Global manufacturing and trade has continued to expand during the past few decades creating a need for continual supply chain monitoring and improvement. The result of globalization of supply chain management has resulted “in the growth of long supply chains” (Jacoby, 2009). Within these long complex supply chains lies opportunities to automatically monitor the movement of products, collect data, and analyze that data to ultimately improve the supply chain process and performance for the customer. One solution has been the implementation of RFID (radio frequency identification) technology.
RFID is a technology that allows for automatic identification of objects without human intervention wirelessly using radio waves. The RFID technology consists of RFID tags and RFID readers. RFID tags are an electronic chip with storage capability and some sort of antenna for communication. Most often, RFID tags are categorized “according to their (i) energy supply, (ii) data storage capabilities, and (iii) communication frequency” (RFID Technology, 2010). RFID tags are further categorized by their need for energy to operate: “passive” RFID tags require no local energy and receive their energy from RFID readers while “active” RFID tags have their own energy source. RFID tags can contain information storage capability of different amounts from bytes to megabytes and this capability continually grows along with the growth of chip technology. In addition, RFID tags “can be built to be reusable, designed for single use, shielded against heat, manufactured for application on certain surfaces, or tailored to other application-specific conditions” (RFID Technology, 2010). An RFID reader “is a device that has one or more antennas that emit radio waves and receive signals back from the tag. The reader then passes the information in digital form to a computer system” (RFID Journal, 2005).
There are four classes of RFID tags: Class-1 are passive tags with an identification number and memory; Class-2 tags have more memory and authenticated access control to it’s data; Class-3 tags are semi-passive tags with the capability to log data from sensors; and Class-4 are active tags that can contain sensors. Class-4 tags can also communicate with other RFID tags and form a sort of sensor network (RFID Technology, 2010). Depending upon application, RFID tags can operate on low frequency (LF), high frequency (HF), and ultra-high frequency (UHF) bands on radio transmission. The higher the frequency of operation, the longer the effective operating distance between RFID tags and readers.
An important part of implementing an RFID solution is the software required to run the communication and data capturing between the readers and tags at a low level, and then pass on that data to a company’s warehouse management, logistics, or supply chain management software system. The manufacturer of the tags and readers usually supplies this “middleware”, and complies with the standard data format in place for SCM systems. The most prevalent standard identifier is the Electronic Product Code (EPC). Established in October 2003, this standard allows for the unique identification of any object with and RFID tag on a global basis. A subset of the EPC is the Serialized Global Trade Identification Number (SGTIN) which allows a data record to be kept at a “manufacturer – item reference – serial number” basis. At such a detailed level of record, it allows for accurate RFID tracking of any tagged item within the supply chain throughout the world.
In utilizing older barcode technology, bar code readers have to be in direct sight of the barcode in order to scan the barcode. However, RFID tags can be place anywhere on an item, case, container, etc. and don’t require a direct line of sight for the RFID reader. In addition, RFID readers can read hundreds of RFID tags in a second. Another advantage of RFID tags is that they are harder to counterfeit and can withstand a variety of different environmental conditions. However, in spite of these advantages, barcode technology still prevails. “In 2008, it was estimated that 5-10 trillion barcodes were printed while only approximately 2 billion RFID tags were created” (Kumar et al., 2011).
Although companies vary in their individual processes they enjoy some common advantages in successful RFID implementation. “The need for fewer employees, fewer out-ofstock situations and reduced loss prevention of assets are additional benefits companies have experienced” (Kumar et al., 2011). Companies implementing RFID technology share a common set of objectives for their supply chain. These objectives include asset tracking, production efficiency, supply chain visibility, raw materials management, compliance, and finished goods inventory control.
RFID technology has a significant positive impact on the supply chain. Any item with a tag can be tracked and monitored through different nodes in the supply chain, and analysis of these data points can drive supply chain efficiencies, lower inventory costs, and ultimately improve customer value. “By subsequently retrieving these data, the items path through the chain becomes transparent, inventorying becomes easier, bottlenecks could be identified, and handling processes be optimized” (RFID in the Supply Chain, 2010). The EPC standard creates uniformity in the storing and retrieving of large volumes of data that RFID systems produce. Through this standard, other stakeholders (manufacturers, suppliers, retailers, etc.) in the supply chain can exchange this data and thereby create an opportunity to improve supply chain efficiency.
The adoption of RFID technology has been growing over the past decade. In November 2002, Gillette bought half a billion tags for its RFID implementation. In June 2003 Wal-Mart asked its top 100 suppliers to RFID tag all pallets and cases, and in October 2003 the US Department of Defense required all suppliers to use RFID technology. In May 2004 both Airbus and Boeing adopted RFID for airplane parts, and in November 2005 the International Air Transport Association approved RFID for baggage tracking systems. In July 2008, Oil and Gas consortiums launched their RFID Solution Group. More recently, item-level tagging was adopted by Wal-Mart in July 2010 and by Macy’s in September 2011 (RFID Journal, 2012).
The costs to implement RFID technology has been decreasing due to cheaper mass production of RFID tags coupled with continuous technological innovation in tags and readers. Moving the price points of tags and readers downward will increase the use of RFID in the supply chain. One such innovation has been the ability to print RFID tags, first introduced by Silicon Valley manufacturer Kovio in 2008 (Hughes, 2011). Although a step in the right direction, the printed tag concept has still not lowered pricing enough to take RFID beyond back office applications due to the high cost of silicon, the main commodity ingredient in RFID tags. Kovio and others are working to remove silicon completely from future cheaper RFID tags. “Low-cost, printable RFID, which would transform the retail world at an item-level and make the barcode obsolete, has always been the great goal, but for the moment that remains a distant prospect” (Hughes, 2011).
As costs to implementing RFID continues to fall, the technology is being utilized in more innovative ways in the supply chain. One example is supermarkets where they are testing an RFID system to track DVD’s and CD’s that have RFID tags. “When the shelves require restocking a print-out can indicate precisely where the CD’s have been mixed with one another and where they need to be moved to” (Hughes, 2011). Another example is Wal-Mart where each pair of jeans is RFID tagged. Once the point of sale operator has scanned the jeans, the replenishment order is far more accurate at the level of size, color, etc. A future application of RFID tagging would be to tag all items in a retail store so that customers would no longer need to checkout their items and would be billed as they left the door. However, there is a security concern that cheap RFID tags could be reproduced and swapped in the items by the customer thereby resulting in large losses of income.
Privacy remains a concern with the implementation of RFID technology. To the consumer, RFID is an invisible way to track where an item is, what and where they bought something, and where they might be holding something. This technology can even track consumer buying behavior or the consumers themselves if they have a tag or loyalty card on their person. “Consumer privacy concerns are more pronounced as the consumption experiences, personal information, and financial information can now be disseminated to a much broader audience” (Beitelspacher et al, 2012). This consumer concern has launched private advocacy groups such as CASPIAN (Consumers Against Supermarket Privacy Invasion and Numbering). According to CASPIAN, RFID tags are “tiny tracking devices the size of a grain of dust, [that] can be used to secretly identify you and the things you’re carrying–right through your clothes, wallet, backpack, or purse” (Caspian, 2004). There are now a number of privacy laws and regulations in place to protect consumers. In addition, many retailers and agencies send notices to consumers on their privacy policies and procedures. Increased implementation of RFID will increase supply chain efficiency and possibly drive costs down to the consumer, but the point of value vs. privacy is already at hand.
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