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SUPPLY CHAIN MANAGEMENT

MID- TERM PROJECT

MBA II SECTION- C

GROUP MEMBERS

ABDUL MOEED BABAR


ASAD AHMAD SHUBHANI
MIAN HASHIM AYAZ
SAIM HASEEB
SHAHZAD YAHYA

SUBMITTED TO
MS. SHAMILA KHAN

TOPIC

HOW IS TECHNOLOGY RESHAPING SUPPLY CHAIN

DUE DATE

9TH APRIL, 2017

LAHORE SCHOOL OF ECONOMICS


Contents

Introduction ................................................................................................................................ 1
Supply Chain Management and ERP ......................................................................................... 5
Enterprise Resource Planning (ERP) as a Tool for Supply Chain Integration. ..................... 9
Role of ERP in Supply Chain Management: ....................................................................... 10
Implementation of ERP in Supply Chain............................................................................. 11
Risks involved in ERP implementation ........................................................................... 13
Advantages and Disadvantages of ERP Systems................................................................. 15
Radio Frequency Identification (RFID): .................................................................................. 17
History: ................................................................................................................................ 17
Current RFID technology: ................................................................................................... 18
Components of RFID: ...................................................................................................... 18
Working or Operation of RFID: ...................................................................................... 19
Types of RFID: .................................................................................................................... 20
RFID in Industries................................................................................................................ 21
Challenges in adopting RFID technology ............................................................................ 24
References: ............................................................................................................................... 26
Introduction

Supply chain management is an important part of organizations. From the initial step the
demand forecasting to the ending steps as to deliver products or services to the consumers is
all about supply chain. As the era is going to be change, the ways of process are also going to
be change. So the question arises over here that what are those forces, changing the ways to
perform activities particularly supply chain management? This is very simple question and to
know about the force how that is changing and reshaping the supply chain management in
depth analysis is required. The word has become a global village and the main force that
changes the world as global village is technology. Technology is very important it has changes
the living standards. Technology has changed the organizational ways to perform their
activities. Technology has changed the businesses. Technology has absorbed everything in
itself.

It is understood that technological innovations have mainly the evolutions of supply chain
management process and logistic. Now the era has changed itself and it has changed the
approaches to perform business activities from traditions to modern ways. So the question is
what organizations do? Definitely organizations have to become up to date with the new ways
of supply chain management because now it has become the necessity of organizations to
become aware of the new tech innovated rules of supply chain management and processes in
order to compete in the field. Now a day we see that the supply chain systems for the
organizations are better and effective that adapt the technology.

There are a lot of ways to improve supply chain that contains technological effects like
unmanned aerial vehicles. UAVs have the potential to have an enormous impact on
the supply chain. They basically helped the logistics professional in managing
warehouses and trailer yards, and in this area the stacks of shipping are
inventoried, tracked and moved and that depends on the supply chain needs. This
technological improvement changed the supply chain concept in such a way that
at every location the condition of goods are under noticed, the status of the system
is tracking and confirming the exact location of any trailer and transmitting other
important data as they fly. Market data about consumer and customer is also very
important and they also changed the way of supply chain management systems.

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Modern supply chain management is affected by new technological resources. For
example the ERP systems definitely they have changed the supply chain systems.
Talking about a small part of supply chain management that is logistics, when
products are departed from factories or firms to the distributor then at the same
time the modern technological ERP systems they points the true locati on of
product with each destination at the control rooms. This is a simple reality that
has made supply chain in this regard as an effective supply chain. Talking about
the Emirates and BSL logistic companies are interlink with Unilever production
firm. They can easily locate the merchandise at every location and hence it has
affected the supply chain systems, cost reducing way and increase benefits.

Now a days in highly competitive markets it is really very difficult for


organizations to streamline their supply chain. The ultimate achievement is the

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satisfaction of customers and a bit problem in sully chain management will cause
very severe situations in overall systems. Technology has helped to make this
system effective in terms of minimizing the variab ility in the supply chain system.
How technology has changed supply chain. There are different ways related to
technology that affects the supply chain management.

1. Computerized Shipping and Tracking


2. Radio Frequency Identification
3. Use Social Media to streamline supply chain
4. Big data will envelope and empower all other supply chain technology
applications.

Technology has reduced so many errors in supply chain with the development of
different ERP software. For example transportation management system has
reduced the transportation errors in supply chain systems. These software systems
have made the supply chain system at a single place. Because with the help of
these software every department at a single place or with different places are inter
connected with each other. It seems like the same room where people are working,
because these software systems have integrated the sources of communications. it
helps in saving time whether its the matter of shipping, receiving or tracking.

Radio frequency identification is also very important and they have eased the
inventory control by reducing the cost. In this cas e the owners of the business are
relaxed because inventory controlling cost has minimized. Since RFID chips provide
computerized product management, they can eliminate the potential for errors, simplify the
supply chain, and reduce operating costs.

Social Media is also important part and is playing an important role in supply chain
management. The reason is that people are inclined toward Twitter and Face book. People are
connected through these sources with the companies. So now a days most of the companies
are performing their marketing strategy and product display in social media. So with the help
of these social media now companies are doing their forecast. In this way data are going to be
accurate and demand estimations are going to be corrected and effective. Social media as a
source for the different organizations has helped them to forecast accurate demands and to
minimize the variability in estimations.

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Role of information technology in supply chain management is also very important. SCM is
linked with information technology. It is impossible to perform supply chain activities without
linking them with information technology. Because todays the World has become a global
village. Transformation of products from one part to another part has become possible with
technology. Technology has integrated the Supply chain process among each and every section
of supply chain management systems. Whether its forecasting the initial stage of the system
or whether it is distribution now system is being executed under the technological revolutions.
When something becomes valid to some extent then handling of that process also becomes
complex. So complexity and validity are interlinked. Let us understand this validity with the
complexity by taking an example of supply chain. For example the very first step of supply
chain is forecasting, the software that we use definitely here we are talking about technology
whether it is software or some other thing related to technology will provide us the right path
to calculate right forecasting and that will be valid. But on the other hand the process for
calculating this forecasting is not so simple because the executions for such kind of
technological aspects are complex. To achieve the complexity high level training is needed. So
if we are getting valid results then the process for achieving that validity is complex. But there
is need to know the overall effects. The overall effects for the organizations regarding to supply
chain management is more profit generations because the validity at every stage of the whole
supply chain process is helping to reduce and cut cost. As a result organizations are making
more and more profits with such a technological supply chain systems. Thus technology has
improved the supply chain management systems. Alignments with different part of supply
chain system now has become an isolated body where the information shared from one point
automatically reached at every section of supply chain system and thus it has proved the system
now effective. Thus it has enabled the organizations to operate their system more efficiently,
visibility and control over the inventory systems and bullwhip effects.

Thus supply chain system now has become an important part of consideration, as a result now
it is being adapted by the technological evolutions. It has become valid and results are going to
be improved for the organizations using supply chain systems with alignment of technology.
Organizations are now looking for better and better supply chain system with technology and
making effective their all process in order to improve the final results as profit making
industries with minimum costs and reducing variabilitys and risks from avoiding incurring
costs.

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Technological aspects that are related with supply chain systems are internet, media,
transportation, enterprise systems, Computerized Shipping and Tracking Radio
Frequency Identification, use Social Media to streamline supply chain, Big data
will envelope and empower all other supply chain technology applications,
media, computerized data from the customers according to their opinion that
helps for real forecasting the demands and many other things related to this.

Supply Chain Management and ERP

Supply chain is a set of activities starting from identifying and procuring raw materials,
manufacturing good, and finally distributing and delivering the finished products to the
consumers; involving the material and information flow. Whereas supply chain management
(SCM) is a set of coordinated and integrated activities creating synergies amongst the suppliers,
manufacturers, transporters/logistics, distributers, whole sellers retailers and customers,
whereby delivering the right product in right quantities at the right place in right time. An
efficient supply chain managed effectively provides organizations sustainable competitive
advantage (L. Li, 2007). This definition can best be illustrated by the house of SCM
explained by Stadtler (2002) shown below (figure 1) (Stadtler, 2002). SCM is

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relatively a new term in business management and was coined in 1982 (Christopher, 1992).

Fig: House of SCM [Adapted from (Stadtler, 2002)]

According to Christopher 1998, all the activities and processes along the supply chain should
be customer centric i.e. customer is an integral part and should be best served. While keeping
this in mind, focus or the goal should be on order fulfillment (how the customer is best served)
with the cooperation and coordination of flow of (summarized in figure 2):

1. Information: which involves ordering, forecasting, demand generation and planning,


tracking and delivery of orders etc. It is always linked with the flow of products.
2. Material: It involves the physical flow of products from suppliers to manufacturers to
customers and vice versa. This requires high level of coordination.
3. Financial Flow: Flow of credit, payments and consignments and other ownership
arrangements and requires the highest level of cooperation. (Akkermans, Bogerd,
Ycesan, & van Wassenhove, 2003)

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Figure 2: Integrated Model Of Supply Chain [figure adapted from (Akkermans et al., 2003)]

This network of flow of information is based on three pillars i.e.

a) Processes: Which includes organizations capabilities and knowledge management.


b) Organizational structures: which includes relationships from vertical integration to
hierarchies within the same company involving management techniques, strategies,
performance measurement and reward.
c) Enabling technologies: including information and process technologies.

According to Fisher (1997), supply chain performs two main functions i.e.

a) Physical function: which involves transformation of materials, distribution,


transportation and storage. It relates to production control and inventory management.
b) Market mediation: whose function is to match demand and supply. It relates to Supply
chain design and Supply chain coordination. (Fisher, 1997)

Fine (1998) describes supply chain designing as firms capability identification and selection.
It is a dynamic process rather than just collaborating and coordinating (Hoek, 2000). Whereas
supply chain coordination deals with the coordination of three types of flow described above
(Suhong & Binshan, 2006). This is summarized by the following flow diagram.

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Figure 3: Matching supply and demand in supply chain [Figure adapted from (Akkermans et
al., 2003)].

An effective and an efficient SCM involves creating synergies among

Operational flexibility (such as postponement or made to order (MTO))


Channel alignment (vendor managed inventories VMI)
Joint decision making through collaborative supply chain (collaborative planning, forecasting
and replenishment CPFR) (Akkermans et al., 2003).

All this can only be achieved through improved information sharing through supply chain
processes and structures, which in turn enhances the information flow and coordination across
the chain. Improved information sharing results in improved supply chain integration,
coordination and collaboration enabling improved material flow, reduction in inventory on
hand and inventory costs, dependable product delivery, responding efficiently to customer
demand, partnership quality and eventually higher customer satisfaction. Thus, information
sharing is very crucial and has a direct impact on the supply chain performance, service levels
and associated costs (Suhong & Binshan, 2006). The information exchange across all the
channels and partners in the supply chain is dependent on information sharing and information
quality, this in explained in the figure 4. Whereas information sharing is related to uncertainty
across the supply chain and information quality is related to accuracy, credibility, sufficiency
and timely delivery of information.

This requirement for quality and efficient information sharing has increased the importance
information systems resulting in reliance and increased dependency of SC on it. With the help

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of information systems and related technologies the information sharing, speed and quality has
improved. Information systems and technologies helps in efficient and accurate delivery and
information sharing reducing the delays, disruptions and enhancing the quality. Thus, SCM in
todays world is very much dependent on the information systems and technology (Gerhard,
Peter, Alexander, & Jrg Thomas, 2009) (Ince, Imamoglu, Keskin, Akgun, & Efe, 2013).

Figure 4: Factors influencing information sharing and quality across supply chain (Suhong
& Binshan, 2006).

Enterprise Resource Planning (ERP) as a Tool for Supply Chain Integration.

Enterprise resource system (ERP) can be defined in several ways in different contexts. Simply
it can be defined as, ERP is a standard adaptable software, which is part of organizations
information system, which manages and integrates business processes and functions.(Al-
Mashari, Al-Mudimigh, & Zairi, 2003). It enables the information linking among all the
partners and stakeholders in the supply chain, whereby information is shared instantaneously,
efficiently and effectively. It also integrates various organizational resources, developing
synergies amongst members of the supply chain resulting in operational effectiveness and
enhanced business performance (Ince et al., 2013).

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Role of ERP in Supply Chain Management:

ERP plays several important roles in SCM and its overall impact on business performance,
profitability and sustainability cannot be denied. Some important ones are described as under
and can be represented pictorially as shown in the figure 5.

1. It improves and enhances supply chain network. Clear visibility and communication across
supply chain. Effective tracking and management of processes (Seyed & Dinesh, 2013).
2. Minimize delays and disruptions. With ERPs all activities across supply chain can be integrated
and coordinated in a better and efficient way, resulting in improved delivery with lesser
disruptions.
3. Enhanced Collaboration. It enables organization to gain better control over suppliers and
distributers, with real time information sharing across all channels bridging the gap between
supply chain partners (William, 2007).
4. Reduced costs. ERP also helps organizations to help reduce or control costs by improving
inventory management, effective demand planning and better forecasting etc. It also enables
decision makers to identify and implement cost cutting opportunities (Subramoniam, 2008).

Figure 5: Role of ERP in SCM (Seyed & Dinesh, 2013).

As ERP are adaptable software packages which are part of information systems, they cover
wide range of functionalities across organizations ranging from accounting to commercial
operations, financial planning to production planning and so on and so forth.

There are three basic functionalities of an ERP system.

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Transaction processing integrated management of data and information across the
organization.
Work flow management functions controlling various processes across the
organization.
Decision support functions in assisting in making decisions and planning, by
providing support information across all business functions.

The functional components of ERP which used in SCM are called Workflow Management
Software Systems (WfMSs), which can be stand-alone software packages or they can be
integrated into ERP systems.

Broadly ERP systems can be categorized into:

Traditional ERP software applications.


Web-based ERP applications.

Traditional ERP software applications consisted of integrated modules installed throughout the
organization linked through an internal network or intranet. Whereas Web-based ERP
applications are the latest developments in information system technology, and is based on
access through internet rather than relying only on organizations intranet. Internet based
technologies provides more flexibility and ease of information sharing.

Some of the leading ERP solution providers across the world are Oracle, SAP and PeopleSoft,
HP and IBM; whereas some other smaller outfit service providers such as Exact Software Ins.
and Hyperion (Mabert, Soni, & Venkataramanan, 2003).

Implementation of ERP in Supply Chain

When the use of ERP systems creates improvements in, or enhances the effectiveness of the
organization, it is termed as ERP systems success. This success is not like the technical
implementation in which certain factors are measured to indicate success. According to the
work of DeLone and McLean (DeLone & McLean, 2004), a clear picture is formed regarding
what makes up the success of such information systems. There is an interrelation between the
success factors in the premature stages of ERP implementation. ERP systems are different from
other information technology systems. The reason for this difference is that the implementation
of ERP comprises the administrative, operative, tactical and organisation related components.

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This is also why the measures of success of other systems are different too (Adaileh & Abu-
alganam, 2010).
DeLone and McLean organized the factors that affect ERP systems success in 6 groups. They
are the following (Ince et al., 2013):

1) System Quality
2) Information Quality
3) Individual Effect
4) Organizational Impact
5) System Usage
6) User Satisfaction

The work of Sedera and Gable (Sedera & Gable, 2004) deduced that although factors labelled
above as 1-4 did contributor to successful ERP systems, but they added a fifth factor as
Institutional System Success as the main five things that affect it. Service Quality was
added by DeLone and McLean as a separate measure. They state that the quality of service in
data processing divisions is crucial for customer retention. This is simply because it not being
able to provide this quality will result in catastrophes. Clients are the users and if support is not
extended to users, will lead to a decrease in sales for a business (Ince et al., 2013).
Since ERP systems are integrated application programs for enterprise firms, administration and
control. Usually, information is scattered across the business, so ERP technologys purpose is
to remove or reduce this fragmentation of information across an enterprises business. By
doing so, it integrates information collectively in an organization. In order to have a continuous
performance from the supply chain, a business should check the compatibility issues. These
compatibility issues arise when the supply chain units such as the suppliers and the customers
have a different ERP system implemented. Therefore, Enterprise Application Integration (EAI)
is used so the different ERP systems can be connected in an integrated supply chain through
connection (Ketikidis, Koh, Dimitriadis, Gunasekaran, & Kehajova, 2008).
Real time adjustments made continuously, along with planning and sourcing of substitutes in
logistics, the changes in pricing and risks assessment, given the dynamic nature of the demand,
are required in the efficient management of the supply chain. ERP systems are not exactly
intended for supply chain systems. Supply chain are suited for the functions of ERP, but the in
ERPS, the material capacities and the demand fluctuations are considered separately. Whereas,

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in SCMS, we consider these factors at the same time to form efficient tactics in short times
(Aloini, Dulmin, & Mininno, 2007).

The chief objective of ERP systems is to incorporate a wide range of information concerning
organizational assets to be more innovative along with the business partners to create more
value for customers, meet customer needs, and improve the performance from an operational
perspective. But the reason of implementing an ERP system is not same for all. It is variable
across different companies. Therefore, the benefits of ERP can be defined in diverse ways for
different firms. ERP and SCM are going hand in hand and are a foundation for the performance
of the organization. It provides the means required to cater to the requirements of various
entities across the supply chain (suppliers, customers and competitors), as it can be a source of
competitive advantage (Ince et al., 2013). Relying entirely on ERP alone to manage the supply
chain is a mistake. This is because that it is designed as a system which is inflexible, therefore,
there will be problems when trying to handle any uncertainties. Other technologies should be
used alongside it. RFID, mobile and wireless tech are examples of the technological
combinations that organizations can use to their advantage. It will help greatly to increase the
traceability of products in the SCM system (Ketikidis et al., 2008).

Risks involved in ERP implementation

Being able to properly identify the risks associated with projects are part and parcel of a
managers responsibilities. The role of risk management plays a huge role in defining the fine
line between success and failure. Risk management is not extra work, hence it should be taken
very seriously. The same goes for any risks that are involved in the implementation of an ERP
system and integrating with the SCM system. The risks that are involved in IT projects require
project innovation as well to be mitigated. The following figure shows some risk factors
involved in ERP implementation (Aloini et al., 2007):

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Figure 6: Top 10 Risk Factors (Aloini et al., 2007)

There is a risk diagnosing methodology that should be followed (Aloini et al., 2007):

1. Context Analysis;
2. Risk Identification;
3. Risk Analysis;
4. Risk Evaluation;
5. Risk Treatment;
6. Monitoring and Review;
7. Communication and Consulting.

Moreover, ERP systems can affect the reliance between the business processes. In order to do
risk treatment, the circumstances of the risk must be reduced. Through either anticipative
behaviour or reactive behaviour, the risk factors can be treated. This is because they will
provide flexibility to the system (Aloini et al., 2007).

The following figure shows several risk factors and their effects on the overall system.

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Figure 7. Risk factors, effects and project failures (Aloini et al., 2007).

Advantages and Disadvantages of ERP Systems

There are many advantages of an ERP system. A firm can regulate its procedures, providing
more control to the company, combine its facilities, computerize data for its trading processes,
improving the flexibility of its operations, decrease the number of employees and most
effectively use it for problem solving. An advantage over the competition can be achieved if
the ERP is linked to the company logistics (Ince et al., 2013).

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Advantages Disadvantages
1. More control. High initial investment.
This is more advantageous in the case This includes the cost for
of larger businesses. The amount of implementation and maintenance
data and information is much more than cost.
smaller companies.
2. Prevents duplication of information. It must adapt to the company
hardware.
3. Enhanced internal and external Requires a lot of employee training.
communication. This is because the system must be
operated and used in an efficient and
effective way.
4. Allows profitability analysis. The other applications in the company
This is primarily to analyse the areas must be aligned with this system.
where costs outnumber the sales
volumes.
5. Better decision making. System rigidity.
6. Firms become more proactive. Not many experts of the system.
7. Improved time utilization. Incorrect application can lead to huge
losses.
Table A. Advantages and Disadvantages of ERP Systems (Arciniega, 2013).

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Radio Frequency Identification (RFID):

In the last few decades a number of steps have been taken by the different producer or
manufacturer to enhance the efficiency of the supply chain though introduction of various
concepts i.e. six sigma, lean & agile manufacturing etc. The technology now a day is changing
the way of doing business activities therefore organization are spending a lot on business
intelligence activities. The technology that is gaining popularity and changing the dynamics of
supply chain is the RFID (Radio frequency identification).RFID is the new technology that
used frequency of radio to transfer data from an item or object for identification and tracing of
item and has outperformed the previous technology i.e. barcode used for the similar purpose.
The technology uses e-tags for identification of various items. These tags are more efficient in
term of range, data capacity compared to barcodes. The one of the most important benefit of
RFID technology for any organization is that it can reduce the involvement of human being in
various processes.

History:

The history of RFID goes backed to World War II and it was initially used by the English army
on their tanks and jets to identify their enemies and friends and then attack in accordance to
respond from the application. The countries like Germany, Japan and U.S were using the radar
technology which is developed by Scottish person that help them to know about their enemy
planes even before they were mile away (Vasilia & Socrates, 2013).

The application is updated over the period of time and is now used by the armies all around the
globe. Later on, during the seventies the technology is used for commercial purpose as well
and the Electronic Article Surveillance was the application that was used to avoid incident like
burglary and robbery. Later on the scope of this application is enhanced and is used for
agriculture purpose as well; the people mostly use it for tracking of their animals. The RFID
technology gain huge popularity in eighties when countries like U.S and many of its state
started using this technology for collection of toll taxes at major highway and roads of the
cities. In late nineties a center was established at Massachusetts institute of technology the
purpose is to establish a worldwide standard for tagging various items which later on was
replaced by Electronic product code in 2003 (Amita & Sarita, 2013; Christoph, 2006).

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Current RFID technology:

This portion explain about details like different components that are used in RFID, how it work,
different kinds of tags, the sources of power for these tags and their reach in term of frequency.

Components of RFID:

The Tags that are used in the RFID contain elements like Antenna, Microchips, case and
battery. The size of chip used in RFID technology depends on the frequency, area & well as
the antenna.

The picture of RFID is shown above. The size of tag depend on the size of the antenna which
is clearly seen in the picture .Moreover the Microchip lies on the center of the tags and it does
not have its own power source because it is a passive tag. The major components of RFID
technology are

1. The tag: it is usually attached to the particular item and is used to carry the data to the
system.
2. The RFID resource reader: it is used to read data from the tag and then write it to the
transponder.
3. The Database: It helps to verify the data present in the record with the data obtained
through reader source. (S. Li & Visich, 2006)

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Working or Operation of RFID:

The RFID operates as; the reader source creates electromagnetic waves that are than transfer
the current to the tags which is the source of power for the chip. In case of passive tags the
current also charged the condenser, the main purpose of that is to make sure to provide
consistent power supply to the chip without any disturbance. While in active tags the tags can
generate the power of their own and has a power source in the form of battery. The tags receive
the direction from the reading source and respond by sending the information needed. The tags
usually do not have enough power so it absorbs the energy provided by the reading sources in
the form of electromagnetic waves. The reason mainly is due to fluid which can easily consume
these waves and metal can divert these waves and make it difficult to reads these tags in
presence of these two things. So during the reading phase the source has to provide the
continuous energy to the tag and with the increase in the distance range a more powerful source
is needed (Christoph, 2006; S. Li & Visich, 2006).

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Types of RFID:

Energy Sources:

In term of power the RFID tags are divided into three different kinds i.e. Passive, Semi-passive
& Active tags.

Passive Tags:
These tags usually do not generate power on their own and had to rely on power that is
coming from the reader source so they are very much dependent on the reader and
reader has to make sure that the power remains intact until the task is finished. These
tags are less costly and are of very small size because of the no power source attached
to it. The range of these tags lies in between 2mm to few meters. These tags have long
life and these tags are manufactured through printing as well.
Semi-Passive Tags:
These tags have their own power source that is consistently providing the power to the
chip. The responsiveness of these tags is very high is term of fulfilling the request. Semi
passive tags did not rely on field energy hence the signal that are send are much stronger
and covered more range compared to passive tags.
Active Tags:
Active tags contain their own power source but its different from the semi-passive in
a way that it provide energy source to both microchip as well as the antenna for
generating the signals. The range of these types of tags is usually long and covered
distances up to many meters. The life of these kinds of tag is around five years.

Frequency Bands:

The RFID are classified into three parts on the basis of their frequencies i.e. Low frequency,
High frequency & Ultra High Frequency.

Low frequency:
These tags are less costly and available at low price compared to high frequency tags.
These tags are efficient and quick for many applications but in case of handling the big
data these tags have to stay much closer to reader. The material like metals and liquids
can have very minimal effect on the performance of these tags. Once of the biggest

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drawback is that they have a small range. The following are few frequencies under
which they tags operate i.e. 140 - 148.5 kHz.
High Frequency:
High frequency tags are very responsive and have very high rate of transmit the signals.
These tags covered long range but they much more expensive in term of their cost
compared to low frequency tags. The 13.56 MHz is the frequency at which these tags
operates and perform. The most common type of high frequency tags are the Smart
tags. These tags do not require any license to operate worldwide.
Ultra High Frequency:
These tags are much more efficient and have very long range, high transmission rate
help with in a small time frame to read these tags. It covered a huge distance in meters
compared to passive and active tags. These tags are very expensive and incurred huge
cost. Their performance can be adversely affected due to material like metal and liquids.
It is mostly effective in area or systems that are developed for toll collection purposes.
There frequencies range varies from region to region e.g. the frequency for UHF tags
in U.S is 915 MHz, 868 MHz in Europe etc. A special permit is needed to operate and
use these tags (Christoph, 2006; Michael & Susan, 2005).

RFID in Industries

With the world becoming global village and with the massive growth in businesses, companies
are now holding inventories of various suppliers. This in turn put extra pressure on the
management to optimize their processes so that profit can be assured. Since there are many
suppliers and each have their own way of doing business, management is usually pushed to
their limits in maintaining suppliers; thats where radio frequency identification (RFID) helps
the management. RFID is about using technology to ensure that right product is at right place
at the right time so that sales can be maximized whereas the cost can be reduced. Since optimal
supply chain is considered to be the one which is able to reduce its cost RFID helps in achieving
that goal. By placing RFID tags companies can better track the market demand and help
generate more responsive and calculated response from the company ends. RFID is being used
in developing and developed countries alike. Countries like America and Japan have excelled
in this regard whereas India and Pakistan are also moving towards the use of RFID technology.

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With the advancement in technology and increasing relying on it, people now feel more
comfortable interacting with technology. Big companies like Wal-Mart and Tesco are
generating huge benefits by deploying RFID. Even the developing countries like India are
using this technology. Reliance retail which is one of the largest privately owned company in
India is testing the benefits of RFID and is in the process of testing the use of RFID in their
hypermarkets and supermarkets. These stores are being equipped with this technology since
these stores are carrying huge inventories wireless computer networks helps maintaining the
optimal level. RFID is being used in various different business sectors but the major sector to
adopt RFID is retail.

According to one estimate the adoption of RFID in retail business of Wal-Mart helped them
save $8.35 billion annually which translates into the entire revenue of almost half of fortune
500 companies (Amita & Sarita, 2013). These saving results from various different subgroups
such as avoiding stock outs, avoiding thefts, eradicating vendor frauds, improved tracking of
inventories and through eliminating additional staff that was previously employed. It is
estimated that companies that deploy RFID achieve a sales gain between 4- 20 percent without
escalating the stock levels. RFID is creating new ventures for the companies. Number of
companies such as Proctor & Gamble and Intel has created post such as vice president for
research and development for RFID. Since RFID is providing immense utility to the
organization its applications are now classified into four major categories

Identification
Authentication
Location
Automatic data acquisition

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RFID has number of applications from managing inventories to reducing costs and from
tracking products to even tracking people. One of the most prominent example in this regard is
of Lego land amusement park where children are given wristbands to wear so that if they get
separated from their parents their parents can send message to an app called Kidspotter. This
app in return sends the coordinates of the area of the park where child is present. This is just
one example from so many others. The framework below classifies some of the application,

RFID is now being combined with different technologies to make the best out of it for example
Intel new concept which is known as inventory in motion combine RFID with GPS. This
combination helps the company to reduce their delivery cycle from three weeks to one week.
The concept relates with moving inventories fast enough that the products are shipped even
before they are ordered. This keeps the pipeline filled so that when the ordered is received the
products are diverted towards the nearest hub located to the customers this concept in return
help company reduce cost remarkably. RFID is also combined with various other technologies
which are being used in several industries such as

Preventing transfusion of wrong blood to the patients at Boston Massachusetts General


Hospital using RFID (Ann, 2004).
Log tracking application is utilized by German forestry.
RFID technology is used in Michelin tires so that assistance can be provided to the
people facing flat tires.
Animal identification is made easy in livestock industry. U.S agricultural department is
under the process of deploying it on mass scale.

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Boeing and FedEx uses RFID technology to facilitate their aircraft maintenance
process which allow them to access the date of installation and the supplier who
provided the equipment (Narsing, 2011).
Harvested fruits are located backward to their corresponding trees to measure the yield
through matching the production collected in bins.
Coca cola headquarter uses RFID technology to track their cylinders and tanks at their
own facility and at their customer sites (Amita & Sarita, 2013).

Challenges in adopting RFID technology

On a large scale RFID is a feasible option for many businesses especially to those who are
handling excessive inventories and have complex supply chain but still RFID proposes some
challenges in adoption. This section will discuss those challenges that are being faced in the
adoption of this technology.

Hardware and setup cost

Although the cost of using RFID technology is decreasing with the days passing but still it
represents significant cost for some. There are two types of cost associated with the use of
RFID. One cost is of the tags that are put on the items that are needed to be identified whereas
the second cost is of tags reader. Tags usually cost a little; the cost can be as low as 50 cents
per piece if ordered in bulk but the tag reader is of significant cost. The cost for RFID tag reader
rages between $1000- $3000 (Zaheeruddin & Munir, 2005). Since small scale companies
usually try to avoid cost using this technology can be expensive for them and hence they are
not quite motivated in using the technology. Apart if RFID is compared with the traditional bar
code system the later one is much cheap alternative. The traditional barcode simply cost less
than a cent as compared to the RFID tag which is 50 cents per tag and thats too if purchased
in bulk. Additional to this, RFID require a setup so that products with tags can move from the
system smoothly.

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Training of personnel

On one side company will bear the cost of hardware but on the other side to use such system
company will require to hire more people, train them, and will have to optimize processes. The
costs of these functions are expected to surpass the hardware and software cost itself. Apart
from this RFID is still in its development stage which means that the potential to using the
technology still vary a lot therefore company will have to train people in a way that they can
integrate the technical aspect with the business challenge that is being by the company. Finding
and training such people is very hard or they are extra costly.

Standard

Since RFID is still in its fancy stage a complete standard of operation is still not defined. The
people in charge of making standards are underway significant efforts to propose a common
requirement for all. Like all other technological products the implementation is the major
difficulty being faced. Since RFID works on tag operating frequencies, these frequencies differ
in different regions therefore companies face difficulty converging their data (Gurudatt,
Ramesh, & Sangita, 2014).

Privacy concerns

The RFID chips are attached with the product which helps the company in locating the product
but customer feels it as a breach of their privacy. Since the chip goes with them once they
purchase the product, customer does not want them to be tracked along with the product. To
counter this problem kill tag feature is introduced which disable the RFID chip once the
product bearing it is sold to the customer (Michael & Susan, 2005). Since privacy is an
important concern, people sometime do not feel safe in buying products bearing RFID chips.

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