, Journal of
Purchasing and Supply Management, vol 13, 2007, pp. 261-273
www.intechopen.com
Supply Chain, The Way to Flat Organisation
356
Vempati, S. (2004), RFID Architecture Strategy, Infosys Technologies Limited,
http://www.infosys.com/rfid/Infosys_White_Paper_on_RFID_Architecture_
Strategy.pdf
Wamba, F.; Lefebvre, L. & Lefebvre, E. (2007), Integrating RFID Technology and EPC
Network into a B2B Retail Supply Chain: a Step Toward Intelligent Business
Processes, Journal of Technology, Management & Innovation, , Vol. 2, No. 2, 2007, pp.
114-124, ISSN 0718-2724
***a (2008), A Summary of RFID Standards, RFID Journal, Available at:
http://www.rfidjournal.com/article/view/1335/1/129
***b, (2007), RFID Is A Hot Topic, Nutech Systems, Available at :
http://www.nutechsystems.com/news_rfid.html
***c, (2007), Advantages of RFID, ActiveWave Inc., http://www.activewaveinc.com/
technology_rfid_advantage.html
***d, (****), Radio-frequency identification, Wikipedia, Available at: http://en.wikipedia.org/
wiki/RFID
***e, (****), E-business Definitions, http://www.cheshirehenbury.com/ebusiness/
ebdefinitions.html
www.intechopen.com
Supply Chain the Way to Flat Organisation
Edited by Julio Ponce and Adem Karahoca
ISBN 978-953-7619-35-0
Hard cover, 436 pages
Publisher InTech
Published online 01, January, 2009
Published in print edition January, 2009
InTech Europe
University Campus STeP Ri
Slavka Krautzeka 83/A
51000 Rijeka, Croatia
Phone: +385 (51) 770 447
Fax: +385 (51) 686 166
www.intechopen.com
InTech China
Unit 405, Office Block, Hotel Equatorial Shanghai
No.65, Yan An Road (West), Shanghai, 200040, China
Phone: +86-21-62489820
Fax: +86-21-62489821
With the ever-increasing levels of volatility in demand and more and more turbulent market conditions, there is
a growing acceptance that individual businesses can no longer compete as stand-alone entities but rather as
supply chains. Supply chain management (SCM) has been both an emergent field of practice and an
academic domain to help firms satisfy customer needs more responsively with improved quality, reduction cost
and higher flexibility. This book discusses some of the latest development and findings addressing a number of
key areas of aspect of supply chain management, including the application and development ICT and the
RFID technique in SCM, SCM modeling and control, and number of emerging trends and issues.
How to reference
In order to correctly reference this scholarly work, feel free to copy and paste the following:
Cornel Turcu, Cristina Turcu and Adrian Graur (2009). Improvement of Supply Chain Performances Using
RFID Technology, Supply Chain the Way to Flat Organisation, Julio Ponce and Adem Karahoca (Ed.), ISBN:
978-953-7619-35-0, InTech, Available from:
http://www.intechopen.com/books/supply_chain_the_way_to_flat_organisation/improvement_of_supply_chain_
performances_using_rfid_technology
doc_391130126.pdf