The Impact of RFID on Supply Chain Efficiency

1
The Impact of RFID on Supply Chain Efficiency

2
Reasons for Unready RFID

• A few challenges of RFID are still remain
• Establish common international standards for tags
• Resolve technical problems with tag-scanning
  accuracy
• Reduce the cost of tags
• Other issues
• The reliability of tags
• The problems occur in trying to read tags through
  metal or liquids and in preventing interference
  from nylon conveyor belts
• Privacy concerns

3
RFID Applications

• Some mandated applications within the next few
  years include
• Wal-Mart Stores, Inc. The top 100 suppliers must
  tag pallets and cases shipped to three
  Dallas-area distribution centers by January 2005
• Department of Defense. Pentagon suppliers must
  place RFID tags on cases or pallets shipped to
  the DoD by January 2005
• Food and Drug Administration. The organization
  recommends that all pharmaceutical producers,
  wholesalers, and retailers begin developing plans
  to place RFID tags on pallets, cases, and unit
  items by 2007

4
RFID Applications cont.

• Examples of some applications of RFID that
  already exit
• Package trackingUnited Kingdom Breweries uses
  ruggerized RFID tags from a third-party service
  to track the location and ownership of beer kegs.
• Product trackingMichelin North America, Inc.,
  has implanted RFID tags on some tires to track
  their performance over time.
• StoreMarks and Spencer has been testing
  item-level tagging after an initial trial,
  starting October 2003. Executives have said that
  the small paper tags enable the company to
  accurately track its inventory rather than have
  to deduce the number of specific clothing items
  in its stores.
• ManufacturingClub Car, Inc., a Georgia maker of
  golf cars and utility vehicles, implemented RFID
  use in the manufacturing process of a new
  high-end car, named Precedent.
• Warehouse managementGillette launched a major
  RFID trial in 2003 in its packaging and
  distribution center in Fort Devens,
  Massachusetts. The company is tracking all cases
  and pallets of its female shaving systems.

5
RFID and Point-of-Sale Data

• The data commonly used by retailers and their
  suppliers to forecast demand is point-of-sale
  data
• Much more detailed than POS for companies that
  comply with the Wal-Mart mandate that will
  receive these events
• Received at Wal-Mart distribution center
• Departed distribution center
• Received at store
• Departed store stock room (arrived on shelf)
• Case (or tag) destroyed

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RFID and Point-of-Sale Data cont.

• Immediate benefits
• Better control over overage, shortage, and damage
  claims management and the ability to better
  assign responsibility to the supplier, the
  carrier, or Wal-Mart
• Better control over product recall
• Data that improves process through collaboration
  between Wal-Mart and its suppliers
• For the first time, quantification of lost sales

7
Business Benefits

• RFID implementation will improve both the
  accuracy and speed of data collection
• According to a study, retailers expect benefits
  in hree primary areas
• Reduced inventory
• Store and warehouse labor reduction
• Reduction in out-of-stock items
• The estimated direct costs for RFID
  implementation include
• Tagging
• Readers
• Information systems

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Business Benefits cont.

• Manufacturers can also benefit from RFID,
  depending on the type of business. Immediate
  benefits from internal implementation include
• Inventory visibility
• Labor efficiency
• Improved fulfillment
• Many other benefits can be achieved with
  case-level implementation
• A lower number of pallet touch points, which
  results in efficiencies and labor savings
• Elimination of manual scanning of cases and
  pallets
• Elimination of manual case counting
• A decrease in label printing and application
• Shorter time to check orders before shipping
• Improved order accuracy
• Fewer negotiations with retailers over missing
  products
• Curtailment of shrinkage at distribution centers
  and warehouses and in transit
• Improved forecasting
• Lower overall inventory levels
• Increased on-shelf availability of products
• Improved customer service levels

9
Supply Chain Efficiency

• Information received from RFID systems throughout
  the supply chain can provide almost instant
  real-time visibility of inventory and in-tran-sit
  product status
• In a supply chain with zero lead time, no
  capacity limits, and no economies of scale, RFID
  technology will lead to an immediate supply
  reaction to every demand instance
• In an ideal supply chain, the main benefit from
  RFID technology is the ability to enjoy the
  benefits associated with lean manufacturing
  strategies

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Closed-Loop Supply Chain Process

• Develop a closed-loop supply chain process that
  creates a continuous interaction between planning
  and execution systems
• The new concept by using the Total Quality
  Managements plan-do-check-act process, a cycle
  of activities designed to drive continuous
  improvement

Figure8.1 The closed-loop Supply Chain Process
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Conclusion

• The revolutionary technology RFID will
  significantly affect the way supply chains are
  managed and lead to greater efficiency
• RFID tags will not merely replace bar codes, but
  will allow real-time tracking of products, or at
  least cases and pallets
• In particular, RFID will largely reduce lost
  sales, which is very costly for companies