Supply Chain Management

Posted: September 9th, 2013

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Supply Chain Management

Introduction

Supply Chain Management is managing and controlling information and materials in the logistics process from acquiring raw materials to deliver to the and users. Radio Frequency Identification is a technology that was developed after the bar code in order to enhance the efficiency of numerous applications in business such as improving management of inventories. RFID technology provides endless opportunities for constructing innovative intelligence systems used for monitoring and tracking. The information and data collected on daily processes and transaction routines is used to improve quality control and logistics. Its efficiency has increased its popularity in many developed and developing countries world over. Despite its growing popularity, Radio Frequency Identification has some advantages and disadvantages to its users.

Application of RFID in Woolworths

The supply chain at Woolworths can use RFID to keep accurate records of their stock. This will be made possible by the special attribute of not needing line-of-sight when reading RFID tags. This feature is common in barcodes, which requires specific orientation or items during scanning. The scanners in RFID communicate to the tags in milliseconds and have the ability to scan multiple items simultaneously (Michael and McCathie, 2005). The Supply Chain Management tasks would therefore be significantly automated by this particular ability. In addition, inventory costs would be lowered and there would be less out-of-stock occurrences.

Advantages of RFID

This technology provides speedy automation of the supply chain to unparalleled levels. Labor is considered one of the main components of distribution costs. Keith et al (2002) envisage that receiving check-in time could be reduced by a projected 60-93 percent with RFID technology. RFID could also yield savings on labor by up to 36 percent in picking orders and 90 percent decrease in verifying shipping costs. This displays the significance of labor in supply chains and that cost reductions could provide substantial financial savings. Supply chain automation promotes inventory costs to an organization. Retailers such as Woolworths can significantly benefit from using RFID, as it will remove the huge labor component needed for stock management. A reduction in labor costs could allow business expansion and other growth possibilities.

RFID helps to improve visibility in the supply chain, which plays a major role to lower distribution and handling costs and reduce inventory levels. Woolworths can use this to improve on areas such as addressing customer demands and market trends. In the retail business, it is imperative that business owners adopt RFID systems to reduce the costs of manufacturing, distributing and maintenance. This would be achieved through following products across the supply chain by installing smart shelves with inbuilt RFID tag receivers. Smart shelves would allow instantaneous inventory stock takes, as it relays data about location, design and history of all products (Hellstrom 2009). In this article, the implementation of radio frequency identification technology is discussed and its benefits in the management and control of transport items are demonstrated. Retailers such as Woolworths could use this technology to improve the management and organization of their products in transit. Smart shelves should be installed with RFID tags so that it becomes easier to track products. Product tracking is fundamental to effective inventory management. RFID enhances inventory by enabling suppliers to forecast product demands by between 10 and 20 percent as compared to traditional systems such as barcodes.

The RFID tags monitor temperature, bacteria levels and offer evidence incase of product- tampering. For contemporary supply chains like Woolworths whose products are shipped all around the world exposed to different environmental stresses, this feature will help them to keep track of these products incase of breach of quality. RFID tags are practically impossible to copy, which makes then appropriate for security applications. These tags are resistant to harsh weather conditions and their durability makes them ideal for dirty, oily, wet or harsh industrial and commercial environments (Zebra Technologies, n.d) Companies are constantly losing products in transit and this is sometimes referred to as product shrinkage. Drivers and suppliers are fond of stealing products while transporting to different destinations and this has cost organizations millions of dollars in damage and loss. Woolworths could implement RFID to trace their products and take anti-theft measures in their numerous retail outlets and distribution centers.

RFID tags are known for their ability to hold immeasurable quantities of information ranging from the product serial number, color, size, date of manufacture, current price and all distribution points the products touched before arriving at a particular store. Their data capacity promoted the identification of individual products thanks to the ability of RFID tags to hold relevant information about different products. Dynamic updates can also be made to the tags as the products are on transit. Smith (2005), in his article, points out that RFID tagging guarantees accurate inventory tracking and since Woolworths would be able to practice item-level tracking, this will improve their customized manufacturing processes and help them to identify and store product properties such as expiry dates. Tracking containers is not always easy because they are transported throughout the world. However, through RFID, organizations such as Woolworths can ensure that government rules and regulations are followed.

Disadvantages of RFID

One of the major impediments to the implementation of RFID is its cost. Numerous organizations complain that it is too expensive hence the widespread deployment in supply chain management. This is mostly given by the fact that integrating RFID into existing systems and practices requires extensive investment from the company. Implementation of the technology will affect the organization’s facets and cost a lot of money. Many organizations are opting to minimize their costs by tagging products as they are shipped. This approach has given way to errors during placement and engineering tags that need to be readable by customers (Hugos and Thomas, 2006). It is also feared that there is shortage of skills in the RFID industry as well. This observation will become more apparent with the escalating number of organizations installing RFID equipment.

There are no standards hindering the adaptation of RFID technology meaning that RFID products do not possess interoperable qualities. This feature prevents the technology from being integrated into the supply chain between partners therefore adding no value. In this case, Woolworths would have to collaborate with all its suppliers and distributors for efficiency purposes. According to (Holweg et al, 2005), collaborative forecasting for manufacturing enterprises such as Woolworths is paramount for effective supple chain management. Even with the creation of the International Organization for Standardization, there is not common standard amongst the stakeholders that addresses the needs of the users. Radio spectrum management in most countries is controlled by government agencies. Radio spectrum is restricted resource prohibiting the adoption of RFID technology.

RFID uses radio spectrum to transmit signals to its readers. These transmissions are susceptible to interferences hindering reliable information from reaching RFID readers. The intrinsic range limitations also affect its transmissions. This means that products have to be packaged accordingly so that readers are able to read tags. Determining which products are tagged how not an easy task for organizations. Metal and liquid packages and products are the most difficult when reading and interpreting RFID signals. They are sometimes referred to as the ‘kryptonite to RFID’ because they play havoc with RFID signals. Such products make it harder for most organizations to adopt and implement RFID systems because of the potential risks involved. It has been noted that it takes a lot of time determining where to position RFID tags.

There are privacy concerns about RFID tags where they are not removed after customers purchase the products. These consumer privacy concerns are reducing the likelihood of many organizations from using RFID technology in their stores because the protocols are only designed to provide performance between tags and readers. Numerous complains from customers have brought to the forefront the issue of RFID tags not being removed after purchases. This has significantly reduces sales in major retail outlets. The fact that RFID tags are known for their capability to store massive information has overwhelmed some systems and data warehouses. This is because organizations like Woolworths generate an estimated seven terabytes of RFID data per day.

Managing RFID data requires regulations to allow the organization, filtering and cleansing of input so that systems are not overcome by nonessential data (Yahia, 2011). Systems to which RFID is integrated need to be flexible enough to allow the separation of signals from data. If not regulated, RFID systems can bring in irrelevant information into operational and intelligence systems. Wrong analysis of RFID data can lead to an increase in inventory costs, reduction in supply chains, depreciated corporate resources and unsatisfactory customer service. Internal operations cannot to be viewed if RFID data is interpreted wrongly. Organizations that are adopting RFID systems are facing the challenge of bringing together and managing huge volumes of data.

Recommendations

Since its inception, RFID has helped improve businesses world over. Organizations should adapt the use of RFID in order to reduce costs. It reduces the labor required for stock management by providing appropriate measures in supply chain automation. Supply chain automation enhances productivity in organizations by reducing work force and using appropriate technological advances. This will ensure considerable financial savings for the company. Supply chain visibility reduces inventory levels, therefore organizations need to implement RFID to stay ahead of competition and address the needs of their customers. Supply chain visibility will also enable organizations to know and understand their stock, income and expenses from sales and accurate record keeping.

This can only be successful with the installation and use of smart shelves. Smart shelves should be fitted with RFID tags for easy record keeping and product monitoring before during and after transportation and purchase. Organizations that use RFID tags are able to keep records of their products. This is because RFID tags are weather resistant and are impossible to copy hence convenient for security measures. These tags can also hold huge information quantities about the products to which they are attached. This allows for necessary updates and changes as the products are on transit. It promotes adherence of government requirements and regulations. In summary, organizations should adopt the use of RFID systems for growth, efficiency and financial benefits.

Bibliographies

HELLSTROM, D. (2009). The cost and process of implementing RFID technology to manage and control returnable transport items. International Journal of Logistics Research and Applications. 12, 1-21.

HOLWEG, H., DISNEY, S.M, HOLMSTROM, J and SMAROS, J., (2005). “Supply Chain Collaboration: Making Sense of the Strategy Continuum.” European Management Journal, Vol. 23, No. 2, 170-181

HUGOS, M., & THOMAS, C. (2006). Supply chain management in the retail industry. Hoboken, N.J., Wiley.

KEITH ET AL, 2002. Focus on the Supply Chain: Applying Auto-ID within the Distribution Center. IBM Business Consulting Services, Auto-ID Center, Massachusetts Institute of Technology.

MICHAEL, K., and L. McCATHIE. (2005). “The Pros and Cons of RFID in Supply Chain Management.”

Proceedings of the 2005 International Conference on Mobile Business. Sydney, Australia. 623-629.

SMITH, A. D. (2005). Exploring radio frequency identification technology and its impact on business systems. Information Management & Computer Security. 13, 16-28.

YAHIA ZARE MEHRJERDI. (2011). Quality function deployment and its profitability engagement: a systems thinking perspective. International Journal of Quality & Reliability Management. 28, 910-928.

ZEBRA TECHNOLOGIES (2010). ‘Zebra’s RFID Readiness Guide: Complying with RFID Tagging Mandates’ pp 3.