RFID, a great potential for Operations and SCM

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RFID technology increases supply chain visibility, improves inventory management, quality control, and enhances relationships with suppliers and customers. It could enable small, agile businesses to compete with larger, more bureaucratic ones that may be slow to adopt this new technology. RFID could lead to great potential benefits for Operations and Supply chain management like long-term competitive advantages for more than one company in the supply chain.

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RFID, a great potential for Operations and SCM

  1. 1. RFID: The Technology and its Applications in Operations and Supply Chain Management 1 RFID: The Technology and its Applications in Operations and Supply Chain Management Georgi V. Kostadinov Hristo B. Kolev AUBG1, EMBA2 program 1 2 American University in Bulgaria Executive Master of Business Administration
  2. 2. RFID: The Technology and its Applications in Operations and Supply Chain Management 2 1. Abstract: Purpose: Investigate trough actual, real examples in different industries and write down a paper about RFID technology (Radio frequency identification) and its applications in Operations and Supply Chain Management. Methodology/approach: The present paper is based on academic reviews about the topic and practical cases of adoption/implantation from different industries like Aerospace; Defense; Retail; Healthcare; Manufacturing; Packaging and Tourism. Findings: RFID technology increases supply chain visibility, improves inventory management, quality control, and enhances relationships with suppliers and customers. It could enable small, agile businesses to compete with larger, more bureaucratic ones that may be slow to adopt this new technology. RFID could lead to great potential benefits for Operations and Supply chain management like long-term competitive advantages for more than one company in the supply chain. 2. RFID General description of the Technology RFID (Radio frequency identification) is an automatic identification method that can store and remotely retrieve data from a tag, attached or incorporated into a product, animal, people, etc.RFID technology enables business to identify, track and monitor in real time any object in the supply chain that is within the range of the tag reader. The most important components of the RFID systems are:
  3. 3. RFID: The Technology and its Applications in Operations and Supply Chain Management 3 Transponder/RFID tag: integrated circuit and an antenna that project information or other data to network-connected RFID reader, using radio waves. There are 2 different tag types: o Passive tag: these don’t have any power supply. They receive electric signal, strong enough to generate and transmit information. These tags perform on short distance (up to 2 meters), they are small enough to be integrated in a sticker, and cost about $.70. o Active tag:these tags havetheir own on-board power supply (battery), meaning that is more reliable and could send more powerful signals. This kind of tags are very reliable in a difficult for the radiofrequency environments such as water or steal. Active tags are expensive (could cost up to $70) and could perform on distances up to 500 meters. RFID transceiver: is composed of antenna, transceiver and a decoder. The reader sends periodical signals in order to detect nearby tags, once the signal is detected, the receiver is supposed to extract data and send the date to the processing system. Middleware RFID: a computer software that provides services that enable communication and management of data in distributed applications. The adoption of RFID technology could be of a great benefit for the entire supply chain, leading to competitive advantages in more than one company in the chain. In order to adopt and implement the technology, the different companies implied in the process should form alliances in order to assess their actual capabilities and identify where RFID could have greater impact.
  4. 4. RFID: The Technology and its Applications in Operations and Supply Chain Management 4 3. RFID and its applications in Operations&Supply Chain Management Radio Frequency Identification Device could be applied virtually in any operations and deliver efficiency and effectiveness. 3.1. Aerospace Airbus applies RFID in their part marking across all of its aircraft family. After the successful pilot of implementing RFID on one of their aircrafts A350 XWB, staring 2013 Airbus committed to implement this to all of its aircrafts. The new technology will cover around 3000 serialized, replaceable, repairable parts with a limited lifespan. Airbus is committed to continue innovation and improvement, with this move they are targeting to reduce the cost related to manual intervention involved in quality monitoring and maintenance. As an example in past each of the several hundred life jackets and seats within airplane cabin would need to be manually checked and noted which took around 14 hours for single A330 FAL plane. With the new technology single person would be able to perform the check in 26 min. In parallel with this Airbus is working closely with their suppliers to make sure all the RFID system components are interoperable in for all actors in the value chain. To support the value chain Airbus has created a new, state of art set of operational processes that cover the lifecycle of the aircraft, using RFID for such tasks as supply chain logistic, tooling management and work in process management. Oc. 29 2012 – Southwest Airlines Cargo has approved the temperature enabled RFID device to be used on its aircraft. Such devices are critical in situation when temperature should be continuously monitored and recorded for temperature sensitive goods. By having such RFID the goods temperature can be checked remotely without need to open the packaging. This new technology is marketed by Cold Chain Technologies which provides passive containers relying on cold gel packs suitable for Southwest airplanes which do not maintain refrigerator containers
  5. 5. RFID: The Technology and its Applications in Operations and Supply Chain Management 5 due to the size and weight. The solution is passive RFID which gets activated by wake-up signal from handheld device, having an active RFID could be concern from a regulation prospective.(Roberti 2012) 3.2. Defense US Navy tests show Visible Assets readers – tags can operate at zero safe separation distance to ordnance. Navy maintains sites at which stores bombs and ordnance that are denoted by what is known as electro-explosive device EED or electrically initiated device EID. Electromagnetic radiation EMR produced by the RFID could create potential danger when around the EED or EID as malfunction or premature detonation – this is known as Hazards of Electromagnetic Radiation to Ordnance HERO. Visible Assets, manufacturer of 134kHz tags and readers has announced portable handhold device first to be certified by US Department of the Navy with a zero Safe Separation Distance SSD for Ordnance. Their devices were tested successfully in specialized Navy center after which Department of Defense approved the tags as zero SSD from HERO and with no HERO restrictions. This is first time of implementing RFID technology in such environment which will guarantee safety maintenance of explosive and ordnance. Canada Foreign Affairs used RFID to track assets worldwide. Department of Foreign Affairs and International Trade DFAIT has adopted RFID to keep track and perform audits on house appliances on its 170 locations worldwide. Whenever an employee moves to new government location DFAIT conducts an audit to determine which assets are within that house, as well their conditions. Until recently this task was performed manually absorbing great amount of time to tag the inventory and assess the condition. At each location DFAIT’s office staff attaches RFID to assets which on average could be around 130 items within a residence. Three type of tags are used – woven tag for rugs that can survive wash, adhesive tags or metal
  6. 6. RFID: The Technology and its Applications in Operations and Supply Chain Management 6 mount tags. SAP system stores the data of each tag location then the operator could easily upload the data to handheld device and go for check the residence. This is allowing to keep low inventory at the local office of DFAIT thus reduce the costs and increase the satisfaction of new residence. 3.3. Consumer Packed Goods Omni-ID printable on-metal RFID labels. Omni-ID solution is targeting one of the key differences between RFID and barcodes – size and ease of use. With the new technology of Omni-ID achieved the thinnest RFID by 0.8 cm and easily printable on thermal bar-code printer and then affixed to an item via built-in adhesive. This is passive tag which can be mounted over metal or liquid which ads even more flexibility over the traditional dipole label. (Swedberg, RFID Journal 2012)
  7. 7. RFID: The Technology and its Applications in Operations and Supply Chain Management 7 3.4. Healthcare Palex Medical, a health-care technology firm based in Barcelona is marketing new RFID solutions to help hospitals manage their inventory of prostheses and other medical assets. Company developed two solutions Dyane smartCabinet and Dyane smartKanban which are currently implemented in Hospital UniversitariSant Joan de Reus. The Dyane smartCabinet is designed to monitor and track the usage of high-value medical items hold behind close door. While Dyane smartKanban is monitoring the usage of daily low-value, frequently restock supplies such as gloves of gauze. The access to Dyane smartCabinet is maintained by secure access utilizing biometrics or special RFID card or via password. After authentication user is offered several options as to return equipment, search for product, check availability of certain surgical kit etc. User gets what is needed then the system close the door and perform scan on the RFID of the remaining inventory. Dyane smartKanban is utilizing the JIT approach by monitoring the usage of low-value appliances so those can be restock once certain minimal level is reached. RFID technology is used in drug tracking, providing granularity of monitoring when pills are removed from a vial or blister pack. During a clinical trial it is crucial for data collection if the right dosage has been taken by the patient. Although patients may claim that they have taken a medication at specific times the information supplied could be inaccurate. To overcome this problem Information Mediary Corp. developed RFID which monitors pills taken from blisters and bottles then transmits this information to reader trough Near Field Communication NFC enabled phones to monitor medication usage in clinical trials. (Swedberg, RFID Journal 2012)
  8. 8. RFID: The Technology and its Applications in Operations and Supply Chain Management 8 3.5. Manufacturing RFID tags support the JIT automotive manufacturing in Toyota plant in Princeton IN. In order to facilitate the Toyota JIT system or Kanban, material flow should be tightly monitored and coordinated between suppliers and final vehicle-assembly line. For example barcode tags and RFIDs ensure that seats for each vehicle are together and move on pallets trough various stages of assembly. (Hallett 2004) By using strong market position as of Jan1 2005, Wal-Mart requested all of its suppliers to provide RFID on their products. This created great challenge to suppliers manufacturing as implementation was supposed to happen over running operations. Some of the suppliers implemented the RFID at the end of their manufacturing process just to satisfy the requirement of Wal-Mart but not taking any of the benefits. Others took it seriously and embedded RFID trough the entire process. Wells’ Diary took the second option and implemented RFID at full scale of its operations. At that moment there was not enough information around this solution and Wells Diary was supposed to perform trial and error to find the best solution. This exploration gave them great knowledge around RFID and how to apply it from the harvesting phase until store shelf. 3.6. Packaging Argentina based manufacturer Promedon, supplies medical implants and prostheses has adopted RFID to increase efficiency and quality of its shipments. By implementing new technology Promedon efficiency of shipping department reduced from 1h to 15 min. Accuracy is especially vital when it comes to shipping goods to a hospital prior to surgery, the company reports, since an error can mean that surgeons may not have the necessary materials during an operation. The solution, installed in August of this year, consists of Tageos passive EPC Gen 2 ultrahigh-frequency (UHF) RFID tags, which are applied to items within the product line. As
  9. 9. RFID: The Technology and its Applications in Operations and Supply Chain Management 9 each item arrives at the warehouse from the manufacturer, a tag is attached to its packaging. Xerafy Metal Skin tags are utilized for products composed mostly of metal. (Swedberg 2012) 3.7. Retail - Department stores J.C. Penney Aims To Be 100 Percent RFID Tagged By February 2013Speaking at FORTUNE'S Brainstorm Tech conference in Aspen, Colo., J.C. Penney's CEO announced that he aims to have every piece of J.C. Penney's merchandise tagged by February 1, 2013. If J.C. Penney has confidence in its data, and has confidence in its associates' ability to quickly locate merchandise, then one can easily envision scenarios where shoppers can request that items on the screen be pulled for them to try on. According to British consultancy Envision Retail, shoppers who use fitting rooms are 71 percent more likely to make a purchase than those who merely browse. The size of their purchase is usually twice as large, and if they received service while in the fitting room, their purchases are typically three times larger. Of equal interest will be the impact that this expansion of RFID has on J.C. Penney's omni-channel fulfillment plans. In-store pick up is not currently an option available to its customers. By operating with such a large volume of tagged merchandise in its stores, J.C. Penney is positioning itself to be the first major department store retailer to leverage RFID to dramatically enhance its loss-prevention capabilities. Self-reinforcing dynamic has been set in motion in the department-store channel that is causing RFID adoption to snowball. Several brands that, up until now, have only been tagging for Macy's, J.C. Penney and/or Wal-Mart have reached the point at which it is more economical for them to tag entire product lines -- even merchandise destined for retailers that have yet to require RFID tagging. (KAMEL 2012)
  10. 10. RFID: The Technology and its Applications in Operations and Supply Chain Management 10 3.8. Hotels Management of hotels is looking for efficiencies and with the latest technology of RFID attached to employees uniforms and linens are monitoring very essential data for current stage and need for replacement. This is giving the opportunity to reduce stock levels and control the overall need to wash linens. The chips are designed to track the movement of uniforms or linens to and from washing areas in order to cut down on unnecessary washes, lengthening the life of most fabrics. The software packaged with the chips allows the hotel to build an individual history with items, allowing it to track them based on the number of times they have been washed and worn and replacing them as they wear down. It also allows the hotel to keep track of loaned uniforms between employees, and better maintain a uniform quality of items.(Mest 2012) References: Hallett, Joseph. Vision Systems design. Oct 1, 2004. http://www.visionsystems.com/articles/print/volume-9/issue-10/features/quality-control/scanning-and-rfid-guidecar-assembly.html (accessed Dec 2, 2012). KAMEL, JOHNPIERRE. Pumping Up The Volume: RFID In The Apparel Industry. Exclusive report, Apparel Magazine, 2012. Mest, Elliott. "Hotel Operations." Electronic integration with housekeeping, Oct 22, 2012: 22. Roberti, Mark. RFID Journal. Nov 12, 2012. http://www.rfidjournal.com/article/view/10116 (accessed Dec 2, 2012).
  11. 11. RFID: The Technology and its Applications in Operations and Supply Chain Management 11 Swedberg, Claire. RFID Journal. Nov 16, 2012. http://www.rfidjournal.com/article/view/10130 (accessed Dec 2, 2012). —. RFID Journal. Nov 14, 2012. http://www.rfidjournal.com/article/view/10124 (accessed Dec 2, 2012). —. RFID Journal. Nov 14, 2012. http://www.rfidjournal.com/article/view/9909 (accessed Dec 2, 2012). Stevenson, William J., 2012 "Operations Management: Theory and Practice"

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