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The International Journal of Logistics Management Supply chain typology for configuring cost-efficient tracking in fashion logistics Ville Hinkka Maiju Häkkinen Jan Holmström Kary Främling

Article information: To cite this document: Ville Hinkka Maiju Häkkinen Jan Holmström Kary Främling , (2015),"Supply chain typology for configuring cost-efficient tracking in fashion logistics", The International Journal of Logistics Management, Vol. 26 Iss 1 pp. 42 - 60 Permanent link to this document: http://dx.doi.org/10.1108/IJLM-03-2011-0016

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Supply chain typology for configuring cost-efficient

tracking in fashion logistics Ville Hinkka

Transport and Logistics Services Department, VTT Technical Research Centre of Finland, Espoo, Finland

Maiju Häkkinen Industrial Engineering and Management Department, Aalto University School of Science, Espoo, Finland

Jan Holmström Department of Industrial Engineering and Management, Aalto University School of Science, Espoo, Finland, and

Kary Främling Department of Computer Science and Engineering, Aalto University School of Science, Espoo, Finland

Abstract Purpose – The purpose of this paper is to propose a typology of radio frequency identification (RFID)-based tracking solution designs to fit differing fashion supply chains. The typology is presented as principles of form and function contributing toward a design theory of configurable RFID tracking for fashion logistics. Design/methodology/approach – The typology is developed based on a case study of a logistics service provider (LSP) interested in designing a tracking solution for different customers in fashion logistics. In addition to the LSP, four fashion retailers were involved in the study. The case study was carried out using a review of existing RFID tracking implementations in the fashion industry, analysis of an RFID tracking pilot conducted by the case company, and interviews with representatives of the retailers. Findings – By varying three design parameters (place of tagging, place of tracking start and place of tracking end) a tracking solution can be configured to fit the requirements and constraints of different fashion supply chains. In the fashion logistics context under investigation, such parameterization addresses retailer requirements, brings concrete and quantifiable benefits to both LSP and its customers, and enables incremental adoption of RFID tracking. Research limitations/implications – Although the typology is developed in the specific setting of a case company developing RFID tracking solutions for fashion logistics, the design parameters identified in the study can be used when considering configurable tracking solutions also in other domains and settings. However, further research is needed to evaluate the proposed typology in those settings. Practical implications – The proposed typology enables fashion companies to consider which configuration of RFID tracking best fits the requirements and constraints imposed by their particular supply chain. For fashion companies, who find adoption of RFID tracking difficult despite the obvious benefits, the proposed typology enables incremental implementation of supply chain-wide tracking. Originality/value – The developed typology, describing how RFID-based tracking solutions can be adjusted to fit the needs of fashion companies with differing supply chains and requirements, is novel. The typology is generalizable to most fashion logistics settings and probably to numerous other logistics domains. Keywords RFID, Retail trade, Supply chain management Paper type Research paper

The International Journal of Logistics Management Vol. 26 No. 1, 2015 pp. 42-60 © Emerald Group Publishing Limited 0957-4093 DOI 10.1108/IJLM-03-2011-0016

Received 2 March 2011 Revised 31 May 2012 22 July 2014 3 November 2014 12 November 2014 18 December 2014 Accepted 19 January 2015

The current issue and full text archive of this journal is available on Emerald Insight at: www.emeraldinsight.com/0957-4093.htm

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1. Introduction The dynamic nature of fashion retail creates major challenges for supply chain management (SCM). The product variety is vast, and the demand for certain products is virtually unpredictable and highly volatile. Many countries have short seasons and the products have to be in the stores by the start of each one. At the same time, the industry is suffering from long lead times of up to six months when sourcing from off- shore production, thus forcing fashion retailers to plan their supply based on blurred forecasts. Some models and sizes end up being produced in excess while others run out far too soon, resulting in lost sales and forced markdowns at the end of each season, out-of-stocks and high inventory-carrying costs (Christopher et al., 2004; Brun and Castelli, 2008).

To deal with the situation, fashion companies have developed different approaches to enhance responsiveness (Fisher, 1997). A responsive company is able to adjust its output rapidly within the available range of four external flexibility types: product, mix, volume and delivery, in response to an external stimulus (Reichhart and Holweg, 2007). In addition to forecasting, a common requirement for responsive solutions to work is that sales and inventory movements are accurately recorded and shared in the supply chain. In order to be responsive, the information between supply chain actors has to move fast and it must be correct; obtaining it requires the use of tracking systems (Holmström et al., 2010). In fashion retailing the only way to exploit the benefits of tracking is at item level, and the most cost-efficient way to introduce it is to adopt radio frequency identification (RFID) (Moon and Ngai, 2008).

Only a small minority of fashion companies have introduced RFID tracking, even though the benefits have been widely recognized for at least a decade (Ngai et al., 2014). Fashion retailers that have been particularly successful in benefitting from RFID tracking operate highly integrated supply chains with suppliers, distribution centers (DCs) and retail stores under the direct control of the retailer (Azevedo and Carvalho, 2012). A likely reason for non-adoption among fashion retailers in general is that introducing RFID tracking on a supply chain-wide scale is more challenging when sourcing from a wide variety of suppliers, or relying on logistics service providers (LSP) and franchisees in distribution and sales. To help meet this challenge, we propose a typology for configurable RFID-based tracking solutions. The typology addresses the needs of different actors in efforts to increase both the efficiency and responsiveness of fashion supply chains.

To develop the typology we first reviewed RFID tracking solutions currently in use in the fashion industry, analyzing both functionality and form. A range of alternative designs of RFID tracking were developed and evaluated in collaboration with an LSP company that was conducting an RFID tracking pilot, and four fashion retailers interested in adopting RFID tracking. The proposed typology was developed based on these alternative designs and their evaluation by the LSP and fashion retailer representatives. The typology describes how a tracking solution can be configured by varying three design parameters (place of tagging, place of tracking start and place of tracking end) and helps managers consider the justification for alternative RFID tracking configurations. Finally, we examine several possible alternatives from the standpoint of the case LSP and explain why they selected a certain RFID tracking configuration.

2. Literature review SCM aims to control different functions of the supply chain with the intention of enabling timely and reliable delivery of products from manufacturer to end customer

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(Stock and Boyer, 2009). However, these inter-organizational processes are prone to failure and disturbance, which often prevents the delivery process from functioning as scheduled. Several procedures and tools have thus been developed to react to this SCM problem and improve responsiveness. Otto (2003) describes a management concept, supply chain event management (SCEM), which is also the name of a business software solution and components. SCEM attempts to quickly recognize deviations between a plan and its implementation across the multiplicity of processes and actors in the supply chain, and to activate corrective actions according to predefined rules. However, this means getting the relevant data early enough, for which an effective tracking system is required (Otto, 2003).

Tracking systems, in general, register the movement of tracked items by sending a message to the tracking database when those items arrive at a predefined checkpoint in the supply network. Barcodes or RFID are typically used as an automatic identification technology to register the passing of a checkpoint (Främling et al., 2003; Kärkkäinen et al., 2004). Tracking systems are needed on the one hand for linking the information systems and physical reality in the supply network (Främling et al., 2006), and on the other for introducing paperless and more accurate information systems (Van Dorp, 2001; Holmström et al., 2010).

Currently, tracking systems are generally built to read different types of barcodes, but the use of more technically advanced RFID-based tracking is increasing rapidly despite the added cost. An RFID tracking system has three essential components: the tag (or “transponder”), the reader device, and the back-end computer system (Van Dorp, 2001). Unlike barcodes that require visual contact between reader and code, no line of sight is needed for RFID-tagged items; dirt and wear are therefore not a problem. Another fundamental benefit of RFID over the most common barcodes used in retail is that all RF identifiers are unique. These technological advantages make RFID tracking superior in logistics management, at every echelon of the supply chain, to the use of barcodes or any similar auto-ID technology ( Johansson and Pålsson, 2009). As a result, RFID-based tracking systems have been adopted in several industries from manufacturing to recycling and waste management. With a few exceptions, almost all RFID tracking systems used in logistics management are based on passive RFID technology. (McFarlane and Sheffi, 2003; Sheffi, 2004; Attaran, 2007; Främling et al., 2007; Mehrjerdi, 2011; Rantasila et al., 2014).

The aim of RFID tracking system research has been to create an open standardized system that covers the entire supply chain and is an integral part of inter- organizational operations (Fosso Wamba and Chatfield, 2009; Zhou, 2009; Hinkka and Tätilä, 2013; Vlachos, 2014). However, the literature does not elaborate on the introduction of RFID tracking in different types of supply chains. Instead, it highlights the constraints affecting the design of RFID tracking solutions, such as different types of costs related to RFID technology adoption (Gaukler et al., 2007; Li et al., 2010; Srivastava, 2010).

Manufacturing is identified as the lowest cost echelon for attaching tags due to economies of scale and low operating costs (Whang, 2010). However, as the literature points out, the retail level has the best potential to derive benefits, especially for item- level RFID tracking, because at this level the products are usually handled as individual items (Hinkka et al., 2012). Thus most of the existing RFID tracking systems cover only the downstream echelons of the supply chain: the DC and a few stores (Soon and Gutiérrez, 2008; De Marco et al., 2012). Some authors even regard supply chain-wide, multi-company RFID tracking solutions as almost impossible to implement

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in practice, and therefore argue that research should focus on the benefits of intra- company or simple inter-company applications (e.g. Spekman and Sweeney, 2006).

Whereas the literature acknowledges a more narrow extent of tracking coverage than integrated supply chain-wide RFID tracking, merely because such systems are difficult to build and are still relatively scarce, the authors of these articles do not question the objective of tracking across the entire supply chain. Based on a literature review, a typology of alternative RFID tracking solution designs and their benefits and shortcomings appears to be lacking. A synthesis of empirical research is needed to indicate that in many supply chain contexts more limited solution designs may be more straightforward to adopt while still offering many of the same benefits as an integral supply chain-wide system (Fosso Wamba and Chatfield, 2009; Visich et al., 2009).

According to a report by IDTechEx, the fashion and apparel industry has been the most active in integrating RFID tracking as part of its SCM operations, with RFID penetrating about 7 percent of the total addressable market for apparel in 2014, and about 100 organizations tagging apparel in trials and rollouts (Harrop and Das, 2013). The recent literature on RFID implementations in the fashion and apparel retailing sector discusses almost exclusively item-level identification, because the most common applications, such as automatic checking and content verification of incoming shipments and stock-taking, require tracking of individual clothing items (Moon and Ngai, 2008; Azevedo and Ferreira, 2009; Balocco et al., 2011; De Marco et al., 2012). However, when shifting focus from retail to the supply chain as a whole, tracking is no longer as evidently beneficial at item level as it is at pallet or container level.

Table I outlines ten existing item-level RFID tracking solutions in the fashion and apparel industries. They have been chosen to reflect different types of supply chains and options available in designing the RFID tracking solution. The information is based on the latest available public sources.

Currently, the largest item-level RFID tracking solution in the fashion and apparel industry is that of Marks & Spencer (M&S). M&S started a large-scale rollout after a successful trial of the use of RFID tracking of apparel in selected stores in 2006. In 2012, the company’s board of directors approved a plan to expand the tracking to other general merchandise at all of its 760 stores by 2015. In 2014 the company expects to purchase some 400 million RFID tags for its suppliers for tagging of clothes and other general merchandise before delivery to M&S (Roberti, 2013; Violino, 2013). M&S is an example of a company with its own fashion brands, which are primarily sold in its own stores. In Table I, other similar companies that sell their own brands primarily in their own stores are American Apparel, Staff Jeans & Co. and Kohl’s (Gaudin, 2008; Gentry, 2008; Hardgrave, 2009; Charicleia, 2010; Wessel, 2010; Swedberg, 2012, 2014).

Another large-scale RFID user is Gerry Weber, a German retailer that tagged all of its 26 million items sold in 2011 (Roberti, 2011). The company has designed its RFID tracking system primarily for the benefit of its own stores, although a significant share of its products end up with franchising companies or other retailers that do not use the tags (Roberti, 2011; Azevedo and Carvalho, 2012). By comparison, the North American company Tomorrow’s Mother leases maternity departments in 384 stores and uses its RFID tracking solution to control these departments on premises managed by other retailer companies (Swedberg, 2007c; Violino, 2008).

The retailers Mi-Tu in Hong Kong and the Dutch company Van Vuuren Mode only sell fashion items produced by other companies. Mi-Tu attaches its RFID tags in the retail stores and Van Vuuren Mode at the company’s own DC (GS1 Hong Kong, 2007; Swedberg, 2007b; Säilä, 2011). Lemmi Fashion and Throttleman are not retailers but

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Supply chain typology

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C om

pa ny

na m e

W he n ar e

th e R F ID

ta gs

at ta ch ed ?

T hr ot tl em

an (P or tu ga l)

M an uf ac tu ri ng

ph as e

L em

m i fa sh io n

(G er m an y)

M an uf ac tu ri ng

ph as e

G er ry

W eb er

(G er m an y)

W he n

pr od uc ts

le av e th e

m an uf ac tu re r

K oh l's

(U S)

M an uf ac tu ri ng

ph as e

St af f Je an s &

C o. (G re ec e)

M an uf ac tu ri ng

ph as e

M & S (U K )

M an uf ac tu ri ng

ph as e

T om

or ro w ’s

M ot he r (U SA

, C an ad a)

M an uf ac tu ri ng

ph as e

A m er ic an

A pp

ar el (U SA

) M an uf ac tu ri ng

ph as e

V an

V uu

re n

M od e

(H ol la nd

) D C ,

ex cl ud

in g

G er ry

W eb er 's

cl ot he s

(a lr ea dy

ta gg

ed )

M i-T

u (H on g K on g)

In ve nt or y

of st or es

W he re

do es

tr ac ki ng

st ar t?

M an uf ac tu ri ng

ph as e

In tr an si t fr om

ve nd

or to

D C

M an uf ac tu ri ng

ph as e

M an uf ac tu ri ng

ph as e

M an uf ac tu ri ng

ph as e

M an uf ac tu ri ng

ph as e or

D C

D C ,i nc om

in g

D C ,o ut go in g

D C

W he n a cu st om

er pi ck s an

it em

W he re

do es

tr ac ki ng

en d?

D C

W he n

sh ip m en ts

le av e

D C

P oi nt

of sa le (o w n

re ta ili ng

), D C

(o th er

re ta ile rs )

P oi nt

of sa le

P oi nt

of sa le

P oi nt

of sa le

P oi nt

of sa le

P oi nt

of sa le

P oi nt

of sa le

or po in t of

re tu rn

P oi nt

of sa le

F un

ct io n of

R F ID

tr ac ki ng

Im pr ov e

in ve nt or y

ac cu ra cy

in D C ,

sh or te n th e

ti m e pr od uc ts

sp en t in

SC

Im pr ov em

en ts

in D C

op er at io ns :

be tt er

vi si bi lit y

at w ar eh ou se ,

im pr ov ed

sh ip pi ng

ac cu ra cy ,

pi np

oi nt in g

pr ob le m s in

op er at io ns

Im pr ov e in ve nt or y

ac cu ra cy

an d

de cr ea se

er ro rs

in sh ip m en ts ,

tr an sm

it ti ng

m an uf ac tu re r

in fo rm

at io n,

im pr ov in g re ta il

st or e pr oc es se s an d

se cu ri ty

F as te r

in ve nt or y

co un

ts ,f as te r

re pl en is hm

en t,

le ss

ou t- of -

st oc ks

Im pr ov e

re ce iv in g an d

in ve nt or y

ac cu ra cy

in D C ,

im pr ov e re ta il

st or e se cu ri ty

an d pu

rc ha si ng

pe rf or m an ce

of co ns um

er

Im pr ov e

in ve nt or y-

ta ki ng

an d

ac cu ra cy ,f as te r

an d m or e

ac cu ra te

re pl en is hm

en t

Im pr ov e

in ve nt or y

ac cu ra cy

of th e

co m pa ny

's de pa rt m en ts

in st or es ,

in cr ea si ng

th e

ef fi ci en cy

of re pl en is hm

en t

sh ip m en ts

Im pr ov e

in ve nt or y

ac cu ra cy ,

re du

ce th ef t,

re su lt in g

de cr ea se

in lo ss

sa le s

D ev el op

on -

lin e

sh op pi ng

an d re ve rs e

lo gi st ic s

Im pr ov e

pu rc ha si ng

ex pe ri en ce

by us in g in te lli ge nt

fi tt in g ro om

s, de cr ea si ng

sh op lif ti ng

, co m bi ni ng

fi tt in g

ro om

da ta

w it h

sa le s da ta

(c o n ti n u ed

)

Table I. Overview of ten existing item-level RFID tracking solutions in fashion and apparel

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Su pp

ly ch ai n

pa rt ie s

in vo lv ed

M an uf ac tu re r

in In di a, D C in

P or tu ga l

D C ,n

eg ot ia ti on s

w it h re ta ile r

co m pa ny

s (in

20 06 )

M an uf ac tu re rs ,

D C s, ow

n st or es ,

ne go ti at io ns

w it h

fr an ch is in g st or es

M an uf ac tu re rs ,

D C s,

de pa rt m en t

st or es

St af f Je an s is

ve rt ic al ly

an in te gr at ed

co m pa ny

fr om

m an uf ac tu ri ng

to D C an d

st or es

F ac to ri es ,D

C ,

st or es

D C of

T om

or ro w 's

M ot he r, st or es

th at

se ll th e

co m pa ny

's ga rm

en ts

A m er ic an

A pp

ar el is

ve rt ic al ly

in te gr at ed

fr om

m an uf ac tu ri ng

to D C an d

st or es

St or es

an d

D C

M i-T

u st or es

Sc al e of

R F ID

tr ac ki ng

In 20 08 ,t he

co m pa ny

ta gg

ed 60 %

of it s it em

s, ar ou nd

37 0, 00 0

ar ti cl es .P

la ns

to ex pa nd

th e

sy st em

to co ve r

al l 10 0 st or es

A ll L em

m i's

pr od uc ts

ar e

R F ID

ta gg

ed

A ll 26

m ill io n it em

s w er e ta gg

ed in

20 11

P ilo t in

25 st or es

w he re

se le ct ed

pr od uc t

ca te go ri es

w er e

ta gg

ed .

E xp

an di ng

to co ve r m or e

ca te go ri es

an d

st or es

0. 8 m ill io n

R F ID

ta gg

ed it em

s in

20 10

15 0 fa ct or ie s

ar ou nd

w or ld ,

72 0 st or es

in E ur op e, 40 0

m ill io n R F ID

ta gs

in 20 14

M at er ni ty

de pa rt m en ts

in 38 4 st or es

ac ro ss

U SA

an d

C an ad a

R F ID

in 10 0

st or es

at th e

en d of

20 11 ,

pl an

to eq ui p

al l 28 0 st or es

by th e en d of

20 12

50 0, 00 0

it em

s an nu

al ly ,2 6

de pa rt m en t

st or es

an d

w eb sh op s

A ll ga rm

en ts

in tw

o fa sh io n

st or es

in H on g

K on g

T ak en

in to

pr od uc ti on

us e

20 08

20 05

20 09

20 13

20 10

20 06

20 07

20 08

20 11

20 07

Table I.

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fashion suppliers without their own retail stores, thus their RFID tracking systems concentrate on automation of operations in the distribution echelon (Speer, 2006; Swedberg, 2007a; IT Reseller Magazine, 2008; Azevedo and Ferreira, 2009).

The reviewed fashion and apparel industry solutions cover the main benefits achievable through RFID tracking as identified earlier by McFarlane and Sheffi (2003). Almost all of these solutions aim to reduce errors in handling operations and shipments, bringing better inventory accuracy to stores and DCs. This in turn reduces the probability of out-of-stock situations and cuts the cost of lost sales. Another stated aim of many of the reviewed solutions is improved handling efficiency in DCs and receiving shipments in stores. This functionality is important as it offers both savings in labor costs and reduces delivery times. Some of the retailers that have implemented RFID tracking in retail stores also expect to decrease shoplifting, and to improve the purchasing experience of consumers by offering better information about available products.

As seen in Table I, most RFID tracking solutions attach the tags already in the manufacturing echelon, particularly where the vast majority of the products are meant for a single retail company. However, even then not all the companies reviewed start tracking at that point. Some attach RFID tags in their DCs, and one retailer even postpones tagging to the store. In eight out of ten RFID tracking solutions reviewed in Table I, tracking ends at the point of sale. The two companies that do not track products in retail stores have supply chain partners that handle retailing. Their RFID tracking is only implemented in the DC, but these companies intend to negotiate with retailer companies to extend tracking to the retail echelon (Speer, 2006; Swedberg, 2007a).

Developing typologies is a possible approach to synthesizing design knowledge on the different realizable options over where to attach tags, when to start tracking, and when to stop tracking in different supply chain contexts. Comparing estimated implementation costs with the likely benefits of tracking in different supply chain echelons makes trade-offs explicit. When tagging is done in the manufacturing echelon there are more opportunities for benefits, but in many supply chain contexts there is excess tagging of products that will be distributed through channels where RFID tracking is not yet in use. For this type of comparison, SCM literature has introduced the theoretical concepts of postponement and speculation (Yang et al., 2004; Boone et al., 2007). In the RFID tracking context, speculative tagging in the manufacturing echelon would mean that RFID tags are attached before knowing the share of products that will be distributed through channels using RFID tracking. Postponed tagging, on the other hand, would mean that RFID tags are attached in the later echelons of the supply chain, such as the DC or store, when it is known that all those tags will be used for tracking purposes.

In summary, RFID tracking can speed up, streamline and improve the existing processes, for example in the warehouse, and is thereby beneficial in shortening unreasonably long lead-times that are typical of the fashion industry. Tracking also assists in collecting precise data on store inventory and consumers’ shopping and buying behaviors, enabling more precise forecasts and less out-of-stocks (Sarac et al., 2010; Azevedo and Carvalho, 2012). However, for retailer companies in general, building and adopting tracking systems is not easy because they usually have limited knowledge of the technology and its possibilities (Visich et al., 2009), and developing an actual business case might turn out to be difficult for many retailers constrained by a diverse supplier base and network of LSPs and retail channels (Curtin et al., 2007; Li et al., 2010). A typology for configurable RFID tracking focussing on the business pros and cons of different alternatives could lower the bar to fashion companies adopting RFID. However, the research literature still lacks a typology of this type that would be

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applicable to most existing solutions. A typology would help to show more flexibly how supply chain partners from different echelons or even competing supply chain actors could adopt RFID tracking solutions, thereby reducing development and implementation costs for all.

3. Methodology This paper is based primarily on a case study research method (Yin, 1994). Case study research enables researchers to develop relevant and testable theories by collecting and analyzing qualitative data, especially in complex and practice-oriented fields such as operations management and logistics. Well-conducted qualitative research offers better information for understanding causal factors than does traditional quantitative research (e.g. Bensabat et al., 1987; Meredith, 1998; Roth, 2007). The case company here is a LSP interested in designing a tracking solution supporting their customers in fashion logistics. The LSP also sees services that support supply chain responsiveness as a potential competitive advantage in the future. The selected case company was interesting because it has been actively piloting the use of RFID and other tracking technologies in its operations, for example for tracking roll cages and vehicle positioning. Additionally, it was already piloting RFID tracking with a customer in the fashion industry. In the pilot, the customer company was attaching RFID tags to all clothing items that the LSP had been handling for them in a DC. Also, the LSP offered access to more retailers interested in implementing RFID tracking.

The case study thus provided an interesting context for developing a typology for configurable RFID tracking in the fashion supply chain. The case LSP had experimented with RFID tracking and saw an opportunity for introducing it in the fashion industry. At the outset of the study, the LSP had an outline of an idea for a solution, but was unsure how the different design alternatives would fit the needs of different retailers.

The development of the typology contributes to design science theory. In general, a design science theory describes a means to an end (Holmström et al., 2009) by articulating: purpose and scope, constructs, principles of form and function, artifact mutability, testable propositions, justificatory knowledge, principles of implementation, and expository instantiation (Gregor and Jones, 2007). A typology addresses one of these design theory elements, namely the principles of form and function. The proposed typology combines function as described by value equations (Anderson et al., 2007) and form as described by design parameters of a configurable RFID-based tracking solution.

The typology was developed in four phases:

(1) The researchers reviewed the literature to find existing RFID tracking solutions in the fashion industry. The findings were contextualized based on interviews and workshops with personnel from the case LSP. Three alternative forms of a solution were identified for RFID based tracking in fashion logistics in the case company context.

(2) The researchers revisited the RFID literature and looked for existing RFID tracking solutions quantifying possible benefits that RFID tracking could bring to the operations of the case LSP and to its fashion retail customers. Personnel involved in the tracking pilot were interviewed to gain insight into the potential benefits of RFID tracking for both the LSP and its retail customers. Based on this literature review and interviews, the likely benefits of RFID tracking were identified and their magnitude estimated. The estimates were calculated together with the case LSP personnel.

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(3) The needs of four fashion retailers were mapped against the three design alternatives and likely benefits identified in the preceding phases. Retailers were involved in improving the understanding of the proposed form and function of RFID tracking in specific supply chain settings. Two CEOs, one CIO and one development manager from fashion companies were interviewed. These four retailers were selected based on the LSP’s acknowledgment of good supply chain competence. The semi-structured interviews examined previous RFID experience, the stages and challenges of the supply chain, differing information systems and the structure of the retail network. The interview questions were formulated jointly with the researchers and personnel of the LSP to give answers that would offer enough material for typology formulation. Each interview took an hour on average and a voice recorder was used for better reliability.

(4) Once the first propositions had been formulated for a typology describing the form and function of a configurable RFID tracking solution, workshops were organized on the premises of the two most active retailer companies. Based on the case study findings and literature reviews, the propositions synthesized by the typology were discussed with the representatives of the hosting retailer company and personnel from the case LSP. Finally, the solution typology was validated and refined in the supply chain setting of the retailer.

Table II summarizes different phases of the research and how they are applied in our case study. These phases proceeded mainly linearly, although some activities overlap.

In all, seven personnel from the case LSP were involved in the case study in 12 interviews and four workshops. They were logistics process and information system developers, and logistics and SCM managers including operative managers of the DC and the sales manager. They all reported their own experiences of the RFID tracking pilot and expressed their views on different possible RFID tracking solutions based on their area of responsibility. Additionally, the researchers interviewed representatives

Research phase Phase description

1. Identification of alternative forms for the case company’s (LSP’s) RFID tracking solution

Systematic search of alternative forms by analyzing existing RFID tracking solutions in the fashion and apparel industry and a pilot conducted by the LSP. Three realizable alternatives were identified in collaboration between LSP personnel and researchers

2. Recognition and description of the most important benefits of RFID tracking for the LSP and its fashion industry customers

By combining the literature review of existing RFID tracking solutions in the fashion industry with interviews of LSP personnel involved in the RFID tracking pilot, probable benefits in the case setting were identified

3. Evaluation of different alternatives of RFID tracking in specific supply chain settings

Conducting customer company interviews. Summarizing the benefits and identifying the most suitable form of RFID tracking for specific fashion industry customers

4. Development of typology Proposed typology refinement in two workshops together with representatives of the hosting retailer company and personnel from the LSP

Table II. Research phases and their use in the case study

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from four fashion companies, and spent two days observing daily routines in different fashion stores. Two half-day workshops were arranged on the premises of the most active customer companies after developing a preliminary version of the typology for configurable RFID tracking in fashion logistics to refine the ideas further.

The four interviewed fashion retailers are integrated vertically, meaning that they are responsible for the apparel design, and sell at least half of their products in their own retail stores. Limiting the number of retail companies to four was deemed sufficient, as Eisenhardt (1989) suggests that a range of four to ten examples “usually works well” in inductive case study research. Selecting the interviewed companies on the basis of their good supply chain competence should not pose a problem, since according to Eisenhardt and Graebner (2007) selection of the most suitable cases is acceptable, when the purpose is to develop a theory and not to test it. Compared to the companies reviewed in Table I, the retailers selected for interview are considerably smaller and therefore have limited resources to initiate an RFID tracking solution on their own.

4. Results 4.1 Typology Based on the analysis of existing tracking implementations presented in the literature review section (see Table I), the factors that affect the form of the tracking solution are:

• The structure of the supply chain: in vertically integrated supply chains, such as those of American Apparel and Staff Jeans & Co., the RFID tracking system is usually developed to cover the entire supply chain from tagging in the manufacturing echelon to point of sale. Similar solutions are also used in supply chains, where the retailer plays a dominant role and has its own fashion brands, such as M&S. Therefore vertical integration or a dominant role by one company seems to simplify implementation and expansion of the tracking system.

• The initiator’s position in the supply chain: Mi-Tu and Van Vuuren Mode are rather small retailer companies that therefore tag their products in the warehouse or DC, unless for some reason the products already have RFID tags. Throttleman and Lemmi Fashion on the other hand are fashion suppliers and their tracking ends when the products leave their DC.

• The focus of tracking: especially with the current RFID tracking applications of American Apparel, M&S and Tomorrow’s Mother, the purpose is to improve the accuracy and speed of replenishment of retail stores and improve the stores’ performance, not to improve the management of the whole supply chain. Thus in these cases tracking generally starts when the products leave the DC, even if tagging has mostly occurred further upstream.

The outcome of existing tracking implementations is that RFID tags are attached in the manufacturing echelon whenever possible, as the cost of tagging is cheapest there. In some supply chains, where the RFID tracking initiator does not have its own brand or manufacturing, tagging is postponed to where the focal company obtains its products. However, even if the companies attach RFID tags speculatively, tracking start is often postponed to later echelons, typically the DC.

Thus two design parameters (place of tagging and place of tracking start) can be identified. By adjusting these, their impact can be seen in the costs of tagging and equipment, in the amount and volume of achievable benefits, and in the suitability of

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the solution for different customers and configurations. The place where tracking ends is a third design parameter. In the case of fashion logistics, tracking end usually takes place in the retail store, as limited or no benefits can be achieved in after-sales. Most benefits are achieved in the store in the receipt of goods and stock-taking.

Figure 1 illustrates the typology for configurable RFID tracking. Basically, there are three alternative places for tagging: the manufacturing phase, some of the DCs or the retail store. However, tracking instead has more variety, as it can cover almost every actor of the supply chain, if the products already have RFID tags. Alternative configurations can be described with the three design parameters in different combinations. In our case setting, three alternatives were deemed relevant.

“Supply chain-wide tracking” is potentially the most beneficial as well as the most resource-intensive configuration. It offers the greatest benefits, as tracking is started in the manufacturing echelon, but it is also quite demanding to implement. In this option, all the events related to the product between the manufacturer and the retail store can be linked to the RFID tag and it is possible to determine the complete cost of the product from manufacturer to retail store.

“Postponed tracking start” is a less demanding option, as tags are attached in the manufacturing echelon where it is cheapest, but tracking between the manufacturing site and the LSP’s DC is not introduced. In this way most of the benefits in the supply chain-wide configuration can be achieved, but the costs of tracking are lower. Even if some events in the supply chain remain inexact, this tracking option still offers enough information to define the total cost of the product with sufficient accuracy because, among other possible factors, all the transportation modes during the stages of incomplete tracking can still be known.

“Postponed tagging” is a configuration where RFID tags are attached to products just before they enter the operations of an actor capable of benefiting from RFID tracking. The most common place to attach RFID tags in this configuration is a retailer

Manu- facturing

Transport to LSP’s

DC LSP’s DC

Delivery to stores

Retail store

Tagging at production site

Tracking during transport

Tagging at DC

RFID- enabled DC operations

Efficient retail store replenishment

RFID- assisted sales

Postponed tracking start

Supply chain-wide tracking

Postponed tagging

Tracking start

Tagging

Tagging

Tagging

Tracking start

Tracking start

Tracking end

Tracking end

Tracking end

Figure 1. Typology of configurable RFID tracking

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or LSP-operated DC. This option provides flexibility when flows of goods are complex. It enables tagging of products that are sourced from any manufacturer, and tagging of only those products that are sold in certain stores. As such, however, this type of postponement is not especially cost-efficient for retailers. Even if this option is the easiest to implement, the information about product manufacturing cannot be obtained, nor can the item-level costs of products reaching the end-consumer be reliably defined.

The advantages and shortcomings of the alternative configurations are summarized in Table III.

4.2 Evaluation of alternative configurations in the case context Based on interviews with representatives from the case LSP and four fashion retailers, this section highlights the specific needs and challenges for configuring the tracking solution in the case context.

Comparison of the tracking system configurations shown in Figure 1 and Table III was used to select the appropriate form of tracking for the fashion customers of the LSP.

“Supply chain-wide tracking” “Postponed tracking start” “Postponed tagging”

Description RFID tags are attached in the manufacturing echelon, and used throughout the supply chain

RFID tags are attached in the manufacturing echelon, but tracking between the manufacturing site and LSP’s DC is incomplete

RFID tags are attached in the LSP’s DC and tracking starts in that echelon

Examples of companies

Gerry Weber, Kohl’s, Staff Jeans & Co.

American Apparel, M&S, Tomorrow’s Mother

Van Vuuren Mode

Benefits Manufacturing echelon is the cheapest place of tagging

Manufacturing echelon is the cheapest place of tagging

All attached RFID tags will be exploited in the supply chain processes

Covers the entire supply chain

Covers the most vital parts of the supply chain

Small number of outside partners (e.g. manufacturers) simplifies negotiations on practical issues and responsibilities

All the supply chain actors could benefit from RFID tracking

Most of the supply chain actors could benefit from RFID tracking

Possible to obtain information about manufacturing conditions

Possible to obtain information about manufacturing conditions

Shortcomings Expensive to arrange tracking between manufacturing echelon and LSP’s DC

Tracking between manufacturing site and LSP’s DC is incomplete

Tracking based on RFID is not possible before the LSP’s DC

Some tags will probably be wasted if the tagged product ends up in a distribution channel that is not using RFID tracking

Some tags will probably be wasted if the tagged product ends up in a distribution channel that is not using RFID tracking

No possibilities to collect item information about manufacturing and upstream supply chain activities Attachment cost for single RFID tag is bigger in the LSP’s DC than in the manufacturing echelon

Note: Throttleman, Lemmi Fashion and Mi-Tu do not fit into this typology

Table III. Comparison of benefits and

shortcomings of the three configurations deemed practically

relevant by the case company

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Although “Postponed tagging” would be the easiest to introduce, for several reasons it is not the most suitable alternative in this case context. First, tagging at the facilities of the LSP is considerably more expensive than at the manufacturing site. Second, the LSP’s possibilities to exploit the tag in its operations are limited if the LSP itself tags the products. The case LSP was able to obtain over 10 percent savings in its DC operations by using RFID for tracking instead of barcodes, but realization of these savings required that the tags could also be exploited in the shipment receiving process. Third, information about the manufacturing conditions and the possibility of calculating the item-specific supply chain cost of individual pieces of clothing is lost if the products are tagged as late as at the LSP’s facilities. The benefits of the other two options, “Supply chain-wide tracking” and “Postponed tracking start” are rather similar. However, supply chain-wide tracking is more expensive and difficult to realize, because the case LSP has little influence over other LSPs handling the products between the Asian manufacturers and major European ports. Also the benefits of tracking products when they are somewhere between Asia and Europe brings little, if any, added value for the LSP’s customers. Defining the supply chain cost of an individual product does not require exact information about shipping, because knowing the type of transportation provides the necessary information with the required accuracy to calculate the cost, in the “Postponed tracking start” scenario as well. Therefore “Postponed tracking start” was the preferred option for the case LSP (Table IV).

If tracking starts already at the production facilities, there are more opportunities to exploit the information on the tags. Most clothes are tagged with barcodes already at manufacturing, where different sizes, colors and models may have their own barcode number. However, such barcodes are not item-level identifiers and therefore cannot be used as such for the required tracking in the case supply chain. One benefit of RFID technology in tracking is that all RF identifiers are unique by default, and therefore all pieces of garments can be handled individually. The technology can be used to track, record, and trace all the phases of the product during its life-cycle after an RFID tag is attached. In addition to contributing to quality maintenance, this kind of item-level information enables finding cost-efficient alternatives to serve the product. Therefore the combination of early placement of an RFID tag and the possibility to track a single product at item level enables the case LSP to respond to several kinds of needs of potential fashion company customers.

Characteristics of “Postponed tracking start” scenario Assessment

Benefit Manufacturing echelon is the cheapest place of tagging

The price of manpower at the manufacturing site is low compared to the DC and to the cost of RFID tags

Covers the most vital parts of the supply chain

The transition from DC to point of sale is the most vital and sensitive part of the supply chain

Most of the supply chain actors could benefit from RFID tracking

All supply chain actors benefit from RFID tracking from DC onwards

Possible to obtain information about manufacturing conditions

It is possible to deduce the place of manufacturing from the RFID tags and tracking data

Shortcoming Tracking between manufacturing site and LSP’s DC is incomplete

Tracking from manufacturer to DC is not relevant for the case LSP

Some RFID tags wasted The price of wasted tags is negligible compared to the benefits

Table IV. Assessment of case LSP supply chain against benefits and shortcomings of “Postponed tracking start”

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Integration of RFID tags into the hangtags typically used on garments turned out to be the most suitable solution. Therefore, attaching the RFID tags at production facilities requires co-operation with the relevant hangtag supplier. Another widely used alternative is to integrate RFID tags into the care instruction label. If the tags are attached already at the production facility, tracking can also start there with suitable equipment. Data on which products are sent from the production facilities, and further tracking data during transport, are provided either through a portal hosted by the LSP or, if desired, directly into customer systems. All data can be handled centrally in the current systems of the LSP. RFID tags are utilized in the processes of the DC, and one option is to attach the tags only after the products are received at the DC. Finally, store receiving and inventory counting is performed with portable RFID readers.

5. Conclusion This paper presents a typology for configurable RFID tracking solutions to fulfill the requirements of fashion companies with differing supply chains. Examining the typology of the fashion industry systems presented in the literature (see Table I), the typology of form and function can readily be found in existing implementations. However, synthesizing alternative configurations as a typology enables fashion companies to seek process improvements, while taking into account possible constraints to supply chain- wide implementation in their particular supply chain context.

The principles of the form of typology derive from the literature and the concepts of postponement and speculation. The requirements behind the formulation are based on the context of the case LSP and its fashion customer companies. Configurability is essential, because supply chain-wide RFID tracking systems are not widely used by many supply chain parties of the case LSP. Configurability allows customers of the LSP to start RFID implementation by seeking benefits in retail operations from tagging products in the DC. Later the cost of tagging can be reduced incrementally by engaging suppliers to tag in the manufacturing echelon. Configurability of tracking start and end is also valuable, as in many situations tracking between the manufacturer and LSP’s DC does not bring considerable added value, but in some cases may be important in acting against counterfeiting of luxury brands. Furthermore, item-level tracking from manufacturing to retail may be turned on temporarily in process improvement projects to identify non-value adding and wasteful practices in the supply chain.

A limitation of the current study is that the proposed typology does not address the challenges of implementation. Companies that have fundamental problems in logistics operations, e.g. as a result of poor logistics management or underdeveloped processes, will hardly gain any benefit from using the proposed tracking solution before they have settled these problems. In addition, RFID cannot solve all the problems related to scheduling, because RFID tags will not move shipments quicker from one place to another, nor avoid occasional problems in transportation. Instead, tracking information can be used to accelerate handling processes, e.g. in ports and DC’s, by increasing automation. Tracking information also enables detecting deviations between a plan and its implementation, which is required for SCEM to work. At the very least, tracking offers statistical information about durations and their variations for different processes. Such information enables the comparison of different alternatives for shipping and material flows, which may eventually help improve SCM scheduling and organization.

In terms of further research, this paper concentrates on a traditional supply chain with manufacturer, DC and retailer store. However, increased online shopping of fashion products may change this structure and decrease the importance of the retail

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store in fashion supply chains. In online shopping RFID tracking will offer numerous possible benefits, but in this business model, the point of sale should no longer be considered the best place to stop tracking, while RFID tags could also be used to automate handling of returned products. It can thus be anticipated that e-business will strengthen the role of the DC and its part in arranging tailored tracking solutions for fashion retailers, but this topic requires more research even if the proposed typology works as a good basis.

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About the authors Dr Ville Hinkka, DSc (Tech.), Research Scientist, gained MSc in Industrial Management from the Helsinki University of Technology (HUT) in 2004 and DSc in October 2013 in the same department. After master level studies, he worked as a Development Project Leader for a medium-sized logistics service provider, and from 2006 to 2013 he worked in the Logistics Research Group at the Aalto University School of Science (Part of former HUT) as Researcher and Project Manager. Since April 2013 he has worked for VTT Technical Research Centre of Finland. His research interests are focussing on solutions for new logistics technology testing and adoption in demand-supply networks. Dr Ville Hinkka is the corresponding author and can be contacted at: [email protected]

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Maiju Häkkinen (née Rahkonen), MSc (Tech.), Development Manager, gained MSc in Industrial Management from the Helsinki University of Technology (HUT) in 2009. She worked in HUT as a Research Assistant and researcher between summer 2008 and the end of 2009. After leaving HUT she has worked as development manager in industry.

Jan Holmström, Professor in Industrial Engineering and Management, has a background as a systems analyst and technology consultant. From 1995 to 2001 he has worked as systems analysts for Unilever and as a Technology Consultant in McKinsey & Company. In 1999 he returned to the Helsinki University of Technology to build up the Logistics Research Group. He is a Professor in Industrial Engineering and Management, the author of more than 60 peer reviewed journal publications, numerous conference presentations and the co-author of a book in the field of supply chain management and technology driven management innovation.

Kary Främling, Professor of Practice in Computer Science, received his MSc in Computer Science from the Helsinki University of Technology (HUT) in 1990 and his PhD from Ecole Nationale Supérieure des Mines de Saint-Etienne, France, in 1996. He is currently a Professor of Practice in department of Computer Science and Engineering at the Aalto University School of Science (Part of former HUT). His research topics are information management practices and applications for product lifecycle management. His main areas of competence are distributed systems, middleware, multi-agent systems, autonomously learning agents, neural networks and decision support systems.

For instructions on how to order reprints of this article, please visit our website: www.emeraldgrouppublishing.com/licensing/reprints.htm Or contact us for further details: [email protected]

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