Strategic implications of RFID implementations in the retail industry supply chain

International Journal of RF Technologies 2 (2010/2011) 155–171

DOI 10.3233/RFT-2011-009

IOS Press

155

Strategic implications of RFID implementations in the retail industry supply chain

Mohsen Attaran

∗

School of Business and Public Administration, California State University, Bakersﬁeld, CA, USA

Revised 30 December 2010

Abstract.

Radio Frequency Identification, or RFID, has been attracting considerable attention from large retailers and consumer goods manufacturers with the expectation of improved efficiencies, and significant business benefits. Despite many useful applications, the technology’s potential has yet to be fully realized.

The aim of this paper is to highlight RFID’s promises as well as its pitfalls in the retail supply chain, discuss potential strategic benefits of this technology, explore the many factors that may contribute to

RFID success, identify the implementation challenges and key business drivers, and suggest a possible relationship among implementation factors and success variables.

Keywords: Radio Frequency Identification (RFID), RFID Technology, RFID tags, bar coding, RFID success variables, RFID strategic benefits, Retail industry, Retail Supply Chain, information flow

1. Introduction

Many companies are struggling with the economic downturn that started in 2008, proceeded through 2009, and is overflowing to 2010. They are looking for solutions that will save them money in the short term, while making their firm more competitive in the long run. With the world facing an economic crisis deeper and more profound than we have seen for more than 70 years, most experts remain optimistic of future uses for RFID. Implemented properly, this technology can bring velocity to certain markets by serving more customers faster, and it can also increase customer loyalty.

RFID has the potential to enable accuracy, increase reliability, enhance service and reduce cost in supply chain management. The initial application for RFID technology was retail supply chains. The technology is now proving to be more useful in nonretail environments. RFID is slowly reemerging as a valuable way to improve internal efficiencies (Smith, 2005; Hou and Hung, 2006; Attaran, 2007b, 2009; Reyes and

Frazier, 2007).

∗

Corresponding author: Mohsen Attaran Ph.D., Professor of Operations Management, School of Business and Public Administration, California State University, Bakersfield, 9001 Stockdale Highway,

Bakersfield, CA 93311-1099, USA. Tel.: +1 661 654 2310; E-mail: mattaran@csub.edu

1754-5730/10/11/$27.50 © 2010/2011 – IOS Press and the authors. All rights reserved

156 M. Attaran / Strategic implications of RFID implementations in the retail industry supply chain

RFID is not a new technology. It has been around since the 1940s. The British Air

Force used RFID technology to distinguish allied aircraft from enemy aircraft with radar technology during World War II (Asif and Mandviwalla, 2005).

The RFID market is maturing. Maturing technology is helping the next generation of users adopt RFID. Despite the economic downturns, the RFID outlook is good for steady growth through the next five years. According to a forecast by ABI Research, the global RFID industry will be worth $8.25 billion by 2014, enjoying nearly a 15 percent compound annual growth rate over the next five years. By the end of 2010, the RFID market is set to reach a size of $4.47 billion which is 15% more than the adjusted 2009 figure (ABI Research, 2010). These figures highlight an RFID market that is growing robustly.

However, as with the introduction of other disruptive technologies, and like all major information systems (IS) projects, there are many issues to consider and overcome. As one of the most promising and anticipated technologies in recent years, few studies have assessed RFID critical success variables and their impact on the organization. Although many guidelines for implementation exist, most of them are not identifying success factors. This study addresses the fundamental issue of how to define the success of RFID implementation and to suggest a possible relationship among implementation factors and success variables. In addition, this paper discusses the opportunities and challenges facing enterprises as they begin to evaluate/or deploy

RFID technology. This paper will address other issues such as:

•

RFID potential in the retail industry

•

Adoption phases necessary to develop and deploy RFID

•

Implementation challenges and opportunities

•

Bottom-line business benefits and successful integration

•

Evolving technologies and trends

2. The retail industry: Its evolution and the potential for RFID

2.1. Changes in the retail industry

In the past 30 years, the retail industry has gone through many transformations.

These transformations have had a great impact on the size of stores and the number of

Stock Keeping Units (SKUs) managed within those stores. Furthermore, this industry is facing many challenges such as high product variants, customized demand, shorter product life cycles, globalization, aggressive competition, increasing cost pressures, and strict traceability requirements (Li and Lin, 2006). Traditional capturing of sales information using manual, and therefore error-prone, methods increases transaction costs and causes inventory inaccuracies and has become almost obsolete (Abernathy et al., 2000).

Business-to-Business (B2B) e-commerce is growing at a phenomenal rate. While the procurement and selling advantages are the big benefits, the most promising source

M. Attaran / Strategic implications of RFID implementations in the retail industry supply chain 157 of B2B benefits is collaborative supply chain management. Supply chain collaboration improves a buyer-seller relationship and provides an opportunity for partners to work together to gain a better understanding of future product demand. This collaboration in demand and logistics planning, scheduling, synchronized production, and new product development could drastically improve supply chain performance. In this context, information technology facilitates supply chain collaboration and optimization and is positioned to be the key enabler of a new wave of supply chain competition

(Attaran, 2007a).

The current economic crisis created major stress for many companies in the retail industry. At the same time, it is offering a rare opportunity for companies to recognize current and emerging trends and opportunities and to invest in new technologies that can reduce costs and make them more competitive in the long term. RFID technology can certainly help (Attaran, 2007b).

2.2. RFID potential in the retail industry

IBM recently surveyed nearly 400 supply chain executives at companies located in

25 countries and serving 29 separate industries. The study titled “ The Smarter Supply

Chain of the Future, ” revealed that supply chain visibility is still a major issue. The technology best poised to improve supply chain visibility is RFID, which can collect and deliver real-time data regarding every facet of an interconnected supply chain

(IBM, 2009). Several studies show that RFID technology could effectively enhance information flow within a supply chain. The technology could improve performance and reduce potential human errors. The technology could also reduce document handling and processing costs, by automating and synchronizing information-based activities, product flows, and allowing end-to-end information visibility in the supply chain (Angeles, 2005; Prater et al., 2005; Vijayaraman and Osyk, 2006; Reyes et al., 2007; White, 2007; Visich et al., 2009). Firms such as Wal-Mart, Tesco, Target,

Procter & Gamble, Lauren Scott, and Metro AG have capitalized on the potential of

RFID technology to streamline supply chains (Attaran, 2007b).

RFID can be used for automated data collection to augment ERP systems (Kalakota and Robinson, 2001). In addition, this technology can facilitate inter-organizational e-commerce initiatives, such as continuous replenishment or vendor-managed inventories. RFID is already being used in a variety of settings, including access control to buildings, animal tracking, asset management, document tracking, library management, health care, payment processing, vehicle security, pay-at-the-pump gasoline sales, product authentication, retail, sports timing, tracking baggage and packages, and wireless payment (Juban and Wyld, 2004; Kern, 2004; Attaran, 2006, 2009;

Reyes and Frazier, 2007). RFID technology can also reduce material-handling costs by improving pallet throughput and warehouse data accuracy through the deployment of sensor-based RFID forklift systems.

Most of the benefits listed for embracing RFID in retail supply chains are realized due to better information management. RFID is providing new ways for companies to

158 M. Attaran / Strategic implications of RFID implementations in the retail industry supply chain handle information. Some of the benefits listed could be realized by other IT enhancement techniques. For example, CRM, SCM, and ERP systems help link customers, suppliers, and partners to integrate multiple activities in the firm’s value chain (Porter,

2001). Similarly, Collaborative Computing Technology enables a company to increase efficiency, improve productivity, reduce costs, and improve quality by enabling the group to achieve superior decisions and solutions. The technology provides improved communications between upstream suppliers and downstream customers as well as logistics providers that help eliminate demand and supply uncertainty (Attaran, 2007a;

Visich et al., 2009).

2.3. Beneﬁts gained

RFID technology helps eliminate demand and supply uncertainty through improved communications between supply chain trading partners. RFID enables trading partners to collaborate more effectively, plan more accurately, and respond more rapidly up and down the value chain (Attaran, 2007a). RFID technology can help retailers reduce the costs of receiving, inventory, and shrinkage losses by up to 11 percent.

It can also cut logistics delays by up to 5 percent, and can decrease the occurrence of out-of-stock merchandise by up to 14 percent (Krivda, 2004). According to Consultant Accenture, RFID technology could reduce the cost of checking inventory by

65%, in part, by eliminating the need to physically count boxes (Gogoi, 2005).

Moeeni (2006) noted that Moore’s law favors RFID as the costs associated with implementing RFID systems has continuously declined while performance has improved. Moeeni also stated that according to Metcalfe’s law, as more organizations deploy RFID the business value of RFID should increase. In a separate study,

Visich et al., 2009 presented the empirical evidence of supply chain performance improvements due to RFID using the categories manufacturers/suppliers, distributors/logistics providers, retailers and the supply chain as a whole. RFID applications at the retail level have reduced stockouts up to 26 percent, improved inventory accuracy and product locating accuracy by 99 percent, increased shelf availability by 100 percent, increased sales by up to 30 percent, and sped up the goods receipt process.

The research conclusion is that significant benefits have been reported for a variety of supply chain entities, processes and performance measures. The authors agreed with Moeeni’s assessments and their research has shown there is a business case to be made for RFID technology in the supply chain. See Table 1 for a summary of the empirical evidence of RFID benefits in the retail industry.

RFID technology offers a very significant advantage over bar-coding. A comparable analysis of RFID and barcoding technologies in practice proved that RFID can deliver more rapid scanning times than barcode scanning (White et al., 2007). Wal-Mart’s initiative in using the technology was heralded as the most important tech development for retailers since the bar code. RFID tags continually gather information as products move from shelves to the check out counter. The technology not only helps the retailer to reduce labor and manual costs, it also curbs shoplifting and boosts store

M. Attaran / Strategic implications of RFID implementations in the retail industry supply chain 159

Table 1

Prior RFID technology business benefits and recommended success variables

Reported RFID business benefits

1. Enhanced visibility into what customer will need

2. Enhanced visibility along the supply chain

3. Accurate and timely asset tracking

4. Smart product recycling

5. Streamline or better manage a business process within the company

6. Improved productivity by generating the fastest and lowest cost method of acquiring the data

7. Improved velocity by responding to demand signals faster

8. Reliable and accurate order forecasts

9. Reduction in inventory costs including stock-out and holding costs

10. Improved technology return on investment

11. Improved accuracy by reducing the opportunity for human error

12. Increased productivity and dramatically reduced operating costs

13. Improved product quality and reliability including traceability

14. Improved supply chain management by better tracking transportation and warehousing channels

15. Improved Counterfeiting identification, theft prediction, and faster recalls

16. Enhanced long-term relationships with suppliers

17. Reduced opportunity for human errors

Recommended RFID success variables

1. Ease of integration

2. Speedy information retrieval

3. Accurate and timely asset tracking

4. Improved information accuracy

5. Better decisions

6. Improved productivity

7. Dramatically reduced operating costs

8. Improved business process

9. Improved quality and reliability

10. Improved competitive position productivity (Gogoi, 2005). The tags already help Wal-Mart with reordering, stocking, and keeping track of purchases. According to an estimate, Wal-Mart can save $6.7

billion in labor costs alone from RFID implementation (Rockwell Automation, 2004).

Gillette Company placed RFID tags on all of the cases and pallets of its new Fusion razor that were shipped to 400 retailers with RFID readers in their storage facilities in 2006. When the data collected by RFID reader showed the products had reached a store’s storage facility but were not placed on shelves for sale in a timely manner,

Gillette would call and request that the product be moved out quickly. This strategy forces Fusion razors to be placed on store shelves 90 percent faster than before.

Gillette expects a 25 percent return on its RFID investment by 2016 (Rothfeder,

2008). Finally, Walgreens, the largest U.S. drugstore chain has completed installation of an RFID tracking system to track product displays at nearly all of its 5,000 stores.

The project began in 2007 and has enabled the drugstore chain and its suppliers (such as Revlon) to manage the promotional displays more effectively, thereby increasing sales of the promoted products. The data gathered by the RFID system enabled Revlon to ensure that the most popular displays were placed on the sales floor at the proper

160 M. Attaran / Strategic implications of RFID implementations in the retail industry supply chain time and location, thereby boosting sales by as much as 400 percent (Swedberg,

2009).

There are many success stories of effective implementation of RFID technology in this sector. For example, the U.S. Army is using a Global Sentinel Unit (GSU), which is mounted onto a truck and act like RFID tags and communicate via satellite and cellular communications to ensure troops in Iraq receive their necessary supplies. More accurate visibility, helps the military keep supplies from running out, and prevents overstocking (Bacheldor, 2003).

RFID technology could be an extremely powerful tool for improving efficiencies, especially when used as an infrastructure for applications. A few companies, such as

Airbus, have already adopted this infrastructure approach, and have been successful.

Airbus, a consortium of several European aerospace companies, started testing RFID in the 1990s, but like many corporate giants, the company didn’t have a coordinated plan. In 2006, the company made a conscious decision to implement RFID technology in three phases. In Phase I, Airbus decided to streamline its supply-chain tracking capabilities, and warehouse logistics and distribution processes. By using RFIDenhanced shipping labels, Airbus fully automated data entry across its warehouse and logistics processes. The RFID process enabled a100 percent inventory accuracy and a 75 percent reduction in handling time that in turn helped reduce cycle times and inventory levels. The second phase of the RFID program was designed to help improve the process in manufacturing, assembly, and global transport. In this phase, RFIDbased technology pilots were aimed at evaluating the use of RFID for tracking work orders and improving the handling of tools throughout the manufacturing process.

In the third phase of the RFID program, Airbus is looking to RFID technology to reengineer its in-service processes and support operations (Wasserman, 2007).

RFID tagging can help a company to track and trace reusable assets through the supply chain. The tags can enable a company to sort and recycle products by automatically identifying and selecting the right treatment or maintenance for them. With better visibility to each asset, inventory accuracy and labor productivity will be increased, and fixed asset costs will be reduced (Guidance Document, 2005). RFID can also provide reliable and accurate order forecast and the visibility needed to prevent outof-stock situations throughout the supply chain. RFID tagging can help prevent lost or misplaced goods and can ensure product is delivered in a timely manner (Forcinio,

2006).

According to an IBM Business Consulting Services Analysis, implemented properly, RFID technology has the capability to improve efficiency, cut costs, and boost sales (Rockwell Automation, 2004).

Some of the most important benefits that businesses are able to obtain by embracing

RFID technology have been listed in various studies (Vijayaraman and Osyk, 2006;

Attaran, 2007b; Reyes et al., 2007; Cannon et al., 2008; Visich et al., 2009). These benefits are summarized in the first column of Table 1. A review of the literature and the above list produced a consolidated inventory of ten RFID success variables or benefits summarized in column two of Table 1. Most of these ten factors, however,

M. Attaran / Strategic implications of RFID implementations in the retail industry supply chain 161 apply not only to RFID implementation, but also to large system development projects in general. For example, these factors have been touted by various authors in the literature as benefits or advantages of data warehousing projects (Sakaguchi and

Frolick, 1997; Watson et al., 2001; Wixon and Watson, 2001; Shin, 2003). Similarly,

Attaran (2004) argued IT can be more than a useful tool in success of business process redesign and provided a summary of IT roles and its benefits (similar to benefits in

Table 1) in initiating and sustaining Business Process Reengineering (BPR).

3. Implementation issues

RFID technology faces implementation challenges. The three big challenges are: technological maturity, global standardization and cost (Attaran, 2007b). The cost of implementing full-fledged RFID in a large manufacturer could be in the millions.

However, the value of RFID lies in its ability to automate the identification process: no longer does one need to rely on workers to scan items as it is the case in barcoding.

With RFID, the label cost is higher, but the incremental cost of each scan is very low. Thus, potential benefits from RFID tend to be highest when each tagged good is scanned repeatedly at different stages of the supply chain.

Furthermore, a return on investment (ROI) is not always a straightforward calculation to justify RFID spending. The business benefits of RFID technology will not arrive with a big bang. Benefits from RFID can be categorized as evolutionary vs.

revolutionary. The benefits from RFID in this category stem from cost savings due to faster and potentially more accurate scans. Examples of such improvements are labor cost savings, more accuracy in inventory control, and increased throughput (Attaran,

2009). RFID systems offer enterprises an advanced way of gathering and processing business data. RFID is becoming a real opportunity to drive business process efficiency across the manufacturing, transportation & logistics, wholesale distribution and retail trade sectors.

The following section summarizes how RFID implementations are perceived in the retail industry environment (Krivda, 2004; Attaran, 2007b).

3.1. Adoption phases

Before deploying a RFID system in a company, determine where RFID will add business value and plan a scalable deployment approach. Table 2 summarizes possible phases to follow:

I. Elementary phase or (slap and ship) – At this stage companies begin to evaluate the overall business strategy and attempt to identify opportunities and benefits from deploying an RFID strategy. RFID tags are installed on a small-scale pilot project to test the premises of the strategy at minimal investment and to learn more about RFID within the four walls of the company.


Adoption phases

I. Elementary phase or slap & ship

II. Intermediate phase

III. Final phase

Table 2

The RFID adoption phases

Activities

Begin to learn about RFID technology

Ensure nominal compliance with customer mandates

Put the RFID tags on a small sample of products

Use RFID as a data collection agent

Deploy RFID in a limited number of sites

All facilities will be RFID-enabled

Use information generated by RFID to understand customer demand and to shape supply chain

Source: Attaran, June 2007.

II. Intermediate phase – At this stage companies use RFID technology as a data collection agent and apply RFID tags during production. During this phase,

RFID is also used for receiving goods and processing shipments. Data collected from RFID process is shared with back-office business systems.

III. Final phase – At this stage all facilities will be RFID-enabled. During this phase, relevant metrics should be in place to gauge the performance of the implementation and to take corrective action when indicated. RFID promises the highest benefits from integrating the RFID data across the supply chain and beyond the four walls of a company. RFID provides vast amounts of data that need to be processed to be used to drive operational actions. Companies will use the data generated by the RFID technology to drive a supply chain much more efficiently, and to extract value from a variety of supply chain processes.

3.2. System success factors

Table 3 summarizes RFID system success measures and its implementation success variables. The first two variables “Ease of integration” and “Speedy information retrieval” measure the quality of the RFID system developed. The success of a RFID system is more than likely be judged by how user-friendly and efficient it is, in either its user interface or the analysis tools, for end users to generate information to support decision making.

The next two variables, “Accurate and timely asset tracking” and “Improved information accuracy” are concerned with the quality of the system’s outputs. An RFID system is expected to provide information of higher quality as well as improved accuracy by reducing the opportunity for human errors.

The following two variables, “Better decisions” and “Improved productivity” are associated with how these outputs can benefit the individual users. RFID technology, implemented properly, can make its users more effective and efficient. Armed with accurate and timely information, employees should be able to improve accuracy, reduce costs and make better decisions.


Table 3

The RFID system success measures and its implementation success variables

System success measures

I. Quality of RFID system developed

II. Quality of system’s output

III. Individual users’ benefits

IV. Firm-level’s benefits

RFID success variables

Ease of integration

Speedy information retrieval

Accurate and timely asset tracking

Improved information accuracy

Better decisions

Improved productivity

Dramatically reduced operating costs

Improved business process

Improved quality and reliability

Improved competitive position

The last four variables, “Dramatically reduced operating costs,” “Improved business processes,” “Improved quality and reliability,” and “Increased competitive position” measure benefits accrued at the organizational level. A well implemented

RFID system is purported to improve return on investment in technology, streamline or better manage a business process within the company, and improve supply chain management. Furthermore, the technology could improve product quality and reliability including traceability, and increase productivity and dramatically reduce operating costs.

3.3. Implementation factors

Various studies have identified the factors that contribute to the success or failure of large system development projects. For example, Vatanasombut and Gary (1999) identified 51 success factors that contribute to the success/failure of data warehousing projects. Sammon and Finnegan (2000) recommended ten-commandments of data warehousing success. DeLone and McLean (2003) tested a model of information systems success. Other researchers provided their own lists of critical success factors

(Watson and Haley, 1997; Wixon and Watson, 2001; Angeles, 2005). Similarly, there has also long been a keen interest in identifying factors that contribute to the success or failure of a new technology. Authors have touted numerous success factors for technology adaptation considering the following five views:

IT Adoption – Perceived benefits, complexity, organizational compatibility, and top management support (Beatty, Shim and Jones, 2001; Attaran, 2004).

Innovation Theory – Entry timing, organizational readiness, and extended factors

(Beatty, Shim and Jones, 2001).

Technology, Organization, Environment – Technology competence, firm scope, size, competitive pressure, and consumer readiness (Zhu, Kraemer and Xu, 2003).


Industrial Organization – Firm performance is enabled or constrained by industry structure (Porter, 1981).

Resource-Based View – Presence of resources that meet certain conditions such as value, rarity, and lack of substitutability (Barney, 1991).

Based on these studies and review of other RFID studies (Angeles, 2005; Reyes et al., 2007; Waters and Rahman, 2007; Visich et al., 2009) we produced a consolidated list of ten RFID implementation success factors. These success factors are related to the four feasibility tests of information systems (IS) development projects and are summarized in Table 4.

As shown in Table 4, RFID success hinges upon factors of different dimensions. For the operational feasibility, it is suggested that organizations clearly make a business case and define the business needs and benefits as the first step in their RFID endeavors. For technical considerations, the factor that demands top priority is “Choosing the right RF technology,” which again has been advocated in various studies. It is important to realize that RF technology provides the ability to gather data but not necessarily make use of it. RF and bar coding technologies need to be implemented in conjunction with software systems that not only gather the data but also respond to it in real-time or in batch mode. The risk of choosing a wrong solution is high and choosing the wrong technology can lead to unreliable communications and system problems.

Other factors, such as “adequate IT staff,” and “project management and teamwork,” do play an important role.

Two factors measure how reasonable the time allowed for development of a RFID system is: “proper planning and scoping.” and “practical implementation schedule.”

Finally, the last two factors, “adequate funding,” and “measurable business benefits,” measure the economic aspect of the RFID project.

Table 4

Information systems’ feasibility test and RFID implementation success factors

IS Feasibility tests

I. Operational/organizational

II. Technical

III. Development time

IV. Economic

RFID implementation factors

Clearly defined business needs/ benefits

Top management support

User involvement/participation

Choosing the right RF technology

Adequate IT staff and consultants

Project management (teamwork)

Proper planning/scoping

Practical implementation schedule

Adequate funding

Measurable business benefits


3.4. Practical implications

Even though both RFID critical implementation factors and system success variables have received a fair amount of attention in the previous studies, they have not been examined in the same study. Table 5 is an attempt to find interaction between the two. No formal hypotheses are developed; simply the objective is to suggest a possible relationship among implementation factors and success variables. Table 5 provides guidelines for practitioners to plan and implement an RFID project. Since different organizations have different objectives, Table 5 could be used in identifying the exact factors that need attention. For example, companies that are new to RFID

RFID success/benefits

Ease of integration

Speedy information retrieval

Accurate and timely asset tracking

Improved information accuracy

Better decisions

Improved productivity

Dramatically reduced operating costs

Improved business process

Improved quality

Table 5

RFID success variables and implementation factors

Improved competitive position

Implementation success factors






Adequate funding










Project management



Adequate IT staff and consultants


Adequate funding









Clearly defined business needs/benefits

166 M. Attaran / Strategic implications of RFID implementations in the retail industry supply chain technology should focus on the ease of integration. In this case it is recommended to concentrate on six factors: “clearly defined business needs,” “top management support,” etc. On the other hand, for advanced companies those are interested in using

RFID technology for competitive advantage, it is recommended to concentrate on two variables: “measurable business benefits,” and “clearly defined business needs.”

4. Evolving technologies and trends

4.1. Challenges

RFID is hailed by proponents as an exciting technology application that will transform supply chains into more effective systems and close the information gaps in supply chain operations (Cannon et al., 2008). Skeptics characterize RFID as upgraded bar codes that are costly, lack common industry standards, unreliable, and raise serious issues regarding consumer privacy (Reyes and Frazier, 2007).

In a survey of 5,000 supply chain professionals, Reyes et al. (2007) investigated the current and planned uses of RFID, and the reasons that motivate the adoption.

Some of the most important reasons given by firms for not planning to implement

RFID technology include:

1. Not applicable in our business

2. Our systems work fine

3. Too busy to consider it

4. Lack of proper standards

5. Initial costs are too high

6. Expected benefits are not enough

7. Security or reliability issues

Although RFID has enormous potential for reducing the total cost of supply chain, there are also a number of reasons at the fundamental and technical levels for its delayed acceptance. Attaran (2009) reviewed obstacles to rapid RFID implementations and concluded that reasons for the slow adoption range from technology issues to economic justification of RFID tags. Theses challenges are summarized in Table 6.

4.2. Trends

RFID is still a relative newborn in terms of mass adoption. The technology, however, is maturing and have become broader, deeper, and cheaper. Today, RFID systems continue to see tremendous innovation in improved radio frequency communication range and power delivery efficiency (Attaran, 2009). Most of the challenges highlighted in

Table 6 are being resolved.

Following is a list of some of these trends:

•

Cheaper Tags and Readers – Moore’s law favors RFID. The technology is becoming less expensive and the price has been coming down quickly. There are claims


Levels

Fundamental

Technical

Table 6

RFID implementation challenges

Challenges

High capital costs

More expensive than a bar code

Finding the ROI not easy

Uncertainty around standards

Privacy concerns and the potential for legislation

Imperfect read-rates

Unproven systems

Problems with assembling low-cost tags

Problems with using tags on metal objects

The middleware that links RFID hardware to various

IT systems is still young

Shortage of appropriate software and middleware

Lack of in-house experts to implement RFID

Source: Attaran, 2009.

by some companies that they are developing a technology that will soon lead to penny-a- piece tags. Moreover, the next generation of RFID tag technologies containing chip-less or printable RFID are being researched extensively today.

RFID tags based on paper, plastic, and nontoxic RFID ink are being developed by several companies (McGlaun, 2010). Experts also predict average pricing for readers will be reduced from $1,600 to about $500 by 2010. Lower costs drive adoption (Attaran, 2006).

•

More Intelligence and Enhancement in Devices – The cost of RFID readers is reducing while the technology is seeing advancements at a steady pace. Companies are providing features on readers, keeping costs at a minimum to obtain a clear edge over competition. Improvements have been made to overcome limitations, such as read range. For example, high-frequency passive RFID tags with antennas capable of functioning as multiple sensors have been developed to extend the read range between the readers and tags. Similarly, intelligent RFID devices are used to determine the distance, direction and speed of ultrahighfrequency (UHF) tags and to locate tags in 3-D space (Roberti, 2008). In addition,

“unclonable” tags are designed to prevent counterfeiting of high value or high interest items such as luxury goods and pharmaceutical products (Biyong, 2008).

•

Mobility – Mobile RFID readers extend the reach of RFID network and achieve a new level of visibility into inventory and assets. These compact readers can be installed almost anywhere – on material handling equipment such as forklifts, on mobile carts, portable skate wheel conveyors or even in hard to reach places where a cabled fixed reader would not be practical. The result is continuous realtime information – allowing the enterprise to achieve a new level of productivity and efficiency throughout.


•

Growth in Applications Software – Some innovative companies are working with academic and industry leaders using hardware and software to develop powerful integrated RFID solutions. In cooperation with university research labs, these companies are developing the IT processes and applications to improve efficiency of RFID application in different industries. Microsoft and other software companies are creating scalable, extensible platform for development, deployment, and management of RFID solutions.

5. Conclusions

5.1. Discussion

RFID technology, implemented properly, can save the firm money and make the company more competitive for years to come. RFID is one of the most promising and anticipated technologies in recent years. RFID can provide immediate and tangible benefits throughout the supply chain. The bottom line is that RFID is easy, can be made cheap and is a competitive advantage within the supply chain. Handled properly, RFID technology can result in an evolutionary change incorporating legacy systems with the real-time supply chain management of tomorrow. The challenge for

IT experts today is to determine how to integrate RFID with existing Supply Chain

Management (SCM), Customer Relationship Management (CRM), and Enterprise

Resource Planning (ERP) applications with the entire system.

RFID is not just an operational tool that can be used in isolation; rather, it is a strategic technology. RFID streamlines the flow of inventory along the supply chain, enabling a new warehouse design geared to digital sensing. The successful supply chains in the future will be those that deliver higher levels of performance in satisfying consumer demands. Tomorrow’s consumers will pull new or customized items into the supply chain. RFID has the potential to offer insight into consumers’ buying habits and to revolutionize the way the supply chain meets customer expectations.

Companies have to get away from thinking of RFID as a cost-cutting tool and look at its broader strategic role and explore its potential. RFID technology needs to be treated as part of a suite of technologies helping to enable different business processes and become a mainstream part of information technology systems.

At the current stage, this industry needs to focus on a team effort between integrators, end users, and manufacturers. Many regard RFID as a technology in its infancy with as yet untapped potential. The technology has many benefits to offer. Its stumbling point seems only to be a variety of issues outside the technology itself: marketing problems, false promises, and a lack of standards. Industry members, however, have become painfully aware of these problems and are trying to do something to remedy the mistakes of the past. If they are able to successfully unify the industry with standards, deliver on future promises, and convince end users of the technology’s benefits, then RFID’s future looks favorable.


5.2. Research implications

This study confirms that RFID success is a multi-faceted construct. Further, it suggests an RFID system be implemented to improve business process and productivity with users in mind. Other highly valued benefits include speedy information retrieval, improved information accuracy and dramatically reduced operations costs. The results also indicate that success hinges upon factors of different dimensions. For operational feasibility, clearly defined business needs/benefits stand out; for technical considerations, choosing the right RF technology tops the list. Equally important, different factors are significant when different benefits of RFID technology are considered.

This perspective helps an organization prioritize its pursuit of RFID objectives.

For organizations looking to identify and measure RFID implementation success, there are four benefits/success measures to consider: ease of integration, improved information accuracy, improved productivity, and improved business process. Interestingly, each of these four benefits measures a different aspect of success. The most highly rated benefit of an RFID technology is its ability to improve the productivity of its users.

This study has enhanced the understanding of RFID success variables and real-world factors that impact success. By examining critical success variables individually, the factors that are important and need attention are identified. For the critical success factors, results of this study are consistent with the literature. It suggests that organizations must clearly define the business needs and benefits as the first step in their RFID endeavors. Another factor that demands high priority is top management support, which again has been advocated in various studies. Since different organizations may have different objectives in pursuits of RFID technology, this study is useful in identifying and prioritizing the exact factors that need attention.

Acknowledgments

The author wishes to acknowledge constructive suggestions received from the editor and the reviewers of the Journal.

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Strategic implications of RFID implementations in the retail industry supply chain

Strategic implications of RFID implementations in the retail industry supply chain

Mohsen Attaran

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Strategic implications of RFID implementations in the retail industry supply chain

Strategic implications of RFID implementations in the retail industry supply chain

Mohsen Attaran

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