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A Synopsis On

Impact of RFID in inventory management

Submitted towards the PARTIAL FULFILLMENT Post-Graduate Diploma in Management(Approved by AICTE, Government of India-Equivalent to MBA) ACADEMIC SESSION 2010-2012

Under Guidance of: Dr. Akhilesh Kumar Director IMS Ghaziabad

Submitted by: Ashutosh Kumar Jha BM-010039 SEC-A



Radio-frequency identification (RFID) is a technology that uses radio waves to transfer data from an electronic tag, called RFID tag or label, attached to an object, through a reader for the purpose of identifying and tracking the object. Some RFID tags can be read from several meters away and beyond the line of sight of the reader. The application of bulk reading enables an almost-parallel reading of tags. The tag's information is stored electronically. The RFID tag includes a small RF transmitter and receiver. An RFID reader transmits an encoded radio signal to interrogate the tag. The tag receives the message and responds with its identification information. Many RFID tags do not use a battery. Instead, the tag uses the radio energy transmitted by the reader as its energy source. The RFID system design includes a method of discriminating several tags that might be within the range of the RFID reader. A number of organizations have set standards for RFID, including the International Organization for Standardization (ISO), the International Electrotechnical Commission (IEC), ASTM International, the DASH7 Alliance and EPCglobal. There are also several specific industries that have set guidelines including the Financial Services Technology Consortium (FSTC) has set a standard for tracking IT Assets with RFID, the Computer Technology Industry Association CompTIA has set a standard for certifying RFID engineers and the International Airlines Transport Association IATA set tagging guidelines for luggage in airports. RFID can be used in many applications. A tag can be affixed to any object and used to track and manage inventory, assets, people, etc. For example, it can be affixed to cars, computer equipment, books, mobile phones, etc. The Healthcare industry has used RFID to reduce counting, looking for things and auditing items. Many financial institutions use RFID to track key assets and automate compliance. Also with recent advances in social media RFID is being used to tie the physical world with the virtual world. RFID in Social Media first came to light in 2010 with Facebook's annual conference. RFID is a superior and more efficient way of identifying objects than manual system

or use of bar code systems. Furthermore, passive RFID tags (those without a battery) can be read if passed within close enough proximity to an RFID reader. It is not necessary to "show" the tag to the reader device, as with a bar code. In other words it does not require line of sight to "see" an RFID tag, the tag can be read inside a case, carton, box or other container, and unlike barcodes RFID tags can be read hundreds at a time. Bar codes can only be read one at a time A basic RFID system consists of three components:

An antenna or coil A transceiver (with decoder) A transponder (RF tag) electronically programmed with unique information

The antenna emits radio signals to activate the tag and to read and write data to it. The reader emits radio waves in ranges of anywhere from one inch to 100 feet or more, depending upon its power output and the radio frequency used. When an RFID tag passes through the electromagnetic zone, it detects the reader's activation signal.

The reader decodes the data encoded in the tag's integrated circuit (silicon chip) and the data is passed to the host computer for processing.

Current and Potential Uses of RFID

Inventory monitoring and asset visibility In a replenishment-based system, whenever the total inventory at a warehouse or distribution center drops below a certain level, the RFID enabled system could place an automatic order. RFID-tagged products will allow stores to track the location and count of inventories in real time. This will better monitor demand for certain products and place orders to prevent an out-of-stock situation. PoS Data RFID technology at the point-of-sale (PoS) can be used to monitor demand trends or to build a probabilistic pattern of demand. This application could be useful for apparel industry or products exhibiting high levels of dynamism in trends. Reduced Bullwhip effect Exaggeration of demand in upward direction in a supply chain network is termed as Bullwhip effect. Due to tracking limitations of conventional systems it may not be possible to get accurate information on actual sales of items If RFID systems are used for information collection, accurate and real time information on product sale can be captured and used for decision making. This will definitely help to reduce overall bullwhip effect. Lead-time Reduction Conventional systems limit tracking of items while being transported. RFID Systems gives a total visibility of product movement in the supply chain. This may help to make early decisions about inventory control in case there is any interruption in the supply. It partially or completely eliminates time and effort required for counting while loading/unloading the items. This results into reduction of total lead-time for arrival of an order. Pharmaceutical industry, perishable product industry could use RFID systems for reducing lead-times that will help to increase total useful shelf life of items.

RFID for Inventory control Improves sort/pick rate In a warehouse, sorting/picking activity is more time consuming and subjected to errors. RFID systems ease the sorting and picking operations, as it captures real- time, accurate information about product availability in host computer database without physical movement. RFID tags are read via radio frequencies therefore it is not mandatory to place the items in a particular position to read it. This could be helpful for effective warehouse management. Reduced inventory shrinkage As items are continuously monitored, Inventory shrinkages including thefts, misplacement of items can be avoided using RFID technology. Issuing policies RFID systems give exact count and location of items. This will help to follow a certain issuing policies for items as per the requirements. E.g.: First-in-first-out (FIFO) policy for items such as, vegetables, bread; or last-in-first-out (LIFO) for blood banks. Perishable inventory control A perishable product has limited useful life and if it is not handled properly while transporting, it may get spoiled and its useful life reduces. If this reduced life information of items is not updated, then it may be possible that an outdated item gets

delivered to a customer. In such a case, there may be an additional cost of replacement of item and also loss of goodwill of customer. Such spoilage could be reduced simultaneously with automating inventory management, by using RFID technology for product identification, while it moves through the supply chain. RFID system can track the items in real time without product movement, scanning or human involvement. Using active RFID tags it can be possible to update information on it dynamically. Maintaining Warehouses Many warehousing processes can be automated such as, receiving, picking, and ordering. Various enterprise applications, for example ERP packages, can be configured and linked to RFID technology for direct and on-line collection of data. It could be possible to combine RFID and Bar coding technology for tracking of items to take competitive advantages of both the technologies. Supply the among supply chain Chain within supply a Management company's chain control for years. partners.

RFID technology has been used in closed loop supply chains or to automate parts of As standards emerge, companies are increasingly turning to RFID to track shipments

A literature review on the impact of RFID technologies on supply chain management RFID technologies offer several contributions to supply chain through their advanced properties such as unique identification of products, easiness of communication and real information. the time Thus, of the

RFID can improve traceability and products

visibility throughout


entire supply chain, and also can make reliable and speed up tracking, shipping, checkout and count- ing processes, which leads to improved inventory flows and more accurate information (Chow et al., Tajima). Leung et al. [69] present the benefits if RFID as in Figure in three main groups; revenue, operating margin, capital efficiency.

Figure : RFID benefits tree

The objective of RFID implementation is not just to improve current systems. Reorganizing processes using this new technology can also lead to large gains in the overall supply chain effectiveness (McFarlane et al. [75], Agarwal [1], Langer et al. [63]). Bottani and Rizzi [13] conclude that reengineering models highlight possible benefits gained through RFID for all processes of distribution centers and retailers. In 2005, Wal- Mart asked their 100 first suppliers to tag all their pallets and cases [115], [70], [118]. Through this innovative attempt, Wal-Mart provided a considerable acceleration to RFID implementations in supply chains. According to the analysis of the University of Arkansas, Wal-Mart succeeded in adopting the RFID technology and reduced out- of-stocks by 16% [13]. Roberti [89] shows that out-of-

stock items with RFID were replenished three times faster than items using standard barcode technology. He also concludes that Wal-Mart experienced a 10% reduction in manual orders resulting in a reduction of excess inventory. Mark & Spencer is also employing RFID technologies in its refrigerated food supply chain. Wamba et al. [113] report that they are tracking 3.5 million reusable trays, dollies and cages using RFID, and about 70% of the products are perishable in this chain. Wilding and Delgado [116] show that, through RFID technologies, Mark & Spencer gained 83% reduction in reading time for each tagged dolly, 15% reduction in shrinkage, a reduction in lead time and also an improvement of inventory management. Simulation studies on the impact of RFID technologies on supply chains Simulation methods are developed in order to observe the dynamic behavior of a system and to optimize its perfor- mances. One of the first simulations on supply chain is performed by Krajewski et al. (1987). They analyze the factors of the inventory management performance through an MRP based production simulation. Inventory level, per- centage of late orders are some of these performance factors. Brown et al. (2001) also simulated an MRP environment in order to analyze the impact of inventory inaccuracy. They showed that the frequency of errors (the number of time periods of inaccuracy) is the main supply chain performance factor, followed by the magnitude (the percentage of in- accuracy) and the location of errors (the processes where inaccuracy occurs). Joshi (2000) simulates a simple supply chain in order to evaluate the value of information visibility in the supply chain through RFID. He focused on the bullwhip effect. He tested different scenarios by varying the degree of in- formation visibility and supply chain actors collaboration through RFID technologies. The results showed that, in supply chains, information visibility and actors collabora- tion can provide 40-70% reduction in inventory cost. He also concluded that the reduction in lost sales by timely deliveries or orders, real-time traceability and more con- fidential supply chain management improve the customer service. Several authors used simulations in order to analyze the impact of RFID technologies on inventory inaccuracy due to shrinkage errors. Kang and Koh (2002) simulate a

retailer inventory system with an automatic reorder point replenishment policy and random demand. They showed that a 2.5% increase of shrinkage can augment stockout rate by about 50%. He also concluded that the indirect cost of stock-outs due to uncounted shrinkage errors is 30 times greater than the direct cost of shrinkage errors. Kang and Gershwin (2004) simulate a single-item inventory model with a periodic review system under a (Q, R) policy. They observed that even a 1% of shrinkage error can cause an out-of-stock level of 17% of the total lost demand, and that 2.4% of shrinkage error can increase this value up to 50%. They also examined and analyzed several inventory management methods, in order to eliminate inaccuracy, such as safety stock, manual inventory verification, manual reset of the inventory record, constant decrement of the inventory record and Auto-ID technologies. Lee et al. (2004) perform a quantitative simulation under a reorder point and order-up- to level inventory replenishment policy (s,S). They compare different models with or without RFID, with different values of s and S. The results show that RFID implementation can reduce the distribution center inventory level by 23%, eliminate completely backorders and also that RFID can provide a reduction in order quantity that can reduce the distribution center inventory level by up to 47%. Fleisch and Tellkamp (2005) simulate a one-product three-level supply chain. They detail shrinkage errors as low process quality, theft, and items becoming unavailable for sale. They compared two models with and without an inventory level alignment. The results showed that the elimination of inventory inaccuracy, even a small initial level as 2%, can reduce out of stock level and supply chain costs. Basinger (2006) develop a simulation model for a single-item three- level supply chain. He believes the main factors of inventory inaccuracy are the order policy, stock-out/backlog policy, theft and supply chain synchronization. His results showed that the stock-out/backlog policy is the dominant factor, followed by the order policy. He concluded that physical inventory counting is a current, frequently used method to align physical and information system inventory levels while RFID is a new method that can facilitate this alignment. Leung et al. (2007) simulate a three-echelon supply chain under the (s,S) replenishment policy. Three scenarios were tested. In the first scenario, RFID technology does not exist. Physical inventory counting is done in the store once every three months. In the second scenario, RFID is integrated in order to provide inventory accuracy in real time and better replenishment decisions. They considered that RFID technology provides 100% accurate inventory levels. The results show that the back-order

quantity decreases by 1%, the average inventory level increases by 20% and the fluctuation of the inventory is much smaller in the second scenario. In the third scenario, they decrease the reorder point and order-up-to level inventory, respectively from 36 to 26 and from 48 to 38. The results show that the back- order quantity becomes 22% lower from the first scenario, and the average inventory level is reduced by 16%. The Impact of RFID on Supply Chain Imagine youre at the grocery store the week before Thanksgiving and many of the items youre looking for are sold out. The employees restocking the shelves cant keep up with consumer demand. To make matters worse, you arrive at the checkout counter and every line is long. A new automated data collection (auto-ID) system may be able to help stores work out these kinks. Radio frequency identification, or RFID, has the potential to revolutionize the way business is conducted. Consisting of three parts, a chip, a reader, and a database, RFID can automatically identify people and objects by a 100-digit tag and track them through the supply chain. As they move through the process, RFID readers collect information on the products and match their tag numbers to a central database, which provides access to all information regarding the product. Because of those abilities, RFID technology can provide unprecedented speed and accuracy in a supply chain, says Smeals Dennis Lin, University Distinguished Professor of Statistics and Supply Chain Management, and coauthor Vijay Wadhwa, former Ph.D student in the Department of Industrial and Manufacturing Engineering at Penn State, in their article, Efficiency Gets a New Identity, published in American Society for Qualitys Quality Progress. Implementing RFID technology could increase a companys efficiency and productivity when conducting business on both a national and global scale. RFID in Retail There are two types of RFID tags: passive and active. The passive type, which Lin studies, works with little to no energy. The active type can use either radio waves or satellite signals to track products.

Wal-Mart is currently experimenting with passive RFID tags to help its stores meet high consumer demand. This auto-ID technology aims to reduce the likelihood of empty shelves by obtaining real-time product information. Items with RFID tags have different identification numbers. It takes the RFID reader, which can read products within a 15-foot radius, about a second to retrieve information from the tags. Then, that information is sent to a database, which provides real-time inventory reports to help stores manage inventory and replenish shelves. RFID can provide several other advantages that cannot be achieved easily using a barcode system: faster product check out, theft reduction, dynamic pricing of products and tracking employees for labor efficiency, say the authors. But those advantages come at a price. RFID tags are more expensive than barcodes, which are the most commonly used forms of auto-ID, and have a greater impact on a companys bottom line.

RFID in Warehouses and Manufacturing Like retail, the cost of implementing RFID technology in a warehouse setting could be an issue. According to the authors, it is estimated that an RFID-enabled warehouse would cost in excess of $2 million. Nonetheless, this technology would be very useful. The warehouse is an important supply chain entity because it acts as a buffer to minimize the effects of variability in the supply chain and serve customers in a timely fashion during peaks in demand, the authors write. If RFID technology was used in a warehouse, shipments could be received automatically, barcodes would no longer need to be scanned before storing the products, and picking and shipping the products would be easier. The advantages of implementing RFID in a warehouse setting are very similar to those in a manufacturing environment, except that, in manufacturing, there is the

potential to improve product lifecycle management, quality control, and inventory management. As a result, manufacturers can improve visibility and lower the overall inventory levels, labor costs and safety stocks, write the authors.

The corporate impact of real-time inventory tracking What do cows, runners in the Boston Marathon, and designer clothes from United Colors of Benetton have in common? They're all being tracked with a 10-year-old technology called Radio Frequency Identification (RFID) that will dramatically revolutionize supply chain management for corporations over the next three years. With large retail chains such as Wal-Mart requiring major suppliers to support RFID technology by January 2005, many corporations will spend the next 12 to 18 months trying to figure out how to implement systems that allow them to use RFID technology to track their products from manufacturing through major distributors. I'll examine the origins of the RFID boom and discuss the systems implications for which CIOs should begin their planning now. Radio waves of the future RFID technology has many uses beyond the simple tracking of animals, people, and merchandise. RFID tags include smart memory and a radio transmitter. RFID receivers collect this information and identify the item based on the information stored in memory on the tag. Unlike bar codes that require the reader to be able to "see" a specific set of bars on the item, RFID readers can collect the information from certain distances, depending on the frequency of the transmitter. Low-frequency RFID transmitters require the reader to be within 1 foot. High-frequency transmitters emit a signal that readers can acquire within 3 feet of the item. And Ultrahigh Frequency (UHF) tags have a range between 10 and 20 feet. Major retailers such as Wal-Mart and Target are in the midst of pilots designed to test the UHF RFID technology as a replacement for their existing bar code systems.

Developing standards Early adopters of RFID have all used their own proprietary implementations. But for the technology to prosper, it will be necessary for companies to agree on standard implementations of RFID. The Auto-ID Center, a consortium of vendors and customers interested in spurring adoption of RFID, is implementing a standard called the Electronic Product Code (EPC), which will make RFID easier to adopt and support for supply chain applications. Some of its members are already making huge commitments to the technology. For example, Gillette has committed to a 500-million tag purchase for its upcoming pilots and market rollouts, and United Colors of Benetton placed an order for 1.5-million tags for use in item tracking in its retail stores. The EPC technology is designed to replace the bar code as a unique identifier for an item and can carry more information about the item than a bar code.

Future benefits and applications Consider almost any scenario in your organization where you need to use a bar code to track items that you send or receive, and you'll immediately realize the benefit of RFID tags over standard bar codes. The reduction in labor and simplification of automated tracking systems alone could justify the cost of an RFID implementation. But price is still the biggest barrier to adoption of RFID. With a current price of 50 cents per tag, the cost of tracking anything other than high-ticket, low-volume items is prohibitive. But the three major RFID manufacturers have all set their sights on delivering RFID tags for about 5 cents by mid-2004. At that price, manufacturers will begin slapping RFID tags on every pallet and case that leaves their warehouses. And smart distributors and retailers will take advantage of RFID for new and innovative inventory and supply chain applications.

One retailer is already experimenting with inventory control using RFID tags. By placing RFID readers on its store shelves, the retailer can identify low stock items, analyze traffic and purchase patterns, and identify potential theft of its products. In the near future, RFID readers at the checkout lanes will allow store personnel or the customer to simply move the products near the reader and have an accurate invoice

without having to "scan" all of the items individually.

Barriers to adoption New systems like these will have to be developed to handle the massive amount of new data points that can be collected, stored, and analyzed based on the flow of RFID-tagged items through a system. Over the next two years, developers will have to design new warehouse and inventory management systems to take advantage of the real-time nature of RFID tag information. And management will have to design, adopt, and implement policies that protect the privacy of individuals who purchase or consume their products. Matching the RFID tag information to individual identification mechanisms like charge cards and frequent buyer cards both maximizes the marketing opportunities for companies and creates a potential privacy policy nightmare. Nonetheless, you should consider doing your own RFID pilot in the next 18 months so that you're prepared when the adoption tidal wave hits in late 2004 or early 2005.

Wal-Mart-Commissioned Study Shows RFID Improves Store Inventory Accuracy March 13, 2008A new research study commissioned by Wal-Mart underscores RFID's positive role in improving inventory accuracy at retail stores. The goal of the study was to examine the store-level influence of RFID on perpetual inventory (PI). PI is an inventory management system's continuously updated calculation of on-hand inventory (which is typically determined by manually counting the items).

The research study was first announced in October 2007 by Carolyn Walton, WalMart's VP of information technology, as one of three initiatives the retailer was carrying out as part of a "change of focus" in its RFID program (see Wal-Mart, Sam's Club Push RFID Further Along). The research was conducted by the RFID Research Center, part of the University of Arkansas' Information Technology Research Institute (ITRI). The RFID Research Center was created to provide research designed to

investigate the business value of RF technologies (see University Opens RFID Research Center). A resulting white paper, entitled "Does RFID Improve Inventory Accuracy? A Preliminary Analysis," is available from ITRI's Web site (click here and enter the term RFID in the keyword field.)

The study involved RFID systems, including a new PI inventory adjustment tool, in eight Wal-Mart stores, and was conducted to investigate the impact of RFID on inventory accuracy. The eight test stores have RFID interrogators and antennas installed at various backroom locations, such as receiving docks, doors between stockrooms and sales floors, and box crushers where empty cases are discarded. The PI inventory adjustment tool was basically a software system that used business rules to adjust PI by analyzing the automated inventory counts collected by the RFID readers and antennas, as well as from point-of-sale terminals.

Eight Wal-Mart stores without RFID systems served as a control group during the study. To establish a baseline for PI accuracy, inventory was counted for 10 weeks before the PI inventory adjustment tool was activated in the test stores.

There are two types of PI errors: Overstated PI occurs when the system indicates more inventory is on hand than is actually in the store; understated PI occurs when PI levels recorded in the system are less than the actual quantity on site. Overstated PI is typically caused by such scenarios as theft and cashier errors, while understated PI is often the result of such things as manual adjustments, errors when processing returns or sales, and incorrect shipments from a distribution center (DC) or vendor.

For this study, only understated PI was investigated. For the purpose of analysis, researchers divided PI accuracy into three categories: perfect, meaning the PI matches the actual inventory on hand; close, defined as the PI being within two units (cases) of on-hand inventory; and inaccurate, i.e., the PI is off by more than two units.

Benefits of RFID-Enabled Supply Chain Supply chain management objective is to increase the long-term performance of individual companies and the overall supply chain by maximizing customer value and minimizing costs. Not all companies achieve these goals with the same strategy. A supply chain is either agile or lean and given this, a different approach to increase the efficiency and effectiveness is adopted. Companies such as Wal-Mart and Dell have gained efficiencies by having a clear understanding and a tight commitment to deliver customer value by maximizing not only the value provided by their companies but also aligning their partner's interest to create unique supply chains. Information systems are the backbone of every supply chain and they are based on automatic data acquisition techniques to meet the goal of collecting information. RFID is a technology with unique characteristics that make it suitable to enhance data collection processes along the supply chain. EPC Global, the standards body sets the standards for how basic product information is encoded in the RFID chips. The vision that drives the developments of standards is the universal unique identification of individual items. The unique number, called EPC (electronic product code) is encoded in a Radio Frequency Identification (RFID) tag. There are three types of RFID tags, all of which can either be read-write or read only. Passive Tags - simply store data and draw power from a reader whose electromagnetic wave induces a current in the tags antenna for short-range communication (up to 10 m). Semi-passive Tags - use an integral battery to run the chips circuitry but draw power from the reader to communicate. Active Tags - are capable of communicating over greater distances (up to 100m) but are currently far more expensive. The EPC Network also capture and make available (via Internet and for authorized requests) other information that pertains to a given item to authorized requestors. The benefit of an EPC code is primarily derived from the ability to automatically pin-

point the exact location of goods and documents anywhere within an extended enterprise. Such ability leads to the following benefits: Enhance supply-chain control. As the location of a part can be identified at every transfer point with accuracy, the whole supply-chain can be controlled with close to 100% accuracy. Security and authentication. A RFID tag can be written with an identifier chosen by the enterprise. This unique identifier can be used to authenticate a part or a document. The RFID technology also supports encryption and other security models so that a tag cannot be easily duplicated or forged. Enhanced customer service. The RFID technology can promote customer service by allowing faster check-outs, returns, and personalization of service. RFID will have a significant impact on every facet of supply chain management from the simple tasks, such as moving goods through loading docks, to the complex, such as managing terabytes of data as information about goods on hand is collected in real time. It has a potential to dramatically improve supply chain by reducing costs, inventory levels, lead times, stock outs and shrinkage rates; increasing throughput, quality, manufacturing flexibility, inventory visibility, inventory record accuracy, order accuracy, customer service, and the collaboration among supply chain members. The applications fall in the manufacturing, warehousing/distribution centers, logistics and retailing environments. To understand the impact of RFID in the manufacturing floor environment you have calculate the return of investment (ROI) achieved by increase of visibility and workin-process (WIP) inventory accuracy. This reduces the operating cost and thus increases the profit. Lead times and the total cycle times are shortened as a result of the increased manufacturing speeds and reduced inefficiencies of the manufacturing line. The automatic identification of products with RFID in the warehousing and distribution center environments has a consequence: increased visibility and accuracy of the inventory. This increases the warehousing efficiency and order accuracy. At the

same time it reduces shrinkage, stock outs and inventory levels. The increased warehousing efficiency has as a consequence a reduction in the operation costs, which translates into increased profits and also a reduction in lead times. Reduced lead times means increased customer service as well as decreased inventories along the supply chain. Ultimately, reduced inventories increase ROI. The uses of RFID systems to track asset provide a distinctive set of benefits. RFID tags enable an increased visibility and accuracy of the asset pool. This visibility and accuracy impacts six main areas: operating costs, shrinkage, lead times, inventory visibility and accuracy, customer service and integration among parents. RFID streamline the management of assets (such as machinery or containers) and increase the efficiency by reducing the equipment needed or reducing labor, thus translating into higher profits. Reduced assets shrinkage, increase ROI. Lead times (total cycle time) are reduced with the increased efficiency to handle the assets. The prototype system developed by e-Smart Source in a supply chain RFID pilot showed the following benefits: Data accuracy in the supply-chain. The project resulted in 99.9% accuracy of inventory where all the links of the supply-chain were RFID enabled. As a result the stock-out rate in those stores was reduced to less than 0.1% over a period of several months. Profit margin. Preliminary analysis shows that the product line profit margin is expected to increase by over 20%.

Wal-Mart RFID Trial Shows 16% Reduction In Product Stock-Outs Wal-Mart Stores Inc. says its customers are finding the items they want in stock on shelves more often in stores that are using radio frequency identification technology with embedded electronic product codes, compared with those that are not, according

to initial findings from a University of Arkansas study conducted during the last several months. Researchers found a 16% reduction in out-of-stock merchandise at Wal-Mart stores equipped with RFID labels using EPC codes. The study also shows that out-of-stock items with RFID were replenished three times faster than items using standard barcode technology. Wal-Mart also experienced a "meaningful reduction" in manual orders resulting in a reduction of excess inventory, according to the university report. "An RFID tagged item made it to the shelf three times quicker than a non-tagged item," says Simon Langford, strategy manager for RFID at Wal-Mart. "These items were identified as being in the back room three times quicker than those without RFID tags." Linda Dillman, executive vice president and CIO for Wal-Mart, told

InformationWeek last month that the study would provide conclusive evidence RFID technology increases the frequency with which it can put products in customers' hands. The study is the first to compare the impact of RFID with embedded EPC on merchandise availability in operating stores. For 29 weeks researchers analyzed outof-stock merchandise at 12 pilot stores, including Wal-Mart Supercenters, Discount Stores, and Neighborhood Markets, equipped with RFID and 12 stores without the technology. While Wal-Mart commissioned the study, the University of Arkansas conducted it independently. Specific items were selected at the beginning of the study and the items remained constant throughout the process to ensure data consistency. To establish a baseline prior to the study and to measure the impact of RFID, out-of-stock items were scanned every day throughout for 29 weeks at the 24 stores. Dr. Bill Hardgrave, director of the RFID Research Center at the University of Arkansas and executive director of the Information Technology Research Institute, oversaw the study. "Our analysis consistently found, throughout the test period, that the RFID-enabled pilot stores statistically outperformed the control stores without RFID technology in terms of providing improved on-shelf availability of items for customers," Hardgrave said. "Essentially, this meant fewer total out-of-stock items

and fewer occurrences of empty shelves when the merchandise was in the backroom." The 16% reduction in merchandise stock outs was determined by physically scanning product stock-outs on the shelf every day. Details and findings of the study will be made available in the near future via a series of white papers released by the University of Arkansas. Beyond improvements for in-stock merchandise, Wal-Mart also sees benefits from RFID in overall inventory reduction throughout the supply chain, which is important to drive down costs. "With little effort we have been able to make inroads into this area," says Rollin Ford, executive vice president for logistics in Wal-Mart. "Manual orders placed by stores were reduced by approximately 10%." With prices falling as much as 70% for RFID tag inlays that are inserted into shipping labels, Wal-Mart fully expects suppliers to start tagging additional merchandise in 2006. It also expects that by mid 2006, the retailer will move from the first generation of RFID tag " Class 0, Class 0+ and Class 1 to Gen 2 tags. And encouraged by the development, ratification, and improved read rates of Gen 2 technology, Wal-Mart is now in the final stages of testing this global standard. Wal-Mart this year began installing equipment to more than triple the number of stores where RFID technology has been installed. By the end of October, Wal-Mart will have more than 500 stores and clubs and five distribution centers live with RFID. The next 200 suppliers will join the existing approximately 130 in January 2006, shipping EPC-tagged cases and pallets. In 2006, Wal-Mart will double the number of stores that are RFID-enabled, along with distribution centers that service stores. By the end of 2006, more than 1,000 stores, clubs, and distribution centers will be using RFID. In January 2007, Wal-Mart expects the next wave of 300 suppliers to start shipping tagged cases and pallets. That will bring the total number of suppliers using RFID in early 2007 to over 600. Since the 1980s, Wal Mart has insisted that all its major suppliers add RFID tags to their supplied products to Wal Mart. These tags are little microchips planted on individual products or their containers. Wal Mart stores have detecting devices that receive signals from these RFIDs as soon as a product comes into store. This signal then goes to a central supply chain management and inventory control database which

stores the information. The same system is used to track shelf life of products, customer buying habits and a host of other important information that the retail giant then utilizes to understand how its products are being bought in various geographies and at different times of the year. This kind of information is very important for Wal Mart, because this helps it determine what product to send where and at what time. This is an in depth study of market trends and product movement that no other method would have made as thoroughly possible as the RFID. It has been estimated that the use of RFID saves Wal Mart over half a billion dollars annually, by letting it transport products at just the right time and to just the right places. The technology will bring benefits to a wide range of industries, as we shall see, but one of the main drivers of RFID adoption has been the retail sector, led by Wal-Mart in the US. Phillip J. Windley, an Associate Professor of Computer Science at Brigham Young University, estimates that US retail giant Wal-Mart alone could save $8.35 billion annually with RFID - that's more than the total revenue of half the companies in the Fortune 500. Its massive total is made up as : $600 million through avoiding stock-outs; $575 million by avoiding theft, error and vendor fraud; $300 million through better tracking of a billion pallets and cases; $180 million through reduced inventory; and a huge $6.7 billion by eliminating the need to have people scan barcodes in the supply chain and in-store. Small wonder, then, that Wal-Mart is investing $3 billion in RFID over several years and is one of the leading proponents of RFID implementation. The information on tags is read when they pass by an RFID reader, and that movement is captured and managed by the infrastructure. In this way, organizations are able to link the physical world to the digital world without any human interaction. Whatever actions are then triggered depends on the individual application, from basic stock replenishment at one end of the spectrum to facilitating the ultimate lean supply chain at the other.

RFID promises to revolutionize supply chains and usher in a new era of cost savings, efficiency and business intelligence. The potential applications are vast as it is relevant to any organization engaged in the production, movement or sale of physical

goods. This includes retailers, distributors, logistics service providers, manufacturers and their entire supplier base, hospitals and pharmaceuticals companies, and the entire food It has the potential to improve efficiency and visibility, cut costs, deliver better asset utilization, produce higher quality goods, reduce shrinkage and counterfeiting, and increase sales by reducing out-of-stocks.

The Future of RFID in the Supply Chain Management Companies are always searching for new ways to improve efficiency and cut costs. This has caused an inevitable shift towards outsourcing, particularly in transportation and warehousing, according to a recent study by Georgia Tech University and Capgemini LLC. A reported 50% of businesses that currently do not outsource logistics plan on outsourcing at least some of their operations in the future, and in the

last four years of the study, 80% of companies were using third party logistics (3PL) services, an increase of almost 10% from the first six years. While the benefits of outsourcing (lower costs, higher productivity, and better services levels) are clear, the methods for achieving those benefits are often complex and are better left to your 3PL partner, allowing you to focus on your companys core competencies. As technologies advance, 3PLs have remained abreast of the ever improving ways to successfully manage all aspects of the supply chain. The use of radio frequency identification (RFID) is one solution that has received increased attention in logistics operations in recent years. RFID is a tracking method similar to barcoding that enables customers and shippers to virtually retrieve data about products throughout the shipping process. Unlike barcodes, however, RFIDs carry tracking devices that uniquely identify each individual item, allowing a client and/or the 3PL to identify the exact location of any product and the time of delivery for every shipment.

Solutions offered by 3PLs, like RFID, have become essential in todays highly competitive business market. Greg Cudahy, global supply chain leader for Capgemini, acknowledges todays increased interest [in] and sustainability of truly collaborative relationships between 3PL providers and their customers," going on to explain that while there are ways in which all parties can improve these relationships, long-term success in the marketplace requires that more effective logistics and supply chain solutions be developed, including the next generation of RFID pilot programs." As any company knows, to fall behind on technology is to sabotage your firms ability to compete within its industry, making a partnership with an IT-savvy 3PL a wise and necessary decision in achieving your long term business goals.

When initially considering technological advancements like RFID, price point is often a deterrent for companies. The substantial amounts of hardware, software and redesign processes involved in a complete RFID overhaul are significantly more costly than traditional methods of item coding. Partnering with a 3PL that has expertise in providing item tracking options that fit your needs and your budget can give any company a strategic advantage within its industry. Alternatives that a

qualified 3PL may provide include a level of RFID tracking that monitors products by the case and pallet, rather than the individual unit. This method of tagging is suitable for companies that offer products with low profit margins, while manufacturers that produce high-value, low-bulk and frequently stolen items such as consumer electronics would benefit from unit level tracking, in spite of the high initial cost. Through careful analysis of the initial cost in comparison with the long term benefits, a knowledgeable 3PL will know how to advise your company in order to achieve ultimate cost savings.

In addition to cost savings, an effectively constructed and implemented item tracking system can improve productivity and the level of service a company is capable of offering its customers. As noted by Jim Farrell and Ralf Saykiewicz, leaders in technology solutions, the time required for physical verification of orders has fallen dramatically, particularly for mixed pallets. Whereas verification previously took from 80 seconds to 20 minutes per pallet, with RFID it now takes no more than 20 seconds. With time reductions such as these, supply chain functions can greatly improve, and getting products into the marketplace and the hands of consumers will occur more efficiently than ever before. Also, because shipping information is in realtime, RFID nearly eliminates human error in the supply chain. If someone operating a forklift mistakenly loads a truck with the wrong product, a red flag will notify a supply chain supervisor that an item is off-track, allowing the 3PL to address mistakes before they become complex and difficult to reverse.

The benefits of a well-implemented and managed item tracking system do not stop with cost savings, improved productivity and increased service levels, however. Supply chain visibility and transparency is among the greatest assets a 3PL can offer its clients. For the 3PL, it means the supply chain can be managed efficiently and without error; for the company, it means they can turn their focus to their core competencies, knowing their supply chain can be viewed and assessed at a moments notice. This visibility also helps key decision makers in the company adopt demandfocused systems that reduce overstocks, margin erosion, and markdowns. Furthermore, as a CEOs ability to forecast demand improves, he or she is able to

more effectively schedule production, ultimately reducing costs and capitalizing on economies of scale. A good 3PL can offer the security and piece of mind that your supply chain and your bottom line is functioning at the highest capacity for success.

In the fast paced, hi-tech marketplace of the 21st century, companies must do whatever it takes to stay ahead of the competition. RFID, as part of a high-level item tracking system, has become a necessary component in a well-executed supply chain. It is time for companies to realize that approaching their supply chain operations with the if it aint broke, dont fix it mentality ultimately puts them at risk for a flat-line in productivity, high operating costs and below average service levels. Assuming that your internal operations are good enough without investigating the many areas of improvement a 3PL can offer is counterintuitive to long term business success. Technology and innovation like RFID is the way of the future, and establishing a relationship with a qualified 3PL today can ensure that your company achieves its full potential in the years to come. Pharmaaaa Radio Frequency Identification (RFID) is hardly a new concept. For some, RFID is already a mainstream technologyit is used every day to pay tolls, secure building access, control manufacturing subassembly movement and track assets. Until recently its impact in supply chain management has been limited to niche roles due to cost barriers as well as a lack of accepted standards, technology challenges and performance limitations. The movement to overcome these barriers and apply RFID in supply chain solutions will be further accelerated as suppliers across all industries begin to comply with WalMart and Department of Defense (DoD) RFID mandates. What has been a niche player throughout the 1990s now promises to be an arena of intense focus over the next decade. The need to comply with Wal-Mart and DoD requirements is forcing the development of standards, hardware and software for RFID applications. More important, compliance with these requirements will greatly increase the number of RFID tags produced, resulting in a rapid and precipitous decline in the cost of RFID

tags. With awareness of RFID technology and its possibilities also comes uncertainty. Many logistics operations understand that RFID is poised to make a major impact on the supply chain world. At the same time, they are also unsure exactly how this technology can affect and benefit the way they do business. Precise questions about its benefits, costs and integration issues can be difficult to answer. Furthermore, the pace at which RFID technology will actually work its way into the supply chain is still unclear. Compliance mandates will undoubtedly accelerate the breakdown of current technology and cost barriers. Intense promotion by RFID solution providers will attempt to position their application in the supply chain as a best practice as they are able to demonstrate its benefits through successful implementations and use. There is also a multitude of different vendors and solutions chasing a market whose exact shape and size can only be speculated at this point in time. No one can guarantee how successful any given vision will be in the coming years. However, the advances in RFID technology and applications forced by the Wal-Mart and DoD mandates makes it highly likely that RFID will become a cost effective and viable logistics tool. Despite the uncertainty, there are compelling reasons to take a close look at RFID right now. Beyond current compliance mandates, reduced costs, improved accuracy, greater visibility as well as added security and increased product authentication and tracking are just some of the benefits possible for pharmaceutical companies, and why they should take notice of RFID today. Although existing cost and performance issues present significant challenges in using the technology in supply chain applications, RFID still can produce a positive return on investment in numerous situations. Even if it can't be currently justifiable for a specific situation, its evolutionary pace is such that it may become feasible in a relatively short time. While its long-term impact can be debated, RFID has the potential to dramatically increase the efficiency of supply chain operations. Benefits for the Pharmaceutical Industry According to many of its proponents, RFID promises to save billions and radically change the way the supply chain works. For those in the pharmaceutical and health

care industries, the anticipated benefits from implementing RFID go beyond just more efficient supply chains: Efficiency: The primary reason that Wal-Mart and other major firms are interested in RFID is that they believe it can save them money by making their distribution operations more efficient. These companies already employ sophisticated systems that utilize bar codes. They require their suppliers to apply bar coded labels on shipments and transmit Advance Shipping Notices (ASNs) so that they can streamline their receiving operations. Even though they effectively utilize bar codes, these organizations believe that RFID can allow them to make their distribution operations more efficient. A typical pharmaceutical warehouse receives pallet loads of expensive products and quickly ships cases and eaches. In addition, the organization needs to be able to track product down to the lot or even unit level after it is shipped. This has traditionally been accomplished using bar code labels, tying cases to pallets and eaches to cases, and a large amount of bar code scanning and manual data recording. RFID will permit the receipt of product by case or unit and will provide automatic tracking of the products throughout the supply chain. This has the potential of greatly reducing both direct and indirect labor. Accuracy: The high cost of pharmaceutical products and the need to track material by lot or unit make tracking particularly important for the pharmaceutical industry. Using current technology and methods tracking is an expensive and time-consuming part of a pharmaceutical operation. RFID can provide an inventory tracking mechanism that is not dependent on human initiated scans. Transactions can be automatically recorded as product is moved within the warehouse. Given enough tags and readers, RFID can provide the ability to track all inventory movements within a distribution center. All physical moves could be systematically tracked without the need for an operator to record the transactions in the system. Mispicks and erroneous putaways where the wrong bar code is confirmed could be eliminated. Cost and technological barriers currently make this level of tracking impractical for most operations, but it is a theoretical possibility that could become a reality sometime in the near future.

Visibility: The pharmaceutical industry has been a leader in creating visibility throughout the supply chain. While traditional EDI provides a mechanism to share information between trading partners, RFID and the Electronic Product Code (EPC) Network will provide the basis for tighter and less costly collaboration and greater visibility within the entire supply chain. An EPC Network is designed to share information over the Internet. Conceptually, it allows one organization to locate and retrieve detailed product information stored on servers maintained by another firm for any given EPC. The ONS, or object name service, provides the appropriate network address or URL for where the information is stored. PML, or physical mark-up language, provides the means for the requesting application to retrieve the information. The EPC Network establishes a vision for RFID that goes well beyond traditional automatic identification technologies. It provides the structure to track product movement throughout the supply chain. Properly maintained and updated PML servers can provide complete item-level history from the manufacturer to the enduser. This feature will make it possible to instantly know the history and location of every item in the supply chain. Today, independent systems often report this information only in financial transactions between partners and at best, send ASNs to the next trading partner. RFID provides the ability to have all systems use and leverage a single tag that creates visibility up the chain, improving the ability to plan for future events. Once the systems are in place, there is great potential to remove billions of dollars of inventory from the supply chain, passing savings along to all trading partners and end-users. For the pharmaceutical and health care industry, lot and unit tracking are part of traditional regulatory and compliance standards. RFID's traceability features are an excellent example of how this extended visibility will benefit the overall supply chain. Consider the process that a pharmaceutical or diagnostic manufacturer must go through to recall a specific SKU / lot. Existing supply chain systems only identify the immediate recipient of the lot. This recipient could be a wholesaler, hospital/clinic, drug store, or retailer who in turn distributes the product to other entities in the supply chain. An individual item could go through many intermediate destinations before ending up in the hands of the final customer. Using RFID allows for traceability at

each point to track where the drug was distributed and by whom. At the lowest reasonable point, pharmacies could track what prescriptions were filled with what lot and greatly improve recall accuracy while minimizing costs. In addition, this concept could also be used to support pedigree paper regulations that require drug wholesalers to provide a record of each entity in the supply chain that has handled the controlled item being resold. Security and Product Authentication: Probably no products have higher security requirements than those in the pharmaceutical industry. Products are extremely high in value, chemical analysis is required to determine if a product is counterfeit, and many products have elicit uses and thus, high street value. There is an ongoing problem of product diversion as well as the reintroduction of expired products into the supply chain. Because RFID can passively track the movement of an individual object, it can be used in a similar manner as sensormatic and other loss-prevention technology to help reduce theft. Product authentication is another area that may prompt enterprises to turn to RFID for greater security. If every object has a unique identifier and detailed information on the object is stored in a PML server, any purchaser can validate the object's authenticity by interrogating its RFID tag. The information contained in the RFID tag could be encrypted so that counterfeiting will become nearly impossible. This would provide pharmaceutical manufacturers a powerful tool to combat product counterfeiting and product diversion and end users/customers will be able to ensure product integrity from the manufacturers. Some of the key benefits projected with the use of RFID include: The ability to identify drugs at the individual and container level. Assurance that the ID on the bottle has not been forged or mislabeled. The ability to track exported drugs being re-imported and resold in U.S. markets at lower costs. Minimized line-of-sight requirements to read product information. Remote tracking of product movement and location. Increased potential for reducing clinical trial times by reducing errors and improving delivery accuracy. The potential for improvements in tracking and visibility are crucial to the long-term

supply chain success for both the pharmaceutical and medical product industries to ensure that consumers are protected, product integrity is maintained, and shrinkage is minimized to maximize revenue. In addition, full visibility of the supply chain inventory will reduce out-of-date stock and returns, further improving profitability. But even the most fervent supporter must admit that the potential benefits from RFID will vary greatly among supply chain operations. While some promises may seem a bit over-optimistic, RFID does provide significant advantages over bar coding. Before any organization can seriously contemplate using RFID to support its operations, it should have a firm understanding of the benefits that the technology can provide. Future impacts of RFID on e-supply chains in grocery retailing Automatic replenishment programs: failure to deliver The main driver in recent grocery retailing research on supply chain issues is the program of efficient consumer response (ECR) that was initiated in the USA after a key report by Kurt Salmon Associates (1993). The motivation for this report was the declining profitability of the grocery industry in the face of competition with WalMart and other warehouse clubs/superstores. The key finding in the report was that in the early 1990s the grocery supply chain was extremely inefficient. On average it took 104 days for dry grocery products to go from the supplier to the consumer. The main reason for the large amount of held stock was the fragmentation of the supply chain. Specifically, stock was pulled through the supply chain by way of replenishment orders for stores, but inventory was pushed through the warehouse system by trade promotions and forward buying practices. Forward buying emphasizes acquiring larger quantities of products based upon the purchase volumes necessary to get the best discounts from manufacturers. These quantities are stored in the warehouse. However, products are removed from the warehouse and sent to the stores based upon what the stores forecast they can actually sell. This difference, between acquired (pushed) volume at the warehouse and actual sold (pulled) amounts at the stores, causes substantial inventory growth within the warehouses of the supply chain. Forward buying began in the 1970s as a way for manufacturers to use discounting to bypass the price controls implemented by the Nixon administration. Forward buying

is a practice on the part of the buyers, who are stocking up, to take advantage of low price offers due to special promotions, quantity discounts, or special pricing discounts. However, in the 1980s, instead of phasing out these programs, they became more heavily used because consumers were hooked on discounting. In fact, grocery manufacturers spending on trade promotions from 1981 to 1991 increased from 34 to 50 percent while advertising fell from 43 to 25 percent. Kurt Salmon Associates argued that this inefficiency, if removed, could save around $10 billion (10.8 percent of sales turnover) in the dry grocery chain. In general, the report held that ECR would reduce inventory levels to 61 days. Kurt Salmon Associates argued that by jointly focusing on the efficiency of the total grocery supply system, rather than the efficiency of individual components, they are reducing total system costs, inventories, and physical assets while improving the consumers choice of high quality . . . grocery products (Kurt Salmon Associates, 1993). ECR is in the same family of programs as continuous replenishment planning (CRP) and vendor managed inventory (VMI). All these programs fall under the umbrella term of automatic replenishment programs (ARPs). The basic structure showing the reliance on reliable information can be seen in Figure 1.

In general, the goal of ARPs is that the system must at any time provide sufficient supplies of goods in demand at the right spot and at competitive prices. These goods are standardized with a limited shelf life, with little opportunities for market segmentation and with a high demand for efficient logistics. Therefore, there has been a shift from pushing goods through the distribution network to a situation where the goods are pulled through the distribution network (Ciborra, 1995). Thus, goods need to be replenished more frequently with a smaller average order size. This means that

the optimization of replenishment processes has been a focal strategic issue (Damsgaard and Lyytinen, 2001). In short, the ultimate goal is that, the right products reach the shelves at the right time and at lower cost and thus boost sales and profits (Cottrill, 1997). Since the Kurt Salmon Associates report was released, research has shown that many grocery firms have implemented ECR/ARP programs (Daugherty and Myers, 1999). Unfortunately, the results have not been as good as hoped. For example, inventory stockpiles have actually increased since 1992, along with their attendant costs (Stank and Crum, 1999; Brown and Bukovinsky, 2001). Bowersox and Closs (1999) studied nine retail grocery chains that had implemented ECR from 1992-1997. They found that the chains had decreased average inventory turns and increased inventory levels, but net profit margin increased 22 percent and ROA increased 7 percent. The report concluded that the improved profits came from larger volume purchases, which generate increased promotional money at the expense of lower operating efficiency. More recent research (Brown and Bukovinsky, 2001) also found that most ECR adopters inventory efficiencies, asset efficiencies, and cash cycles generally deteriorated compared to non-adopters. Some have argued that ECRs promised savings are limited because retailers and manufacturers refuse to abandon forward buying practices (Partch, 2000). So, we see that the current use of technology is not providing the desired results, and we must look for other options. This is becoming a more pressing issue because market saturation is changing the basis of competition. Certain guidelines should be followed when implementing technology within the grocery environment: Specifically, the system must not prevent the practice of forward buying (since retailers have shown they will not give it up). In addition, the system must allow for more efficient shelf space utilization, thus allowing for a greater variety of products to be displayed. This will allow grocers to grab some of their leaked market share. However, this reduced shelf inventory cannot have the negative impact of increasing stockouts. Rather, forecasting must be accurate enough or replenishment must be quick enough so that high service levels are maintained.

Next, the impact of any modified packing methods must improve supply chain performance. Finally, the system must be able to withstand shocks in demand and react quickly. These shocks, while infrequent, do occur. For example, a recent Homeland security alert caused a run on duct tape. Unexpected bad weather can cause a run on milk and bread. The effect of these demand spikes on the reduced in-store inventory must be assessed. Research on RFID implementation In addition to modeling-based research on operational decisions, researchers need to investigate how to best implement RFID technology in the grocery industry. Figure 4 shows the various barriers to technology adoption. In applying this framework to the grocery industry, we have already seen that there is a compelling reason for grocery stores to manage their operations more efficiently, despite the failure of ARP implementations. The magnitude of effort required to adopt RFID is no greater than that required for ARP implementation. Concerning cost/benefit justification, the fact that Wal-Mart is moving ahead with this implementation (Boyle, 2003) should put downward pressure on the cost of the technology. In spite of RFIDs promises, adoption of any new or advanced technology (and the management thereof) includes risks and uncertainty. Further research on RFID applications in the grocery industry, such as the research issues proposed in this study, can help to mitigate many of these risks. As for entrenched business practices, two key factors were pinpointed in our discussions with grocers. As mentioned earlier, one of the reasons for ARP failures is the desire of grocers to continue with forward buying practices. Research needs to be conducted to see how the use of RFID can be integrated with forward buying if inventories are being managed by the DC. That brings up the second issue that is loss of control by the individual store managers. This is a distinct issue that must be addressed by the grocery chains. However, some corporate supply chain managers believe that it would be easier to implement a system like this because it would be driven by the DC (Carson, 2003; Salmon, 2003). From the view of management, this eases the transition because many store managers

are hesitant to learn new technology and operational styles. This is because most managers have moved up the ranks from bag boy. Their focus is instead on customer service and interaction with the customers. Moving ordering decisions to the DC frees up time for store managers to focus on what they would rather do: interact with the customers. This is the traditional view held in process innovation research by Zmud (1984). It is also suggested, by the latest research in innovation, that the best way to implement a disruptive process innovation of this type is to . . . centralize the function. Legacy processes are typically embedded in each of the enterprises operating units. Bring them together under a shared-services model, and put an operations-focused manager in charge. This will free resources that are performing duplicate functions (Moore, 2004).

Figure . Barriers to technology adoption

Research on daily operations Within the military, it is said that no plan lasts longer than the first contact with the enemy. In a similar vein, once an RFID technology plan is implemented, grocers must begin to address the daily operational issues that may change the assumptions of the plan. For example, as mentioned earlier, Kurt Salmon Associates argued that forward buying practices are inefficient and if removed could save around $10 billion (10.8

percent of sales turnover) in the dry grocery chain. However, grocers seem to be hooked on forward buying. How would this reliance on forward buying impact RFID use? On one hand, the research may show that RFID use allows firms to better adapt to varying demands and inventories brought on by the use of forward buying. On the other hand, experience has shown that once a technology is implemented, business people search for new ways to take advantage of it. This adaptation may have unforeseen consequences on the use of RFID. Another daily operations issue that must be addressed is security. Shoplifting is a serious problem in the retail industry. Every year, organized retail crime causes retail loses of $12 billion to $35 billion (Hayes and Roberts, 2003). One method is to stuff stolen merchandize into shopping bags lined internally with duct tape (the duct tape shields the security tags on stolen merchandize from sensors and scanners). An average booster steals purely for profit and will steal $5,000 on an average day. Many will make $125,000 per year on shoplifting (IOMA, 2003). Grocery stores implementing RFID must respond to this threat. The costs for increased security measures may somewhat offset the benefits of RFID. But to what degree will these benefits be impacted?


To study the RFID technology used in the supply chain management

To study the impact of RFID in the inventory management.

To study the future of RFID in the supply chain management


The research strategy to be used is the descriptive approach in research since the aim of the study is to study the role of RFID in the inventory management in the supply chain management.A descriptive research intends to present facts concerning the nature and status of a situation, as it exists at the time of the study.


The secondary data will be used that is through internet, magazines, journals etc and some books will be referred to obtain the objective of the study.

The long term vision in logistics is a system providing the necessary real-time information on the supply chain, this information being extensively utilised. RFID is the key technology to make this happen. Real-time information on the location, contents and conditions of individually identified shipments, products, transport units, and transport vehicles can be gathered in a controlled manner. The collected data can be combined with the planning information and processed into appropriate information to be used at different stages of the process. Product history will become available via B2B networks. The information can be distributed effectively and in real time to the stakeholders.

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