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EXAMINING
APPLICATIONS IN SUPPLY
RFID
CHAIN MANAGEMENT
Technology
R
adio Frequency Identification
(RFID) is an emerging tech- infrastructure,
nology recently in the news as a
result of large organizations, business process,
most notably Wal-Mart and and managerial
the U.S. Department of Defense, requiring issues must be
shipment of goods identifiable by RFID addressed by IT
tags. In Europe, the Metro Group, the fifth- practitioners as
largest retailer in the world, has teamed with
SAP, Intel, and IBM to form the Future they adapt to the
Store Initiative (www.future-store.org). This business changes
group is using a combination of different associated with the
technologies in a test store to learn whether diffusion of RFID
an integrated information system can lower technology in the
cost by improving inventory management,
consumer information gathering, and supply chain.
checkout procedures. As of March 2006, i
ILLUSTRATION BY PETER HOEY
O
perationally, RFID allows data from involve tangible costs but less tangible benefits;
a tag attached to a pallet, case, or developing the information systems solutions that
individual product to be captured would integrate data derived from RFID into busi-
by a reader device. Functionally, this ness processes; and developing the “feedback-
data can be used to identify all of loops” such that new sources of information
these items passing the reader’s loca- generate more efficient and effective business
tion at a point in time. This technology provides a processes and decision making.
means of tracking items from supplier through the dis- Here, we identify the range of issues IT practi-
tribution network to the point of consumption. tioners are likely to confront in fully implementing
Recent advances have lowered the cost of tags such RFID technology. These issues and ideas are dis-
that passive (not battery powered) tags are beginning cussed within a data life cycle framework to help
to approach commercially viable levels. organize the wide range of topics into related sets.
The goal of RFID technology applied to the Because this technology was relatively new and the
retail supply chain is to streamline inventory man- authors knew of no examples of fully instantiated
agement by providing views of product shipments RFID-integrated information systems in supply
and inventory levels at unprecedented levels of chain management, the framework is presented as a
detail [11]. By providing precise data on product helpful viewpoint rather than as a validated optimal
location, product characteristics, and product approach.
inventory levels, RFID promises to eliminate man- The key issues organizations will face in deriving
ual inventory counting, warehouse mispicking, and maximum benefit from RFID technology as it
order numbering mistakes. The ultimate goal is the matures are previewed here. Most prior research
reduction of inventory and increased product sales found in the ACM digital library pertaining to
in the retail supply chain. RFID application development falls into two cate-
From an information systems perspective, RFID gories. Either it demonstrates the potential of
can be viewed as another technology for capturing futuristic applications such as the use of RFID in
source data. But the characteristics of RFID in the ubiquitous computing for outdoor educational
supply chain context—that it can be read unat- experiences (see [12]) or focuses on issues of pri-
tended, in groupings of various sizes, through some vacy and ethical use of RFID information, (see [1,
materials and with a level of flexibility regarding 4]). Although both are important topics, they do
orientation and positioning between tag and not need to be discussed again here; instead, we
reader—creates the possibility that RFID use will focus specifically on RFID use in supply chain
become transformational. Rather than simply sub- management.
stituting for existing technologies such as bar codes
within current processes, it holds the promise of RFID BACKGROUND
process innovations that create orders of magnitude RFID technology is derived from World War II-era
improvements in supply chain business models. techniques to allow aircraft to identify themselves
Achieving such benefits will require integrating to other friendly aircraft and commanders on the
RFID technology into supply chain operations. ground. Before the invention of the transistor and
Currently, from a supply chain perspective, sev- the evolution of microelectronics, the technology
eral major technical challenges exist for firms wish- was large, heavy, and consumed massive amounts
ing to initiate RFID programs. These challenges of power. In the 1970s, Sandia National Laborato-
revolve around the mechanics of reading RFID ries began incubating commercial applications and
tags in the context of “shop floor” realities. Some of launching businesses. One of these was the Amtech
these challenges are due to difficulties with deflec- Corporation, which commercialized animal tagging
tion and refraction from materials such as metal, (still used today to identify pets), and the motor
glass, and liquids; difficulties with angles and vehicle account tag used on some toll roads starting
reception; and difficulties attaining the levels of in the 1980s. At about the same time, industrial
volume and speed required to support industrial applications in manufacturing automation, ware-
house automation, and asset RFID DATA THROUGH ITS LIFE CYCLE
Figure 1. Data life cycle
stages for RFID-generated
tracking were deployed. In the In order to examine the challenges and opportuni-
data in supply chain
management. 1992–1994 timeframe, the ties for IT professionals in RFID implementation,
Niederman fig 1 (7/07)
North American rail industry it is useful to follow the data generated by reading
deployed the Amtech technology for tracking rail an RFID tag and to consider the journey of that
equipment, tagging over 30,000 locomotives and data as it travels through the data life cycle. Under-
1.2 million rail cars and deploying reader devices at standing the data life cycle is important to under-
key control points along the railroad right-of-way. standing the nature of data. (Note also that we
Figure 2. Typical applications and data within
From 1998 through 2003, leadership of retail present something of an ideal view of the journey
the supply chain data lifecycle.
initiatives has been centered at MIT where in 1999 of particular data from beginning to end of the life
the AutoID center was established. In late 2003, cycle while recognizing that at each identified stage
the AutoID Center at MIT officially closed and technical and organizational issues must be
transferred its intellectual prop-
erty to EPC Global. (It is impor- Stage 4: Warehousing and analytical processing
tant to note that EPC Global Physical Supply Chain
Tags Antenna
standards relate only to the Reader Supply Chain Enterprise
Order Customer Rel.
deployment of RFID into the Management Management
EPC Global
IS*
• Source data acquisition (read- DATA LIFE Technology Application Business Management
ing RFID data and integrat- CYCLE Infrastructure Logic Process
ing with other source data); 1. Source Performance, Business logic – Integration with Responsibility for
data speed, and capturing the range physical processes/ investigating exceptions/
• Integrating source data with acquisition capacity of valid actions logistics/industrial recognizing new
enterprise transactions sys- (reading
data and Optimal Missing data
engineering problems
O
actions in actual usage. For nce elemental data (originating
example, in some scenarios from RFID) has been received and
RFID data might be used along with interorganiza- validated, it is likely that additional
tional data concurrently in performance of a partic- information will be added includ-
ular business task. Nevertheless, the stage framework ing time, temperature, location,
provides a logical way of decomposing the poten- and similar indicators. This exten-
tially highly complex and recursive nature of using sion of data surrounding RFID messages is being
RFID data. called “sensor-based computing” by practitioners at
It is a reality of RFID deployment that, to be suc- Oracle [7]. For the item being identified, it is self-
cessful, it involves changes in organization, business evident to human workers where the tag is being
processes, and application systems. Therefore, analy- read, but for downstream use of this data, time and
sis of the data life cycle involves examination along location information needs to be added.
these dimensions. Dividing application systems into Programming logic for the disposition of
infrastructure and logic, we present our analysis in expected and unexpected RFID-generated data will
subdivisions: technology infrastructure; application need to occur at each stage in a supply chain both
logic; business process; and management. Details internally to an organization and among organiza-
regarding RFID at each stage on each dimension are tions. Accurate timing of such messages will also be
presented in Tables 1 and 2. critical. As a simple example, timing calculation
Source Data Acquisition. An IT perspective on must account for time zone changes so that items
RFID begins with initial handling of the data gen- don’t appear to arrive before they are sent. Further,
erated by the RFID reader. All readers and con- the meaning of each tag reading may need to be clar-
trollers must be able to distribute data to the ified with additional information. For example, does
operational applications in distant locations. This a message indicate shipment of goods, receipt of
implies that all devices capturing data must be con- goods, movement into or out of inventory, or tem-
nected either through wired or wireless networks. porary removal for inspection by a customer versus
The key will be to ensure all physical elements of permanent removal for sale or disposal?
the system have sufficient capacity so that data is From an application logic perspective, much
received, processed, and moved without bottle- work needs to be done handling too much, too lit-
A
key issue in implementing such a the data life cycle while the benefits will depend on
system will be developing appro- the quality of data collection, will require added
priate business rules, particularly effort and investment, remain largely intangible,
for handling new exceptions that and be recovered later in the business cycle. More-
arise from having the increased over, those firms aggressively committed to analysis
amount of data generated from and reorganization of business processes will have
RFID use. It can be expected that in many cases the risk that improvements will either not be found
explicit rules will need to be created for program- or be too difficult to implement.
ming business activities where informal methods Integrating Across Organizations. Much of the
are currently in use. rationale for adopting the EPC Global architecture
From an application logic perspective, it will be in the retail supply chain is to facilitate sharing of
critical to normalize data. This is significant for information among supply chain participants such
dealing with dependencies and assignment of as supplier, manufacturer, shipper, and customer in
attributes to proper entities and in the managerial order to provide near-real-time inventory visibility.
sense of ensuring that terms are unambiguously The value created by this process is reduced cost
and appropriately defined for business needs. and improved competitiveness of the cooperating
While it addresses ways to automate data input enterprises. Cost reductions will result from reduc-
into current business processes, in the long run, it is ing the amount of inventory and increasing logis-
likely that the presence of RFID will present oppor- tics efficiency in the supply chain. These include
tunities to develop innovative business models and the cost of carrying the asset, direct network costs
to reengineer existing supply chain processes. such as warehousing and transportation, and obso-
Examples can be found for many common supply lescence. Better visibility will also reduce the inci-
chain activities. The ability to determine time and dence of expensive interventions to avoid
location of reading from unique items will provide undesirable shortages. Improved competitiveness
opportunities to identify bottlenecks. When com- will result from higher customer satisfaction and
bined with value of shortened cycle time, this infor- market responsiveness, and from the ability to dif-
mation can also potentially influence delivery ferentiate commodity products with creative logis-
priorities where resources are constrained. The abil- tics and marketing programs.
ity to determine where a particular object is and has The EPC Global architecture originated at the
been can solve many supply chain problems includ- Auto-ID center at MIT. Key principles underlying
ing the ability to shorten the time to effect product this architecture included minimizing functional-
recalls and removal of outdated products, programs ity on the chip (and thereby lowering the cost); a
to decrease product counterfeiting, decrease occur- product identification scheme that involved the
rences of out-of-stocks, and reduction of shrinkage, enterprise, the product, and the item; using the
and diversion of products. The ability to locate Internet to store and share information about the
inventory can shorten the time for finding a prod- item; and open standards. The core component of
uct as it moves between production floor, ware- this architecture is the product identifier, now
house, and showroom floor. Use of RFID-generated called the Electronic Product Code (EPC). The
information may allow the clustering of small pack- EPC is a set of format standards for encoding prod-
ages from various sources heading toward the same uct identification data on the tag. In the original
destination early in the distribution channel or auto- concept, the EPC had four components, header,
mate dynamic rerouting as information regarding EPC manager (the enterprise,) object class (the
travel conditions or package priorities change. One product,) and serial number (the item). The origi-
related challenge will be dealing with the dynamic nal standard is being replaced by a more complex
aspects of systems change—designing the structure structure to ease the transition from existing stan-
P
lans for an ONS that mirrors Internet tons, cases, and other packaging). Until inventory is
domain name addressing present a nearly identified at the item level, the benefits of and
overwhelming set of opportunities and requirements for the IS, ONS and PML are limited.
challenges. For example, infrastructural Data Warehousing/Analytical Processing. To
challenges of integrating across organiza- this point, expected benefits from the addition of
tions will include creating and supporting RFID-generated data have been discussed in terms
applications that enable other enterprises to access of efficiencies in supply chain operations and new
their information systems. This will likely require the applications that could provide new services or pro-
development of additional security capabilities. vide additional efficiencies. However, the separa-
The IS can be viewed essentially as a new appli- tion of physical products and information about
cation. It must be designed and implemented either them may have its most dramatic influence in sup-
by the participating enterprise or by a third-party porting decision making and other managerial
service. In addition to the core function of the IS, activities. The RFID data warehouse must main-
application logic will be required to support a mul- tain a significant amount of data for decision mak-
tidimensional security model, and to maintain ing. Historical and current data is required from
ONS registration. Full compliance with the EPC supply chain partners and from various functional
Global architecture will also include PML support, areas within the firm in order to support decision
and this may impact the logic of existing internal making in regard to planning, sourcing, produc-
applications. tion, and product delivery. Supply chains are
Business process impacts include the coordina- dynamic in nature. In a supply chain environment
tion of PML dialects with trading partners and the it may be desirable to learn from an archived his-
administration of the multidimensional security tory of temporal data that often contains some
model mentioned previously. Two decades of expe- information that is less than optimal. In particular,
rience with EDI have demonstrated that even with these environments are typically characterized by
a relatively rigid format standard for interenterprise variable changes in product demand, supply levels,
message management, trading partners must coor- product attributes, machine characteristics, and
dinate their individual implementation of those production plans.
standards. The use of PML will create similar Though there is cost associated with storing this
requirements such as developing understandings data, there is potential value as a raw material for
with partners regarding the definition of exchanged knowledge creation, decision support, and data
information, the timing of messages, and the inves- mining. The nature of this data is threefold: items
tigation and resolution of apparent exceptions can be identified at finer levels of individuality;
resulting from operational mistakes, data entry there are many more business events for an item
errors, and true business misunderstandings. Since (events can be disaggregated into parts); and being
the EPC Global architecture provides for the access serialized, individual steps in a sequence have an
of one enterprise’s data by another enterprise, each identity. This opens whole new fields for analysis.
party will need a process to administer the security Not just 20 items leaving a warehouse and 10 arriv-
of its information. At a minimum, the identifica- ing at another location, but which items arrived, by
tion, authentication, and authority of each partici- what route, and how long they were stored.
pant in the relationship must be specified with From a technology infrastructure perspective,
respect to what functionality may be used and what issues will involve selecting and implementing the
data may be accessed. right set of decision support systems and knowl-
A
lthough we did not approach this 5. Redman, T.C. Data Quality for the Information Age. Artech House,
topic from the perspective of the Norwood, MA, 1996.
6. SAP launches RFID package. RFID Journal (Jan. 15, 2004).
issues that confront the particular 7. Seeley, R. RFID and data: Here’s what’s next. Application Develop-
IT leader in undertaking an end- ment Trends (July 2004); www.adtmag.com/article.asp?id=9666.
to-end RFID project, we recog- 8. Shapiro, J.F. Modeling the Supply Chain. Duxbury, Pacific Grove,
CA, 2001.
nize that such a perspective would 9. Simchi-Levi, D. Kaminsky, P. and Simchi-Levi, E. Designing and
highlight additional issues and difficulties that IT Managing the Supply Chain. McGraw-Hill, Boston, MA, 2000.
10. Songini, M. Wal-Mart offers RFID update. Computerworld (Mar. 13,
leaders would need to master for successful imple- 2006); www.computerworld.com/mobiletopics/mobile/
mentation. For example, at each stage IT leaders story/0,10801,109418,00.html.
will confront make/buy trade-offs considering dif- 11. Wailgum, T. Tag, you’re late. CIO Magazine (Nov. 15, 2004),
50–56.
ferences in cost, timing, functionality, long-term 12. Wilde, D., Harris, E., Rogers, Y., and Randell, C. The periscope:
support, and project risk in selecting packages ver- Supporting a computer-enhanced field trip for children. Personal
sus building new applications. We would anticipate Ubiquitous Computing 7 (2003).