An Impact of RFID Technology in Warehouse and Supply Chain Management

An impact of RFID Technology in Warehouse and Supply
Chain Management
1. Introduction
The purpose with this section is to present the problem area.
Intially,an introduction and a background is provided in order to
motivate the importance of the subject. Next, the problem definition is
included, which will result in a formulation of the research problem.
In most parts of the world pharma organizations are driven by daily
operations throughtout the industry, most of the times with relying on
the base of their expereinces they face with a lot of problems such as
increasing costs, decreasing revenues, and dissatisfy customers while
customer satisfaction is the main job.
Customer relationship with requiring to customer-centric bussiness
philosophy and cultural to support effective marketing, sale, making
long term relationship and services process could be a life saver for
most bussiness especially for pharmasuetical distribution
organizations.
Technology implementation can bring a lot of benefits such as
customer satisfaction, increaseing revenues, decreasing in cost that all
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these benefits for a firm can be a source of sustainable competitive
advantage.
1.1 Problem definition
In today word pharma has exapanded to such extent that it is now
claimed to be one of the wold’s largest industry, with high rate of
employee, and bringing a lot of revenue for countries. On the other
hand the increased online proce/products transperency and the new e-
bussiness models (e.g online auctions) enhances customer’s
purchasing power.
More recently, the continuous movement towards globalization has
made information process one of the most important factors in
achieving success as well as in seeking new markets,improving quality
and providing better and faster customer service.
Service at the organizational level is affected by the level of
competition, which leads other organization to step up the
development of their service. Increaed level of service, however does
not imply increase profitability. Competitions may results in lower
prices, thus eriding improvements in margins.
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1.2 Research Purpose
Nowadays, there are strong competitions among corporations which
serve the communication services. Therefore they not employ
information technologies through the organizational levels to improve
the performance quality but also use the newest technologies to cover
customer needs. Rapid process of information and employing
automation system through the organizational levels in recent years
cause firms to access to the update information and knowledge easily
and quickly.
Base on the title and subject of the research: An impact of RFID
technology in warehouse and supply chain management, main
objecives are as follows:
• To understand the impact of RFID on warehouse and supply
chain.
• To get the knowledge about how firms deal with the inventory
from cost effective view. In a broader point of view, it is a cost
reduction procedure that can have an impact on the economies
of the company directly and on other departments indirectly
• Document and analyze the information from handling flow of
goods.
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• Propose improvements to the processes in order to achieve
improved delivery accuracy.
• Determining the effect of implementation of RFID technology.
• Suggesting useful and practical solution that could be used in the
organization.
• Determining the effect of customer needs and meet their needs
via giving more and more servicing using technology.
• Forecasting the result of applying RFID technology on increasing
revenue and decreasing cost.
1.3 Research Questions
To reach above purposes the following research questions emerges:
1. How pharmaceutical distributors can implement an effective
RFID technology?
2. What is the influence of implementing of RFID technology on
customer satisfaction, loyalty and retention.
1.4 Limitations
• The research will only focus on small organization with less
than 10 actors. This is because big organization and small
organization may differ a lot for each other structurally and
culturally.
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• The main focus in this research is to study how the RFID
technology improves the manual process of the organization.
The environment of the organization is not on focus. The study
will be done in one case site only.
1.5 Outline of the thesis
Present thesis tries to find and analyze the pharmaceutical distributor’s
needs, expectations and prerequisite of a successful RFID
implementation. This will also find the relationship between
implementing RFID and customer service, loyalty and retention.
The theoretical findings are compare and adapt to the firm’s specific
needs with giving practical and useful solutions for giving more and
more services.
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2. Literature Review
You've probably heard the acronym "RFID," which stands for radio
frequency identification. You may know that RFID tags can contain
unique information that identifies whatever they are attached to, and
can share that information wirelessly with computer databases and
networks so items can be tracked efficiently. What you may not know
is how far the technology has come and what is being developed right
now that could help your warehouse or distribution center. To help
decide if RFID would be beneficial, consider if any of the following
statements apply to your business:
• Processing speed is essential or could provide a competitive
advantage;
• Deal in high-value assets that need to be protected;
• A bar code cannot physically survive processes;
• Areas of facilities need to be protected from unauthorized
access;
• Need more unique information on each item than a bar code can
contain;
• Highly automated and need to minimize human intervention;
• Obtain benefit by knowing where products are at all times in the
supply chain, in real time.
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If any of these statements apply to business, RFID should be given
serious consideration in system design
RFID uses radio signals to exchange data between a tag (also known
as a transponder) and a read/write device (commonly called a reader
or interrogator). Tags consist of a wireless chip and antenna that are
housed in a label or other protective casing and attached to the item
that is to be identified. The tag may be active, which means it has a
battery to power its own transmission, or passive, which transmits
using power received from the reader in the form of electromagnetic
waves. Active tags have longer read ranges making them appropriate
for asset management and real-time location systems (RTLS). Passive
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tags have a shorter read range and are smaller and less expensive
than active tags making them the tag of choice for most supply chain
applications.
The most common tag type used in warehouse and operations are
passive adhesive “smart labels” applied to cases and pallets. A typical
smart label has an RFID tag encoded within the label material, which is
printed with text and bar code to support legacy operations. Chips and
antenna can also be encased in more rugged tags to provide
permanent asset and location identification or withstand exposure to
high temperatures, industrial solvents, impact, and other conditions
that make bar code or other forms of data collection impossible.
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Readers have antennas for sending and receiving signals, a processor
for decoding tag information, and may have additional software for
more advanced data processing. Antennas may be separate from the
processor and connected by cable for additional placement and
configuration flexibility. There are many types of RFID readers. The
most common include mobile readers integrated into handheld
computers or mounted on vehicles, and fixed-position units, which are
typically mounted at dock doors and conveyor lines.
2.1 RFID-The technology
Radio Frequency Identification (RFID) is an automatic identification
and data capture technology. RFID systems use radio waves as the
communication medium between
RFID tagged objects and RFID
reader stations. Tags—or
“electronic labels,” as they are
also known— operate as portable
databases that can be accessed
wirelessly. The memory on these
tags can be read and written to remotely and at very high speed.
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In recent years, the technology has received increased attention due
to a confluence of actions, including technology advancement,
heightened security concerns, supply chain automation, and a
continuing emphasis on cost control within industrial systems.
The technology offers a revolution in the efficiently of item
management and traceability. The primary benefit of RFID tags over
barcodes is their ease of use and reliability. RFID tags can be read
while in motion, in any orientation, through intervening objects and
without the need for line of sight. RFID tags enable reliable
automation, while barcodes are better suited for manual scanning.
Perhaps most significant is
the fact that several RFID
tags can be read
simultaneously and
automatically, while
barcodes have to be
scanned one by one.
Though it is a costlier technology compared with barcodes, RFID has
become indispensable for a wide range of automated data collection
and identification applications that would not be possible otherwise.
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Interest in using radio frequency identification (RFID) technology in
warehouse and distribution operations is at an all-time high. Wireless
identification and tracking with RFID represents a new way to conduct
operations, which creates new benefits and challenges. Users need to
understand RFID’s capabilities and limitations to accurately assess the
impact it can have on their business.
Warehouse and distribution center operations are at the center of the
surge in radio frequency
identification (RFID)
activity. RFID is proving to
be a cost-effective
resource for saving time,
improving visibility and
reducing labor
requirements for a variety of shipping, receiving and inventory
management operations.
RFID stands for Radio Frequency Identification, and it is used primarily
to deploy automatic identification procedures to provide information
about people, goods, animals and products in transit.
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The RFID device serves the same purpose as a bar code or a magnetic
strip on the back of a credit card, but it uses radio signals to exchange
identifying data which increases the range of identification from a
couple of centimeter to several meters. There are two equal but not
identical decisions made by RFID. The first one is to let the reader
decide if there exist any RFID units from a certain family within the
range, and the second one to verify the identity of the RFID unit that
answers the calls from the reader or who tries actively to contact the
reader.
Since RFID is based on radio waves, there is always a risk for an
intended and unintended listening. That includes the lowest powered
radios because the signal travels more than what is considered to be
the maximum range. The specification guaranties functionality, but
powerful transmitters and receivers increase not only the range but
are less sensitive to interference. Taking into consideration that radio
waves can move in unexpected directions because they can be
absorbed by some objects and reflected by others, leads to
unpredictability that opens the door for sniffing and spoofing attacks.
Modern RFID systems still suffer from radio jamming where a noisy
signal causes a congested frequency.
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This thesis will provide an overview of RFID technology and how it may
be applied to warehousing and distribution operations. It will describe
the technology and its maturity, standards and industry initiatives, and
will also provide examples of how RFID technology can be best used in
warehouses and distribution centers.
2.2 Warehouse Management System
A warehouse management system, or WMS, is a key part of the supply
chain and primarily aims to control the movement and storage of
materials within a warehouse and process the associated transactions,
including shipping, receiving, put away and picking. The systems also
direct and optimize stock put away based on real-time information
about the status of utilization.
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Warehouse management systems often utilize Auto ID Data Capture
(AIDC) technology, such as barcode scanners, mobile computers,
wireless LANs and potentially Radio-frequency identification (RFID) to
efficiently monitor the flow of products. Once data has been collected,
there is either a batch synchronization with, or a real-time wireless
transmission to a central database. The database can then provide
useful reports about the status of goods in the warehouse.
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The objective of a warehouse management system is to provide a set
of computerized procedures
to handle the receipt of stock
and returns into a warehouse
facility, model and manage
the logical representation of
the physical storage facilities
(e.g. racking etc), manage
the stock within the facility
and enable a seamless link to order processing and logistics
management in order to pick, pack and ship product out of the facility.
Warehouse management systems can be stand alone systems, or
modules of an ERP system or supply chain execution suite. The
primary purpose of a WMS is to control the movement and storage of
materials within a
warehouse – you might
even describe it as the legs
at the end-of-the line which
automates the store, traffic
and shipping management.
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In its simplest form, the WMS can data track products during the
production process and act as an interpreter and message buffer
between existing ERP and WMS systems. Warehouse Management is
not just managing within the boundaries of a warehouse today, it is
much wider and goes beyond the physical boundaries. Inventory
management, inventory planning, cost management, IT applications &
communication technology to be
used are all related to warehouse
management. The container
storage, loading and unloading are
also covered by warehouse
management today. Warehouse
management today is part of SCM
and demand management. Even production management is to a great
extent dependent on warehouse management. Efficient warehouse
management gives a cutting edge to a retail chain distribution
company. Warehouse management does not just start with receipt of
material but it actually starts with actual initial planning when
container design is made for a product. Warehouse design and process
design within the warehouse (e.g. Wave Picking) is also part of
warehouse management. Warehouse management is part of Logistics
and SCM.
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Warehouse Management monitors the progress of products through
the warehouse. It involves the physical warehouse infrastructure,
tracking systems, and communication between product stations.
Warehouse management deals with receipt, storage and movement of
goods, normally finished goods, to intermediate storage locations or to
final customer. In the multi-echelon model for distribution, there are
levels of warehouses, starting with the Central Warehouse(s), regional
warehouses services by the central warehouses and retail warehouses
at the third level services by the regional warehouses and so on. The
objective of warehousing management is to help in optimal cost of
timely order fulfillment by managing the resources economically.
Warehouse management = "Management of storage of products and
services rendered on the products within the four walls of a
warehouse"
2.3 Supply Chain Management
Supply chain management (SCM) is the management of a network of
interconnected businesses involved in the ultimate provision of product
and service packages required by end customers. Supply Chain
Management spans all movement and storage of raw materials, work-
in-process inventory, and finished goods from point of origin to point
of consumption (supply chain).
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Supply Chain Management is the systemic, strategic coordination of
the traditional business functions and the tactics across these business
functions within a particular company and across businesses within the
supply chain, for the purposes of improving the long-term performance
of the individual companies and the supply chain as a whole.
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Supply chain strategies require a total systems view of the linkages in
the chain that work together efficiently to create customer satisfaction
at the end point of delivery to the consumer. As a consequence costs
must be lowered throughout the chain by driving out unnecessary
costs and focusing attention on adding value. Throughput efficiency
must be increased, bottlenecks removed and performance
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measurement must focus on total systems efficiency and equitable
reward distribution to those in the supply chain adding value. The
supply chain system must be responsive to customer requirements.
Supply Chain Management is the integration of key business processes
across the supply chain for the purpose of creating value for customers
and stakeholders. Supply chain management encompasses the
planning and management of all activities involved in sourcing,
procurement, conversion, and logistics management. It also includes
the crucial components of coordination and collaboration with channel
partners, which can be suppliers, intermediaries, third-party service
providers, and customers. In essence, supply chain management
integrates supply and demand management within and across
companies. More recently, the loosely coupled, self-organizing network
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of businesses that cooperate to provide product and service offerings
has been called the Extended Enterprise.
A supply chain, as opposed to supply chain management, is a set of
organizations directly linked by one or more of the upstream and
downstream flows of products, services, finances, and information
from a source to a customer.
Supply chain management software includes tools or modules used to
execute supply chain transactions, manage supplier relationships and
control associated business processes.
Supply chain event management (abbreviated as SCEM) is a
consideration of all possible events and factors that can disrupt a
supply chain. With SCEM possible scenarios can be created and
solutions devised.
2.4 How RFID Works
First, the basics: RFID is a means of uniquely identifying an object
through a wireless radio link. The identification is accomplished by an
interrogator, also called a reader or "master," and a tag, also called a
transponder or "slave" that has a unique identification code. Data is
exchanged between tags and readers using radio waves between the
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tag and interrogator, and no direct line of sight is required for the
transaction.
The interrogator asks the tag for the code, or processes the signal
being broadcast by the tag, decodes the transmission and transfers
the data to a computer. The computer, in turn, may simply record the
reading, or look up the tag ID in a database to direct further action,
and may also direct the interrogator to write additional information to
the tag. The latest generation of RFID allows the dozens of individual
objects within a group to be uniquely identified at the same time. This
is in contrast to bar codes, which must be read one by one, and can be
very advantageous in high-speed reading, sorting and material
handling applications. Because no line of sight is required between the
reader and the tag, unattended reading stations can be set up to
identify objects on a conveyor belt or within a transport container. Fast
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simultaneous processing and unattended reading are the main
performance characteristics that set RFID apart from bar code.
This advanced functionality comes with a price, which in the past often
made RFID systems cost-prohibitive. Today, however, pricing has
come down considerably, with many tags suitable for warehouse and
distribution operations costing considerably less than a dollar per RFID
tags are often reusable and can be packaged to be extremely durable,
which helps amortize the initial system cost and provides strong total
cost of ownership (TCO) advantages compared with identification
methods that must continually be replaced.
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At its most basic level, RFID is a wireless link to uniquely identify
objects or people. It is sometimes called dedicated short range
communication (DSRC). RFID systems include electronic devices called
transponders or tags, and reader electronics to communicate with the
tags. These systems communicate via radio signals that carry data
either uni-directionally or bidirectionally. When a transponder enters a
read zone, its data is captured by the reader and can then be
transferred through standard interfaces to a host computer, printer, or
programmable logic controller for storage or action.
Once a link is established with a unique ID on an item, then
automation of an assortment of processes ensues. One example is the
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sorting of packages moving along a conveyor system. At read points in
a distribution system, the boxes can be ID’s as to their location in their
path to their destination. This information can be immediately known
to a central monitoring operation. It is real-time information that can
be shared with the sender, with forwarders, and with the customer
waiting for the shipment. The shipment can be automatically directed
to the appropriate dock door, truck, carrier, etc. The shipment can be
redirected while in transit if plans change; all without human
intervention. This puts real time decision-making power into the hands
of many functional operations up and down the suppy chain.
2.5 RFID Components
RFID systems consist of two main components:
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Figure : RFID main components
The transponder, which is located on the object to be identified.
The interrogator or the reader, which can be a read or read/write
device depending on the design and the technology used. A normal
reader usually contains a control unit, a radio frequency module
(transmitter or receiver) and a coupling element to the transponder.
Many readers are equipped with additional interface such as RS 232 to
forward the data received to other systems such as PCs, other
controlling systems, etc. The actual data carrying device, the
transponder, normally consists of a coupling element and an electronic
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microchip.
Figure : RFID data-carrier device, The transponder
Passive transponders, which do not have any voltage supply, are only
activated when they are within the interrogation zone of a reader.
They get the power through the coupling element (contact less).
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2.6 Tags
The lower-cost tags generally are passive (meaning they have no
internal power source), have limited data storage capacity (typically 32
to 128 bits), are read-only (not rewritable), and have limited read
range. Like bar codes, they are usually used as "license plate"
identifiers, i.e., they hold little actual data but serve to identify the
object to a database containing larger amounts of information. For
example, a tag attached to a product in a work-in-process application
would uniquely identify the product each time it passed by a reader.
The reading, and any work performed on the assembly, would be
recorded in a database. In turn, a conveyor-based sorting system
could identify the item and receive routing instructions from a
database application, allowing products to reach their loading
destination without human intervention. Higher-cost tags are available
for many more complicated longer read applications. They often have
their own power source (these are known as active tags), making
them heavier than passive tags, and large data storage capacities
(upwards of 1M), making them essentially self-contained databases.
These higher-capacity tags could, for example, monitor temperature
through a process or give operational instructions to a robotic
workstation when they arrive attached to their item, then have
updated status information appended to the tag when the task is
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complete. This flexibility does have a cost, however; the internal
power source can burn out, giving these tags a life span of 5-10 years.
Types of RFID Tags
1) Passive
There are many varieties of RFID, but the
most common is passive RFID systems.
Passive tags have no battery or other
power source on the tag; they must derive
all the power required for their operation
from the reader’s electromagnetic field.
Passive tags consequently tend to be flat, in label form, are low in
cost, and offer a virtually unlimited operational lifetime. The tradeoff is
that they have shorter read ranges than battery-powered tags.
2) Active
An active RFID tag is one that has a transmitter to send back
information, rather than
reflecting back a signal from
the reader as a passive tag
does. Most active tags use a
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battery to transmit a signal to a reader. Active tags can be read from
300 feet (100 meters) or more, but they tend to be expensive. These
tags are primarily used for tracking expensive items over long ranges.
For instance, the U.S. military uses active tags to track containers of
supplies arriving in ports.
3) Sensor
Sensor tags incorporate sensors as well as
memory on the tag. RFID sensor tags for
measuring air pressure in car tires or
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temperatures for cold food and drug monitoring are becoming more
widely used.
RFID Technology for Warehouse and Distribution Operations
2.7 Frequencies
RFID systems are available in a wide range of frequencies to suit
various performance needs. Frequency is an important factor in
transmission range and speed. However, bandwidth availability is
regulated by telecommunications authorities in each country, and not
all frequencies are available for use throughout the world. This is an
important consideration when planning logistics and supply chain
applications. Most tag frequencies share the ISM (Industrial, Safety
and Medical) bands. Compatibility problems are gradually being solved
through standardization efforts, particularly in standards sponsored by
the ISO.
Frequencies and the EPC System
Frequency is one of the biggest variables affecting RFID range and
performance. Nearly all RFID systems used for warehouse, distribution
center and supply chain applications operate on one of three major
frequency families:
1) 13.56 MHz high frequency, common for short range (up to
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about 1 meter) reading;
2) 860-960 MHz UHF, which includes the well-known
EPCglobal Gen 2 standard and provides range of up to 20
feet;
3) 2.45 GHz microwave transmission, which is used in active
tags that provide long range reading, commonly used for
identifying cargo containers.
Of the three, UHF technology is by far the most common and best
suited for the majority of manufacturing and logistics needs. High
frequency (13.56 MHz) technology is widely used in other applications
and is a viable option for short-range applications. It is often promoted
for item-level tagging, such as for product authentication and retail
shelf management.
2.7.1 Frequencies - High Frequency
The high frequency, which some call intermediate, band encompasses
the 10 to 15MHz range, with 13.56MHz being the most common. Read
range with a fixed station reader is around 1 to 3 meters (3 to 10
feet), although the reading speed is higher than the low-frequency
band. Sizing of the antennas and tags becomes more critical. More
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expensive than low frequency, this band has the potential to become
more cost-competitive through volume purchase of tags.
Typical applications here include access control and smart cards. The
first "smart labels" which are RFID tags embedded within adhesive bar
code labels, were produced at 13.56MHz, but are now also available in
other frequencies.
2.7.2 Frequencies - Ultrahigh Frequency (UHF)
Ultrahigh-frequency RFID encompasses the 850 to 950MHz band and
is frequently championed for distribution and logistics applications. The
American National Standards Institute (ANSI) standard for RFID
identification of returnable transport items, which complements the
ANSI MH10.8 bar code shipping label standard, specifies the 902-
928MHz band for item identification.
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The ePC specification supported by Wal-Mart also utilizes the UHF
band. Read range, which as with all frequencies depends on tag size,
power output and interference, is up to 10 feet.
2.7.3 Frequencies - Microwave
Some RFID products are also produced in the microwave bandwidth,
typically at either 2.45GHz or 5.8GHz. These products offer the highest
data read rates, but are also more expensive and have higher power
requirements.
2.8 Read/Write Capabilities
When considering what RFID technology is right for your warehousing
or distribution application, it's important to understand the difference
between the various types of writing capabilities available. In general,
the more versatile, or the more stand alone a system is, the more
memory needed, which increases both the size and cost of the tag.
Read-only tags have fixed information securely programmed into them
when they are manufactured. Write once, read many (WORM) tags
may have data written to them once only post-manufacture and are
the most popular kind of tag currently used. Rewritable tags are the
most memory- and cost-intensive, but provide flexibility to update
data. Rewritable tags have a shorter writing range than reading range,
which must be considered when planning the application.
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Reading Characteristics
RFID’s suitability for use in industrial environments is just one of the
attributes that set it apart from bar code and other automatic
identification and data collection (AIDC) technologies. One of the most
significant is that no direct line of site is required between the tag and
reader to exchange data. This enables tags to be read if they’re not
perfectly aligned with the reader, and even to be read through
packaging material. Readers can also identify multiple tags
simultaneously. Organizations can take advantage of these attributes
to reduce labor requirements with automatically triggered reads and
unattended, high-speed reading processes.
RFID tags offer secure, rewritable memory, which can be used to
improve visibility, security and provide other advantages. Most RFID
tags are read/write, and many have memory that can be partitioned
so that some portions
can’t be changed (such
as a serial number)
while other portions
can be updated, with
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transaction histories, storage records, pedigree information or other
variable data.
Electronic Product Code (EPC) RFID technology provides a
standardized, unique serial number for each RFID tag. Many new
supply chain processes are emerging to take advantage of unique,
standardized and secure serialization that EPC provides. Another
characteristic of RFID technology that is useful for warehouse
operations is its read range.
Depending on the tag style, antenna design, frequency and other
variables, passive tags can be read from near contact to approximately
20 feet away. Active tags offer even longer range and are sometimes
used for yard management and container tracking applications.
2.9 Range and Sensitivity
Range can be an overvalued and misleading indicator of RFID system
performance. The control and sensitivity that antennas and readers
provide is often much more important than their range. Long read
range can increase the chances of unintended reads.
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In the case of warehouse operations, finely tuned directional reading
and control are more important than range to ensure only desired tags
are read, and are read only when desired.
RFID Technology for Warehouse and Distribution Operations Vehicle-
mounted RFID readers with high-performance antennas provide an
outstanding degree of reading control, which is a leading reason that
reading technique is being adopted rapidly.
2.10 RFID Systems
2.10.1 Low-end systems
These systems are classified as the bottom end of low-end systems.
What these systems do is to check and monitor if there is any
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transponder in the interrogation zone of the detection unit placed in
the reader by simple physical effects. Transponders that are read-only
and have a microchip are also classified as low-end systems. Such
transponders usually have a unique serial number encoded
permanently and consist of several bytes. The data flow is
unidirectional from the transponder to the reader when the
transponder is located in the HF field of a reader. Such systems have
one serious limitation: the reader cannot handle more than one
transponder at a time due to collisions that might take place when
several transponders start transmitting simultaneously, which results
in blocking the reader.
The advantages of read-only systems are that: they can operate at all
frequencies specified for RFID, transponders are cheap to manufacture
and chip area can be minimized due to the simple function of
transponder which lowers the power consumption that leads to very
high ranges.
If small amount of data is required for identification, then low-end
systems are the way to go. They can replace barcode systems for
example in the control of product flow, identification of animals,
containers, pallets and more.
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2.10.2 Mid-range systems
Such systems have a writable data memory that can vary in size from
a few bytes to 100 Kbytes EEPROM (for passive transponders) or
SRAM (for active transponders), that makes such systems very diverse
and popular.
Collision is prevented due to the transponder’s ability to perform
selective reading and writing when processing some simple commands
of the reader because of the state machine encoded. Such
transponders can even be selectively addressed by the readers. Mid-
range systems can operate at all RFID frequencies available, and it is
common to implement crypto logical procedures such as authentication
between the reader and transponder in those systems.
2.10.3 High-end systems
High-end systems consist of a smart card operating system together
with a microprocessor that makes it possible to use more complex
authentication and encryption algorithms. The top end of such systems
has dual interface smart cards (contact and contact less interface
available on the same chip) which have a cryptographic coprocessor.
The use of a coprocessor reduces radically the computing time, which
makes such contact less smart cards suitable for applications that
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require secure data transmission based on encryption, such as
ticketing systems for public transport or electronic purses.
The operation frequency is at 13.56 MHz.
2.11 Memory Capacity and Functionality
There are two main types of tag memory structure: Read Only and
Read/Write. Read Only is the term applied to a tag in which data is
written (or programmed) once during manufacturing, and afterwards
can only be read and but not changed or altered in any way.
Read/Write is the term applied to RFID tags that can be written (or
programmed) and can subsequently be rewritten and reread numerous
times.
There is a third field-programmable structure that is also of the
read/write variety. After having been programmed by the user, this
Write Once/Read Many (WORM) structure accords the user the ability
to lock the tag’s memory indefinitely.
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Read Only tags are typically passive and are programmed with a
unique set of data (usually 32 to 128 bits) that cannot be modified.
Read Only tags most often operate as a license plate in a database, in
the same way as linear barcodes reference a database containing
modifiable, product-specific information.
Constraints Related to RFID
When implementing RFID solutions it is necessary to recognize some
of the physical constraints of the technology. There are two areas that
should be considered and are particularly relevant to applications.
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Firstly, the presence of metals in the RFID reading environment and,
secondly, the placement of RFID tags relative to each other.
Communication between RFID readers and tags occurs via
electromagnetic waves operating in the Radio Frequency spectrum.
The communication is governed by the laws of physics related to RF
propagation. If metal is placed between the tag and reader,
communications can be broken, as metal is impervious to RF waves.
Care should particular be taken in environment when tagging items
with metal foil covers. Also, care should be taken to avoid tags being
placed flush.
Placement of currently deployed high frequency (HF) tags is a critical
factor affecting system performance. When tag placement in one item
directly overlays another placement and both items are in very close
proximity, readability is compromised. The antenna component of each
tag interacts and changes the radio frequency, making it difficult for
the RFID readers to communicate with the tag. This is analogous to
tuning your FM receiver just a little bit away from the channel you are
trying to receive, diminishing the quality of the reception. A way to
avoid this is the process of staggering tags in like items that are
shelved in close proximity.
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While RFID tags operate with high reliability and readability on most
items, there are still challenges in regards to some forms of media.
Size constraints and presence of metal are core issues to overcome.
These constraints apply equally to all applications of RFID
2.12 Standards
The International Organization for Standardization, best known by its
acronym ISO, has undertaken the most RFID standardization projects
and focuses on technical standards that are accepted globally.
One of its most important subcommittees is JTC 1/SC 31 Automatic
Identification and Data Capture Techniques, which is working on a
series of RFID standards for item management. ANSI, which
coordinates much of its work with the ISO is another important
standards body and has established an RFID standard for shipping
container identification.
The Automotive Industry Action Group (AIAG) and other industry
associations are also developing their own RFID standards, which are
often based on ANSI and ISO efforts.
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The Auto-ID Center at MIT led research to create a specification for
RFID for item-level tagging in the consumer goods industry, which it
calls the Electronic Product Code (ePC).The Auto-ID Center’s work has
since been transferred to a new entity, AutoID Inc., which was created
by the Uniform Code Council (UCC) and EAN International, which
maintain the U.P.C./EAN bar code system and many other standards.
Any technology needs standards to gain acceptance, and RFID is no
exception. Working to get standards in place can delay that procedure,
but too many conflicting standards can have the same consequence.
Such as in the case of the current situation regarding UHF, too many
standards can be the same as having no standard at all. Further
complicating the matter, there are technical standards, which specify
performance requirements for interoperability, and application
standards, often set by industry associations, that describe how RFID
can be used for a specific function.
AIM Global, the trade association for the automatic identification
industry, maintains an updated guide to current RFID standards
activity.
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2.13 Applications
Applications are constantly being developed and refined as the
technology advances and the supply chain industry continues to work
for the cradle-to-grave data flow that will streamline the product
pipeline. Because of the visibility it can provide, and its newfound cost
effectiveness, RFID is emerging as an intriguing option to complement
data collection and product identification in the supply chain.
Many hardware and software suppliers are just beginning to explore
how RFID technology can tie into warehouse management systems
(WMS) to produce a warehouse/DC of incredible efficiency. Several
WMS providers now support RFID data entry in their software.
Here are some potential RFID applications in warehousing and
distribution environments:
• Pallet and case tracking, particularly when the pallets are reused
within a closed system.
• Forklift identification. RFID can identify forklift location to allow
systems to monitor activity and assign the closest forklift to those
pallets needing moved, and serve as a permanent asset ID.
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• Access control: Chips embedded in ID cards can control locks and
prevent unauthorized entry; chips on products, cases, pallets and
equipment can control item movement and sound alarms in case of
unauthorized removal.
• Smart shelves: Retailers are experimenting with readers embedded
in stocked store shelves to keep track of tagged inventory and notify
either the back room or the supplier when stock is low. The
application could be modified for use in warehouses and distribution
centers for materials management and inventory control.
2.13.1 RFID in the Distribution Center
There are several possibilities for how RFID technology can be utilized
in warehouse and distribution center, in concert with existing systems
and other ADC technologies.
Step by step, here's one example of what could happen:
In receiving, items, cases and/or pallets are read by a portal reading
unit placed at the dock door as they are unloaded from the truck. Data
are transferred into the warehouse management system (WMS),
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updating its database. The system reconciles its orders and sends back
information that will allow some items to be cross docked for
immediate transport, while others can be staged and stored. If bar
codes were being used here, all received items would have to be
scanned, their labels clearly visible, by workers, making the process
much more labor-intensive.
When stored on shelves with readers, the readers automatically record
what items have been placed there; when they are removed, the
action is also automatically recorded. All of this happens without
human hands ever touching a scanner, keyboard or clipboard.
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If cases are broken up and items repacked, each item is reassigned to
a tagged case by scanning the item's bar code or RFID tag and the
case/pallet tag. That information transfer initiates an assignment of
the pallet or case to a truck or dock.
Cases/pallets are moved along conveyor belts, triggering readers
along the way that track the movement and also adjust conveyors as
needed to redirect the cases/pallets. Should there be a specific item
out there that is needed to fill an order, a worker can go through the
aisles, with a handheld reader loaded with the needed unique ID, until
the unit beeps, locating the needle in the haystack with keen
efficiency.
When cases/pallets are loaded back onto trucks, door-mounted units
again record the activity, updating the central database and also
initiating a sequence that produces documentation such as advance
shipping notices (ASNs), packing slips, invoices, etc.
2.13.2 Item-level tracking
Item-level tracking in supply chain applications has always been a
coveted thing. Having each and every item uniquely identified, instead
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of generally identified with, for example, a U.P.C. symbol- opens up a
whole new level of tracking management.
The Electronic Product Code, or ePC, being developed by the Auto-ID
Center at MIT (see sidebar/addendum) is the latest RFID technology
proposed for item-level tracking of consumer goods, and other RFID
technologies have also been considered for this application.
While the technology is still being developed and tested, there is much
speculation on what applications would be best to use the technology
with. The Auto-ID Center sees strong possibilities in warehousing for
pallet, case-level and item-level tracking as described in the
application section. Numerous studies and analysis by the Center and
leading independent consulting firms support this assertion, stating
that these types of applications can provide strong return on
investment (ROI) in most circumstances.
Some estimate that item-level tracking will not happen for some time,
up to 10 years. However, analysts say there are clear business
advantages in pursuing pallet- and case-level applications now. "RFID
projects yield the biggest immediate benefits when they support order
fulfillment and logistics," according to a report by Forrester Research
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Inc., Cambridge, Mass. "As such, most near-term RFID testing should
concentrate on pallets, cases, distribution centers and warehouses -
not items and store shelves."
RFID Technology for Warehouse and Distribution Operations
2.13.3 Application Planning Considerations
To design a successful system, you must not only understand what
you want the system to do (application), but you also must be very
clear about what technologies can be used to deliver the performance
you seek. When defining your perfect solution, it is important to ask
yourself often, "Am I adding this technology to do it better, or am I
simply adding technology?"
Reading hundreds of tags per second could easily overwhelm a
network or software application. Existing identification systems should
be retained where they are sufficient, with RFID used to complement
them or eliminate blind spots or bottlenecks in processes.
Part of application evaluation necessarily involves defining what the
technologies you are considering can and cannot do. Just like any
other technology, RFID has its limitations, and it's important to know
what they are.
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For example, RFID cannot read tags over great distances, though it
can certainly work in concert with technologies that can. Also, because
we are talking about radio waves, interference can be a problem, so
metal, liquid, and many tags in close proximity to one another or
varying orientations could affect performance. Though cost has come
down and will continue to decline, an RFID tag will always be more
expensive than a paper bar code label, and we doubt you will ever see
five cents per tag in low to medium volumes.
Finally, RFID tags cannot replace bar codes. But the two can work
together to provide you with an effective, streamlined, highly
productive warehouse and distribution management system.
2.13.4 Shipping
RFID can validate pallet loads and improve shipping accuracy even if it
isn’t used as part of the picking process. A pallet of RFID-tagged cases
can be identified through either an unattended portal reader or a
vehicle-mounted or handheld device.
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The order management system or WMS would match the read data
against the customer order to validate that no cases were missing and
that case quantities were correct. The read data could also be used to
trigger generation of a shipping label for the pallet (which itself may
include an RFID tag) and to provide information for an advance ship
notice (ASN). A scan at the shipping dock can be used to update
information in logistics applications and to record the goods out of
inventory.
Lastly, RFID can even be used to validate the trailer if equipped with
an RFID tag.
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3. Research methodology
There are two main techniques for collection of data which are:
 Primary data
 Secondary data.
Primary sources are those data which are unpublished and is gathered
directly from the people or organization, whereas secondary sources
refer to any materials which have been previously published.
3.1 Primary Data
Data that has been collected for the first time by the researcher are
defined as primary data. Primary data consists of:
 Interviews
 Observations
 questionnaires
 experiments.
Throughout this study have observations and interviews been used to
gather data.
3.1.1 Interviews
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Interviews are according to different ways of questioning by personal
contacts or via telephones, email and text messages. There are a
number of different ways to execute an interview.
By using a structured interview all questions are decided in advance. A
semi structure interview has a decided subject but the questions are
formulated during the interview. By using an unstructured interview
the interview become more as a conversation between the
interviewees and the interviewer. The interviews can be executed
toward one person or a group.
Interviews with
employees (the head,
project coordination,
buyers and other
knowledgeable persons)
have been very helpful
since it is very important
to receive correct
information. The interviews consisted of both discussions to obtain as
much helpful information as possible and semi structured interviews.
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The benefit of having interviewing the employees at Procurement and
Supply is that they know about their processes, where the shortages
are located and what is needed to be addressed. Instead of acquiring
quantitative information a concentration of gathering qualitative
information through these interviews is done. It is vital that the
collected information is right and trustworthy so that a reliable thesis
can be carried out. Both unstructured and semi-structured interview
has been carried out. The unstructured is used in advance when
interviewing the buyers in order to get a dialog where the most
trustworthy information is shared. Primary semi-structured interviews
are held with the project coordinator and the head of Procurement and
Supply to keep track on important issues.
3.1.2 Observation
Observations can be executed in different ways. The observer can
either participate in the researched activity or observe by watching
from distance. The observation can be planned or can take place
without the observed knows about it. As being a part of some work
shops observations could take place. The benefit of having the time
and opportunity to do observations is that a personal opinion can be
formed which will be a good complement to the interviews and the
reliability increases. Throughout this study an open mind is held due to
be able to present an objective study.
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Due to the authors role several observations could be carried out
successfully. By working close to both the buyers and other
knowledgeable personal observations will be contributed to an insight
on how different aspects can affect each other.
3.2 Secondary Data
The secondary data consists of various documentation. It is essential
to use secondary data in order to get a wider sight. For a researcher it
is important to see what other researcher has done and their results
within the research field.
3.2.1 Literature Study
A literature study consists of researches from books, brochures or
magazines. The literature study is based on the purpose of this report,
which is to extend a method for
implementation of systems that suits
the department of Procurement and
Supply.
To fulfill the purpose, I need to find
some background information about
systems in general, its benefits and the
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risks that implementations of systems bring. The benefit of making an
extensive literature study is to find out what the theory claims about
the topics in focus.
The disadvantage however, is that it is hard to find theoretical studies
that suit the company’s unique existence. Consequently, assumptions
and adjustments had to be made.
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4. Conclusion
It is imperative to remain open to new technologies and the
improvements they can offer business. RFID is one useful tool to keep
in mind for current and future system design.
RFID can often reduce or eliminate manual labor requirements, which
provides direct cost savings and often improves accuracy, which
produces other benefits.
Many common warehouse and distribution center activities provide a
strong opportunity to generate positive return on investment (ROI)
from an RFID system. However, companies typically don’t implement
comprehensive, end-to-end RFID systems. Rather, they selectively
apply the technology to improve specific processes that are labor
intensive or prone to creating delays or inaccuracies.
By starting with a flexible RFID infrastructure, the investment can be
leveraged and ROI improved by encompassing additional applications.
Because RFID operations may evolve or expand, mobile readers are
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often advantageous to fixed-position models because they can be used
for multiple applications.
As applications grow, so does inventory visibility, which ultimately
leads to lower inventory levels and more efficient supply chain
operations.
Finding the relevant information has been surprisingly difficult, which
would be a severe problem for a prospective customer evaluating what
is on the market. It has been easier to find information about building
kits than a complete locking system.
It is hard to find information in the standard because it must be paid
before you can see it, which is both expensive and time consuming.
Also you do not know if it contains the right type of information before
you pay! It has been very difficult finding information regarding
security in door locks that use active RFID.
On the other hand plenty of information is available for systems using
RFID tags because tags are very cheap and their use is increasing
dramatically.
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There are also obvious problems that are not treated at all. For
example most of the locking solutions are battery driven to ensure
availability even when electricity is down, but the risk of low battery is
a fact.
The drop in prices of powerful and cheap computers make attacks
easier to carry out, besides even finding relevant information about
attacks and relevant kits to apply such attacks is not a problem at all.
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5. Necessary future improvements
The following improvements are regarded as necessary to achieve a
reasonable level of security for RFID-based technology.
• The Use of 128-bit standard encryption algorithms to increase
security and make attacks such as reversed engineering very
hard to carry out.
• Implementing a kind of watch dog that monitors the amount of
unsuccessful challenges and from a certain sender and warn the
owner in case a number of different challenges were
unsuccessful, log the time and date and lock permanently until
certain measure is made, but the availability might be affected.
• Make electricity as the main source of power to the locks and
use battery as a backup for sudden loss of electricity to increase
availability.
• Use true random number generators not deterministic.
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• Use more sophisticated algorithms that are known to be strong.
• Use hardware solutions in both the transmitter and the receiver
instead of using EEPROM with write protected algorithm in.
• It is important to point out that the use of longer keys, more
sophisticated algorithms and true random number generator
might raise some problems that have to be dealt with, such as:
longer system response time, more power consumption due to
higher computation complexity (shorter battery life), an
increased chip area (hard to place in small devices) and more
expensive chips to produce.
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6.Reference/Bibliography
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An impact of RFID Technology in Warehouse and Supply

The purpose with this section is to present the problem area.

Intially,an introduction and a background is provided in order to

motivate the importance of the subject. Next, the problem definition is

included, which will result in a formulation of the research problem.

In most parts of the world pharma organizations are driven by daily

operations throughtout the industry, most of the times with relying on

increasing costs, decreasing revenues, and dissatisfy customers while

customer satisfaction is the main job.

Customer relationship with requiring to customer-centric bussiness

philosophy and cultural to support effective marketing, sale, making

most bussiness especially for pharmasuetical distribution

Technology implementation can bring a lot of benefits such as

customer satisfaction, increaseing revenues, decreasing in cost that all

these benefits for a firm can be a source of sustainable competitive

1.1 Problem definition

In today word pharma has exapanded to such extent that it is now

claimed to be one of the wold’s largest industry, with high rate of

employee, and bringing a lot of revenue for countries. On the other

hand the increased online proce/products transperency and the new e-

bussiness models (e.g online auctions) enhances customer’s

More recently, the continuous movement towards globalization has

made information process one of the most important factors in

achieving success as well as in seeking new markets,improving quality

and providing better and faster customer service.

Service at the organizational level is affected by the level of

competition, which leads other organization to step up the

development of their service. Increaed level of service, however does

not imply increase profitability. Competitions may results in lower

prices, thus eriding improvements in margins.

1.2 Research Purpose

Nowadays, there are strong competitions among corporations which

serve the communication services. Therefore they not employ

information technologies through the organizational levels to improve

customer needs. Rapid process of information and employing

automation system through the organizational levels in recent years

cause firms to access to the update information and knowledge easily

Base on the title and subject of the research: An impact of RFID

technology in warehouse and supply chain management, main

objecives are as follows:

• To understand the impact of RFID on warehouse and supply

from cost effective view. In a broader point of view, it is a cost

reduction procedure that can have an impact on the economies

of the company directly and on other departments indirectly

• Document and analyze the information from handling flow of

• Propose improvements to the processes in order to achieve

improved delivery accuracy.

• Determining the effect of implementation of RFID technology.

• Suggesting useful and practical solution that could be used in the

• Determining the effect of customer needs and meet their needs

via giving more and more servicing using technology.

• Forecasting the result of applying RFID technology on increasing

revenue and decreasing cost.

1.3 Research Questions

To reach above purposes the following research questions emerges:

1. How pharmaceutical distributors can implement an effective

2. What is the influence of implementing of RFID technology on

customer satisfaction, loyalty and retention.

• The research will only focus on small organization with less

than 10 actors. This is because big organization and small

organization may differ a lot for each other structurally and

• The main focus in this research is to study how the RFID