Radio Frequency Identification Technology and Its Benefits

Introduction

Radio Frequency Identification (RFID) is a rapidly evolving technology that eases the identification and tracking of goods and assets across the world. The technology uses radio waves, RFID tag, and reader device to identify items (Miles, Sarma, and Williams 17). The technology is very important in the business environment, as well as other sectors of the economy of a country. Companies use RFID to track expensive assets and goods across the world. It is also used in the supply chain process to track goods from the point of manufacture to the point of sale. In the health sector, the technology can be used to track healthcare products to reduce counterfeiting among other benefits. The technology is considered revolutionary due to its potential to enhance business processes and systems. In this paper, the benefits of Radio Frequency Identification technology will be discussed and a case study used to show its application in real world business environment.

Literature Review

Radio Frequency Identification (RFID) is an Auto-ID technology, which is applied in the identification and tracking of goods and belongings. Auto-ID technology refers to various forms of technologies that assist machines in identifying items (Roh, Kunnathur, and Tarafdar 357-363). The technology involves auto-capture, which allows companies and businesses to enter product information into a computer without requiring people to enter it manually. In addition to RFID, there are other Auto-ID technologies such as Barcodes, Smart Cards, Optical Character Recognition (OCR), and Biometrics (Sarac, Absi, and Dauzère-Pérès 78). To understand the RFID Technology, it is important to comprehend its various components and their functionality.

Firstly, the RFID technology consists of three components, which include tags, readers, and the host computer system. RFID systems use tags or labels attached to the items to be identified. The tags are also referred to as smart tags, transponders, radio barcodes, or smart labels. The tags are made of simple silicon microchips, which the manufacturers attach to a small flat aerial strip before mounting them on a substrate (Rekik, Sahin, and Dallery 266). The tags that are stuck on the items or objects are used to store information, which is then read remotely by a RFID reader to ascertain the products quality, status, and details.

The second component of the RFID technology is the ‘Reader’. The ‘Reader’ is also referred to as interrogator or scanner that acts as the source of the signal, which helps to identity the information contained on the RFID tag (Sarac, Absi, and Dauzère-Pérès 79). The readers use antenna to send and receive radio wave signals, which allow information to be obtained remotely. Lastly, the third component of the RFID technology is the host computer. The host computer contains the database of information that relates to specific objects that the RFID is used to track, hence allowing the matching of the information to the relevant item (Ustandag and Tanyas 30). Further, the host computer allows the processing of data into meaningful information, which can be used by the company, business, or relevant individuals.

Secondly, the RFID technologies present an important development in the Auto-ID technologies that are viewed as a major improvement over the barcodes, which have been popular since 1970s (Rekik, Sahin, and Dallery 264). Although the RFID is likely to co-exist with the barcode technology, it offers various advantages over the barcodes. For instance, barcodes have a low storage capacity and hence only limited information can be obtained from the product (Roh, Kunnathur, and Tarafdar 357). Barcodes also are used to represent only a series of items, as opposed to an individual or unique item. This shortcoming means that the unique characteristics of a given product cannot be identified. Barcodes are mostly printed on paper. Thus, their durability is a major shortcoming. In addition, barcodes have a very low range. They can only be read in the presence of a line of sight between the barcode and the barcode reader (Miles, Sarma, and Williams 14). Reading of barcodes is also slow since only one item can be read at a time.

Thirdly, there are different types of RFID technologies. The first type of RFID technology is the Low-Frequency RFID, which is mostly used for access control, asset tracking, and animal tracking. The low-frequency RFID uses 125/134KHZ speeds (Rekik, Sahin, and Dallery 267). The second type of FRID is the High-Frequency RFID. The frequency can read items up to 1.5 meters. Further, the frequency is not interfered by water and metals. The high frequency uses speeds of 13.56MHz. Lastly, the Ultra High Frequency offers the longest reading range of up to 3 meters. The frequency range is 850MHz and 950 MHz (Ustandag and Tanyas 32). The frequency offers an advantage over the others since it provides high levels of reading speeds.

The RFID technology has evolved over the years. It finds application in many areas of the marketplace. These areas are categorized as access control for people, access control for vehicles, manufacturing automation, healthcare provision, logistics and distribution, retail, maintenance, and product security. The usage of the technology offers various advantages such as improved productivity and cost avoidance, decreased cycle time, reduced rework or retries in recording of information, reduced business risk, and control of assets, improved security, increased revenues, and improved utilization of resources.

Case Study-Wal-Mart Corporation

Background of Wal-Mart

Formed in 1962, Wal-Mart is currently the world’s largest retailer. In its first five years, the company had expanded into more than 24 stores in Arkansas where it reached sales of close to $13 million. Currently, the company has more than 11,000 departmental stores and warehouses worldwide. In 2014, the company made roughly $500 Billion in revenues, effectively cementing its position as the world’s largest retailer (Turcu 59). Since its inception, Wal-Mart has focused on discount pricing. It has undertaken major steps to ensure that it lives up to its catchphrase of ‘everyday low prices’ (Zhu, Mukhopadhyay, and Kurata 152). Among the approaches that the company has focused on is a reduction in its operational costs, which allow it to be competitive and profitable even when the prices of its products are lower.

One of the main areas of operational costs that many retailers and companies face relate to supply chain management and distribution and inventory costs (Rekik, Sahin, and Dallery 271). In this case, Wal-Mart is viewed as one of the companies with the most effective supply chain management and distribution systems that have allowed it to remain competitive. The company has pegged its success on the economies of scale and scope. Thus, it has invested heavily in an effective distribution system to ensure that it lives up to its goal of keeping its prices low and accessible to masses. Therefore, Wal-Mart is continually on the lookout for new technologies and approaches that can add value to its supply chain systems to increase its efficiency. The strategy will make the company gain the highest profits even with low pricing strategy.

Wal-Mart and Information Technology

Wal-Mart has been in the forefront in the adoption technologies and approaches that are geared towards a more effective supply chain system in its operations. The company operates in a highly competitive segment of the market. Any technology that can significantly remove supply chain costs can easily change the dynamics and position of power in the industry (Turcu 51). As such, Wal-Mart or any other company in the industry must be on the lookout for new technologies and approaches to ensuring competitiveness. Since the 1970s, Wal-Mart has been in the forefront in looking for and adopting viable technological approaches, which have increased its effectiveness while at the same supporting its discount pricing marketing strategy.

In the 1980s, the company took its major step towards an effective distribution and supply chain system by implementing the central database, store-level POS systems, and a satellite network. In addition to the implementation of the above technologies, the company implemented UPC barcodes, which allowed information at the store level to be collected instantaneously and analyzed for decision-making purposes (Turcu 60). The company was also able to combine sales data with external information, including weather forecasts, which allowed Wal-Mart to have accurate sales predications. In the 1990s, Wal-Mart introduced the Retail Link, which was the world’s largest civilian database. The company provided sales information of all its products, spanning from the past 20 years. Further, through the database, the company managed to provide suppliers with real-time access of their products all the way to the individual stock keeping while ensuring that they were aware and prepared for future supplies before the stock was exhausted.

In 1990, the company was among the first to adopt the Collaborative Planning, Forecasting and Replenishment (CPFR). The CPFR is a planning and forecasting integrated approach that utilizes the sharing of supply chain information with relevant departments and players in the industry (Turcu 59). The information that is shared includes data on promotions, daily sales, and inventory levels among others. The company’s CPFR is referred to as the Wal-Mart Vendor Managed Inventory (VMI) or the continuous replenishment program, which allows suppliers to manage the level of inventory at Wal-Mart distribution centers at agreed upon service levels.

Wal-Mart and RFID Technology

The most revolutionary supply chain management technology by Wal-Mart is the RFID, which was introduced in the 2000s. It has been adopted in varying levels at the organization. The RFID technology is important in the supply chain since it allows ease of flow of products in an organization (Roh, Kunnathur, and Tarafdar 361). Zhu, Mukhopadhyay, and Kurata assert that the effectiveness and benefits of RFID systems in the supply chain is dependent on the integrity of the system and the large amount of data that is collected in a company (155). The incorporation of RFID into the supply chain management system requires the top management to be involved in all stages of the supply chain in an easy manner enabled by technology.

Wal-Mart adopted RFID technology to improve its operations to increase its competitive advantage as the world’s largest retailer. Through the RFID, the company sought to achieve improved operations, reduced labor costs, improved inventory control, and improved market intelligence to inform decision-making in its operations. Several drivers were cited for the adoption of the RFID technology at Wal-Mart (Turcu 63). Firstly, the company sought to achieve higher visibility, productivity efficiency, and accuracy of the supply chain operations. Secondly, the company sought to optimize promotion management efficiencies. Another important driver of the adoption of the technology was the desire to optimize inventory levels, improve working capital management, and/or minimize loss of stock (Rekik, Sahin, and Dallery 272). Further, the company wanted to reduce OOS (Out of Stock) commodities to increase product availability. Lastly, the company aimed at improving customer care and service levels to create value for the customers.

The implementation of Radio Frequency Identification (RFID) in Wal-Mart’s supply chain began in June 2003 following a decision by the top management. Wal-Mart required its 100 top suppliers to put RFID Tags with the Electronic Product Code (EPC) code. Dallas and Texas distribution centers were selected as the locations for the pilot program (Miles, Sarma, and Williams 24). In November 2003, the company held a consultative meeting with its top 100 suppliers where it provided more information on the RFID technology. The company made several specification of its program on RFID to which the suppliers were required to adhere.

For instance, the company required all the suppliers to tag cases/pallets by the end of 2006. It was a requirement to use Ultra High Frequency (UHF) tags (Sarac, Absi, and Dauzère-Pérès 82). At the time, the company would only accept EPC Global ‘class 0 and class 1’ tags with plans to phase them out in 2007 in favor of generation-two EPC global codes. All the tags were required to provide 100% accuracy for tagged products within a distance of 10 feet. By the end of 2005, the company had installed RFID technology capability in more than 600 stores and 12 distribution centers (Roh, Kunnathur, and Tarafdar 359). A research by the University of Arkansas showed that the implementation of the technology had led to a decrease in OOS at the store level by 16%.

The technology almost had an immediate impact on the effectiveness of the company’s supply chain. For instance, the company managed to improve stock visibility as it moved across the distribution channel. Further, it managed to reduce OOS losses and overstock expenses (Miles, Sarma, and Williams 23). To guarantee accuracy of the technology and effective tracking of products, the company installed RFID tag readers in various stages and locations of the store. In this process, readers were installed at the entry point of the stock, in the backroom, at the door between the stockroom and sales floor, and in box-crushing area (Ustandag and Tanyas 34). The approach allowed the company to track its products in the supply chain up to the sales floor. This plan allowed the store managers to know the amount of stock on the shelves and the quantity of stock in the backroom.

The implementation of the RFID Technology was aimed at increasing the efficiency of the supply chain for Wal-Mart. The company also sought to guarantee transparency of the SC, which would reduce operational and labor costs while at the same time strengthening the inventory control (Rekik, Sahin, and Dallery 276). The technology led to several benefits to the company. Firstly, the company sought to reduce the losses from OOS. In the retail industry, OOS affects more than 8% of products in a retail company. As such, it is important for measures to be put in place to reduce the losses incurred through OSS. In the same case of Wal-Mart, a reduction of OOS by 16% that was achieved during the initial years of the RFID technology translated into higher revenues for the company (Turcu 62). Other studies showed that some products reached a higher outcome of up to 92%, which showed that RFID had been effective in reducing OOS (Sarac, Absi, and Dauzère-Pérès 86). The replenishment speed of products also increased up to three times in stores using RFID as compared to the stores that did not have the technology in place.

In addition to the benefits cited above, Wal-Mart addressed inventory shrinkage problems and OOS complications through the automation of the product movement in the supply chain. Another important benefit that Wal-Mart experienced was a drastic reduction in data entry errors that were a major issue in the company’s inventory system (Ustandag and Tanyas 36). Since the system increased efficiency, it led to better deals for customers. The technology allowed the organization to easily track the products that were moving fast, thereby allowing suppliers to bring new stock in time as a strategy to eliminate OOS and/or ensure that customer were assured of products of their choice at all times and at low price (Roh, Kunnathur, and Tarafdar 362). The company was also in a better position to predict product demand, thus dedicating resources where it would get more returns.

Concisely, the adoption of RFID technology in Wal-Mart has allowed the company to increase efficiency in its supply chain. The technology has paved a way for transparency, efficiency, and involvement of suppliers throughout the system, thus leading to better outcomes for the company and its stakeholders. The company provides a major case study of the benefits of RFID technology in the business environment

Analysis and Discussion

Radio Frequency Identification (RFID) is a revolutionary technology in the tracking of assets and products. The technology can be applied in various industries such as logistics and distribution, retail maintenance, product security, and access control for people among other areas. One of the major reasons that the technology is gaining popularity in various industries is its ability to increase the efficiency of operations. For instance, in the supply chain management, the technology can be used to track products from the point of manufacture to the point of sale. Such a concept eliminates unnecessary delays of inventory control that are evident in other technologies. The ability to track many products simultaneously allows the technology to be more effective than barcodes.

In the retail industry, companies deal with many products at a time. Thus, it becomes very difficult to track stock. In this case, many companies, which lack good technologies for inventory management, face challenges that relate to Out Of Stock (OOS) issues and losses when potential customers fail to spend their money because the products are missing. More than 8% of products in the retail companies face OOS. This situation contributes to the loss of income in such companies (Miles, Sarma, and Williams 29).

When managing inventory databases, it is possible to encounter human errors from manual data entry. The errors can cause losses to companies. Therefore, it is important to substitute manual data entry with technologies that can automate the process, which not only increases efficiency but also reduces the number of errors. The use of RFID increases the effectiveness of inventory management and hence better outcomes for the company.

The case of Wal-Mart has shown that the technology has the potential of revolutionizing the supply chain management. For instance, with its worldwide, Wal-Mart operations are in a better position to track and position the movement of its products in real time. Further, such tracking can be applied in other industries such as healthcare or manufacturing where companies can track expensive assets and products as they move across the world. The application of RFID is also evident in the security of products in companies. For instance, in control of access by people in a given facility or areas such as airports and border crossing points, it eliminates the possibility of intrusion. RFID is currently being used in the United Stated border gates to ease trade. RFID is being used in Hospitals to make health care procedures faster. It is also used in airports to ease airplane ticket recording. The technology also allows the participation of suppliers since it becomes easier for them to track their products, thus ensuring timely replenishment of products before they run out of stock.

Personal and Reflective Thinking

Technology is changing fast. Hence, companies that do not adopt or respond to the dynamics do not stand a chance in the competitive business world. The establishment of RFID technology represents an important technological development that influences the future of tracking and identification of products and assets in the business segment. Although the technology has not been adopted widely as compared to barcodes, its potential indicates that in the near future, it is going to be the most prominent technology of choice in tracking and identification of products and assets. The advantages of the technology are the driving force that will lead to the prominence of the technology.

For instance, its effectiveness is evident in terms of the amount of information that can be stored as compared to other technologies. In addition, its ability to reduce inventory errors ensures that companies can track their stock. This strategy leads to timely replenishment that reduces errors from OOS. The fact that the technology allows suppliers to be involved in tracking their products from the point of manufacture to the point of sale is a revolutionary concept that will reduce lead times in the communication between suppliers and their clients. Concisely, the adoption of RFID is an inevitable reality that all businesses will have to face. However, it is worth noting that the benefits of the technology make it an advisable decision that businesses should take.

Conclusion and Recommendations

In conclusion, RFID is a recent technology that promises to change how tracking and positioning of products and assets in the world is undertaken. The application of the technology is diverse. The technology is not limited to healthcare and retail. The fact that it reduces OOS problems while increasing accuracy of inventory is an important advantage that can promote competitiveness. In addition to leading to security, it reduces inventory errors.

However, the lack of widespread adoption indicates the need for future advancement in the technology. As such, it is highly recommendable for more research to be undertaken to make the technology widely accessible to companies, regardless of their position in the industry. Such research will ensure that the technology is accessible in terms of affordability and value for companies that adopt it.

Works Cited

Miles, Stephen, Sanjay Sarma, and John Williams. RFID technology and applications, New York, NY: Cambridge University Press, 2008. Print.

Rekik, Yacine, Evren Sahin, and Yves Dallery. “Analysis of the impact of the RFID technology on reducing product misplacement errors at retail stores.” International Journal of Production Economics 112.1(2008): 264-278. Print.

Roh, James, Anand Kunnathur, and Monideepa Tarafdar. “Classification of RFID adoption: An expected benefits approach.” Information & Management 46.6(2009): 357-363. Print.

Sarac, Aysegul, Nabil Absi, and Stéphane Dauzère-Pérès. “A literature review on the impact of RFID technologies on supply chain management.” International Journal of Production Economics 128.1(2010): 77-95. Print.

Turcu, Crispas. “[email protected] B2B a Powerful Enabler of Business Transformation.” Elektronika ir Elektrotechnika 93.5(2015): 59-64. Print.

Ustandag, Alp, and Mehmet Tanyas. “The impacts of radio frequency identification (RFID) technology on supply chain costs.” Transportation Research Part E: Logistics and Transportation Review 45.1(2009): 29-38. Print.

Zhu, Xiaowei, Samar Mukhopadhyay, and Hisashi Kurata. “A review of RFID technology and its managerial applications in different industries.” Journal of Engineering and Technology Management 29.1(2012): 152-167. Print.