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Radio Frequency Identification 1
Part One Introduction The goal of supply chain management is to increase organizational effectiveness through the coordination of activities among suppliers, manufacturers, distribution centers, and customers. Technology evolution in the latest years has significantly contributed towards this direction. The implementation of systems such as ERP, SAP, RFID, etc., makes the production and distribution of the products more accurate and efficient. Through technology implementation, the parties of the supply chain manage to accomplish the production and distribution of the right product, at the right time, to the right location, at the minimum cost while sustaining a certain level of quality (Ramsay, n.d.). This paper will explain what exactly the RFID system is and how it works. Moreover, the steps a company should follow in order to effectively implement RFID technology will be discussed. The advantages and the disadvantages of this technology will also be presented. Finally, three real life case studies regarding RFID implementation will be analyzed. RFID RFID stands for Radio Frequency Identification and is an example of automatic identification technologies. Based on the RFID Journal glossary of terms (2009), automatic identification technologies such as barcodes, biometrics, voice recognition, and RFID are able to collect and then enter the necessary data into computers automatically without human intervention. Specifically, RFID uses radio waves in order to wirelessly transfer the identity of either an object or a person. The identity for each item or person is unique and is in the form of a serial number (“What is RFID?”). The purpose of RFID system is to transfer data and provide information regarding the location of a product, its price, its date of purchase, and, in case of a
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human being, personal information. In the following paragraphs it will be discussed in further detail how this system works, its advantages, and its drawbacks. Typical RFID tags consist of tiny computer chips, called microchips, which are placed on the package of the product. Microchips storage capacity is 2 kilobytes, or less, of data regarding current location of the product, date of shipment, date of manufacture, destination point, etc. These microchips are surrounded and connected with an antenna which absorbs the electromagnetic energy when reader devices scan them. Hence, in order to access the data stored in the microchips, a reader and a computer system are necessary. The reader is an electronic device which consists of one or more antennas that can transmit radio waves to the microchips and then receive back the identification number and the other information stored in the microchip. Finally, the reader sends the information in digital form to a computer system (“What is RFID?”). These microchips can send information to reader devices that are up to 30 feet away or more (Albrecht, n.d.). RFID has been used for more than one decade by thousands of companies. Initially, due to its high cost, its usage was limited. RFID cost was bearable in just in time manufacturing companies where tracking a high volume of products is essential and contributes to the system’s profitability, and in cases where RFID tags could be reused. The cost was approximately one dollar per tag. Hence, in open supply chains the cost of RFID was not sustainable (“What is RFID?”). Nowadays, RFID tags cost from 20 to 40 cents, but research is being made in order to reduce the cost to 5 cents. The lower cost attracted many companies such as Wal-Mart, Tesco, and Metro to implement RFID technology. RFID tags are placed on the products a company owns and then supply chain partners get the information they need via the internet through a secure network. In addition, the U.S. Department of Defense inserts RFID tags in U.S passports
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for identification and safety reasons. The reading distance for the tags placed on passports is about 30 feet. Companies that specialize in technology related to supply chain management conducted studies about the successful RFID implementation. Some companies assert that there are fourteen steps for successful implementation, while others assert twelve or ten. Regardless of the number, these companies highlight the following steps. These steps will be further analyzed in this section. 1. Training: As in every innovative implementation the first step is training. Engineers, managers, mechanics, and every employee whose job requirements are affected by RFID should be appropriately trained. Training should be adjusted to employees’ job duties. For example, operations managers should be able to answer questions such as: “Should linear or circular polarized antennas be used?” and “What is the difference between passive backscatter and inductive-coupling?” On the other hand, financial managers should focus on cost, savings, return on investment, etc. (Sirico, n.d.). 2. Team creation and operations/system analysis: A company should create teams that will focus on the design, process, and evaluation of the project, and the planning and development of a strategic plan regarding the implementation of RFID technology. The team should identify the needs the company has. In other words, the team can identify the inefficiencies the company wants to eliminate through technology implementation and the goal of this implementation. 3. Radio frequency product profiling and tag/ reader/ equipment selection: In this phase using the appropriate software and other means, the company should determine which needs should be covered by which characteristics of RFID products. In other words, the
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company should determine which RFID product features will better fit with the company’s and the supply chain’s needs. For example, passive RFID or active RFID should be chosen (“Twelve steps to successful RFID implementation”). Moreover, the selection of tag, reader, and peripheral products is essential for the efficiency of the RFID system. Therefore, the selection should be done after a detailed analysis of the special needs of the company and of the whole supply chain. For example, some significant criteria for the readers’ selection may be their distance ability to transmit and receive data, the amount of tags they can scan per second, etc. Significant criteria for the
selection of the tag may be the required read range, the read/write capability, the weather conditions, etc. (“RFID tag and antenna services”). 4. Infrastructure and controls: Though changes and/or adjustments in the infrastructure are required, consistency should be ensured. Control is needed to ensure the proper integration (“Twelve steps to successful RFID implementation”). 5. Implementation: After the training has been successfully completed, the operations analysis has been conducted, and the selection of the RFID products has been accomplished, it is time to integrate the outputs of the above steps in order to make the system work. 6. Validation: Criteria for the effectiveness and productivity of RFID implementation should be set. Once the system has been installed and has been working, its effectiveness and success needs to be measured. 7. Local and remote data management: Internal management systems, as well as information technology systems such as ERP and WMS, are useful tools to facilitate control and provide real time feedback. By receiving, filtering, and evaluating data,
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managers will evaluate the effectiveness of the system in order to be able to make additional changes, readjustments, etc. 8. 24 x 7 x 365 support: Round the clock support is essential for the effectiveness of the system since transportation and logistics services are non-stop operations (“Twelve steps to successful RFID implementation”). 9. ROI, operational verification and refactoring: When a company decides to make a new investment, its main goal is to increase its ROI. In other words, the company needs to verify if the investment is adding value and if the investment has helped the business to achieve its objectives. In addition, the company needs to implement a non-stop system of monitoring and collecting data. Using the collected data, managers will stay up-to-date and will be aware of inefficiencies, delays, etc. Changes and improvements are essential for the long-term acceptance and benefit of the system. Nowadays, technology changes rapidly and if a company wants to be effective and competitive, it needs to stay up to date and make the necessary adjustments, changes and improvements. RFID Advantages RFID technology has many advantages and in some cases it is more efficient than other automatic identification technologies. For example, with RFID technology, unlike barcodes, there is no need for a person to scan the tag since this can be done automatically. Moreover, with RFID technology, each particular item of product has its own identification code while barcodes are the same for the whole branch of a product. To illustrate, all Coca-Cola cans have the same bar code, for example, a can in Ohio has the same code as a can in Florida. On the contrary, with RFID each can has its own identification code. Hence, a supply chain partner knows the exact location of a specific can. In addition, reader devices can access the information on the RFID
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tags from a big distance and regardless of the weather conditions. For instance, reader devices can scan a product from a distance of 30 feet to 300 feet away, even under rain or snow conditions. Furthermore, RFID readers are much faster than barcode readers. RFID codes are better protected since they are rugged and electronic parts are covered by plastics, unlike barcodes that are printed in the package of the product and sometimes the code can be deteriorated. One more advantage of RFID is that information on the chip may change since information can be added or deleted, based on the needs. Barcodes do not offer this alternative (“Advantages of RFID versus Barcodes”). Later on, the paper will particularly focus on the benefits of RFID technology in the companies’ and supply chains’ efficiency. Part Two Case Studies The number of companies that take advantage of RFID systems continuously increase. In fact, not only companies such as Wal-Mart, Dell, Levi Straus and Co., and Gillette implement RFID technologies, but also hospitals and governments. In hospitals it is used primarily to track patients, doctors, and expensive equipment in real time, control the pharmacy inventory, etc. (Carr, A., Zhang, M., Klopping, I., Min, H., n.d.). Governments use this system mostly for military, identification, and security reasons. In the following paragraphs, the RFID implementation by three different companies will be discussed. Case Study One: Perfecting Just-In-Time Production Johnson Controls business manufactures car and truck seats for big automakers such as General Motors, Toyota, Ford Motor Co., and Daimler Chrysler (Collins, 2003). The company’s mission is to deliver to automakers what they want, when they want it. For example, Johnson Controls’ plant, Livermore, ships approximately 1,500 seats daily doing more than 20 deliveries
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per day, to the New United Motor Manufacturers (NUMMI) production plant, which manufactures Toyota and General Motors cars. The manufacturing process in the auto industry is based on an assembly line; hence, even a little mistake in the features of a seat or in the type of the seat will cause the car manufacturing plant to be interrupted for several hours. Thus, the productivity will be reduced and the cost will be increased. The implementation of an ID system is required in this case. Managers at Johnson Controls initially thought of implementing a barcode system. This implementation would be inefficient since due to the manufacturing process there is a high possibility that the labels would get dirty and/or damaged. Hence, the barcodes would not be able to be read at all, or they could be misread. RFID is the best solution, since its tags are protected by hard plastic covers. The advantages gained from the implementation of RFID are discussed in the following paragraph. For both parts, Johnson Controls and the auto industry, accuracy is of great importance. Through the implementation of an RFID system, accuracy rate for Johnson Controls is 99.9%. RFID makes possible for the supplier to deliver the correct number and type of seat in the exact order demand. Moreover, the process of producing the range of seat has been smoothed and human errors have been eliminated. At the same time, the supplier is able to meet the demander’s requirements for just-in-time services and supplier receives seat orders every hour. The orders consist of a list of serial numbers that assigns the quantity of the seats, the type of the seats, and the exact sequence which seats should follow in order to directly enter the production line as soon as they arrive at the car manufacture. In addition, the RFID implementation provided time saving and flexibility not only for the seat production function, but for the car industry as well.
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Case Study Two: Logistics Gets Cheaper by the Yard NYK Logistics is a company which is responsible for the shipment and distribution of a high volume and variety of products including consumer and industrial goods, software, food and beverages, etc. (Maselli, 2003). NYK Logistics serves approximately 1,000 companies globally. The distribution center at Long Beach, California, manages approximately 50,000 inbound freight containers and 30,000 outbound trailers per year. NYK Logistics used to track its containers and coordinate its activities manually. To be more specific, when a truck arrived in the yard, an employee needed to manually enter information regarding the truck and its cargo, including where the truck should park, drop the cargo and then pick up another cargo for the next shipment. However, if a parking spot was occupied by another truck, the truck had to be relocated based on the driver’s free will. Hence, employees on the gate had no accurate information on where trucks were located. The situation was even worse during peak seasons, even though the company was hiring seasonal employees. The consequence of the above was a number of organizational problems that led to inefficiencies and delays. Therefore, the company decided to implement RFID technology. After the implementation of an RFID system, the NYK Logistics is able to know the exact location of every truck and every container in the yard. The company is able to monitor 1,100 parking spots and 250 dock doors in real time, 24/07. The employee at the gate scans the license of the driver as he enters the yard. Then, a tag is attached to the cargo; hence, the yard operators can locate the cargo at any time. Next, the system prints a ticket to the driver giving him direction on where to park, drop the cargo, and pick up the cargo for next shipment. If, despite the directions given, the driver parks in another location, the system will recognize that and it will be updated automatically, assigning the new empty spots for the next drivers. At the same
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time, NYK Logistics monitors the driver’s behavior, and if he systematically does not follow the exact parking directions, he will be charged. As the driver exits the yard, the tag is removed and it can be reused. After RFID implementation, the above procedure eliminated the check-in time by half. Moreover, the new system has been integrated with the company’s system, which is a custom database that provides information regarding distributor, content of the container, and shipping notices. Pople, NYK Logistics’ manager, mentions that “Not only do we know the name and the identity of the unit, we also know its DNA. We can see the yard and the containers”(p. 2). Other than the previously mentioned information the system provides, it also gives a list to the supply partners regarding the carrier costs. Based on the list, the system will suggest the least expensive available carrier first and will suggest the most expensive only when no other carrier is available. In this way, the supply chain partners reduce their shipping costs. The advantages of the RFID system implementation for both NYK Logistics and its supply chain are significant. NYK Logistics has cut its costs and has increased its operational efficiency. The time a trailer spends in the yard has been decreased by 20 to 40 percent; hence, the supply chain average turn time has decreased, increasing efficiency. The average turn time in the yard used to be 10 hours, but after RFID implementation the average turn time is usually 6 hours and sometimes can reach 8 hours. The two hour decrease on the average turn time means that there are 35 to 60 parking spaces saved. The fact that the yard is well organized improves the speed of the operations, thus NYK Logistics and the whole supply chain save money. Moreover, the time spent for tracking containers has also been decreased and the possibility of making mistakes in the container selection has been significantly eliminated even during peak seasons. In addition, employees’ productivity has been increased and the company does not need to hire seasonal personnel during the busiest seasons anymore. One of the most important advantages of the
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system is that it has been integrated with the customer’s system; hence, the communication with its carriers and the other logistics partners has been improved. The system sends e-mails to all the relevant parties to inform them about the shipments and the containers. Every day three emails are sent automatically to the relevant parties. Another significant advantage of the system is that the company and its partners have reduced its detention fees levied by the shippers. Shippers can charge detention fees if empty containers are not on time at the dock. The system provides the company and its partner with the following information: what is inside the trailer, which containers are empty, which dock doors have trailers, how long the trailers stay at the docks, which containers are “hot loads”, or of high priority, etc. Since the supply chain partners have this information, they can manage better the flow of trailers and containers. Further, since the transactions have all been made automatically, it is easier and more accurate for NYK Logistics to measure its ROI and keep track of its financial transactions. Case Study Three: Boeing Finds the Right Stuff Boeing Wichita is a facility that has the size of a small city. In this facility, the building of commercial airplanes takes place (Anderson, 2003). There, Boeing’s employees design, fabricate, and assemble fuselage structures, struts, and engine parts for the majority of Boeing’s commercial jetliners. The Military Development and Modification Center also operates in the same facility. Overall, this plant employs approximately 15,000. Each one of them, in order to successfully accomplish his/her job mission, needs to have the right tools or parts, at the right time. Employees work in a highly complex environment since each plane consists of tens of thousands of parts that should be assembled in a well organized process. Every flow of the parts should be followed by a flow of the necessary documents. Moreover, each part has to be tracked separately based on the aviation regulations. Losing track of a part means that the production will
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be delayed. As a consequence, the company needed a system for tracking parts and their documents as they move through the plant. It is of great importance for Boeing to be able to track transportation vehicles, material handling equipment and other assets located in the plant. At the same time, keeping track of the paperwork that accompanies the parts as they move through the production process is also essential. For the successful completion of this project, two different teams were created. The teams had to perform research and face challenges not only prior the implementation, but also through the implementation. For example, some pilots didn’t perform as advertised and had to shut down. Due to the numerous challenges and the complexity of the project, the teams gave priority on implementing a system for tracking the paper work of work in process. Later on, the company will implement an asset tracking system. As previously mentioned, tracking paperwork is just as important as tracking assets. Documents that accompany parts include information such as Boeing’s certification of the parts, Federal Aviation Administration requirements, quality assurance information, etc. All these documents are put inside a plastic pouch and follow the flow of the parts. The system can read the tag from a distance of 20 feet regardless of the orientation of the tag. Terry Alderson, the VP of Aerospace and Government at Boeing, explains how this system works: “the RFID supplier writes a serial number into each tag at the factory. The supplier attaches a tag to the Boeing purchase order and then sends us an advance shipping notice over the Internet and lets us know the serial numbers associated with the parts. That information is stored in our database. When the supplier delivers the parts, they are scanned automatically as they come into our receiving area. The system matches the parts to the purchase order and confirms that the company got all the items ordered. The system also sends information to all of our enterprise resource planning
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(ERP) and legacy systems.” (p.3) In addition, the company had to deal with the integration of the data from the readers with backend software applications. The data needed to be formatted in order to be sent to the legacy systems. This procedure was the most time consuming process of the project. Though there were challenges, after the systems implementation there is 99% accuracy on the tag readings. Moreover, Boeing labor costs have been decreased. Line managers have become more efficient since their job is less complex now. Further, all managers have immediate access to the information they need in order to perform their duties. Since the system is efficient, the company added more shops to the tracking process. Boeing is willing to implement a system in order to track “on-load” work. As it was previously mentioned, in the facility there is also the Military Development and Modification Center. Boeing decided to install 20 RFID readers in that part of the facility in order to track certified tools in two large hangers. Each tool is being tagged so employees can check through the computer where tools are located in the facility. This system is going to expand so it can also track assets. Disadvantages of RFID In the previous paragraphs, we discussed in detail the advantages of RFID technology as well as the benefits companies and their supply chain gain from RFID implementation. However, RFID system is not perfect and has some drawbacks. First, RFID technology has a high cost mostly related to the cost of tags, but also to other components, software and support personnel. Therefore, many companies cannot afford to make such an investment. Tag producers try to drop the cost per tag to 5 cents, so it would become easier for many companies to implement RFID. Second, there are some technical drawbacks. For instance, passive tags (tags that have no on
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board power and they draw power from a reader) cannot be read near metal or liquid, since metal tends to reflect the RFID waves and liquids tend to absorb the RFID waves. Moreover, when many tags are being read simultaneously, collisions may occur (“RFID frequently asked questions,” 2004). Another technical issue is that tags may be damaged by static discharge or high power magnetic surges (“Advantages and disadvantages of RFID”). Finally, there are some social concerns. Consumers worry that privacy issues arise from RFID implementation (Farragher, 2004). For instance, Benetton’s and Gillette’s customers protested against RFID implementation on these brands’ products. Using slogans like “I would rather grow a beard” or “I‘d rather go naked,” consumers were calling people to boycott these products. They claimed that through RFID-delivered data, their individual item purchases can be monitored, and then the customers can be subject to spam advertisements. In order to avoid misunderstandings with customers, many American and European countries implement RFID technologies only at warehouses and “back end” operations and not at the retail or “shelf” level. Though there were some concerns whether RFID technology is dangerous for health, RFID specialists verify that RFID waves are similar to AM and FM types of signals; hence, they are not harmful (“RFID frequently asked questions,” 2004). Conclusion To sum up, RFID which stands for Radio Frequency Identification is a system that consists of tags, antennas, reader devices and computers. RFID is used by business, hospitals, governments, etc., in order to wirelessly transfer data regarding the identity of an object or a person. RFID is superior to other automatic identifications such as barcodes. The basic advantages of this system is that there is no need for a person to scan the tags, each item of a product has its own identification code, reader devices can access the information on the RFID
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tags from a big distance, RFID readers are fast enough, and RFID chips are rewritable. The most important drawbacks of the system are its cost and the fact that RFID passive tags tend to reflect waves when they are near metals and tend to absorb waves when they are near liquids. In addition, static discharge or high power magnetic surges may damage the tags. Further, when an increased number of tags are being read simultaneously, collisions may occur. Despite these
disadvantages, companies that implemented RFID support that they have increased their ROI and their profits. Moreover, they have become more efficient as they save both money and time. Research shows that RFID sales for supply chain will be increasing by 38% annually (Carr, A., Zhang, M., Klopping, I., Min, H., n.d.).
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Appendix RFID Tag
Source: http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=34100 RFID Chip
Source: http://www.epnonline.com/lib/image.php?uri=/content/USER/scope/.bin.WEB.1199881566722.j pg
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RFID Handheld Reader
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RFID at Gillette Packages
RFID at Passports
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References Advantages and disadvantages of RFID. ID Automation. Retrieved March 22, 2009, from http://www.idautomation.com/rfid_faq.html#RFID_Advantages Advantages of RFID versus Barcodes. Retrieved March 20, 2009, from http://www.technovelgy.com/ct/Technology-Article.asp?ArtNum=60 Albrecht, K. What is RFID. Retrieved March 20, 2009, from http://www.spychips.com/what-is-rfid.html Anderson, T. (2003). Boeing finds the right stuff. RFID Journal. Retrieved April 13, 2009, from http://www.rfidjournal.com/article/print/596 Carr, A., Zhang, M., Klopping, I., Min, H. The adaptation of Radio Frequency Identity Technology in hospitals. Retrieved April 12, 2009 from http://www.osra.org/2007/powerpoints/carrzhangkloppingmin_pp.pdf Collins, J. (2003). Perfecting Just-In-Time logistics. RFID Journal. Retrieved 11, April, 2009, from http://www.rfidjournal.com/article/print/530 Farragher, M. (2004). Practical use of RFID. Retrieved 12, April, 2009, from http://www.firstfocus.eu/presentations/RFID_presentation_en.pdf Maselli, J. (2003). Logistics gets cheaper by the Yard. RFID Journal. Retrieved April 13, 2009, from http://www.rfidjournal.com/article/print/617 Ramsay, G. Using modeling and optimization to achieve better supply chain planning. Retrieved April 10, 2009, from http://www.maximalsoftware.co.uk/slides/Atl03Profitpt/sld005.htm RFID frequently asked questions. (2004). RFID Factory. Retrieved March 22, 2009, from http://www.rfidfactory.com/faqs.html RFID Journal glossary of terms. (2009). RFID Journal. Retrieved March 20, 2009, from http://www.rfidjournal.com/glossary/12
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RFID tag and antenna services. Tracient Technologies. Retrieved March 22, 2009, from http://www.tracient.com/rfid-tag-services.html Sirico, L., Choosing RFID training that is best for you. Retrieved March 22, 2009, from http://rfidwizards.com/index.php?option=com_content&task=view&id=332&Itemid=173 Twelve steps to successful RFID implementation. Venture Research Inc. Retrieved March 22, 2009, from http://images.vertmarkets.com/crlive/files/downloads/a42f45e4-04da-472b-8091fb42c9397472/VentureTwelveSteps2008Update.pdf What is RFID? RFID Journal. Retrieved March 20, 2009, from http://www.rfidjournal.com/article/view/1339/1/129
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