Company’s customer and their business strategy

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Theortitical Framework

This chapter will first introduce the reader to the supply chain integration, mapping of the supply chain flow, RFID technology featuring its technical capabilities, data management architecture, adoption standards, application, potential benefit sand implementation challenges.

RFID Technology – a supply chain performer

The RFID technology aids to bridge the gap between the product flow and information flow in the supply chain integration. Radio frequency identification (RFID) is one of the most promising and leveraging the performance of the supply chain in recent years. The rapid development in this technology and its potential application across various fields is fast becoming a industry standard. In recent times there where many articles, analyst pa-pers, organisation around the globe are working closely to bring a standard use of the tech-nology. The success of this technology and to leverage its benefits across the supply chain in various parts of the world is hammered by the lack of pervasive standards in the area of technology adoption (Jakovljevic, 2004). According to Jakovljevic (2004) “early adopters of RFID will be wary of locking into the wrong standards, a potentially costly mistake both in terms of time and money”. The theory will explain in depth detail of what to be considered in choosing the technology standard that will remain as a basic platform for many years to follow.
The theory also explains briefly how this technology works; describe their current stan-dards, the compliance environment and the consideration to make sure that you have a successful implementation and to get the most return out of the investment. As this thesis is based on the technology implementation in a manufacturing environment, the theory will comprehend what manufacturers can especially benefit from RFID and how the technol-ogy can make internal processes more efficient and improve supply chain responsiveness. And also how RFID can provide immediate and tangible benefits that would bring to the entire supply chain. Thus making its benefit really a supply chain performer.

SUPPLY CHAIN MANAGEMENT AND INTEGRATION

The Institute for Supply Management describes Supply Chain Management as “the design and management of seamless, value-added processes across organizational boundaries to meet real needs of the end customer. The development and integration of people and technological resources are critical for successful supply chain integration” (Wisner, Leong & Tan, 2006).
According to The Global Logistics Research team at Michigan University (1995), “informa-tion sharing is the willingness to make a strategic and tactical data available to other members of the supply chain”(Cooper et al in, Mentzer et al, 2001).
In addition, it is argued that sharing information such as inventory levels, forecasts, sales promotion strategies, mass customization and marketing strategies shrinks the ambiguity among supply members and leads to a better performance. So in the above definition it is made clear that the efficient management and integration is the primary motive to stay suc-cess in the business. The collection of data, efficient management of these data, linking of these processed data over wide supply chain members needs very high technological re-sources to perform a reliable integration.
The evolution of the internet and the computer era has automated much of the business activities in the name of e-commerce. This facilitated the speed of information sharing and the efficient management of this information within the supply chain. The activities that are exchanged between the channel partners are the “information flow, physical flow, finance flow and trading flow” (Yan, Zhixue & Juan, 2006). In the above four flows according to Yan ,Zhixue & Juan (2006) the information flow, finance flow and trading flow are well integrated into the network of information system, whereas the physical flow lacks integration in this net-work world.
An RFID enabled supply chain in one sense will, for first time, allow information and product flows to in-ter-relate as the “product” moves through raw material, manufacturing, distribution, retailing ,consumption, waste, and even recycling.(Asif and Mandviwalla,2005). In the traditional supply chain flow the information and the physical goods flow has been an independent of each other. Although the barcode has made a revolutionary to carry the information, the technological constrains of barcode is very less significant in comparison to RFID technology. So the recent tech-nological advancement that could efficiently handle this enormous data is the success fac-tor of RFID technology. The ideology behind the introduction of this technology is to col-lect the errorless data without human intervention. Where this technology can deliver an immense advantage while the product is on move and can add seamless value added infor-mation when the product moves across various partners in the supply chain.
According to Asif and Mandviwalla (2005), it is interesting to analyse the data form a pilot projects in complex organisation and completely map the flow of information (i.e. the in-formation embedded in tag). On obtaining such a flow of information it helps to restruc-ture the information flow in the area where the lack of information can prove vital in mak-ing decision. It also helps to increase the automation level in the flow when this informa-tion tag is carried along with the product.
Rai, Patnayakuni (2004) suggested a research model that maps, IT integration capabilities into supply chain process integration capabilities. This leads to enhancement of specific firm performance. To integrate physical, information, financial flow, IT provides infra-structure platform to enable integration (Asif and Mandviwalla, 2005). There by the RFID act as a prime integrating tool and bridges the integration to develop an intelligent Supply chain network.

SCM Technology FIT

Ability to secure

The information that is carried and shared among the channel partners needs a very high collaborative relationship; such relation can exist only by developing a long standing trust between partners in the supply chain. Though the information shared along the supply chain leads to the increase in the performance and efficiency of the entire supply chain. On seeing the other side of the coin there is always an uncertainty exist due to the fear of the exploitation of the information shared. So “trust is important from a relationship point of view, from a technological point of view a company can attempt to protect itself from exploitation while maintain-ing an open collaborative system by its ability to secure SCM systems” (Rupple, 2004) and she also ar-gues that certain level of trust can be replaced by secured information using technological capabilities. Thus the adoption to the information enriched physical flow across boundaries of different channel members can be played safe and this leads to the wide scope of using the SCM tool selectively across organisation.

Return on Investment (ROI)

The rate of return on investments depends on the sensible RFID strategy that one has to follow to reap the break even in the short run and to bring high value to the stakeholders in long run (Poirier & McCollum, 2007). The investment return can be yield from the range of benefits it offers. The visibility it brings in the supply chain to make a tactical decision. How far the RFID can change the supply chain dynamics for efficient performance?. The benefits include high level of information accuracy, high degree of visibility, reduction in labor hours, improved through put and many more associated benefits. But these benefits vary among the different members in the supply chain. Based on the scale of varying bene-fits and the total cost of ownership for deploying this technology, it results in a varying rate of ROI for each channel partners involved in the same supply chain. Thereby the ROI de-pends on the extent of exploitation of this technology, the level of usage of this informa-tion for the efficient operational management within each partner of the chain.
In order to realize the Return on Investment, it relies on the extent of the technology user, it needs a deeper understanding what this technology can bring in for the stake holders. This involves a strategic implementation process, so that it delivers and aids in efficient performance over a long run.

Sensible strategy

Before any technological implementation one has to understand clearly what this technol-ogy can bring into their specific business need. Rupple (2004) suggested that technology should not be implemented merely for technology’s sake, but rather to meet the specific business objective. So a sensible strategy has to be framed for the RFID adoption into the existing business practice.
How to fit it in the current business process, such that it changes to efficient supply chain and increase its performance is the questioned to be answered sensibly. The implementers have to understand the current supply chain dynamics and the changes that it should bring for better performance. And such that these changes are in align with their business needs. According to Hildebrand (1998) suggest that “the greatest advantage can be obtained, when the im-plementation of the technology is closely aligned with the business need”. The strategy to measure the post performance in the efficiency of the various benefits that this technology is delivering should also be incorporated. Introduction of Key Performance Indicator (KPI) before and after commissioning of this technology will define a clear road map for the improvement process. This in fact helps to control the process efficiently.
Since this technology needs a custom fit for organisation to organisation, a trial run of the project should be tested repeatedly for the consistency in the technical difficulties. The de-ployment of this technology needs collaborative approach for all the channel partners, so that the supply chain as a whole can be developed. As there are many industry standards in the deployment of this technological the channel captain has to make a cooperative solution in choosing the right technology from right vendor and to deliver the required syn-chronisation between the channel members.
According to Poirier & McCollum (2007) has suggested some important factors that need to be considered while developing the strategy for the deployment of this technology. “
Enumeration of the costs, delivery enhancements, potential savings, and effect on customer satisfac-tion that will be influenced by RFID applications — making at least an order-of-magnitude as-sessment of the costs and benefits involved with execution across an extended enterprise Definition of the steps necessary to execute a meaningful strategy for RFID and its relationship within the greater business strategy, operating plan, and supply chain model being pursued — ex-plaining to key stakeholders what the firm plans to do and how it affects current business posture Exploration of piloting RFID-enabled processes with selected trading partners to identify shared benefits, instead of limiting RFID pilots to processes that take place within the “four walls” of the organization Listing the functions and services that acceptance and deployment of RFID can bring to the business and its supply chain strategy — identifying where value can be added beyond satisfying key customer mandates including tactical and strategic issues Beginning documentation of the expected financial impact that will derive from an RFID deploy-ment, starting with controlled experiments and pilot tests to provide meaningful metrics — getting your hands on what the future state might really look like and how it will affect profits”.

Supply chain performance and KPI

As mentioned by Gunasekaran, Patel, Tirtiroglu, (2001) ‘‘measures and metrics are needed to test and reveal the viability of strategies without which a clear direction for improvement and realization of goals would be highly difficult’’. The performance measurement is a vital tool for evaluating the per-formance that RFID is making in the supply chain scenario. These performance measure-ments are to be clearly aligned with the operational objective of the business.
For any newly implemented system to indicate its performance, the evaluation of the sys-tem is necessary. This is done in a real time industrial atmosphere to indicate the basic per-formance factor, which is called key performance indicator (KPI). Reh (2008) defines KPI as “Key Performance Indicators are quantifiable measurements agreed to beforehand, that reflect the critical success factors of an organization.”
There can be a multiple KPI level can be set, which differ form organisation to organisa-tion depending upon their objective. According to Reh (2008) some of the important KPI that has to be measured in relation with RFID deployment is
1. The process improvement,
2. Efficiency of track and tracing,
3. The level of inventory visibility,
4. Reduction of human errors,
5. Reduction in lead time,
6. Reduction in stock outs.
As Reh (2008) mentioned that the KPI should be clearly defined of how this indicator should be manipulated and also it should clearly define for any exception involved and the factors to be considered and excluded. Once the clear definition has been identified the measurement has to be recorded with in depth detail of the condition in which the per-formance is measured. Finally a well defined quantifiable target should be set for evaluation or to assess the progress of the implemented system. As a whole the KPI should reflect the organisational goals and align the improvement process strategically towards it. This will serve as a vital management tool for the organisational success over a long term.
According to Bendavid, Lefebvre & Fosso (2008) has segmented the KPI as horizontal and vertical KPI. Where the horizontal KPI will provide an overall assessment for the en-tire supply chain on four major dimensions: “Reliability, Responsiveness, Flexibility and Asset management efficiency”. The vertical KPI will provide a specific assessment for the particular member of the supply chain concentrating on the inventory cost at supplier level or mini-mum down time at operator level. They argue that the supply chain will tend to move to-wards the horizontal KPI on the grounds that only if the Supply chain members are ready to share the information from where they considered previously as business confidentiality.

INFORMATION SHARING

The major objective of the RFID is to serve the accurate data and provide an information enriched product. The information collected should serve to improve the performance of the supply chain.The performance of the supply chain can be improved by the level of in-formation shared among the members. According to Yu, Yan and Cheng (2001) states that “willingness to share information among supply chain members will increase the whole system’s performance from information sharing”. They also argue that uncertainties caused due to unforeseen factors can be reduced by efficient information sharing among the member. The level of informa-tion shared and the transparency should be given the highest priority. When this happens, the different members of the supply chain act as a single entity thereby maximising the profit for the entire supply chain. Thus RFID can serve the purpose of information sharing at any point in the supply chain accurately.

Mapping

A good designed map communicates the knowledge and information and “creates a basis for supply chain redesign or modification; construct a map to link corporate strategy to supply chain strategy; and assess current channel dynamics” (Gardner & Cooper, 2003).
Why should a firm create an internal supply chain map?
According to Hines and Rich (1997), the compelling reason to create a map is to enhance the order planning process, ease the distribution of key information, it facilitates to redes-ign or modify the flow chain, it helps us to analyze and evaluate the current process, helps to bridge the communication gap between different levels in the organization and also pro-vides knowledge and can act as a communication tool for the process developers to make the system to work lean.
Identifying the flow of process for each successive step inside the company’s supply chain involves a string of operations or actions that are to be carried out in order to map the process. This sequence of operations should be well structured and legitimized, which in turn align with their corporate strategy of the company. The flow of these processes in the supply chain network is initiated by the information to act or proceed in performing the operations at each level. So every action in the supply chain flow is initiated by the infor-mation or data. In real time operation, the flow of product in the supply chain network to carry the information along with the physical flow became an essential factor. This ideology of coupling the product along with the information, initiates further chain of action and also triggers the system to react dynamically, when the product flows in the supply chain network. This enables a high degree of visibility and flexibility of the product when the product carries real time information coupled to it. So mapping plays an initial step to iden-tify the current flow of activities that are in process.
“ when system analysts attempt to understand the information requirements of users, they must be able to conceptualize how data moves through the organization , the process or transformation that the data under-goes, and what the outputs are”(Kendall and Kendall, 1995)

Process Activity Mapping

The process activity mapping has its origin form the industrial engineering. It is a group of techniques that can be used to “eliminate waste, inconsistencies, and irrationalities from the workplace and provide high quality goods and services easily, quickly and inexpensively” (Ishiwata, 1991).

Orientation

According to Gardner & Cooper (2003) “the orientation of the mapping project can be defined as the focus of the mapping procedure”. They state that the process activity mapping directs its atten-tion to a single operation or system within a company.

Level of details

The process activity mapping has a high level of details enriched with wide information in-volved in the process. Gardner & Cooper (2003) states that “the process mapping tends to break down a process into a number of activities and steps”.

Purpose

The main purpose of the process activity mapping is to identify and recognize the problem area or a potential process, where an attempt can be made to improve operating efficiency (Gardner & Cooper, 2003). The objective of the mapping is to make effective changes in the current operation of the firm.

Significance of Process Mapping

According to Hines and Rich (1997) the process activity mapping has five stages, which are to be approached in developing the map. “
1. The study of the flow of process
2. The identification of waste.
3. A consideration of the process, whether it can be rearranged into a more efficient sequence.
4. A consideration of better flow pattern involving different flow layout or transport routing.
5. A consideration of whether everything that is being done at each stage is really necessary and what would happen if superfluous task were removed”.

Physical Mapping in Manufacturing Environment

Once the efficient mapping is formulated, it helps us to identify the non value addition process and the value it adds in each sequential step during the process. According to Hines and Rich (1997) that the value stream mapping technique helps for several cross sec-tional analyses of the internal value chain, where the management can have a direct control over it. They also state that the vitality of the material to carry the information and the need for improvement and modification in the activity flow can be well understood. The elimi-nation of the waste activities will helps us to understand the need for mapping the process and its significance.
Mapping the process activity will help us to determine the duration involved in performing each action. This determination of the duration will guide in analyzing for further process improvement in the supply chain flow. It also determines the level of human intervention involved in carrying out the action to perform and check for redundancy in the work car-ried out.

Functionality and Technical Insight

This chapter will first introduce the reader to the working principle of RFID, the components of RFID sys-tem, technical issues in choosing the RFID components. The major source for the technical information is from the white papers of Intermec technologies.

How RFID Works

RFID systems include tags, readers and software to process the data. Tags are the trans-ponders which are usually applied to items, often as part of an adhesive bar-code label. This tag is of two types active and passive, where the passive receives power from the reader to transmit data and the active tag has its own power generation. Readers can be un-attended standalone units which receives this transmitted radio signal from the tag/ trans-ponders. The reader sends a radio signal that is received by all tags present in the RF field tuned to that frequency. Tags receive the signal via their antennas and respond by transmit-ting their stored data (Intermec, 2007). The tag can hold many types of data, including a se-rial number, configuration instructions, activity history (e.g., date of last maintenance, when the tag passed a specific location, etc.), or even temperature and other data provided by sensors. The read/write device receives the tag signal via its antenna, decodes it and trans-fers the data to the computer system through a cable or wireless connection. The model of a set of RFID system is shown in the figure 1.
The reader has to communicate with two systems simultaneously, one hand it has to inter-face with the RFID tag and the other hand it has to interface with the business network. The reader continuously receives data from the tag and sends the data for processing. The reader can read multiple data from the number of tags at same time depending upon its operational capability.
The data received from tag are interfaced through its communication port to the host sys-tem. A middle ware is used to interface with the existing enterprise resource planning (ERP) or ware house management system or any business software application. This can be in either way interactive, that the information can also flow form the host system to the RFID tag when the information has to be encrypted into the tag. It is now apparent that this technology can communicate wireless, when the product is on move and change the status of the product while it is on move when it is within the receivable range.
The technical capability of the component can depend upon the manufacturer to manufac-ture based on the affordability and the additional features demanded. Today there are wide ranges of RFID components based on their operational ability. Here are some of the fac-tors where the technical specifications vary for the different RFID components.
1. The range it can operate
2. The capacity to store data
3. The environment it can operate
4. The number of data it can receive simultaneously.

TAGS

RFID tags have two basic elements: a chip and an antenna. The chip and antenna are mounted to form an inlay shown in figure 2 .The inlay is then encapsulated in another ma-terial to form a finished tag or label shown in figure 3. The silicon chip can store large amount of data depending upon its capacity, but it quiet expensive. On the other hand less expensive chipless tag can offer several advantages when it comes to its application point of view. Due to the recent advancement in technologies the size and the range it can oper-ate are increasing in its specification portfolio. These chipless tags are making their significance very rapidly because of their enormous application in various field and very less manufacturing cost in compared to the other type of Tags There are several technology used for chipless tags which includes inductive resonance and magnetic resonance. The inductive resonance type uses transistor less circuits made up of conductive polymers instead of silicon based micro chips. The magnetic resonance tag uses microscopic magnetic particles that are emitted from the reader (Asif and Mandviwalla, 2005). There are seamless innovations in the development of this technology for wide ap-plication around the world. The data stored can include product identification, expiration, warranty, handling and storage instructions, and service history.

1. Introduction
1.1. Background
1.2. Problem
1.3. Purpose
1.4. Delimination
2. Research Question
3. Methodology
4. Theoretical Framework
4.2 SCM Technology Fit.
4.3 Supply chain performance and KPI
4.4 Information Sharing
4.5 Mapping
4.6 Functionality And Technical Insight
4.7 Challenges In Implementation Of RFID
4.8 Benefits of RFID
4.9 RFID Experimental Design for Pilot study
5. Empirical findings
5.1 Company’s customer and their business strategy
5.2 Current Customer Order Process Mapping
5.3 RFID Equipment selection
5.4 Vendor selection
5.5 Cost of RFID System
5.6 Data collection for ROI analysis
6. Analysis
6.1 Choosing the right case for Pilot Implementation study
6.2 Identification of RFID Fit
6.3 Choosing the Right Tag and RFID system
6.4 Return on investment
6.5 Implementation Procedures
7. Conclusion and Recommendations
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