RFID Implementation of Supply Chain: Comparison of Three Case Studies

Raul Valverde and Malleswara Talla

John Molson School of Business, Concordia University, Montreal.

(e-mail: [email protected], [email protected])

Abstract: This paper integrates the impact of different approaches in implementing Radio Frequency
Identification (RFID) technology, namely supply chain inventory management system based on RFIDs to
address the challenges encountered in the operation of the warehouses, item-level inventory tracking at
retail stores, and customer order processing and distribution using RFIDs; to eventually propose RFID
based supply chain management. Supply chain management (SCM) involves an effective information
sharing, inventory management, transportation, sourcing and pricing strategies. This paper highlights
upon how RFID can improve SCM drivers, one by one, and together that improve overall synergy. This
paper extends the solutions of case studies and proposed improvements to RFID solutions in ERP
applications. The paper also highlights the motivation to such implementations as these solutions offer
further cost savings and performance gains. Consequently we conclude that RFID is a vital technology
for the success of SCM and bridging the gaps among the existing enterprise applications.
Keywords: Radio Frequency Identification (RFID) technology, Supply Chain Inventory Management.

1. INTRODUCTION questionnaire for gathering quantitative data while leveraging

the work performed in these case studies.
The Radio Frequency Identification (RFID) is an automatic
identification system without contact and without a need for As per (Adoga & Valverde 2014), the challenge to maintain
line-of-sight (Finkenzeller, 1999) with applications an accurate data in warehousing and inventory management
significant impacting supply chain management. When the operations in Shell Petroleum Development Company,
United States Department of Defense (DOD) decided to Nigeria (SPDC) prompted for considering an implementation
adopt the technology as a means of tracking its inventory of an RFID based inventory management system as it can
(Sen, 2009), WalMart swiftly took advantage of RFID help in the resolution of problems. These challenges include
technology by mandating its suppliers to tag all goods inaccurate stock accounting, theft, and high man-hour
supplied to its supermarket chain (Matta 2008). As the prices requirement for stock taking activities among other things.
of RFID tags reasonable, RFID technology is successfully The approach was to engage a consultant who can first
implemented in almost all segments of supply chain analyse existing inventory management system in SPDC,
management for inventory tracking. It is also demonstrated identify issues and challenges (through interviews with key
that RFIDs have been successfully implemented in the retail personnel’s in the department and personal observation by
industry in particular for fast checkout operations (Rathore touring facilities) and to evaluate and propose upon how an
2011). The RFID technology is used in services sector as RFID based supply chain inventory management system can
well, for inventory management and secured communications be used to resolve and control the issues. A simulator with
(Felix 2014). RFID technology holds promise in RFID technology was developed and its impact for a two
transforming supply chain management by providing real month period was evaluated in (Adoga & Valverde 2014).
time intelligence for tracking In (Felix & Valverde 2014), the UK dental products, both
enterprise assets (Khan &Valverde 2014) and has shown to supplies and equipment, were highlighted in a rising demand
be beneficial to improve the profits and internal with aging population and the need for secured information
communications of the firm (Valverde & Saade 2015). RFID of demand and inventory data. As health care continued to
technology also facilitates the reengineering of legacy improve, the life expectancies continued to rise in developed
systems into modern supply chain systems by providing a countries. On the other hand, older segments of the
tool information sharing across the supply chain (Valverde & population are well positioned to pay for the needed
Talla 2012)(Talla & Valverde 2012). procedures because they control sizable amounts of
In this paper, we examine three case studies: (a) An RFID discretionary income (Datamonitor 2008). The UK dental
based supply chain inventory management solution for the market space has witnessed significant growth rates, with
petroleum development industry (Adoga & Valverde 2014), stronger inventory focus. (Felix 2014) focused on enhancing
(b) An RFID simulation for the supply chain management in efficiency of inventory management and dental solutions with
the dental industry (Felix 2014), and (c) An RFID based the usage of online platforms and RFID in the UK dental
intelligent system that integrates with an E-commerce sector.
application in an unattended store (Rathore & Valverde In (Rathore & Valverde 2011), it is presented that an
2011). The aim of this study is to develop a comprehensive evolving E-commerce on the Internet certainly needs an

Electronic copy available at: http://ssrn.com/abstract=2822142

efficient and secure way of executing sales transactions. The
emergence of cost effective wireless RFID provides a new
way of tracking and implementing security and conducting
business. It will enhance confidence in business process
automation. In a virtual shopping over Internet, a buyer
selects items, places in shopping cart, and proceeds for
checkout. In a physical store, a buyer in a physical store picks
up all RFID tagged items in a shopping basket, and proceeds
to checkout via an RFID activated exit, that can automatically
completed an invoice and receive a payment without a need
for agent. This solution allows a physical store to be
integrated with E-commerce application to make it a
complete 100% unattended store.
These three case studies presented differing needs and
solutions via RFID applications: one focusing on inventory
management using RFID technology for accurate data and Figure 1. Store layout with multitag readers (Adoga
faster tracking of inventory items, the second focusing on &Valverde 2014)
simulating an implementation, and the last one aiming at The RFID reader devices are installed at fixed locations in a
integrating an E-commerce application with an unattended store and mobile RFID readers within the store communicate
store so that customer can reserve items and pick-up at an with management system that actually maintains inventory
unattended store thereby saving on operational expenditure of database as depicted in Figure 2. The deployment of RFID
a physical store. readers should be sufficient enough that no RFID tag
In this paper, we integrate the subject matters of above case becomes undetected. It is ensured during a rigorous testing
studies and develop a comprehensive system that addresses process. It is also advised to keep redundancy built into the
as many activities of business processes as possible. system. (Adoga & Valverde 2014) used a small prototype of
However, at this stage of work, we focus on inventory limited scope built with the help of a mobile desktop based
management, inventory tracking, inventory solutions, and E- RFID and investigated the practical challenges of developing
commerce application to attach to unattended stores, in an and deploying a full fledge solution.
effort to further improve upon cost-effectiveness of business
processes.

2. RFID IMPLEMENTATION METHODS

The RFID technology is proposed for inventory tracking,
automatic updates of inventory records, and integration of an
E-commerce application with an unattended store. An RFID
solution for store NG1101 would require a series fixed
readers mounted at dedicated locations inside and at the exit
side of a store with a number of mobile readers for the
outdoor area (Adoga & Valverde 2014). The tag readers will
be connected to the inventory management module of an
Enterprise Resource Planning (ERP) database system that
will detect and trace the movement of tagged items in and out
of the stores. The mobile readers will help in the outdoor
storage area that will not be covered by the fixed scanners
during stock accounting. The layout of a typical store is
presented in Figure 1 (Adoga & Valverde 2014).

Figure 1 RFID based inventory detection (Adoga &

Valverde 2014)
The Dental Distribution Company operates in a simple
Supply Chain. The company receive orders from customers,
purchases products at Manufacturers or Suppliers, maintains
inventory and delivers to its customers. The inbound and
outbound logistics are simulated following the flow of
materials as presented in Figure 3 (Felix & Valverde 2014).

Electronic copy available at: http://ssrn.com/abstract=2822142

 important to implement the system in such a way that no
inventory item gets undetected. To this objective, the case
study involved the analysis of warehouse and existing
inventory management system in Shell Petroleum
Development Company (SPDC) in Nigeria with a view of
identifying all operational challenges and solutions. A
systems architecture of a solution is presented and a partial
prototype is implemented with the purpose to highlighting
how modern information technology and communication
Figure 3 Flow of material for simulation (Felix & tools can add value in the supply chain management of
Valverde 2014) SPDC. In this effort, (Adoga & Valverde 2014) took one
The RFID technology is used for end-to-end operations using store NG1101 of SPDC and considered an implementation of
an independent module called as Real Time Security System RFID. The paper presented strategic locations for placing
(RTSS) as presented in Figure 4, and ensures secured RFID detectors inside and at the exits of NG1101 as
transactions (Rathore 2011). presented in Figure 1. The NG1101 store has four meter high
shelves; the RFID reader needs a near field of at least four
meters to effectively detect the tag, which would required an
RFID reader with a theorectical wave length of 25m and
frequency of 12MHz, and commercially available readers of
13.56MHz would be very suitable. The system would be
Figure 4: RTSS Architecture (Rathore & Valverde 2011) deployed in the manner depicted in Figure 1. (Adoga &
Valverde 2014) used a USB based 915MHz UHF reader
A RFID tag (transponder) in the vicinity of RFID reader (read range of 10cm, for reasons discussed earlier) along with
(interrogator) provides user interface. The RFID reader some RFID on metal tags and other variants of passive tags.
interacts with the tag and receives a raw data message from The simulation provides an overview of RFID
the tag. The raw message is relayed to RTSS server. The implementation and offers a motivation to such
RTSS server processes raw data message (binary and implementation for inventory management.
Hexadecimal) in ISO 15693 format. The message is then
translated into a meaningful string format. (Rathore & 3.2 Inventory Management in Service Sector (Dental care)
Valverde 2011) proposed this system for a physical store
without checkout attendant, but with RFID activated A services organization such as a hospital requires medical
checkout cash counter, and further suggested to integrate the supplies and equipment. Maintaining a healthy level of
system to an E-Commerce application. The RTSS interface inventories for providing better healthcare is always a
uses the message to initiate a transaction over B2B or B2C e- challenge in hospital settings. Therefore, healthcare
commerce application. companies operate in supply chains that actually enhance
supply chain surplus while providing a better customer
satisfaction. In a supply chain, flow of materials (inventory in
3. COMPARISON OF CASE STUDIES transit) should be smooth and faster for the supply chain to be
more responsive and efficient. Faster the inventory records
Three case studies that we examined considered different
are updated whether it is at inbound logistics or at outbound
business processes and RFID implementation for Inventory
logistics, the holding costs of inventory in transit can be
management.
reduced, making the supply chain to be efficient; and serve
3.1 Inventory Management in Manufacturing (Oil & Gas) customer needs, turning the supply chain to be responsive.
(Felix & Valverde 2014) considered a dental supplies
A supply chain involves different processes: Suppliers, distribution company that operated in a supply chain
Manufacturer, Warehouses, Wholesaler, Retailer, and finally relationship, and examined problems experienced at different
the customer. The major drivers in a supply chain are: stages of inventory management. The dental distribution
Facilities, Inventory, Transportation, Information company was actually using bar codes and scanners as it
Technology, Sourcing, and Pricing. The warehouse and main technology for semi-automatic identification for
logistics play very important role in smooth operation of a capturing data. (Felix & Valverde 2014) conducted
company and in improving customer service level. (Agoda & interviews for identifying activities for RFID
Valverde 2014) proposed an implementation of RFID for Oil implementations for both inbound and outbound logistics as
& Gas Company, especially installing RFID devices at shown in Figure 3. The company receives customer orders,
strategic locations. Traditional inventory management used purchases products from suppliers and ships them to
manual processes which are expensive and time consuming customers. (Felix & Valverde 2014) proposed RFID
while an automated process to inventory management would technology solutions to problems identified in the company.
impact the supply chain surplus positively. The RFID The proposed solutions are simulated and compared with
technology integrated into an ERP system would certainly their existing supply chain system and metrics; and
improve responsiveness and efficiency of a supply chain. demonstrated significant improvements to data accuracy,
Once a decision is made to implement RFID technology, it is responsiveness and efficiency of supply chain.
(Felix & Valverde 2014) went on simulating an In (Rathore & Valverde 2011), RFID solution is proposed for
implementation using Microsoft simulator and presented automatic checkout operation at retail stores that operates
significant improvement (around 80%) in inbound and with unattended but RFID enabled checkout counter, and
outbound logistics. Currently Microsoft offered a simulator went on proposing a solution E-Commerce for customers
for RFID as found on (Microsoft 2015). Therefore, (Felix & over Internet. Then, the E-Commerce application can actually
Valverde 2014) successfully presented that RFID is surely a communicate with different unattended store servers, check
cost effective alternative to barcode method. Although it is a inventory status to find a nearest store that has all
well-known fact, that RFID is a better solution than barcode merchandise availability, and actually reserve them for
solution, it’s always worthwhile to evaluate a business case. customer for pickup. In some cases if all merchandise is not
Assuming conservatively that time taken for a barcode available at one unattended store, based on customer
operation is one minute, (Felix & Valverde 2014) estimates agreement to pick up merchandise from more than on store,
that the gains would be of about 90% and proved with a the system can reserve multiple pickup stores to a customer.
simulation. Such solutions further improve customer service level and
customer satisfaction. In contemporary E-Commerce
3.3 RFID based retail store operation (Unattended) applications, user selects a store and then looks for
availability of items in that location, whereas in the proposed
In case of shopping over Internet using an E-Commerce solution, user proceeds with order entry, then the system
application, a buyer selects items, places them in a shopping provides options to pick up from nearest store(s). This way
cart and proceeds for payments. As an initial step, (Rathore & user stays on course with the order, and company can
Valverde 2011) proposed solution where all items in a brick- enhance revenues and profits.
and-mortar (physical) store are RFID tagged, and a buyer
picks up all the items that are needed and proceeds to an In (Adoga & Valverde 2014), the emphasis is on RFID
RFID activated checkout exit where all items are implementation at assigned locations so that no RFID tag is
automatically invoiced without a need for scanning. As a undetected. Inherent redundancy of RFID detectors ensure
physical cash counter is not needed, the store is referred to as better detection and server unifies duplicate detections.
unattended. While the system doesn’t totally eliminate Investment in RFID detectors can be progressive, with initial
manpower for security at checkout, it will reduce the need for installations to be just sufficient, and redundancy can follow
manpower significantly thereby offering cost savings. successful execution and cost savings of RFID
(Rathore & Valverde 2011) also proposed that the same implementations. Today’s applications can proactively
RFID system can be integrated with an Internet based E- communicate with inventory via RFID automatic detection
commerce application in an effort to extend the application to and highlight any discrepancies in inventory records, so that
make it a complete 100% unattended store. In case of E- managers can investigate the reasons for discrepancies and
Commerce and an unattended store, the most important take appropriate actions. Such automatic detection on a
aspect of executing such transactions is security; therefore periodic review of inventory is often time consuming and
(Rathore & Valverde 2011) identified security as a primary expensive if the review is manual. RFID technology can
concern and proposed a Real Time Security System (RTSS). substantially reduce cost of such inventory reviews.
(Rathore & Valverde 2011) presented a complete architecture
of an end-to-end solution with RFID technology, integration 5. CONCLUSIONS
with inventory database application testing methodology; and
further proposed to integrate the system with an E-Commerce In this paper, three distinct RFID technology case studies that
retail order processing. addressed issues in different industry sectors covering
manufacturing and services are examined. The focus of case
studies and implementation details are further examined and
4. IMPROVED RFID BASED SOLUTIONS integrated into essentials of a typical company implementing
RFID technology. Furthermore, this paper went on proposing
The RFID tags automate inventory record updates at inbound
improved solutions. Future work will involve challenges in
and outbound logistics and provide significant cost savings in
integrating these improved solutions into RFID based ERP
a supply chain. In (Felix & Valverde 2014), while detection
system that provides a comprehensive solution to inventory
of merchandise is RFID based, the inventory management
and logistics management in a supply chain, and quantifying
system actually is a database system as a module of ERP
the gains of such implementation.
system can actually implement more functionality. For
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