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  1. 1. Günter Kahr ( ) Graz, am 24.05.2010 Topic: The justification of RFID-technology in apparel and pharmaceutical industry 1 Introduction Continually decreasing but not discontinuous reductions in costs, performance improvements and the development of standards will enable radio frequency identification (RFID) to be used broadly in enterprise processes. This will change the course of business during the next years because the first big pilot implementations can be seen on the market. However, RFID tags will not totally replace bar codes at any industry segment. The two will coexist, with users applying the right data collection technology for the right process situation. RFID is not the answer to every data collection problem a business may encounter, but there are especially two industry segments which seem to have a real benefit from the technology. These are: • the Apparel industry and • the pharmaceutical industry Both industry segments have quite good prerequisites because of their products, at apparel there are no big metal materials which makes identification much easier and at pharmaceutical there are products which are really worth to be tracked. The most important thing that is missing from RFID, however, is a broad understanding of the business applications of the technology and a recognition that each application of the technology will mature independently. That is, technical feasibility which has been established for a variety of applications proven in some pilot installations, but a real business justification for the use of RFID significantly lags behind technical capabilities in many applications. Page 1/11
  2. 2. Günter Kahr ( ) Graz, am 24.05.2010 The motivation to implement RFID-technology is quite different in those industries: for apparel it is of high interest to optimize the supply chain from the manufacturer which is very often somewhere in Asia across the distribution centers to the store somewhere in Europe. For the pharmaceutical industry it is of high interest to prove the originality of their products. RFID can be a good technology to support them by their anti-counterfeiting initiatives and to fulfill new upcoming legal requirements for tracking and tracing drugs. 1.1 RFID's Impact on Business RFID will not totally replace bar codes — Calling RFID "the next bar code" or "bar codes on steroids" caused the RFID community to hyperfocus on taking their established bar-code-based business processes and "supercharging" them with RFID tags. This has turned out to be unsuccessful, and the RFID community is recalibrating its expectations with respect to how RFID will change the business landscape. RFID will not follow a monolithic technology adoption life cycle across all applications - Nonetheless, RFID will not move in lock step across applications of the technology or industries where it can be deployed. However, just because RFID might become feasible in hospital supply applications in 2007 doesn't mean that it will be applicable for any other industry or application at this point. Some "spillover" effects occur from one application to another, but they are small and swamped by the massive amount of process engineering and technology development that must take place for any one RFID application to mature. Some typical new RFID applications which we can be found as implemented pilot installations in the field focus to solve or improve business processes problems like the once listed here: • Unstructured Business Processes Page 2/11
  3. 3. Günter Kahr ( ) Graz, am 24.05.2010 • Trust Shifting • Durability • Mismatch of Personal Incentive • Mobile Asset Management • Supercritical Processes • Inverse Location Scenarios • RFID as a Low-Cost Data Transmission System The aim of the dissertation is to prove the economical justification of RFID-technology in the two branches based on new and innovative business processes and applications, this hypothesis shall be confirmed to be true in case studies. A comparison to the worldwide used and established EDI (electronic data interchange)-technology is possible, here it was also important to define the relevant and possible processes, the format of the data correlating to the item flow and to clearly bring up the business benefits for the participating partners. The dissertation should be handsome background information for decision makers in the defined industries and a guideline for new possible business applications and services based on RFID. 2 Objectives The main objective is to bring up new and innovative business processes and services because the implementation of the technology has to bring up clear benefits for the companies otherwise they will not implement it. The range of processes which will be analyzed is quite wide, in a minimum version it is just one identification point. On a much more global view there can be business processes where companies all over the world are involved. It is necessary to understand and analyze how a typical company works in those industries, so at the beginning of the work there must be an analyze of the current business processes. This information is the base for working out new possible processes and services. I am confronted with a whole supply chain from the manufacturer, to the distribution centers, to the stores and also back from the stores as reversed goods. There are a high number of processes where you need different types of Page 3/11
  4. 4. Günter Kahr ( ) Graz, am 24.05.2010 data from each member of the whole supply chain for some of those the justification of RFID can for sure be shown. Sub-Objective 1 is to detect the relevant identification points for RFID, because it will not be useful to implement RFID at all identification points. There are business processes which seem to be quite relevant for outstanding people who are not really involved in the industry but for the company these processes are just of minimum relevance because there are other mechanisms or influences where the problems are solved. Some key questions at that point of research work are: • Where can I efficiently use RFID to improve my process? • Can I get better data quality? • Which additional services are possible at this identification point? Sub-Objective 2 examines economical benefit for each member in the supply chain. For all of them RFID is an investment so it is necessary to bring it to the point what the benefits are at their processes. Otherwise the acceptance of the technology will shrink to a minimum. Here it is necessary to show what can really be done much more efficient with current and next generation RFID-technology and also to show decision maker which applications are just fakes. Here ECR (Efficient Costumer response), CPFR (Collaborative Planning, Forecasting and Replenishment) and typical cost-structures in supply chains are a main topic at this point. Sub-Objective 3 is a survey of possibilities of current and new, upcoming RFID technologies because in some areas of current RFID-technology and upcoming RFID- technology the international standardization isn’t already done. Decisions at that level can have enormous impact on strategic decisions. Here I need to highlight what are the restrictions of the technology and what are the requirements of ISO and EPCglobal standards which have to be fulfilled by the hardware manufacturers. Page 4/11
  5. 5. Günter Kahr ( ) Graz, am 24.05.2010 3 Methodologies Based on the common understanding that the studies of economy is applied science, and that the interests of recognition is aimed on practical goals, we have to find the link between theory and practice for RFID-technology. According to this, applied economical science is based on the analysis of proceeding alternatives, development of scenarios and models and the distribution of knowledge for operative decisions. A simple description of the reality is not enough the focus of new and upcoming RFID-technologies applied to business processes in textile and pharmaceutical industry is the defined goal. An important aspect of any research process is to decide how to conduct the research and to obtain the required knowledge. The treated problems are coming out of daily business in the industry segments, the development of solutions is at the end a combination of theory, lab and field-tests and practical possibilities. A model of explanation for textile/pharmaceutical supply chain management, a model of description of their supply chain management, a recommendation for business actions and an exhibition of case studies has to be searched. Because different research methods produce different kinds of knowledge I selected a quite long list of suitable methods. It is vital to be aware of the relationship between the research questions and the focus of research, the sort of knowledge required to address that focus and the method of data collection to provide that knowledge. A comprehensive answer to the chosen research question will only be possible if different kinds of data are being collected to result in different but complementary types of knowledge: Literature and database research as basics In this category I have the possibility to get direct access to peer reviewed documents for instance at Athens, but also to the universities which work together at the Auto-IT Lab (University of St. Gallen, MIT, Cambridge, University of Dortmund). On the other hand I get technical descriptions of RFID-hardware vendors and documentations of standardization institutes from ISO and EPC. Page 5/11
  6. 6. Günter Kahr ( ) Graz, am 24.05.2010 Experiments (Lab-tests and field-tests) The data collection for this research project will include qualitative as well as quantitative data to meet the aims of the research and to balance possible disadvantages of using one single approach. Qualitative data is known to reflect reality better than quantitative data, as it takes into consideration uncertainty, ambiguities and contradictions. It also provides richness and details of a relatively focused area. For lab-tests I have the possibility to use the test equipment of our company. As a company we have one of the biggest RFID-labs in Europe where companies like Philips Semiconductors and Infineon technologies are doing tests together with us. Field-Tests in pilot installations, to get real data in typical environment, especially at the area of RFID there can be big differences between lab and field test because of the surrounding of the installation. To compare them will be a very informative way of getting knowledge. Statistical methods For data analyzing the use of quantitative data enables a relatively fast analysis of large volumes of data in an effective and efficient way. Methods of descriptive statistic will be used for data analyzing. Benchmarks A benchmark is the result of running a program, or a set of programs, in order to assess the relative performance of an object, by running a number of standard tests and trials against it. Benchmark, is also commonly used for specially-designed benchmarking programs themselves. Benchmarking is usually associated with assessing performance characteristics of RFID hardware, for example, the range of RFID antennas. With special lab-equipment I have the possibility to compare RFID-hardware in typical user scenarios. It is of high importance to give an objective overview of the performance Page 6/11
  7. 7. Günter Kahr ( ) Graz, am 24.05.2010 of RFID-equipment. The challenge is to fix the environment variables/parameters and to have an identical bases installation of the equipment. Peer Groups In Open Systems Interconnection (OSI) Architecture, a peer group is a group of functional units in a given layer of a network in which all the functions performed by the functional units extend throughout the system at the same layer. On this base I am working in several peer groups • Working-groups of the International Standardization Organization (ISO) • Working and decision-groups of EPCGlobal • Comprehensive transponder systems R&D working-group with Infineon • A German working-group to the topic RFID & Fashion together with Metrogroup, Gardeur, Gerry Weber, Mustang....) Simulations with software-tools Software simulation has become a useful part of modeling many natural systems in economics and social science (the computational sociology) as well as in engineering to gain insight into the operation of those systems and processes. The common feature of all simulations is the attempt to generate a sample of representative scenarios for a model in which a complete enumeration of all possible states of the model would be prohibitive or impossible. On this base I would like to show a complete improved, more efficient supply chain. Case studies The goal of the case studies is to highlight and to reflect pilot installations and planned rollouts in the industry segments on their economical impact for the involved companies. There has to be a selection of relevant, important and typical pilot-installations to give orientation for companies and decision makers in their future decisions on RFID projects Page 7/11
  8. 8. Günter Kahr ( ) Graz, am 24.05.2010 in their own environment. Here I would like to work on a minimum of 2 case studies in each segment. 4 Ethical issues RFID-supporters praise the amazing power to streamline and optimize supply chains. I agree with those supporters. RFID will significantly increase the efficiency of supply chains but the problem with RFID is that the RFID tags will be released into the world and can become a privacy and security problem which is worth to be looked at. Many argue that the depth of information which can be held by these tags, the ease with which they can be incorporated into products and the ability to read this information at a distance, present major issues for society particularly regarding privacy and should also be considered in he whole research process. ( ) lists four main privacy concerns regarding RFID technology as: • The purchaser of an item will not necessarily be aware of the presence of an RFID tag or be able to remove it. • An RFID tag can be read at a distance without the knowledge of the individual. • If a tagged item is paid for by credit card or in conjunction with use of a loyalty card, then it would be possible to tie the unique ID of that item to the identity of the purchaser. • RFID Tags create, or are proposed to create, globally unique serial numbers for all products, even though this creates privacy problems and is completely unnecessary for most applications. Larry Ponemon (2004) ( ) warns of another potential problem with RFID tags. He explains that over-reliance can lead to complacency in stringent monitoring in the supply chain which can have devastating effects in apparel and pharmaceutical industry segments. Page 8/11
  9. 9. Günter Kahr ( ) Graz, am 24.05.2010 True world wide RFID is the "Internet of Things" on which “Frauenhofer Institute” in Germany do a lot of research work will end privacy. In my research project I also can’t ignore ethical aspects but there is no real focus on it. RFID and ethics are a very hot topic and can bring a RFID-project to the ground, the acceptance of the technology by customers/users is one of the main problems which we are confronted with. 5 Indication of PhD level: contribution to knowledge The research will contribute to existing knowledge in the area of RFID-projects with a specific focus on the economical justification of RFID-technology in apparel and pharmaceutical industry segments. The contribution will primarily consist of objective valued, technological feasible business process and their economical relevant data for members in the supply chain. Their business environment will be assessed and evaluated end to end from the manufacturer to the consumer in apparel and pharmaceutical industry on current and future available RFID-technologies. The dissertation shall highlight new efficient business process and innovative service for all members of a typical supply chain in the two industry segments. 6 Timescale and plan of work ID Task Name Duration Start Half 2, 2005 Half 1, 2006 Half 2, 2006 Half 1, 2007 Half 2, 2007 Half 1, 2008 Half 2, 2008 A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N 1 Basic Research 437 days Thu 01.09.05 2 literature & DB research 150 days Thu 01.09.05 3 international standards 300 days Mon 07.11.05 4 identifying research partners 150 days Thu 01.12.05 5 relevant business processes 350 days Mon 02.01.06 6 Tests & Experiments 265 days Mon 01.05.06 7 lab tests 200 days Mon 01.05.06 8 field tests 200 days Mon 03.07.06 9 HW benchmarks 50 days Mon 26.02.07 10 business process reenginieering 250 days Mon 01.01.07 11 data analyzing/statistics 100 days Mon 01.01.07 12 innovative processe examples 150 days Mon 12.03.07 13 innovative service examples 50 days Mon 08.10.07 14 applied in use cases 290 days Mon 08.01.07 15 textil usecases 100 days Mon 08.01.07 16 appareal usecases 100 days Thu 03.05.07 17 reviewing data and new trends 100 days Mon 01.10.07 18 finalizing research and documents 500 days Mon 23.10.06 19 finalizing research 60 days Mon 24.12.07 20 writing the thesis 500 days Mon 23.10.06 19.09 Page 9/11
  10. 10. Günter Kahr ( ) Graz, am 24.05.2010 7 Bibliography Technical Finkenzeller (2003) RFID Handbook, Fundamentals and Applications in Contactless Smart Cards and Identification Auto-ID Center (2003) 13.56 MHz ISM Band Class 1Radio Frequency Identification Tag Interface Specification ThinkMagic (2005) Generation2 A User Guide EPCGlobal (2004) EPCTM Tag Data Standards Version 1.1 Rev.1.24 Economical Gartner research Jeff Woods (2005) RFID Enables Sensory Network Strategies to Transform Industries ABIResearch (2006) The RFID Healthcare and Pharmaceutical Markets Frost & Sullivan (2004) World RFID-based Application Markets Auto-ID Center (2003) Auto-ID on Demand: The Value of Auto-ID Technology in Consumer Packaged Goods Demand Planning Auto-ID Center (2003) Auto-ID on the Move: The Value of Auto-ID Technology in Freight Transportation International standards ISO 15693, 14000, 18000 ISO/IEC 18000 - RFID Air Interface Standards Auto-ID Center (2005) EPC Technology Guide Scientific Blaxter, L., Hughes, C., Tight, M. (2004) How to research. 2nd ed., Open University Press Page 10/11
  11. 11. Günter Kahr ( ) Graz, am 24.05.2010 Denscombe, M. (2003) The good research guide. 2nd ed., Open University Press Kromrey H. Empirische Sozialforschung 10-te Auflage UTB-Verlag FH Salzburg (2005) Studie 6: Prozessoptimierung durch eingebettete Technologien für Endprodukte University St. Gallen (2005) RFID Im Supply Chain Management Automotive University St. Gallen (2005) RFID in the FMCG Supply Chain Page 11/11