Current State-of-the-Art Benefits and Challenges of RFID Deployment in Global Supply Chains

Current State of the Art Benefits and Challenges of RFID Deployment in Global Supply Chains

Fachhochschule für Ökonomie und Management - University of Applied Siences Slide No. 1

Master of Business Administration (MBA)

Master Thesis Defence on the Topic

Supervisor : Prof. Dr. Soumit Sain

Referee : Prof. Dr. Matthias Klumpp

Student: : Volker Girrulat

Student ID-No.: 174770

Essen, 08.05.2009



I. Objectives of the Thesis and Introduction of the Topic



Radio Frequency Identification (RFID)

• Transponder (Tag) / Reader Device and Chip-based Combination

• Automated Locating and Identifying data-carrying Objects remotely without any Line of Sight

• Auto-ID Ifrastructure Approach

• Ubiquitous Computing as the Main Objective



The Integration of physical Objects from the real World with IT Systemsby RFID leads to:

• Enhanced Visibility

• Improved Information Sharing

• Sound Order Processing and Replenishment Strategies

• Enhanced Process Coordination in Logistics

• Counterfeit and Grey Market Detection and Shrinkage Avoidance

throughout the Supply Chain.......................................



Objectives Of the Thesis:

• Get a better Understanding about what RFID is capable for

• Investigate the current State of the Art Practice of RFID Deployment and associated Risks and Challenges

• Work out the contemporary Diffusion Extend of RFID in Global Supply Chains



II. Supply Chain Management on a Global Scale



Today´s Supply Chain Challenges

• Global Supply Chain with long Lead Times

• Uncertain Demand and Supply

• Increase in Logistics Costs

• Complex Product Offering

• Component and Assets Availability

• System Variation over Time

• Global Supply Chain Fragmentation



Purchasing Production Logistics

Controlling

Information Technology

SupplierSecond Tier

SupllierFirst Tier

Own Company in the Global Supply Chain Network

CustomerFirst Tier

CustomerSecond Tier



Best Practices to face the Challenges

• Customer Segmentation

• Customized Logistics Network

• Product Mass Customization

• Change from Push to Pull Supply Chains

• Strategic Sourcing

• Supply Chain-Wide Technology Strategy

• Appropriate Key Performance Indicators (KPI´s)



Low

Low

High

High

Costs

Service Level

Source: Boston Consulting Group

Trade-off between Service and Costs



Supply Chain Dynamics

CustomerDemand

Retailer OrdersDistributor Orders

Production Plan



Supply Chain Prerequisites for Uncertainty Mitigation

1) Sustainability

• Transparency

• Communication

• Collaboration

2) Visibility



Supply ChainVisibility

SupplierCollaboration

Supply ChainCosting

InternationalTransportation

Management

TradeCompliance

CustomerCollaboration

RiskManagement

Source: Aberdeen Group, 2006

% of Respondents

Supply Chain Investment Areas



Key Inventory Strategies

• Vendor Managed Inventory

• Merge-in-Transit

• Postponement



Pull-Call-off-to-order

Pull-Call-off-to-order (Component Level)

Pull-Assemble-to-order

Pull-Customize-to-order

Push/Pull-Make-to-Stock

Push-Make and Ship-to-Stock COP 1

COP 2

COP 4

COP 5

COP 6

COP 3 Postponement

Local Stock

Component Warehouse

Tier Ones

Finished Products

Stock Abroad

Source : Bliss and Haddock, 2008COP = Cross-over Point



Traditional On Demand

Source: IBM Institute for Business Value, 2004

Static SupplyChain

Functional Optimization

Horizontal Process

Integration and Automation

ExternalCollaboration,Optimization,Flexibilization

Demand-DrivenSupplyChain

Demand-Driven Supply Chain Development



III. RFID Technology and Architecture



RFID-Reader

Reader Antenna

Transponder Tag

Tag Antenna

Air Interface

Source: Balkovich, Bikson et al., 2005

to Information Systems



Passive RFID Tag

Active RFID Tag



ElectricWaves

RadioWaves Infra-Red

VisibkeLight

UltraViolet X-Rays

GammaRays

CosmicRays

Radio Spectrum

9kHz 30 kHz 300kHz 3000kHz 30Mhz 300Mhz 3000MHz 30GHz 300GHz 3000GHz

VLF LF MF HF VHF UHF SHF EHFNot

designated

125-134kHz

13.56MHz

860-930MHz

2.4 & 5.8GHz

Electromagnetic Spectrum

Source: Zheng, 2008



Common Frequency Bands of RFID



EPC Network as a Global Auto-ID Infrastructure Approach

• Member-driven organization of leading firms and industries

• First launched by MIT in 1999

• Implement the Global Item Number(GTIN) to track RFID tagged items seperatly from others

• Implementation of a global data synchronization network (GDSN)

• Enhanced data sharing among the supply chain partners

• Improved order fullfillment, visibility, replenishment and logistical processes

• Lowered process costs concerning sales order and invoice payment



RFID-Tag

RFID-Reader

Savant (Middleware)

EPC InformationService

External Software Applications

ObjectNamingService(ONS)

Domain Name Service(DNS) Protocol

PML

PML

PML

Source: Flörkemeier, 2005

EPC Network Architecture

Data CapturingFiltering

Transmitting to other Systems

Product-related DataDisemination

troughout the EPCNetwork

Points out theadequate Adress

of the Data Source



IV. Benefits and Challenges of RFID in the Global Value Chain



Information available

Latest Information

Information demand

Subjective Information Reqirements

Objective Information Reqirements

Source: Picot et al. , 1998, p.82

Information Demand and Supply



Integration of IT Systems into Corporate Business Processesand Data Processing helps to avoid Media Disruptions.

Implications of Media Disruptions

• Delays• Information Loss• Failures

It is important that that all Players in the Supply Chain apply the same IT Infrastructure Approach



Marginal Costs for Data Capturing

Dat

a ca

ptu

r ed

m

a nu

ally

Tex

t R

ecog

nit

ion

Bar

cod

eS

can

nin

g

RF

ID

Inte

grat

edIT

Sys

tem

s

Manual Tasks necessairy Full Automation

Integation Extend

Digital World

•Internal and collaborative Application Systems (ERP, E-Business Systems)

•IT-Infrasructure e.g. Internet

Real World•Human Beings•Products•Production Infrastructure

Source: Fleisch, 2001



Costs

Coordination Intensity

Total Costs

Autonomy CostsCoordination Costs

K 1

K 1 : Piont of optimal Coordination Intensity Costs

Source: Frese, 1995, p. 101



Abstract View on Privacy Risks in The EPC Network

Source: Adapted from Garfunkel et al. , 2006

Privacy Concerns:



Technology Acceptance Model (Davis, 1986)

Public Acceptance:



Security Issues:

Summary of Security Evaluation



Environmental Issues:

Used RFID components are discarded electronic gadgets

Transponders contain:

• Copper

• Silicon

• Polyester

• Lithium (active Tags)

Due to falling tag prices and increasing single item tagging ofconsumer goods, the environment will be significantly pollutedwith electronic garbage.



V. Current Best Practice of RFID Deployment



WLANGPRSUMTS

GPSGallileo

RFID Reader

Node in Sensor Network

Sotware Agent/Gateway

RFID Tag

Information Systems

Source: Laur and Lang, 2005

RFID/Sensor Network



VI. Future Outlook



Integration Depth

Integration Range

Integration Range

Diffusion Direction

Single Item

Pallet Level

Case LevelSupplier First Tier

Supplier SecondTier

Supplier Third Tier

Domestic International Global

Derived from Fleisch and Strassner, 2005

PipelinesTransportation Level

RFID Diffusion in Global Supply Chains



VII. Conclusion



2004 2005 ca. 2006 + ca. 2010 +

Supply Chain Optimization

EPC Trails EPC MandatesAccurate Inventory

Counterfeit DetectionShrinkage Avoidance

Grey Market Detection

Verifiable Secure Supply ChainsCase / Pallet Level Item Level

Source: HP invent, 2005

RFID Adoption Timeline



Position of EU Countries in Adopting RFID in 2007



Current Circumstances preventing or hampering RFID Diffusion in Global Supply Chains:

• Insufficient Global Frequency Harmonizing

• Variety of RFID Systems

• Lack of Acceptance,Trust and Knowledge among the Supply Chain Players

• Cost Aversion towards RFID Implementation

• Insufficient Data Security

• Insufficient Data Storing and Processing Capacity due to huge RFID Datastreams

• Govermental Regulations concerning certain Frequency Bands



Thank You


Aberdeen Group, 2006Global Supply Chain Benchmark Report: Industry Priorities for Visibility, B2B Collaboration,Trade Compliance, and Risk Management. Aberdeen Group Inc., Boston,MA,2006www-935.ibm.com/services/us/igs/pdf/aberdeen-benchmark-report.pdf

Balkovich, E.; Bickson, T., et al., 2005Do You Know if Your Boss Knows Where You Are? Santa Monica, CA, RANDCorporation. 2005, pp. 5-9

Bliss, Haddock, 2008Integrating China into Your Supply Chain: Lessons Learned from Global SupplyChain Integrators. Booz Allen Hamiton, 2008www.booz.com/media/file/Integrating_China_into_a_Global_Supply_Chain_en.pdf

References:


Boston Consulting GroupCreating The Optimal Supply Chain. Special Report.http://knowledge.wharton.upenn.edu/papers/download/BCGSupplyChainReport.pdf

Fleisch, E., 2001Betriebswirtschafliche Perspektiven des Ubiquitous Computing. In: Buhl, H.U., Huther,A., Reitwiesner, B.(Pub.): Information Age Econmy. Physica-Verlag, Heidelberg,2001, pp. 177-1991

Flörkemeyer, C., 2005Die Technolgien des Auto-ID Centers. In: Fleisch, E.; Mattern, F.(Pub.): Dass Internetder Dinge: Ubiquitous Computing und RFID in der Praxis. Visionen, Technologien,Anwendungen, Handlungsanleitungen. Springer, Berlin, 2005

Frese, E., 1995Grundlagen der Organisation. Konzept – Prinzipien – Strukturen. Gabler, Wiesbaden,1995


HP invent, 2005RFID and Sensing in the Supply Chain: Challenges and Opportunities. Hewlett-Packard Development Company, 2005www.hpl.hp.com/techreports/2005/HPL-2005-16.pdf

IBM Institute or Business Value, 2004Charting a new Course. IBM Global Business Services, 2004http://www-935.ibm.com/services/de/bcs/pdf/2006/charting_new_course.pdf

Laur, R.; Lang, W., 2005Agent-based perception system for sensitive freight. ITG FG 5.2.4 Workshop “CommunicationApplications for Logistics”. Power Point Presentation. Institut für TheoretischeElektrotechnik und Mikroelektronik (ITEM). Institut für Mikrosensoren, - aktuatorenund -systeme (IMSAS), Universität Bremen, 2005

Mcguffry, T., 1998Electronic Commerce and Value Chain ManagementCopyright 2006 D. Sichi-Levy


Picot, A. et al., 1998Die grenzenlose Unternehmung. Vol.3, Gabler, Wiesbaden, 1998

Zheng, L.R., 2008Wireless Tracking and Sensing. School of Information & Communication Technology,Royal Institute of Technology (KTH), Stockholm, Power Point Presentation Outline,2008www.acreo.se/upload/Publications/Events/2008/20081008-Zheng.pdf

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