REPORT

On

MANAGEMENT INFORMATION SYSTEM ON (RFID)

By

PRABAL JAIN

Batch: PGP2010-12

Roll No.: PG20101189

IILM Institute for Higher Education New Delhi

INTRODUCTION OF RFID IN RETAIL INDUSTRY

Retail industry represents one of the largest industries in the world. In the United States it is the second largest industry in terms of the number of employees as well as the number of establishments for doing business (Vargas, 2004). Retail sector is one of the most important business sectors which see potential in the use of RFID technology in order to stay at a competitive edge and to achieve profitability in short or long terms. With increasing globalization the retail industry is facing more and more competition which is making them struggle harder and harder to succeed through better performance . The global RFID market is expected to reach $ 3.0 billion by 2008 with a growth rate of 23% . Apart from Wal-mart other major retailers like Albertsons, ASDA, Best Buy, Home Depot, Marks and Spencer, Meatco, METRO, Sainsbury, Sears, Target, Seattles Best Coffee, Tesco, Woolworths and so on are the other major players in the retail industry who have either mandated their major suppliers to tag the supplies at pallet or case level or are intending to do so in the near future .According to IdTechEx, the retail industry will comprise 44% of the global RFID market value for systems including tags by the year 2016. The expected growth of RFID usage in the retail industry is primarily because of the perceived benefits that could be obtained by implementing the technology. In the retail industry RFID technology is expected to replace the barcode technology as it provides much more functionalities without requiring the line of sight of the reader thus ensuring speed and process efficiency. Most importantly it provides supply chain visibility thus resulting in a tighter integrated supply chain which is more efficient and is the foundation for future profitability. This will help the retailers stay at a better competitive edge which is what all retailers are striving to achieve in the modern times of ever increasing competition. Good supply chain management is a key to achieve that. It revolves around three core elements which are availability, inventory, and cost .

RFID INTRODUCTION

Introduction to RFID Radio-frequency identification (RFID) is an automatic identification device technology that is used to remotely store and retrieve data without actual scanning of the data source. The predecessor to this technology was the bar code scanner used at retail cash counters which needs actual line of sight scanning to read the data and bill the product . In 1946, Lon Theremin invented an espionage device for the erstwhile Soviet Union, which used radio waves and had applications as a secret listening device. It has been recognized to be the first device to actually use something similar to RFID technology. This technology was introduced on paper by Harry Stockman in 1948 in his report "Communication by Means of Reflected Power" (Proceedings of the IRE, pp 1196 1204, October 1948) The first true ancestor of modern RFID was Mario Cardullo's U.S. Patent 3713148 in 1973 which was demonstrated in 1971 to the New York Port Authority with applications as a toll and traffic detection device at the ports. The first patent to be associated with the abbreviation RFID was granted to Charles Walton in 1983 as U.S. Patent 4384288. RFID was introduced to initially improve the Supply chain but has found applications in manufacturing, retailing, warehouse traffic management, military, medical & healthcare, education sector and e-governance. The companies in India taking to this technology are steadily on the rise and it has the capability to transform the business equations.

RFID System and Global Standardization An RFID system comprises of an RFID Tag or transponder, RFID transceivers, high capacity servers and related application software. An RFID chip consists of a tiny computer chip, which is approximately the size of a small dot, on which are implanted, the code of the product and a small antenna. RFID can incorporate a variety of electronic architecture and code formats. To bring in standardization, especially in the retail sector, a code format called EPC (Electronic Product Code) has been proposed by EPC global (which was earlier called as Auto-ID Center). The generally accepted EPC based RFID format is a result of a collaborative research work done by Auto-ID Center, MIT and over 100 huge corporations that included Wal-Mart, US Department of Defence, US Food and Drug Administration, US Postal Service, Pfizer, Coca Cola, Philips, Microsoft, Infosys Technologies and IBM Consulting . The image of an RFID Tag and the Electronic Product Code Structure is shown below

RFID Tags can be active or passive. Active RFID tags are powered by an internal battery to power the chips and generate the signals and gives longer reading range and are of larger size and higher cost with limited operating life. Passive RFID tags operate without external power source by using just the power generated from the reader and the incoming radio signal only. These are lighter than active tags, less expensive, more widely used, have shorter reading range and have almost unlimited operating life . Low frequency RFID Systems are used in the 30KHz to 500KHz range and high frequency systems are used in 850MHz to 950MHz and 2.4 GHz to 2.5 GHz range. The data transmitted can provide identification information, location information, the product details like batch number, colour, date of purchase, shelf life, time on shelf till now, price, date of manufacture, time spent in transit, location of distribution centre, name of last person to hold the item along the supply chain among other details depending on the level of information required on the tag for different product categories .

Key Application features of RFID RFID devices have several application features when compared to the earlier data storage & retrieval and transaction processing devices like Bar Code scanners.

RFID tags need not be visible to be read/scanned. Tags can be read quickly from significant distances. A number of tagged devices can be simultaneously read at a time. As most of the tags come enclosed in a protective covering, it is difficult to tamper with in normal situations. Since it can be encased in protective covering, they can be protected from harsh environments and fluid & chemical environments which involve rough handling. Many tags now come with both read and write capabilities, rather than just readonly so that information can be added on after some significant event in the movement of the tagged item along the supply chain .

Applications in Retail & Supply Chain Management Global Scenario Nowadays, retailers all over the world are tagging their products and the level of pilferage has come down. Earlier, it was easy for a shopper in a busy supermarket to easily pass unnoticed out of the store, Now, any unbilled item automatically sets off an alarm at all the exit points. Retailers are tagging child trolleys of shoppers so that they do not encounter "missing children" situations and can have child security. The uniqueness of the RFID tags mean that the product can be individually tracked as it moves from location to location, finally ending up in the customer's hands. This can help combat the problems of theft and product loss as mentioned before but also have advantages in recall campaigns for products with quality deficiencies. This can help in post-sale tracking and profiling of customers for future campaigns too. Throughout the European Union, RFID passes are used for the public transport systems. This system has now been copied by Canada, Mexico, Israel, Dubai and Columbia also. All the transport payments and toll charges are monitored and done through RFID Compliant systems. This can reduce a lot of time spent by logistics companies along the motorway and can speed up the checking & inspection stages in the logistics. This automatically brings down the cost of transportation. Another major application is in animal tracking when meat and livestock are transported throughout a country before it reaches supermarkets. The RFID implantation can help identify the farm from which the animal has been loaded, its date of birth, age and nutritional value along with history of any contaminations if any. The Canadian Cattle Identification Agency began using RFID tags for its purposes. RFID finds applications in bookstores and libraries for tracking its inventory. Other applications are in airline baggage tracking, pharmaceutical items tracking, building access control, shipping container tracking, truck and trailer tracking. The pharmaceutical industry is highly vulnerable to counterfeiting with figures suggesting that 7-8% of world market is

counterfeit. RFID technology can help protect against fraudulent introduction of drugs into the drug supply chain. Pfizer has already incorporated this system to their drug supply chain. The automotive sector introduced use of RFID by tagging the car keys. With this application, a car will not start without the actual key. Toyota Avalon 2005, Lexus GS 2006, Toyota Camry 2007, Toyota Prius and companies like Ford and Honda are introducing car models with this feature being optional. The driver can even open the doors and start the car with just the presence of the key within 3 feet without even taking it out of the pocket . Tyre manufacturer, Michelin tested RFID embedded tyres in 2003 to offer tyres in compliance with the United States Transportation, Recall, Enhancement, Accountability and Documentation (TREAD) Act which is aimed at safer road transport for trucks that are involved in logistics operations in the supply chain . Outside of retailing sector, Malaysian government has already introduced RFID passports for proper tracking of travel history of its citizens .

Applications in Retail & Supply Chain Management Indian Scenario Retailers, textiles, aviation, energy and auto sectors in India are switching to this new concept over the last 5 years after seeing the results of implementation in the developed world. This is also necessitated by pressures on them by suppliers from abroad to comply with global business practices, failing which they run the risk of being left behind. Infosys Technologies is a founding member of EPC and Wipro technologies have been associated with Auto-ID Lab at MIT for some years now. Both these companies play a big role in the EPC which provides standards for implementation of the technology. Similarly, Gemini Traze RFID Pvt Limited is building India's first RFID tag manufacturing unit at Sriperumbudur Electronic Park near Chennai. It plans to roll out 45 million units which would be increased to 100 million units per year later on . One of the main companies that is testing this technology is Kishore Biyani's Future group, especially at Pantaloon and Big Bazaar. Pantaloon has piloted an RFID project at one of its warehouses in Tarapur using more than thousand RFID tags [3]. It selected a few lines of apparel for the RFID pilot project. The application was developed by Wipro Infotech and integrated Oracle database also. Nowadays, we can see the major retailers having a plastic flying saucer shaped knob like structure on dresses while on display at the store which are removed when they are billed. This helps in tracking of goods and security from pilferage as it lets out an alarm at the exit door if not billed properly.

IMPACT OF RFID IN RETAIL

The expected growth of RFID usage in the retail industry is because of the perceived benefits that could be obtained by implementing the technology. RFID can provide benefits such as operational efficiency, improved visibility, reduced cost, improved security, improved customer service levels, better information accuracy and increased sales. Operational efficiency and improved visibility are the most significant benefits in comparison to the others but we want to stress the fact that many of these benefits have the potential to influence each other and thus should not be looked at independently rather an integrated approach should be taken when analyzing these issues Here we observe that there are some inherent relationships between different benefit categories which might be interesting to address in more detail in follow up research. One category of benefit can be used to boost the other category. For example RFID provides improved security for the businesses but it overlooks the potential it has to improve customer service levels which directly benefits the customer in terms of savings. Similarly improved visibility has the potential to guard against out of stock incidents which directly is related to improved customer service levels again. Better information accuracy may lead to better demand planning which can boost customer service levels. Similarly increased sales and reduced cost for retailers will ultimately accrue to the savings of the customers. In a nutshell we can say that many of the benefits which are only supposed to be retailer specific have potential to impact customer service levels positively.

Supply chain management is the process of managing raw materials and information from the point of acquisition to the point of consumption. Most of the companies today rate supply chain management as their key priority for survival and success. The use of RFID in the retail supply chain for tracking and tracing products can lead to reduced inventory and better collaboration among different players in the supply chain. Most of the major retailers today see potential of the RFID technology to better integrate their supply chain and improve their efficiency by reducing error rates which can cut down overall cost of operations significantly. The benefits of RFID for Retail industry primarily revolve around allowing for improved supply chain management. Improved visibility which is the second most significant benefits of RFID for the retail sector helps to achieve tighter and integrated supply chain. Retail supply chain may consist of one or more of each of these entities- suppliers, manufacturer, distributor, retailer and consumer (Sikander ). A typical integrated retail supply chain has the following major elements as shown in Figure 3. Each of the elements is briefly explained below ,

1. Merchandise planning: It is an approach aimed at maximizing ROI through proper planning of sales and inventory. This approach is all about maintaining a balance between sales and inventory in order to increase profitability. 2. Assortment Planning: It is the retailers planning for selection of merchandise both in terms of depth and breadth (e.g., what and how much). 3. Sales planning: It is a business process to plan the routes to reach the target customers. 4. Price management: It is the process of understanding, managing, and improving pricing processes based on predictions and forecast data. It has direct impacts on profit. 5. Promotion planning: It is the process of planning and managing promotions that drives demand and profit. It also depends on forecast data. 6. Replenish, allocation and scheduling: It is the process to replenish products to avoid out-of-stock situation. It has the potential to reduce inventory and influence improved customer services. 7. Warehouse management: It is the process to achieve improved distribution of products across diverse facilities. It has the potential to reduce inventory. 8. Distribution: It is the process of distribution of products accurately to the correct destination. 9. In-store operation: Management of various store operations like receiving, shelf stocking, product ordering for store replenishment so on and so forth

Pros and Cons of RFID applications in Retailing & Supply Chain management In retailing, the following statistics from a University of Arkansas & Wal-Mart study conducted over 29 weeks at 24 stores led to the following results:

16% reduction in product stockouts since adoption of RFID. RFID equipped shops are 63% more efficient in replenishing out-of-stock items. Out-of-stock items are replenished 3 times faster with RFID. Cost of excess inventory was reduced by more than 10%.

In 2000, the most basic RFID tags were priced at approximately $1 each. In 2003, they ranged from about $0.25 to $0.40 and today they have dropped to about $0.15 each (Rs. 6 each) for the basic model. As the adoption rate increases and with companies like Gemini setting up manufacturing shops in India itself, the refinements in technology will push down the price to about $0.05 each for the basic model. This will change the scenario from the current one where some retailers tag a box rather than each item in the whole box to save costs . With RFID enabled loyalty cards for frequent shoppers, items could be priced differently depending on the shopper. Different promotions can be offered to different customers via their RFID enabled cards or by the billing staff receiving prompts automatically to apply discounts for a certain category of shoppers. This can also help the same shoppers of one retail chain get similar treatment in Bangalore, Mumbai and Delhi when he/she travels. RFID tagged employees can be monitored better by knowing their time in different areas of the retail facility. A person spending too much time in the restroom can be alerted to go back to the store and an overworked person can be asked to take rest. In short the advantages can be summarized as follows:

Automatic Non-Line-of-Sight scanning enabling multiple product simultaneous scanning in milliseconds. Labour time savings of close to 36% in Order picking, 90% reduction in verification costs for shipping The "always on" nature of RFID technology ensures total visibility to all stakeholders in the supply chain when integrated in a supply chain communications network. Improvements in functions like asset tracking, returnable item movement, product recalls and tracing warranties. Ability to be used in harsh environments and prevention of theft and pilferage. Improves the ability to forecast product demands and lower inventory levels. Ability to hold vast amounts of varied information on a single tag. Cost savings through better inventory management by the deployment of RFID is expected to bring in savings of over $ 1.4 billion annually at Wal-Mart .

Some of the deployment issues in RFID implementation are as follows :

The retailers are forcing manufacturers to absorb the additional costs of RFID tagging an item and processing the information that they generate. Manufacturers rarely report short-term gains from RFID implementation. Short term gains are usually seen for the retailers, though in the long term both parties gain. This makes manufacturers and vendors slightly apprehensive of the technology. Data synchronization, integration and lack of standards except for the EPC global which is still developing itself is a major issue when used across countries. Due to the nascent stage in the technology, the RFID technology is still not fully foolproof and there are issues of electromagnetic interference and wrong reading being reported as the technology is still not fully perfected. Metal and liquid are said to play havoc with RFID signals with the current technology available if not properly done. It is disturbing for many customers to have their movements or buying habits automatically tracked even after purchase. To counter such concerns, some retailers "switch off" their tags once a purchase is made. There are fears that competitors can develop systems which can track a particular companies' shipments and inventory as there are still vulnerabilities in the security system as is the case with credit cards. Issues of whether customer data is safe with the retailer also arises.

SUPPLY CHAIN OF COMPANIES USING RIFD

If we look the supply chain of the any company their process of supply of good starts from packaging of the product from the manufacture firm and it goes to till the showroom remains same .

When the finished good is ready for departure then the good has three thing in it such as, (1) They have lot no. (2) They manufacturing date (3) They have serial no. of the same lot ( bar code) These three things remains same through the show room and they have bar code which reads that code and directly feeds that code into computer and this work is done by RFID . This code helps the company to check their goods and it also help then if any mistake happens with the product . These bar codes are easy to read and this process help the store also which lot comes at which date . Now a days RFID is the best way to look their goods in better way and also helps the customer if any default occur with the product .

Examples of companies using RFID (1) (2) (3) (4) (5) (6) (7) BIG BAZAAR PANTALOONS NEXT WALL MART VISHAL MAGA STORE MORE`S AND MANY MORE

BLOCK DIAGRAM OF FININSHED PRODUCT WITH BAR CODES AND PROCESS OF BAR CODE

Product manufacture in the industry And has lot NO. and serial no.

Product goes to distributer With bar code

Now the product moves to showroom or store for display with same bar code

This product is feed in the store account with same bar code

WAL MARTS SUPPLY CHAIN MANAGEMENT AND RFID

The RFID device is a radio frequency transmitter instrument which transmits a self identifying radio signal that tells its receiver details about whatever object the device is tagged to. This device has tremendous application in the supply chain management system, as has been demonstrated by Wal Mart, the retail giant. 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. Concerns have been raised at some sectors about the so called invasion of privacy that the Wal Marts RFID supposedly commits. But this sort of criticism can be true of all kinds of market study for example, Googles study of visitor patterns and user data which helps businesses profit by understanding customer trends. However, criticism or not, Wal Marts methods have been extensively studied and copied by other retailers. For example, Londons Merck and Spencer, the giant retail outlet, has implemented a massive project to implement the RFID technology across all its product range. 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.

Conclusion In spite of all the teething problems that are there currently, RFID is the next big thing in the strategic plans of companies in retailing, auto, textiles and many other sectors as the evidence of savings through better inventory management is coming through from different parts of the world. The world is waiting for the costs of tags to come down to $0.05 each (Rs.2 each) so that wide spread adoption is possible. The start has been made and the results are encouraging and potential applications varied in scope. Once the technological stumbling blocks are cleared, it will become a common place item just like the barcode scanner of the last 10 years. Wal-Mart's comprehensive usage & success of RFID implementation in retailing has made it an exemplary strategy to follow for other companies in the retailing and supply chain management area.