Effectiveness of RFID Technology Enhancing

Supply Chain Management

By ..S.SENTHIL.,BE.,MBA.,(PhD)Marketing Manager

INTEGRATED LOGISTICS COMPANY

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. 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.

RFID technology has been available for many years. Recently, its application to improve visibility in supply chain has demonstrated significant value for companies. The amount of research and development dollars being invested will enhance capability and reduce cost continually going forward. RFID as a major component of supply chain solutions is here in force. Those companies implementing RFID early will gain competitive advantage. However, implementation must be undertaken correctly by defining clearly the process and ensuring the right technology is applied to the opportunity.

This paper clearly explains how supply chain management is enhanced by the effectiveness of Radio Frequency identification technology.

RFID stands for Radio-Frequency IDentification. The acronym refers to small electronic devices that consist of a small chip and an antenna. The chip typically is capable of carrying 2,000 bytes of data or less.

The RFID device serves the same purpose as a bar code or a magnetic strip on the back of a credit card or ATM card; it provides a unique identifier for that object. And, just as a bar code or magnetic strip must be scanned to get the information, the RFID device must be scanned to retrieve the identifying information.

INTRODUCTION

THE RFID WAY

RFID chip, next to a grain of rice. RFID chips contain a radio transmitter that emits a coded identification number when queried by a reader device. This small type is incorporated in consumer products, and even implanted in pets, for identification.

RFID TagsThe term “RFID Tags” is often used as a general term to describe not only RFID Tags but

RFID Labels and RFID Cards. It is important to know which frequency your RFID solution operates at and what type of product the tag be affixed to before searching for a RFID tag. If your application is to track a metal tote you would want a RFID tag that is designed to be mounted on a metal surface (Metal RFID Tags). If you need additional information on a particular product please click on the “Request Info” link next to the product.

UHF (Ultra High Frequency) Tags, Labels and Cards operate at a frequency of 915 MHz. These types of tags are considered “Passive” – no onboard power source. The supply chain related mandates from retailers such as Wal-Mart, Sam’s Club and Metro require that UHF Passive RFID tags be used. These tags must comply with the international recognized standard set by EPCglobal (UHF Gen 2). UHF frequencies typically offer better range (20-30 ft) and can transfer data faster than LF and HF tags, but they use more power and are less likely to pass through materials.

HF (High Frequency) Tags, Labels and Cards operate at a frequency of 13.56 MHz. These types of tags are also “Passive” – no onboard power source. RFID applications that use HF RFID tags are typically the applications that require read distances of less than three feet. HF tags work better on objects made of metal (RFID Metal Tag) and can work around goods with high water content.

LF (Low Frequency) Tags, Labels and Cards are low-frequency tags (125khz) use less power and are better able to penetrate non-metallic substances. These types of tags are also “Passive” – no onboard power source. They are ideal for scanning objects with high-water content, such as fruit, but their read range is limited to less than a foot.

A significant advantage of RFID devices over the others mentioned above is that the RFID device does not need to be positioned precisely relative to the scanner. We're all familiar with the difficulty that store checkout clerks sometimes have in making sure that a barcode can be read. And obviously, credit cards and ATM cards must be swiped through a special reader.

In contrast, RFID devices will work within a few feet (up to 20 feet for high-frequency devices) of the scanner. For example, you could just put all of your groceries or purchases in a bag, and set the bag on the scanner. It would be able to query all of the RFID devices and total your purchase immediately. (Read a more detailed article on RFID compared to barcodes.)

RFID technology has been available for more than fifty years. It has only been recently that the ability to manufacture the RFID devices has fallen to the point where they can be used as a "throwaway" inventory or control device. Alien Technologies recently sold 500 million RFID tags to Gillette at a cost of about ten cents per tag.

One reason that it has taken so long for RFID to come into common use is the lack of standards in the industry. Most companies invested in RFID technology only use the tags to track items within their control; many of the benefits of RFID come when items are tracked from company to company or from country to country.

RFID Works Better Than Barcodes

Some vendors have been combining RFID tags with sensors of different kinds. This would allow the tag to report not simply the same information over and over, but identifying information along with current data picked up by the sensor. For example, an RFID tag attached to a leg of lamb could report on the temperature readings of the past 24 hours, to ensure that the meat was properly kept cool.

Over time, the proportion of "scan-it-yourself" aisles in retail stores will increase. Eventually, we may wind up with stores that have mostly "scan-it-yourself" aisles and only a few checkout stations for people who are disabled or unwilling.

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.

Next-Generation Uses of RFID?

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 tag’s antenna for short-range communication (up to 10 m). Semi-passive Tags - use an integral battery to run the chip’s 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.

EPC & RFID

The automatic identification of products inside the store would increase the inventory visibility and its accuracy. This will have an impact in four fronts: shrinkage, customer service, stock outs and inventory levels. Decrease shrinkage levels, increase profits. Customer service and the shopping experience can be enhanced by providing complementary applications enabled by RFID. Stock out levels can be decreased as consequences of the increased inventory visibility. Decreased stock outs increase sales and ultimately, increase profits. Decreased stock outs levels also increase the customer service. Finally, inventory levels can be reduced, increasing the ROI.

RFID INFLUENCING ROI & INVENTORY

The projected benefits and impacts of the RFID implementation are summarized in the following table: Supply-chain factor

Current state RFID opportunity and challenges

Type of demand predictable improve leanness capabilities

Contribution margin 5 to 20% early adopters can increase the margin, need cheap tags

Product variety Low (10 to 20 variants per category)

Suitable to track products by pallets or cases

Average margin of error in demand forecast 10% Room to improve forecasting through visibility of inventory and demand.

Average stock out rate 1 to 2% opportunities for reducing stock out and increase margin significantly

RFID systems can be used just about anywhere, from clothing tags to missiles to pet tags to food - anywhere that a unique identification system is needed. The tag can carry information as simple as a pet owners name and address or the cleaning instruction on a sweater to as complex as instructions on how to assemble a car.

Here are a few examples of how RFID technology is being used in everyday places: RFID systems are being used in some hospitals to track a patient's location, and to

provide real-time tracking of the location of doctors and nurses in the hospital. In addition, the system can be used to track the whereabouts of expensive and critical equipment, and even to control access to drugs, pediatrics, and other areas of the hospital that are considered "restricted access" areas.

RFID chips for animals are extremely small devices injected via syringe under skin. Under a government initiative to control rabies, all Portuguese dogs must be RFID tagged by 2007. When scanned the tag can provide information relevant to the dog's history and its owner's information.

RFID in retail stores offer real-time inventory tracking that allows companies to monitor and control inventory supply at all times.

The Orlando/Orange County Expressway Authority (OOCEA) is using an RFID based traffic-monitoring system, which uses roadside RFID readers to collect signals from transponders that are installed in about 1 million E-Pass and SunPass customer vehicles.

COMMON USES OF RFID

Problems with RFID Standards RFID has been implemented in different ways by different manufacturers; global standards

are still being worked on. It should be noted that some RFID devices are never meant to leave their network (as in the case of RFID tags used for inventory control within a company). This can cause problems for companies.

Consumers may also have problems with RFID standards. For example, ExxonMobil's Speed Pass system is a proprietary RFID system; if another company wanted to use the convenient Speed Pass (say, at the drive-in window of your favorite fast food restaurant) they would have to pay to access it - an unlikely scenario. On the other hand, if every company had their own "Speed Pass" system, a consumer would need to carry many different devices with them.

RFID systems can be easily disrupted Since RFID systems make use of the electromagnetic spectrum (like WiFi networks or

cellphones), they are relatively easy to jam using energy at the right frequency. Although this would only be an inconvenience for consumers in stores (longer waits at the checkout), it could be disastrous in other environments where RFID is increasingly used, like hospitals or in the military in the field.

Also, active RFID tags (those that use a battery to increase the range of the system) can be repeatedly interrogated to wear the battery down, disrupting the system.

RFID Reader Collision Reader collision occurs when the signals from two or more readers overlap. The tag is unable

to respond to simultaneous queries. Systems must be carefully set up to avoid this problem; many systems use an anti-collision protocol (also called a singulation protocol. Anti-collision protocols enable the tags to take turns in transmitting to a reader. (Learn more about RFID reader collision.)

RFID Tag Collision Tag collision occurs when many tags are present in a small area; but since the read time is

very fast, it is easier for vendors to develop systems that ensure that tags respond one at a time. (Learn more about RFID tag collision.)

Security, privacy and ethics problems with RFID The following problems with RFID tags and readers have been reported.

Problems With RFID

The contents of an RFID tag can be read after the item leaves the supply chain An RFID tag cannot tell the difference between one reader and another. RFID scanners are very portable;

RFID tags can be read from a distance, from a few inches to a few yards. This allows anyone to see the contents of your purse or pocket as you walk down the street. Some tags can be turned off when the item has left the supply chain; see zombie RFID tags.

RFID tags are difficult to remove RFID tags are difficult to for consumers to remove; some are very small (less than a half-millimeter square,

and as thin as a sheet of paper) - others may be hidden or embedded inside a product where consumers cannot see them. New technologies allow RFID tags to be "printed" right on a product and may not be removable at all (see Printing RFID Tags With Magic Ink).

RFID tags can be read without your knowledge Since the tags can be read without being swiped or obviously scanned (as is the case with magnetic strips or

barcodes), anyone with an RFID tag reader can read the tags embedded in your clothes and other consumer products without your knowledge. For example, you could be scanned before you enter the store, just to see what you are carrying. You might then be approached by a clerk who knows what you have in your backpack or purse, and can suggest accessories or other items.

RFID tags can be read a greater distances with a high-gain antenna For various reasons, RFID reader/tag systems are designed so that distance between the tag and the reader

is kept to a minimum (see the material on tag collision above). However, a high-gain antenna can be used to read the tags from much further away, leading to privacy problems.

RFID tags with unique serial numbers could be linked to an individual credit card number At present, the Universal Product Code (UPC) implemented with barcodes allows each product sold in a store

to have a unique number that identifies that product. Work is proceeding on a global system of product identification that would allow each individual item to have its own number. When the item is scanned for purchase and is paid for, the RFID tag number for a particular item can be associated with a credit card number.

PROBLEMS WITH RFID(Contd..)

RFID tags and barcodes both carry information about products. However, there are important differences between these two technologies:

Barcode readers require a direct line of sight to the printed barcode; RFID readers do not require a direct line of sight to either active RFID tags or passive RFID tags.

RFID tags can be read at much greater distances; an RFID reader can pull information from a tag at distances up to 300 feet. The range to read a barcode is much less, typically no more than fifteen feet.

RFID readers can interrogate, or read, RFID tags much faster; read rates of forty or more tags per second are possible. Reading barcodes is much more time-consuming; due to the fact that a direct line of sight is required, if the items are not properly oriented to the reader it may take seconds to read an individual tag. Barcode readers usually take a half-second or more to successfully complete a read.

Line of sight requirements also limit the ruggedness of barcodes as well as the reusability of barcodes. (Since line of sight is required for barcodes, the printed barcode must be exposed on the outside of the product, where it is subject to greater wear and tear.) RFID tags are typically more rugged, since the electronic components are better protected in a plastic cover. RFID tags can also be implanted within the product itself, guaranteeing greater ruggedness and reusability.

Barcodes have no read/write capability; that is, you cannot add to the information written on a printed barcode. RFID tags, however, can be read/write devices; the RFID reader can communicate with the tag, and alter as much of the information as the tag design will allow.

RFID tags are typically more expensive than barcodes, in some cases, much more so.

Advantages of RFID Versus Barcodes

Credit card companies are claiming the following advantages for contactless credit cards:

The card is faster to use. To make a purchase, the card owner just waves his card over the RFID reader, waits for

the acceptance indicator - and goes on his way. American Express, Visa and Mastercard have all agreed to waive the signature requirement for contactless credit card transactions under $25.If you want to look at the numbers, here is where this technology is taking us in our need for speed (average transaction speeds):

◦ Contactless credit card transaction: 15 seconds ◦ Magnetic strip card transaction: 25 seconds ◦ Cash transaction: 34 seconds

The contactless cards use highly secure data transmission standards. Contactless cards make use of the most secure encryption standards practical with

current technology. 128-bit and triple DES encryption make it nearly impossible for thieves to steal your data.

The contactless card never transmits your card number Instead, the RFID chip within the card creates a unique number for the transaction; if a

criminal intercepted the number, it would be useless even if successfully decrypted. Contactless cards probably use other measuresAlthough this is just speculation, there

are certainly other ways to secure the data on the card. For example, the RFID reader that sits on the merchant's counter may use some sort of special signal, or offer a special set of frequencies, that would be difficult for a thief with an off-the-shelf reader to duplicate.

One additional fact that is known about contactless cards is definitely an advantage for merchants - consumers may feel otherwise. In a 2004 study, the average number of transactions at a retail location rose by about one percent, and the average "spend" rose fifteen percent for all contactless credit card users. So, it appears that there is a correlation between ease of use and total spending. Consumers, take note!

Contactless Credit Card Advantages

The following disadvantages have been noted with contactless credit cards: Contactless cards are more exposed than regular credit cards.

If you want to keep your credit card secure, you could keep it safely in an enclosed wallet or purse; thieves would have absolutely no way to even know if you have a credit card. However, a thief armed with a suitable reader, within a few feet of you, would be able to interrogate all of the cards in your wallet or purse without your knowledge.

Also, a regular credit card transaction is fairly secure; the magnetic strip is swiped at very close range (less than a millimeter). However, a thief with a suitable reader could monitor your contactless card transaction while standing at the counter with you, or just behind you.These concerns have, of course, been carefully noted by credit card companies.

The RFID chip in the contactless credit card responds to the merchant reader with a unique number used for that transaction only; it does not simply transmit the consumer's account number. This number is also encrypted.

It is easier to spend. Studies have demonstrated that consumers will be more likely to spend, and

will spend more frequently, with contactless credit cards. Privacy advocates are particularly concerned about this technology; it is

feared that having this muchc information available "in the open air" will lead inevitably to problems.

 

Contactless Credit Card Disadvantages

Personal identification,id cards,passports Patient identification,safety & medication Livestock, animal identification & tracking Cargo & container identification,security Tracking of high-value assets with real time location

systems Visibility of supply chain objects through product

tracking Transportation payments Money cards Electronic toll collections Wireless commerce Various administration usages

More uses of RFID Applications

Assess your numbering options Assess management of your RFID readers

and devices Assess management of your data Assess integration of your business

applications Assess integration with your trading

partners Assess management of your processes Assess your scaling capabilities and

management of architecture

Steps in applying RFID TECHNOLOGY. PROCESS

— Marks & Spencer attach RFID tags both to entire pallets and individual pieces of clothing. The aim is to raise the efficiency of inventory management.

— Since 2003, Metro Group has been testing the use of future technologies at its Future Store in Rheinberg. Metro reports that the volume of out-of-stock articles has fallen by 14%, and

shrinkage by 18%. — Together with Gerry Weber, Kaufhof is testing an “intelligent” changing room at its

Innovation Center in Neuss. The RFID tag transmits product-specific information which is then displayed on

a merchandising screen at the changing room. — Airbus Industries has adopted a policy of only lending RFID tagged precision tools to

partner companies. Since then, far fewer of the expensive tools have disappeared. — In 2005, the US Department of Defense rebased its pallet logistics management on

RFID tags. — The Vatican Library has RFID-tagged 2 million books and manuscripts. This has

considerably raised the efficiency of inventory and lending procedures since then. — Volkswagen Group transports chassis components in RFID tagged containers. This

enables VW to reduce shrinkage by one third and save EUR 5 million p.a. — In a joint project, the Frankfurt and Tokyo airports are switching their baggage-

handling facilities to RFID technology. It enables the park administration to track missing children.

MILE STONES OF RFID

Five keys to success As discussed, RFID systems differ in respect of many

elements.Despite this variety, we can Identify five factors that determine the potential success of all RFID systems:

— Processing speed — Reading error rates — Observance of data protection and privacy issues — Progress in standardisation — Investment costs

Future technology has long established itself in our everyday lives RFID chips combine the physical world of a product with the virtual world of digital

data. The media celebrate RFID as a technology of the future, but RFID has long been established in our everyday lives. From registering vehicles in road toll systems to timing the performance of individual participants in mass sporting events, many RFID projects have already turned into reality. The inefficiencies in production and inventory management and the struggle to combat crime in all segments of the economy only encourage broader interest in RFID.

CONCLUSION