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53RFID Implementation in Supply Chain: A Comparison of Three Case Studies

RFID Implementation in Supply Chain: A Comparison of Three Case Studies

Raul Valverde* and Malleswara Talla**

© 2016 IUP. All Rights Reserved.

The paper examines the impact of different approaches in implementing Radio Frequency Identification (RFID) technology, namely, supply chain inventory management system based on RFIDs to address the challenges encountered in the operation of the warehouses, item-level inventory tracking at retail stores and customer order processing and distribution using RFIDs to eventually propose RFID-based Supply Chain Management (SCM). SCM involves effective information sharing, inventory management, transportation, sourcing and pricing strategies. The paper highlights how RFID can improve SCM drivers, one by one, and together improve overall synergy. It extends the solutions of case studies and proposed improvements to RFID solutions in ERP applications. It also highlights the motivation to such implementations as these solutions offer further cost savings and performance gains. Consequently, it concludes that RFID is a vital technology for the success of SCM and bridging the gaps among the existing enterprise applications.

* Senior Lecturer of Supply Chain and Business Technology Management, Academic Director of BTM and SCOM Coop programs, Supply Chain and Business Technology Department, John Molson School of Business, Concordia University, Montreal, Canada; and is the corresponding author. E-mail: [email protected]

* * Lec ture r (Part-Time ) of Supply Chai n and Bu sine ss Technology Manage ment, Su pply Chain and Business Technology Department, John Molson School of Business, Concordia University, Montreal, Canada. E-mail: [email protected]

Introduction The Radio Frequency Identification (RFID) is an automatic identification system without contact and without a need for line-of-sight (Finkenzeller, 1999) with applications significantly impacting Supply Chain Management (SCM). When the United States Department of Defense (DOD) decided to adopt the technology as a means of tracking its inventory (Sen et al., 2009), WalMart swiftly took advantage of RFID technology by mandating its suppliers to tag all goods supplied to its supermarket chain (Matta, 2008). As the prices of RFID tags are reasonable, RFID technology is successfully implemented in almost all segments of SCM for inventory tracking. It is also demonstrated that RFIDs have been successfully implemented in the retail industry in particular for fast checkout operations (Rathore and Valverde, 2011). The RFID technology is used in services sector as well for inventory management and secured communications (Felix and Valverde, 2014). RFID technology holds promise in transforming SCM by providing real-time intelligence for tracking enterprise assets. Khan and Valverde (2014) showed it to be beneficial to improve the profits and internal communications of the firm (Valverde and Saade, 2015; and Valverde et al., 2016). RFID technology also facilitates the reengineering

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of legacy systems into modern supply chain systems by providing a tool information sharing across the supply chain (Talla and Valverde 2012; and Valverde and Talla, 2012).

In this paper, we examine three case studies: (a) an RFID-based supply chain inventory management solution for the petroleum development industry (Adoga and Valverde, 2014); (b) an RFID simulation for the SCM in the dental industry (Felix and Valverde, 2014); and (c) an RFID-based intelligent system that integrates with an e-commerce application in an unattended store (Rathore and Valverde, 2011). The aim of this study is to develop a comprehensive questionnaire for gathering quantitative data while leveraging the work performed in these case studies.

According to Adoga and Valverde (2014), the challenge to maintain an accurate data in warehousing and inventory management operations in Shell Petroleum Development Company (SPDC), Nigeria prompted consideration of implementation of an RFID-based inventory management system as it can help in the resolution of problems. These challenges include inaccurate stock accounting, theft and high man-hour requirement for stock taking activities among other things. The approach was to engage a consultant who can first analyze existing inventory management system in SPDC, identify issues and challenges (through interviews with key personnels in the department and personal observation by touring facilities) and to evaluate and propose how an RFID-based supply chain inventory management system can be used to resolve and control the issues. A simulator with RFID technology was developed and its impact for a two-month period was evaluated by Adoga and Valverde (2014). Simulations have a good history of supporting the design of SCM systems (Grittner and Valverde, 2012).

The UK dental products, both supplies and equipment, were highlighted in a rising demand with aging population and the need for secured information of demand and inventory data (Felix and Valverde, 2014). As healthcare continued to improve, the life expectancies continued to rise in developed countries. On the other hand, older segments of the population are well positioned to pay for the needed procedures because they control sizable amounts of discretionary income (Datamonitor, 2008). The UK dental market space has witnessed significant growth rates with stronger inventory focus. Felix and Valverde (2014) focused on enhancing efficiency of inventory management and dental solutions with the usage of online platforms and RFID in the UK dental sector.

Rathore and Valverde (2011) discussed that an evolving e-commerce on the Internet certainly needs an efficient and secure way of executing sales transactions. The emergence of cost-effective wireless RFID provides a new way of tracking and implementing security and conducting business. It will enhance confidence in business process automation. In a virtual shopping over Internet, a buyer selects items, places in shopping cart, and

55RFID Implementation in Supply Chain: A Comparison of Three Case Studies

proceeds for checkout. In a physical store, a buyer picks up all RFID tagged items in a shopping basket and proceeds to checkout via an RFID activated exit, that can automatically complete an invoice and receive a payment without a need for agent. This solution allows a physical store to be integrated with e-commerce application to make it a complete 100% unattended store.

These three case studies presented differing needs and solutions via RFID applications: one focusing on inventory management using RFID technology for accurate data and faster tracking of inventory items, the second focusing on simulating an implementation and the last one aiming at integrating an e-commerce application with an unattended store so that customer can reserve items and pick up at an unattended store thereby saving on operational expenditure of a physical store.

In this paper, we integrate the subject matters of the above case studies and develop a comprehensive system that addresses as many activities of business processes as possible. However, at this stage of work, we focus on inventory management, inventory tracking, inventory solutions and e-commerce application to attach to unattended stores in an effort to further improve upon the cost-effectiveness of the business processes.

RFID Implementation Methods The RFID technology is proposed for inventory tracking, automatic updates of inventory records and integration of an e-commerce application with an unattended store. An RFID solution for store NG1101 would require a series of fixed readers mounted at dedicated locations inside and at the exit side of a store with a number of mobile readers for the outdoor area (Adoga and Valverde, 2014). The tag readers will be connected to the inventory management module of an Enterprise Resource Planning (ERP) database system that will detect and trace the movement of tagged items in and out of the stores. The mobile readers will help in the outdoor storage area that will not be covered by the fixed scanners during stock accounting. The layout of a typical store (Adoga and Valverde, 2014) is presented in Figure 1.

The RFID reader devices are installed at fixed locations in a store and mobile RFID readers within the store communicate with management system that actually maintains inventory database, as depicted in Figure 2. The deployment of RFID readers should be sufficient enough that no RFID tag becomes undetected. It is ensured during a rigorous testing process. It is also advised to keep redundancy built into the system. Adoga and Valverde (2014) used a small prototype of limited scope built with the help of a mobile desktop-based RFID and investigated the practical challenges of developing and deploying a full-fledged solution.

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Figure 1: Store Layout with Multitag Readers

Source: Adoga and Valverde (2014)

20 m

Open Sheds

Open Air Storage Area Store NG1101

Entrance

Admin

100 m Indoor 3 m High Shelves

Tag Reader

Large Vehicle Entrance

Figure 2: RFID-Based Inventory Detection

Source: Adoga and Valverde (2014)

Inventory Database

Management Application

Mobile RFID Reader Within Store

Fixed RFID Reader at Store Exit

57RFID Implementation in Supply Chain: A Comparison of Three Case Studies

The dental distribution company operates in a simple supply chain. The company receives orders from customers, purchases products from manufacturers or suppliers, maintains inventory and delivers to its customers. The inbound and outbound logistics are simulated following the flow of materials, as presented in Figure 3 (Felix and Valverde, 2014).

The RFID technology is used for end-to-end operations using an independent module called Real Time Security System (RTSS) as presented in Figure 4, and ensures secured transactions (Rathore and Valverde, 2011).

Figure 3: Flow of Material for Simulation

Source: Felix and Valverde (2014)

Next Step

Next Step

Receive Goods Loading Truck for Store

Store Parallelization

Figure 4: RTSS Architecture

Source: Rathore and Valverde (2011)

Tag (User

Interface)

RTSS Client

(Reader)

RTSS Server

(Middleware)

RTSS Interface (Application Integration)

B2B, B2C e-Commerce

An RFID tag (transponder) in the vicinity of RFID reader (interrogator) provides user interface. The RFID reader interacts with the tag and receives a raw data message from the tag. The raw message is relayed to RTSS server. The RTSS server processes raw data message (binary and hexadecimal) in ISO 15693 format. The message is then translated into a

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meaningful string format. Rathore and Valverde (2011) proposed this system for a physical store without checkout attendant, but with RFID activated checkout cash counter, it is suggested to integrate the system to an e-commerce application. The RTSS interface uses the message to initiate a transaction over B2B or B2C e-commerce application.

Comparison of Case Studies Three case studies that we examined considered different business processes and RFID implementation for inventory management.

Inventory Management in Manufacturing (Oil and Gas) A supply chain involves different processes: suppliers, manufacturer, warehouses, wholesaler, retailer and finally the customer. The major drivers in a supply chain are: facilities, inventory, transportation, information technology, sourcing and pricing. The warehouse and logistics play a very important role in smooth operation of a company and in improving customer service level. Agoda and Valverde (2014) proposed implementation of RFID for oil and gas company, especially installing RFID devices at strategic locations. Traditional inventory management uses manual processes which are expensive and time- consuming while an automated process to inventory management would impact the supply chain surplus positively. The RFID technology integrated into an ERP system would certainly improve the responsiveness and efficiency of a supply chain. Once a decision is made to implement RFID technology, it is important to implement the system in such a way that no inventory item gets undetected. To this objective, the case study involved the analysis of warehouse and existing inventory management system in SPDC in Nigeria with a view to identifying all operational challenges and solutions. A system architecture of a solution is presented and a partial prototype is implemented with the purpose of highlighting how modern information technology and communication tools can add value to the SCM of SPDC. In this effort, Adoga and Valverde (2014) took one store NG1101 of SPDC and considered the implementation of RFID. The paper presented strategic locations for placing RFID detectors inside and at the exits of NG1101, as presented in Figure 1. The NG1101 store has 4 m high shelves; the RFID reader needs a near field of at least 4 m to effectively detect the tag, which would require an RFID reader with a theoretical wave length of 25 m and frequency of 12 MHz, and commercially available readers of 13.56 MHz would be very suitable. The system would be deployed in the manner, as depicted in Figure 1. Adoga and Valverde (2014) used a USB-based 915 MHz UHF reader (read range of 10 cm, for reasons discussed earlier) along with some RFID on metal tags and other variants of passive tags. The simulation provides an overview of RFID implementation and offers a motivation to such implementation for inventory management.

Inventory Management in Service Sector (Dental Care) A services organization such as a hospital requires medical supplies and equipment. Maintaining a healthy level of inventories for providing better healthcare is always a

59RFID Implementation in Supply Chain: A Comparison of Three Case Studies

challenge in hospital settings. Therefore, healthcare companies operate in supply chains that actually enhance supply chain surplus while providing a better customer satisfaction. In a supply chain, flow of materials (inventory in transit) should be smooth and faster for the supply chain to be more responsive and efficient. Faster the inventory records are updated whether it is at inbound logistics or at outbound logistics, the holding costs of inventory in transit can be reduced, making the supply chain efficient and serve customer needs, turning the supply chain to be responsive. Felix and Valverde (2014) considered a dental supplies distribution company that operated in a supply chain relationship, and examined problems experienced at different stages of inventory management. The dental distribution company was actually using bar codes and scanners as its main technology for semiautomatic identification for capturing data. Felix and Valverde (2014) conducted interviews for identifying activities for RFID implementations for both inbound and outbound logistics, as shown in Figure 3. The company receives customer orders, purchases products from suppliers and ships them to customers. Felix and Valverde (2014) proposed RFID technology solutions to problems identified in the company. The proposed solutions are simulated and compared with their existing supply chain system and metrics; and demonstrated significant improvements to data accuracy, responsiveness and efficiency of supply chain.

Felix and Valverde (2014) went on simulating an implementation using microsoft simulator and presented significant improvement (around 80%) in inbound and outbound logistics. Currently microsoft offers a simulator for RFID (as found on Microsoft, 2015). Therefore, Felix and Valverde (2014) successfully presented that RFID is surely a cost-effective alternative to barcode method. Although it is a well-known fact that RFID is a better solution than barcode solution, it is always worthwhile to evaluate a business case. Assuming conservatively that time taken for a barcode operation is one minute, Felix and Valverde (2014) estimated that the gains would be of about 90% and proved with a simulation.

RFID-Based Retail Store Operation (Unattended) In case of shopping over Internet using an e-commerce application, a buyer selects items, places them in a shopping cart and proceeds for payments. As an initial step, Rathore and Valverde (2011) proposed solution where all items in a brick-and-mortar (physical) store are RFID tagged, and a buyer picks up all the items that are needed and proceeds to an RFID activated checkout exit where all items are automatically invoiced without a need for scanning. As a physical cash counter is not needed, the store is referred to as unattended. While the system does not totally eliminate manpower for security at checkout, it will reduce the need for manpower significantly thereby offering cost savings. Rathore and Valverde (2011) also proposed that the same RFID system can be integrated with an Internet-based e-commerce application in an effort to extend the application to make it a complete 100% unattended store. In case of e-commerce and an unattended

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store, the most important aspect of executing such transactions is security; therefore Rathore and Valverde (2011) identified security as a primary concern and proposed a RTSS. Rathore and Valverde (2011) presented a complete architecture of an end-to-end solution with RFID technology, integration with inventory database application testing methodology and further proposed to integrate the system with an e-commerce retail order processing.

Improved RFID-Based Solutions The RFID tags automate inventory record updates at inbound and outbound logistics and provide significant cost savings in a supply chain. Felix and Valverde (2014) found that while detection of merchandise is RFID-based, the inventory management system actually is a database system as a module of ERP system can actually implement more functionality. For example, when an inventory item is in need, the system can list all alternate products to suit the budget need of customer. In case of dental care, such alternate solutions can be often worthwhile to review to suit the differing needs and budget constraints of customers. Then, the inventory management system of ERP can include a rule-based expert system to find such alternate solutions for further improvement in customer service level and customer satisfaction.

RFID solution is proposed for automatic checkout operation at retail stores that operate with unattended but RFID-enabled checkout counter, and went on proposing a solution e-commerce for customers over Internet (Rathore and Valverde, 2011). Then, the e-commerce application can actually communicate with different unattended store servers, check inventory status to find a nearest store that has all merchandise availability, and actually reserve them for customer for pickup. In some cases, if all merchandises are not available at one unattended store, based on customer agreement to pick up merchandise from more than on store, the system can reserve multiple pickup stores to a customer. Such solutions further improve customer service level and customer satisfaction. In contemporary e-commerce applications, the user selects a store and then looks for availability of items in that location, whereas in the proposed solution, the user proceeds with order entry, then the system provides options to pick up from nearest store(s). This way the user stays on course with the order, and company can enhance revenues and profits.

According to Adoga and Valverde (2014), the emphasis is on RFID implementation at assigned locations so that no RFID tag is undetected. Inherent redundancy of RFID detectors ensures better detection and server unifies duplicate detections. Investment in RFID detectors can be progressive, with initial installations to be just sufficient and redundancy can follow successful execution and cost savings of RFID implementations. Today’s applications can proactively communicate with inventory via RFID automatic

61RFID Implementation in Supply Chain: A Comparison of Three Case Studies

detection and highlight any discrepancy in inventory records, so that managers can investigate the reasons for discrepancies and take appropriate actions. Such automatic detection on a periodic review of inventory is often time-consuming and expensive if the review is manual. RFID technology can substantially reduce the cost of such inventory reviews.

Conclusion In this paper, three distinct RFID technology case studies that addressed issues in different industry sectors covering manufacturing and services are examined. The focus of the case studies and implementation details are further examined and integrated into essentials of a typical company implementing RFID technology. Furthermore, this paper went on proposing improved solutions. RFID technology was highlighted as the main technology used for systems integration in SCM. RFID can work to integrate the different processes in the order to cash cycle, from the order that could be used to integrate with e-commerce applications for the identification of items and automated checkouts, to the inventory management of materials that could benefit from RFID technology for a more efficient way of handling inventory in the warehouse from its arrival, to its storage and location. Different industries were analyzed from different sectors and the benefit of RFIDs can cover a wide spectrum of industries and processes. Future work will involve challenges in integrating these improved solutions into RFID-based ERP system that provides a comprehensive solution to inventory and logistics management in a supply chain, and quantifying the gains of such implementation. ERPs could benefit tremendously from RFID technologies mainly as a way to interface production systems, warehouses and ordering systems. 

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Reference # 34J-2016-12-04-01

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