International Journal of Electronic Business Management, Vol. 3, No. 3, pp. 165-173 (2005)
165
RFID ENABLED SUPPLY-CHAIN: HARVESTING THE
OPPORTUNITIES
Fataneh Taghaboni-Dutta1* and Betty Velthouse2
1
Department of Operations Management
2
Department of Management and Organizational Behaviour
University of Michigan-Flint
Michigan (USA)
ABSTRACT
Implementation of Radio Frequency Identification (RFID) technology stands to save WalMart $750 million dollars per year. The retail giant has mandated that its top 100 suppliers
begin using RFID by 2005. It is believed that other retailers will follow Wal-Mart’s lead.
RFID holds the promise for a more efficient supply-chain, however, the industry struggles
to comply with the cost and logistics to implement this new technology. This paper present
the state of RFID technology and its use in supply-chain management. It outlines benefits
to industry and consumers of this new technology and explores issues related to consumer
privacy, IT infrastructure, and security that need consideration.
Keywords: RFID, Supply Chain
1. INTRODUCTION
*
RFID is causing a whirlwind of activity and
spending in manufacturing. The U. S. Department of
Defense (DoD), Wal-Mart, and most recently Target
have asked their suppliers to adopt RFID tags for the
purposes of inventory tracking and improved supplychain management. These tags are already widely
used; the most common usage of these tags is for
automated toll payment devices such as E-Z Pass™
and FasTrak™. The use of these tags have
significantly reduced the delays at automated toll
stations on highways.
Wal-Mart has received the most press coverage
for RFID. In November 2003, Wal-Mart announced
that it expected its top 100 suppliers to use RFID tags
by January of 2005 [4]. Wal-Mart also expects 100%
reliability for all tags. Getting an accurate read out of
every tag the first time through will be a challenge
since recent pilot tests suggest that the read accuracy
is about 80%. Many factors contribute to this low
level of accuracy. Some of the problem are software
related while others are still hardware related.
On April 30, 2004, Wal-Mart began testing the
first phase of Electronic Product Codes (EPC).
Twenty-one products (i.e. “Select 21”) from eight
manufacturers have already been tagged with RFID
technology. Eight manufacturers are participating in
the testing phase including: Gillette, HewlettPackard, Johnson & Johnson, Kimberly-Clark, Kraft
Foods, Nestle, Purina PetCare, Procter & Gamble,
and Unilever [7]. In this Initial phase, the Pallets
and cases are marked with RFID tags and readers will
*
Corresponding author: fataneh@umflint.edu
be installed on the dock doors of the seven Wal-Mart
stores participating in the testing. This initial testing
is meant to verify the accuracy of information
gathered by Wal-Mart and its participating suppliers
regarding the inventory that enters the store.
Some related issues such as consumer privacy
and enormous IT infrastructure needs have become
evident from this initial phase. This paper provides a
brief description of RFID technology and presents the
challenges and the opportunities that this new
technology offers to all sectors of industry. Further,
the importance of an IT strategy and IP strategy in the
context of RFID implementation highlights the
importance of the organization’s capacity to organize
the data and to extract value from the data.
The remainder of the paper is structured as
follows. Section 2 provides an overview of RFID
technology. Section 3 outlines some of the benefits
of RIFD for consumers and industry. In section 4,
RFID implementation issues are considered in detail
in addition to consumer privacy issues and concerns
about industrial espionage.
2. BASIC RFID TECHNOLOGY
2.1 Development of RFID
The Auto-ID Center, founded in 1999, is a
partnership between 100 organizations and five
research universities. It is headquartered at the
Massachusetts Institute of Technology, but also has
research sites at the University of Cambridge in UK;
the University of Adelaide in Australia; Keio
University of Japan; and the University of St. Gallen
in Switzerland. In October 2003 the Auto-ID Center
officially transferred the administrative responsibility
166
International Journal of Electronic Business Management, Vol. 3, No. 3 (2005)
of the RFID technology to EPCglobal. The research
segment of the Auto-ID Center then became Auto-ID
Labs. Auto-ID Labs will continue to work closely
with EPCglobal.
EPCglobal is the organization that has the
responsibility setting industry standards for RFID
technology. EPCglobal is a joint venture between
Uniform Code Council (UCC) and EAN International
(the European counterpart of the UCC)
[http://www.epcglobalinc.org/index.html].
Since
EPCglobal and EAN have the same CEO, EPCglobal
is now in the position to globally lead the
standardization of RFID technology.
in time in the supply-chain.
Another major
distinction between a RFID tag and UPC code is how
information is gathered from these tags - an RFID tag
is read by radio contact and does not require the a
direct “line-of-sight” contact that UPC bar codes
require.
Figure 1: 96-bit EPC™ structure
2.2 RFID Technology
RFID tags are small silicon microchips attached
to an antenna. These tags can be as small as half a
millimeter square and can be placed anywhere and
can even be embedded in paper. They transmit a
unique serial number, and based on their technology
they can respond to a reader which is few meters or
hundreds of meters away.
There are three components of an RFID system
– an antenna coil, a transceiver with a decoder, and a
transponder or “tag”. Tags can be passive or active.
Passive tags hold a smaller amount of data, and are
activated by a transceiver signal. Since passive tags
do not have a power source, they are smaller, less
expensive and better for the environment. Active
tags store more data, are powered by a small battery,
and have read/write capabilities. The antenna serves
to receive and transmit radio signals and the
transceiver and decoder read the data from the RFID
tags [9].
An Electronic Product Code (EPC) is a standard
for data format in RFID tags. The Electronic Product
Code (EPC) includes the numbers that identify a
specific item; it is similar to a Global Trade Item
Number (GTIN) or Vehicle Identification Number
(VIN). The EPC is stored in the RFID tag and is
transmitted in the signal. Figure 1 represents a 96-bit
EPC structure which has four components: tag
version number, domain manger, object class, and a
unique identifier. Each individual tag equipped with
a 96-bit EPC code can uniquely identify more than
268 million manufacturers, each with more than one
million products.
The tag version number identifies the tag type,
The domain manger identifies the manufacturer of
the product, object class will identify the specific
model, and the unique identifier uniquely identifies
each individual product manufactured. This ability to
uniquely identify each product manufactured is
critical because this is what allows RFID to go
“above and beyond” what barcodes have done for the
supply-chain.
For example, an RFID tag can
distinguish a single bar of soap from every other bar
of soap that is manufactured. Using the EPC code
imbedded in the RFID tag means that a supplier or
retailer can pinpoint where each item is at any point
A reader is capable of reading hundreds of RFID
tags simultaneously, allowing for more efficiency
than bar-codes allow. As with any other technology,
common standards are needed to create seamless
information processing. As such, the EPCglobal goal
is to create a standard so that items may be identified
regardless of the manufacturer. Ultimately the
information stored in EPC can go beyond simply
better inventory control and optimize the supplychain operation from marketing to distribution. As of
yet, a common set of standards has not been ratified
for the UHF-passive tags. One major issue is to
ratify a standard which will be accepted worldwide.
3. POTENTIAL BENEFITS OF
RFID
3.1 For the Industries
RFID
technology
represents
a
truly
transformational technology with the ability to
revolutionize the current supply chain, retail
operations, and consumer-facing processes. Imagine
a warehouse where perishables don’t perish, where
theft is fully detectable, where inventory records
exactly match physical inventory counts, and where
transfers with trading partners are automated and
precise. Imagine product visibility, transparency and
a supply chain built on real-time demand and supply
information – imagine the impact on inventory and
working capital. That is how RFID technology
promises to change the supply-chain that uses UPC
bar codes.
Wal-Mart was one of the first retailers to fully
understand the importance and value of
“information”. The retailer is a pioneer in harnessing
the information from its point-of-sale information
system and doing so has allowed Wal-Mart to offer
lower prices while increasing its revenue growth.
Now Wal-Mart and the U.S. DoD are among the first
organizations that have mandated their suppliers to
adopt RFID technology. Figure 2 shows how the
information stored in each RFID tag is integrated into
the supply-chain management system. Using this
more detailed and real-time information allows WalMart to continue its lower prices to consumers.
F. Taghaboni-Dutta and B. Velthouse: RFID Enabled Supply-chain: Harvesting the Opportunities
167
Figure 2: RFID integration into supply-chain
RFID technology promises to provide a wide
range of business benefits in many industries. In
addition to enabling improvements within companies,
this technology has the potential to track materials,
goods, and assets across the value chain. In the near
future, companies will use this timelier, more
accurate information to collaborate more effectively
and achieve new levels of efficiency and
responsiveness. RFID eliminates human error,
improves data accuracy, and with a full history for
every item, businesses can streamline their
manufacturing and distribution processes in ways that
have not been possible before.
Depending on a
company’s current level of process automation,
technology, and the number of times items must be
handled as they pass through the supply chain, a
company can reduce direct labor costs anywhere
from 5 to 40 percent by applying RFID.
Being able to safely reduce stock volume made
possible by reducing delivery lead times and lead
time variability creates one of the greatest benefits
within the transportation segment of the supply
chain. The greater the current lead time and lead time
variability, the greater is the potential for savings.
Reducing lead time and lead time variability also
makes companies more responsive to shocks in
supply and demand further improving customer
service.
Another significant benefit of RFID technology
comes from the ability to track a product through the
entire supply-chain. This allows for accuracy in
demand planning that UPC bar codes cannot attain.
Items can be tracked through original manufacturers
to warehouses to retail store shelves. On the supply
side, companies will know exactly what is on hand.
On the demand side, all data about an item (sale,
damage, theft) can be tracked and analyzed; this
data, coupled with reduced lead time for
replenishment will make demand projection much
more accurate.
Throughout the manufacturing process, products
can be tracked to help identify and resolve bottleneck
station and improve throughput.
Ford Motor
Company uses RFID in its automobile assembly
plants when line personnel request parts be sent to the
line. Forklift truck drivers are able to locate parts
more efficiently and deliver the parts to the line
faster, reducing line down time and waiting time.
Associated Food Stores, which consists of over
500 supermarkets in the western United States, uses
RFID in its yard management [11]. As trucks enter
or leave the yard , the system allows a manager to
know exactly where and in what state these assets are
held. For example, the yard manager will know
immediately if a storage unit has experienced a
temperature spike (e.g. truck door left open) where
perishable items may spoil. This system has reduced
labor cost as well as shrinkage.
3.2 For the Consumers
RFID technology also offers many benefits to
the final entity in a supply-chain - the customers.
RFID technology can be used to help protect
customers from counterfeit goods. The counterfeit in
industry has reached epic proportions and today any
product, from designer hand bags to drugs to
electronics are readily available in the global market
in counterfeit form [8]. Often times consumers are
completely unaware of the fact that they have
purchased a counterfeit product. Recently several
drug manufacturers and the U. S. Food and Drug
Administration announced an initiative to use RFID
tags on medication bottles for drugs such as Viagra
and OxyContin, both to prevent theft and to protect
consumers from counterfeit. Since EPC codes,
unlike UPC codes, will allow for individual item
identification, counterfeit producers will be unable to
penetrate supply-chain. This is because counterfeit
products will either have their EPC missing, or an
illegitimate or duplicate of an authentic product
which will promote a close investigation of products
carrying the identical tags.
Consumers can also benefit from the efficiency
offered by RFID technology. Some of these benefits
are already available and others will become
available once some of the companion technologies
become commercially available.
For example,
customers using E-Z pass and FasTrak are traveling
without delay through automated toll booths
.Customers using Speedpass™ at ExxonMobil™ can
pay for their purchases and be on their way without
delay. Speedpass automatically and immediately
communicates the customer’s payment preferences,
knows whether or not the customer wants a receipt.
There are other advantages which are not yet
fully realizable and require more technology
development. For example, one day customers will
be able to pass through a store check out point and
pay for their purchases without ever taking any item
out of their carts, reducing time spent at the stores. 7Eleven is one retailer that has started testing this
technology in in their headquarters store in Dallas in
order to gain better understanding of the IT
implications for a full implementation of RFID
technology [12]. The VIP (Virtual Instant Payment),
allows customers, who have participated in the
experiment, to pay for their shopping by just waving
their VIP cards near an RFID reader and leave the
168
International Journal of Electronic Business Management, Vol. 3, No. 3 (2005)
store without standing in line. Individual EPCs will
also allow for returns and exchanges (without a
receipt) and it will allow for automatic registration of
products for warranty and post-sales service
programs.
Being able to grab a few items from store
shelves and simply walk out, with the purchase
automatically debited from a RFID’d credit card will
change the shopping experience dramatically. It will
be easier, faster, and more accurate to ‘check out’
with purchases; it will be harder to shop lift or steal;
and occasionally, it will be a nightmare if/when the
RFID reader becomes disabled. These changes
suggest enormous changes in human resource needs
and deployment. There will be much less demand for
cashiers/checkout people and for security personnel,
but there will be a much greater demand for IT
technicians. This would be true for all sorts of retail
endeavors – groceries, clothiers, appliance stores,
outlets malls, department stores, drug stores, etc.
Given the number of retail establishments, the
changes in human resource allocation suggested by
RFID utilization will likely result in significant
resistance to their implementation. Additionally,
organizations will need time to plan, rearrange, and
retrain their human resources.
4. CHALLENGES OF RFID
IMPLEMENTATION
4.1 RFID Implementation
An important distinguishing factor among
available RFID tags is the frequency at which they
operate. There are three basic types of RFID tags:
Ultra-high Frequency (UHF) tags, High Frequency
(HF) tags, and Low Frequencies (LF) tags. UHF tags
operate in the 868-956 MHz frequency band (same
band as radios and cell phones). These tags have a
long range for read and readers can scan hundreds of
these tags simultaneously.
However, at this
frequency, the signals are easily absorbed by any
form of liquid and therefore companies need to
evaluate how and where to place the UHF tags to
overcome this problem. For example, KimberlyClark had to redesign the antennas for its baby wipe
products because they absorbed the RF signals [15].
HF tags operate at 13.56 MHz (known as industrialscientific-medical band) and have a lower
transmission range and are larger than UHF tags;
however, they can be scanned in the presence of
water. LF tags have the lowest transmission and are
mostly used in “building-access” badges; they don’t
offer much use, if any, for supply-chain management.
UHF tags can be read from long distances and
many can be scanned simultaneously. Scanning the
tags simultaneously promises to increase the
efficiency of tracking inventory but without due
caution, it can prove to be less than ideal. The NCR
Corp.® experimented with RFID-automated checkout
in supermarkets where shoppers passed through the
register with full shopping carts and were
automatically presented with their bill. However,
they found that in some instances a shopper can end
up paying for items in another customers’ carts that
were read by the RFID reader.
An RFID reader engaging hundreds of tags in its
read range, must be able to provide what is known as
“anti-collision” protocol. The anti-collision protocol
eliminates the possibility of one tag interfering with
another tag’s transmission. The two protocols used
in UHF tags and HF tags are tree-walking protocol
and aloha protocol [16]. Tree-walking protocol can
allow for hundreds of tags to be scanned
simultaneously, but since these signals are broadcast
over a large distance it can potentially allow
eavesdropping.
Aloha protocol leaks less
information but only allows for scanning several
dozen tags simultaneously.
4.1.1 IT Infrastructure
To fully realize the potential of RFID
technology, aside from the upfront costs of deploying
readers, an IT infrastructure needs to be set up. Firms
have to either develop or purchase software that can
capture the information obtained by readers. The
volume of data captured by readers can be enormous
and therefore the capacity to scale the data and
integrate the new hardware and software with
existing systems within the organization and across
the supply-chain is essential [11].
As RFID readers gather information at multiple
points of the supply-chain, the data gathered needs to
be processed and communicated across the supplychain. The data that is gathered is substantial and,
without due care, can result in information overload.
Detailed information on every pallet, and eventually,
on every item will be gathered – where the product
was manufactured, picked, packed, and shipped.
These data will be transmitted real-time to a
warehouse management system, an inventory
management system, a financial system, and other
enterprise systems [12]. Companies need to decide
which information must be transmitted in real-time
and what can wait 24 hours for batch processing.
4.1.2 Edge Computing
IT experts agree that RFID is a transformational
technology which will rely on a new kind of
computing technology. This new technology is going
to be much more distributed in nature and is being
referred to as “edge computing” [11]. The central
data processing center at corporate headquarters will
have to be replaced by processing capacity at the
points of sale, shipping docks, and the forklifts. The
edge computing will use the power of the Internet to
process and communicate the information that is
gathered from the tags. Object Naming Service
(ONS) developed by AUTO-ID center [11] is similar
to the Internet’s Domain Name System (DNS), which
routes information to the appropriate web site.
F. Taghaboni-Dutta and B. Velthouse: RFID Enabled Supply-chain: Harvesting the Opportunities
Product Markup Language (PML) has been
developed as the language to describe the physical
objects in the same way that Hypertext Markup
Language (HTML) is the common language that tells
web browsers how to display most Internet web
pages. The ONS tells computer systems where to find
information about any object that carries an EPC
code, and then this information can be communicated
back from the Internet to manufacturers, suppliers, or
retailers whenever they need it. This technology is
not yet ready for widespread use [11].
4.1.3 EPC and UPC Codes
Another IT challenge in adopting RFID
technology lies in the difference between EPC codes
and UPC bar codes. UPC bar codes use 11 digits
where EPC codes are composed of 13 digits. Today,
most retailer’s systems used in warehouse
management, inventory management, etc. have been
developed to hold 11-digits. The extra 2 digits in the
EPC codes requires the numerical structure inside the
information systems needs to be redeveloped. This is
not unlike the efforts that companies had to undertake
to ensure Y2K compatibility.
The North American retailers have an incentive
to get started on the conversion to 13-digits since
many European suppliers have already made this
conversion and also because of Sunrise 2005
compliance requirements. Sunrise 2005 is an
initiative launched by the Uniform Code Council
(UCC) to get retailers in North America to update
their databases to allow for the automatic
identification of 13-digit barcodes. As of January 1,
2005, the UCC will no longer support the UPC-12
barcode standard because it is running out of numbers
to fit in the current format.
4.1.4 Data Management and Integration
As RFID systems get adopted by various
industries, many IT vendors are working toward
providing solutions for IT related issues. Such
vendors generally fall into three categories: RFID
hardware providers, application software providers,
and system integrators. Some vendors provide more
than one type of service. When Wal-Mart mandated
the use of RFID, it was expected that suppliers would
assume all financial and technical responsibilities for
their technology. Not surprisingly, software vendors
are lining up with solutions. Sun Microsystems was
one of the first, in January 2004, to announce the
support of RFID testing via two centers, meeting
Wal-Mart’s standards. Both centers were scheduled
to open early in 2004. One is located in Texas and the
other in Scotland [5].
An alternative to Sun
Microsystems solution is to either purchase or
upgrade to mySAP Supply-chain Management
Version 4.1, since the new version incorporates the
ability to handle the extra identifiers mandated by
Wal-Mart [6].
RealTime Technologies, Inc is
another vendor that is offering to suppliers [3].
169
Printronix is yet another one which specializes in the
smart-labeling requirements. Middleware solutions
are also available that will create RFID tags and
advance shipping notices – i.e. Manhattan Associates,
Provia, and RedPrairie.
All three have worked
closely with the Auto-ID Center and can be added to
an existing system to cut costs [14].
Some early adopters of RFID technology, such
as International Paper, have been successful in
creating a new consulting service for organizations
that are moving toward deploying this technology.
International Paper has developed a warehouse
tracking system which uses RFID technology for
managing its inventory in its Texarkana, Texas mill
and warehouse [2].
International Paper, in
cooperation with ESYNC, a system integrator, and
Matrics, an RFID hardware provider, has used its
experience in their implementation process and has
turned it into an independent business unit [1].
International Paper is marketing its EPC-based
warehouse tracking system, and is offering its
integration expertise to other organizations such as
Wal-Mart and DoD.
4.1.5 What to Expect
To date, much of the focus has been on tag and
reader technology development, and much less effort
has been spent on the needs and scope of data
management systems, applications, and integration
software that are required to build value in the
consumer packaged good’s value chain. The biggest
advantage of this technology will eventually be in its
power to use information as its most important asset.
It has the power to move customer relationship
management (CRM) systems to the next level, where
the product development, manufacture, and
replenishment will be driven by actual demand
(based on consumer transaction). This is being
referred to as consumer-driven replenishment (CDR)
and will require the ability to track point-of-sale
information and have the ability to transfer the
knowledge to other entities of the supply-chain [10].
At this time, the RFID hardware and software
offering among vendors are incompatible with one
another and the propriety characteristic of this
technology adds to the cost of RFID implementation
and hinders the use of this technology across multiple
applications. Development of a standard RFID
technology and standard code for identifying
individual objects will help bring the cost down and
make “across the board” adoption of this technology
possible. The lack of common standards for EPC
code and RFID technology has forced the suppliers of
Wal-Mart to begin attaching tags to many fewer
products by January of 2005 than originally
mandated by Wal-Mart. Suppliers blame this on
Wal-Mart; they suggest that the mandate before the
technology was fully developed was simply
premature[15]. However, in the fear of losing their
business with Wal-Mart, the top suppliers have begun
170
International Journal of Electronic Business Management, Vol. 3, No. 3 (2005)
complying, though at times in such a crude way that
the expected cost savings seem impossible. The
tagging that has begun is commonly referred to as
“slap and stick”, where tags are applied at the last
minute to products that are already palletized and
shrink wrapped and ready to be shipped to Wal-Mart.
In some instances, the products have to be
depalletized to have tags applied, and once again
palletized [15].
4.2 Potential for Industrial Espionage
The ubiquitous deployment of RFID tags in
supply-chain and consumer goods can open the door
for new security
risks not present in closed
manufacturing systems. RFID tags carry a rich array
of information about a firm’s supply-chain. When a
reader engages a RFID tag, it is difficult to shield the
information that is being transmitted without
impeding its effectiveness. It is conceivable for a
competitor with an antenna and some basic receiving
equipment to gather information about the supplychain that was intended for company-only use.
Protocols are under development that will enable
RFID tags to recognize legitimate readers before
emitting any information (e.g. tree-walking
protocols). This is specially important since UHF
tags will have the widest usage in supply-chain and
retail applications, and these tags are the most
vulnerable to eavesdropping [17].
To prevent interrogation by rival or competitor
firms, tags need to incorporate cryptographic
capabilities. Unfortunately since the cost of tags is an
important factor in RFID implementation, low cost
tags will be the most attractive alternative for
manufacturers. However, these low cost tags lack the
computing power to perform even the most basic
cryptographic operations [17]. More expensive tags
can perform basic cryptographic algorithm and are
feasible for use for very expensive items such as
electronics but not for use for consumer goods
products such as toothpaste, clothing, etc. For
inexpensive tags without cryptographic capabilities,
some security companies are working on developing
additional technology to prevent tags from being
tapped by eavesdropping. RSA® Laboratories is
developing technology which involves tags using
pseudonyms. These tags transmit different identifiers
at different times and only a legitimate reader will be
able to distinguish the right information being
transmitted; this should prevent eavesdroppers from
acquiring
any
meaningful
information
[http://www.rsasecurity.com].
It is not only tags and readers, but all parts of an
RFID infrastructure that present important security
challenges. Currently, some limited data-security
tools for device authentication, end-to-end
communication encryption, and database security
may be applied to RFID systems. It can be expected
that with the increased use of RFID tags, spearheaded
by Wal-Mart in the consumer goods industry, more
security tools will be developed. RFID technology,
with its own special characteristics, does present
some unusual challenges. These will unfold as
enterprises deploy RFID and learn about their
security needs, and they will present an important
challenge to data security specialists.
4.3 Consumer Privacy
This new technology has also brought consumer
privacy and the ownership of the information
gathered to the forefront for many privacy rights
advocates. Consumers Against Supermarket Privacy
Invasion and Numbering (CASPIAN) is the most
prominent group that acts as a balance to the control
granted to EPCglobal in the development of RFID
standards. CASPIAN was founded in October of
1999 and has grown to include members from most
of the United States. The group provides links other
information
on
their
Web
site
(http://www.nocards.com) to educate its viewers on
the possible abuses of RFID technology.
One successful tactic that CASPIAN has used is
to boycott companies that “cross the line” when using
RFID. Gillette, Wal-Mart, and Benetton have all felt
the sting of going too far. Gillette and Wal-Mart
were testing smart-shelf technology without publicly
notifying consumers of the test. They were tracking
and video taping consumers as they were viewing and
handling the Gillette Mach 3 razor in specific WalMart locations [18]. After CASPIAN announced the
boycott on their Web site, the testing was put aside.
Benetton was placing RFID tags in one of their
clothing lines without notifying consumers. Benetton
had claimed that they had employed a “kill code” on
their tags after customers had completed their
purchase. Kill code in theory would disable the
RFID tags, however it was found out that the tags
were not killed, but only made dormant. This meant
that as customers re-entered a Benetton store, the tags
of previously purchased merchandize can receive a
command to be activated again allowing store clerks
to obtain information on the customers. Benetton
stopped this practice shortly after CASPIAN placed a
boycott against their goods.
From March through July of 2003, Wal-Mart
and P&G teamed up in the RFID usage by placing
these tags on P&G’s Max Factor Lipfinity lipstick at
a Wal-Mart store in Oklahoma. Cameras, not visible
to customers, were placed on the shelf and customers
were being monitored and watched at P&G’s
headquarters in Cincinnati. Only after Chicago SunTimes made this story public was a sign placed at the
Lipfinity display to notify customers they were being
watched [18].
There are retailers that have attempted to use
this new technology without creating anxiety on
customer’s part. For example, CASPIAN was asked
to advise Marks & Spencer from the consumer
privacy viewpoint about utilizing RFID in their
facility. Marks & Spencer is using portable readers
F. Taghaboni-Dutta and B. Velthouse: RFID Enabled Supply-chain: Harvesting the Opportunities
that are clearly visible to the customers and does not
place readers on store shelves to “spy” on consumers.
Their readers are not hidden and they are not located
in public places such as parking lots.
Consumer privacy advocates have gained the
support of policy makers in several states. For
example, in June 2004 California passed State Bill
SB 1834 which prohibits “a private entity from using
an electronic product code system that uses radio
frequency identification (RFID) tags attached to
consumer products or an RFID reader to gather, store,
use, or share information that could be used to
identify an individual unless the entity complies with
certain conditions.” Those conditions include: data
is collected only to the extent of the law; the
information has been provided by the customer for
purchase or rental purposes; the information is not
collected prior to the customer initiating the purchase
or rental, or after the completed transaction.
In addition, the California Bill includes a
directive that “a library may not use an electronic
product code system that uses radio frequency
identification (RFID) tags attached to circulating
materials to collect, store, or share information that
could be used to identify a borrower unless all of the
following conditions are met: data is collected only to
the extent of the law; information must be provided
by the patron voluntarily for registering to use the
services or to borrow material, including materials
containing RFID tags; the information can not be
collected before the patron attempts to borrow
materials or after the transaction is complete;
information is collected on those who actually
attempt to borrow materials and only for that item”.
Utah has passed a similar act and Missouri has one
under consideration. It is very likely that other states
will follow as the consumer privacy advocates
continue the struggle to balance the control granted to
EPCglobal and personal freedom.
The surge for RFID technology has been started
by Wal-Mart. Suppliers will comply and consider it
the cost of doing business. Once suppliers implement
RFID fully into their operations they will reap
financial benefit, and even though right now suppliers
are focusing on tagging pallets and cases, in some
instances, a case may be an individual item. This is
true with electronics. Three specific electronic
products, among the Wal-Mart “select 21” for initial
implementation, includes two HP Photosmart photo
printers and a HP ScanJet scanner. These products
will be marked on the outside with the EPCglobal
symbol, nearby signs will be posted to notify
consumers since the EPC codes can transmit
information long after they have been purchased by
the customer. This is one of the most critical
concerns regarding consumer privacy rights. It is
possible to imagine the day when there will be
individual items with unique identifiers on shelves
everywhere. This could lead to the creation of a
global registration system where every item
171
purchased is linked to a credit card number and its
owner. This is why CASPIAN has developed a
template for federal legislation that will ban
companies from linking products to the identity of
customers. This effort is getting support from some
of the U.S. Senators [18].
Although Federal or state legislation can protect
consumers from most abuses that occur from
legitimate business, these laws can easily be ignored
by those who want to gather and sell information on
consumers’ buying habits. Just as is the case where
rival companies can gain access to sensitive
information on each other’s RFID enabled supplychain; individuals with a reader can point a reader at
a person’s residence from across the road and gather
information on every item that has an RFID tag. The
implication of total lack of privacy brought forth by
RFID tags that can transmit information long after
they have left a store is a major concern for consumer
privacy advocates.
Privacy advocates will be happy to know there is
hope even with the continuation of RFID. RSA
Security has developed technology that temporarily
or permanently blocks a RFID tag from readers. RSA
places another RFID tag near the original tag that
randomly transmits a huge number of identification
numbers. It is then impossible for the original data to
be distinguished. RSA does not have immediate
plans
to
market
this
inhibitor
[http://www.rsasecurity.com]. However, it can be
expected that, along with legislation, technological
solutions that will protect the consumers will become
more readily available.
5. SUMMARY
The demand for RFID technology has been
started by Wal-Mart, the world largest retailer, and
U.S. DoD. Suppliers will comply and consider it the
cost of doing business. As expected other retail
giants, such as Target, have followed Wal-Mart’s
lead and mandated such identifiers from their
suppliers. Other industries interested in cost cutting
and better supply-chain management will likely
follow the same path. Once suppliers implement
RFID fully into their operations they will reap
significant financial benefits.
Table 1 summarizes the most significant
opportunities and risks offered by RFID both to
industries and consumers. Ultimately, RFID power is
in the data that is gathered and processed. It is a
transformational technology relying on a new kind of
computing technology and information sharing.
RFID technology is not inexpensive but as tag cost
diminishes, companies will go from tagging pallets to
tagging cases to tagging individual cases all in an
effort to introduce higher efficiencies and cost
savings throughout the supply-chain. With RFID
enabled supply-chain, companies will eliminate theft,
their inventory records will match physical inventory
172
International Journal of Electronic Business Management, Vol. 3, No. 3 (2005)
counts, and transfers with trading partners will be
automated and precise. The supply chain will be built
on real-time demand and supply information where
products and their flow are “visible”. But as RFID



Industries 






Consumers



tags becomes ubiquitous, the data gathered will grow
exponentially, and all of the benefits can only be
recognized if companies know how to take the data
and
transform
it
to
information.
Table 1: Most significant benefits and risks of RFID enabled supply-chan
Benefits
Risks
Fully visible supply-chain
 Developing technology
Accurate inventory records
 Lack of universal standards
Improved collaboration with suppliers  High cost of implementation
Reduce lead time
 Integration with other enterprise legacy systems
Better demand forecasting
 More intensive data analysis
Improved planning control
 Possibility of industrial espionage
Reduced inventory related costs
 Higher security needs
Lower prices
 Abuse of consumers’ information
Better availability of stock items
 Using consumers as “test” subject without their
consent
Streamlined returns
 Increased vulnerability to identity theft
Automatic warranty protection
Protection against counterfeits
Faster check outs
Once the current technological barriers to RFID
implementation are removed, the volume of data
captured by readers can be enormous and therefore
the capacity to scale the data and integrate the new
hardware and software with existing systems within
the organization and across the supply-chain becomes
essential. Companies that can successfully link endcustomer’s needs in real-time to manufacturing and
distribution, can raise service levels, eliminate buffer
stock, and reduce lead time. It is the conversion of
data to information that will give the companies the
competitive edge. Without an IT strategy, and more
importantly intellectual property (IP) strategy,
companies can fall short of their ROI of RFID
implementation. The two important issues will be
how to organize the data and how to extract value.
Information that can be gathered from an RFID
enabled supply-chain can become an important part
of a firm’s intellectual asset. Companies need to
develop their intellectual asset strategy as they are
developing their RFID implementation strategy.
Today intellectual assets of most firm’s includes
assets such as copyrights, trademarks, patents, trade
secret, and domain names [13]. As the information
rich RFID enabled supply-chain becomes a reality,
the intellectual asset management should include a
firm’s tacit knowledge. The tacit knowledge is the
firm’s know-how as well as what they know about
their products and customers. What makes a product
attractive and to whom is probably the best spring
board for new product development.
For researchers, RFID is an exciting
development. RFID will require infrastructure and
process changes, and it presents huge security and
privacy challenges. RFID technology will provide
information throughout the product life cycle which
was not possible to have in the past. This new
information can help researchers design and develop
new models of supply-chain management which are
more efficient as well as more responsive.
REFERENCES
Albright, B., 2004, “Choosing an RFID
solution,” Forntline Solutions, Vol. 5, No. 2,
pp.16-20.
2. Andel, Tom, 2003, “IP reads paper to the core,”
Modern Material Handling Management, Vol.
53, No. 13, pp. 32-33.
3. Anonymous, 2003, “Real time technologies to
bring Wal-Mart RFID compliance to the
manufacturing sector,” Business Wire.
4. Anonymous, 2003, “Wal-Mart outlines its RFID
plans,” Modern Materials Handling, Vol. 58, No.
13, pp. 9-10.
5. Anonymous, 2004, “Sun micro systems opens
RFID test center to help suppliers meet
requirements from Wal-Mart,” PR Newswire.
6. Anonymous, 2004, “SAP embeds RFID
functionality in software,” InformationWeek.
7. Anonymous, 2004, “Wal-Mart begins roll-out of
electronic product codes at seven supercenters in
dallas/fort worth metroplex,” PR Newswire.
8. Balfour, F., Matlack, C., Barrett, A., Capell, K.,
Roberts, D., Wheatley, J., Symonds, W.,
Magnusson, P. and Brady, D., 2005, “Fakes,”
Business Week.
9. Deal III, W. F., 2004, “RFID: A revolution in
automatic data recognition,” The Technology
Teacher, Vol. 63, No. 7, pp. 7-23.
10. Gentry, C. R., 2004, “A consumer-driven supplychain,” Chain Store Age, pp. 30.
11. Kambil, A. and Brooks, J. D., Auto-ID Across
the Value Chain: From Dramatic Potential to
Greater Efficiency & Profit, Auto-ID Center,
ACN-AUTOID-BC-001.
1.
F. Taghaboni-Dutta and B. Velthouse: RFID Enabled Supply-chain: Harvesting the Opportunities
12. Levinson, M., 2003, “The RFID imperative,”
CIO Magazine.
13. Tao, J., Daniele, J., Hummel, E., Goldheim, D.
and Slowinski, G., 2005, “Developing an
effective strategy for managing intellectual
assets,” Research Technology Management, Vol.
48, No. 50, pp. 8.
14. Trebilcock, Bob, 2003, “Warehouse software
meets RFID,” Modern Materials Handling, Vol.
58, No. 13, pp. 32-36.
15. Wailgum, T, 2004, “Tag, you’re late; why WalMart’s suppliers won’t make the Jan. 1 deadline
for RFID tagging,” CIO Framingham, Vol. 18,
No. 4, pp. 1.
16. Weis, A., Sarma, S. E. and Engels, D. W., 2002,
“RFID systems and security and privacy
implications,” CHES, pp. 454-470.
17. Weis, A., Sarma, S., Rivest, R. and Engels, D.
W., 2004, “Security and privacy aspects of lowcost radio frequency identification systems,”
Security in Pervasive Computing, pp. 201-212.
18. William, A., 2004, “Tagged: The risks and
rewards
of
RFID
technology,”
Risk
Management, Vol. 51, No. 7, pp. 12-19.
ABOUT THE AUTHORS
Dr. Fataneh Taghaboni-Dutta is an Associate
Professor of Operations Management at the School of
Management, the University of Michigan-Flint. She
173
has received her BS, MS, and PhD in Industrial
Engineering from Purdue University. Her teaching
interests are in management science and operations
management. Her research interest is in Computer
aided manufacturing and supply-chain management.
She has authored many papers, and has made several
presentations on these topics at various academic
conferences. She has been extensively involved in the
research and development of on-line courses.
Dr. Betty Velthouse is an Associate Professor of
Management and Organizational Behaviour at the
School of Management, the University of MichiganFlint. She has received her MSN from the University
of Wisconsin-Milwaukee, and her MBA and Ph.D.
from the University of Pittsburgh. Her teaching
interests are in the area of Organizational Behavior,
Organizational
Communication,
Organizational
Leadership and Change, and Managerial Ethics. She
has been teaching on-line, using a variety of
modalities (interactive televised classes, total on-line
courses, and mixed mode classes) for the past several
years. Her research interests are in the areas of
managerial ethics, empowerment, and the use and
development of on-line education. Her presentations
and publications reflect those interests.
(Received February 2005, revised June 2005,
accepted July 2005)