Radio Frequency Identification (RFID) In Supply Chain

Introduction:
Tracking has always been a challenge at all stages of Supply Chain. Manufacturers came up with various technologies to overcome this challenge which included Bar codes, Automated Storage devices and so on. In recent past, RFID has become a new avenue where manufacturers can depend up on the accuracy of tracking, thereby, ensuring elimination on losses by theft, misplacement or unaccountability. Some manufacturers seem to be reluctant to adopt new technologies for various reasons. They still believe that manual stocktaking is the correct and dependable way of managing inventory. However, some of the reasons may also include, a) The cost of the technology, b) The frequency of usage of the technology, c) Over dependence on old techniques, d) Mental blocks of entrepreneur, e) Lack of awareness of this technology and its benefits (However, awareness has started growing5.) f) Lack of acceptability of the new technology in Supply chain. g) Varied views due to partial knowledge of the technology and so on. Imagine, you are a producer of any musical instrument, and you manufacture not more than 10 pieces every week. In such a case, it is very easy to count the number of items in the stores so as to manage inventory. However, if you consider yourself to be an Airline company, then managing baggage becomes impossible without help of RFID. Worldwide, RFID will definitely be the part and parcel of Supply Chain and sooner the manufacturers adopt the technology, better will be the benefits.

What is RFID?
RFID (Radio Frequency Identification) technology is an emerging technology which can improve the overall Management of the Supply chain. The RFID is a tag and reader based technology where the tag responds to the radio signal transmitted by the reader, once it is in the range of the frequency transmitted by the reader. RFID does not require a line of sight for identifying products. The only thing it needs is that every tag must respond to the signal transmitted by the transmitter. RFID systems include tags, readers and software to process the data. The reader sends a radio signal that is received by all tags present in the Radio Frequency field tuned to that frequency. Tags receive
Ravi Phadke, Asst. Professor at Sinhgad Institute of Management & Computer Application , (Email: raviphadke@simca.ac.in)

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the signal via their antennas and respond by transmitting their stored data. The tag can hold many types of data, including a serial number, configuration instructions, activity history (e.g., date of last maintenance, when the tag passed a specific location, etc.), or even temperature and other data provided by sensors. The read/write device receives the tag signal via its antenna, decodes it and transfers the data to the computer system through a cable or wireless connection4. This technology provides a means of tracking the inventory from the supplier, through the distribution network to the point of consumption. Some of the costs which are involved in installing an RFID application into an organization include cost of readers, Radio Frequency Infrastructure, Software and consulting cost, tagging cost, maintenance costs, etc. The recent advancement in manufacturing technology has resulted in reduced cost of some of the tags (Passive Tags) which are commercially viable1.

Researchers Perspective towards Adoption of RFID by Industry

Western countries including USA and European Countries, also underutilize their competency in RFID. Only 35% of Manufacturers in USA and 15% of manufacturers in European countries use RFID in their Supply chains. There are only a few companies in India, who have actually unlocked the Value of RFID. The most important reason for non-adoption of this technology can be unawareness of the technology3. Johann Riedel, Kulwant S. Pawar, Stefano Torroni, Emilio Ferrari in their research finds that though the level of awareness in UK is 81%, still it doesnt correspond to the adoption rate of only 17%. Hence, they have found that unawareness is not the only reason for non-adoption of RFID technology, but Cost, lack of practical knowledge about application, difficulty of demonstrating ROI and difficulty of attaching tags were the major barriers to adoption, followed by technological issues (integration, reliability, lack of standards)3. RFID, though has not been used extensively, has been showing best performance in the companies wherever it has been installed. It has helped in reducing various costs such as Labour cost, Cost of Goods lost by theft and misplacement, Loss on account of unaccounted inventory, and some more costs. As a new information capture technology, RFID has fascinated the world of Supply Chain Management. Wal-Mart has over 1000 products on their shelves and maintaining optimal inventory levels is essential to their business. One of the reasons why they are able to keep costs so low is because of their high inventory turnover which is made possible by maintaining particular inventory levels. A physical count for a company with as many products as Wal-Mart is out of the question. Wal-Mart employs RFID tags in order to keep track of their inventory2.

Ravi Phadke, Asst. Professor at Sinhgad Institute of Management & Computer Application , (Email: raviphadke@simca.ac.in)

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Why to adopt RFID:

1. Real time, accurate operational data monitoring. 2. Elimination of Lag times. 3. Elimination on losses by theft, misplacement. 4. Elimination of Unaccountability of Inventory. 5. Accuracy in tracking the inventory. 6. Reduced time for counting and managing inventory.

RFID Today:
RFID has not only remained in Supply Chain, but RFID, today, has lot of applications. RFID is extensively used in Retail to keep track of variety of inventories; in Hospitals to keep up to date information about the patients and their medical history; on Toll booths, where vehicles do not have to stop to pay the toll charges, but the Tag responds to the antenna set up on the toll booth and the amount is directly debited to the bank account, and so on. RFID has proved its potential at every point wherever it is implemented, and it will definitely be one of the tool to eliminate waste and increase productivity.

Referances:
1. Examining RFID applications in Supply Chain Management, Fried Niederman, Richard G Mathieu, Roger Morley and Ik-Whan Kwon, Communications of the ACM, July 2007 Vol.50, No.7 Page93. 2. http://www.inventorymanagementreview.org/rfid/ published as on June 15th, 2005. 3. A Survey of RFID Awareness and use in the UK Logistics Industry, Johann Riedel, Kulwant S. Pawar, Stefano Torroni, Emilio Ferrari, H.-D. Haasis et al., Dynamics in Logistics, DOI: 10.1007/978-3-540-76862-3, Springer 2008, page no. 105. 4. Supply Chain RFID: How It Works And Why It Pays White paper, 2007 Intermec Technologies Corporation 611469-01D 02/07. 5. The March of RFID in Asia RFID Focus Journal, October - December 2005

Ravi Phadke, Asst. Professor at Sinhgad Institute of Management & Computer Application , (Email: raviphadke@simca.ac.in)

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