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The process of improving the flow of material, information and money through the entire supply chain from the supplier to the final customer.



The purpose of an effective supply chain is to have complete coordination of the flow of material and information from suppliers to the end users. The supply chain should be able to seamlessly connect supply, planning manufacturing and distribution operations and provide visibility across the supply network, thereby enabling rapid decision making and optimal execution. Supply chain management is the process of improving the flow of material, information and money through the entire supply chain from the supplier to the final customer.

The traditional supply chain which was supply driven has been replaced by a demand driven chain. The increasing competition as a result of globalization, decreasing consumer loyalty and shrinking time to introduce and market the product is forcing companies to become more and more efficient in managing their operation. With falling margins on the production front, the competition between companies would boil down to the efficiency and effectiveness to the supply chain. Speed, flexibility and flexibility to the supply chain have to increase considerably to meet these challenges.

Currently barcodes are used in supply management system for tracking the flow of material through supply chain. However barcodes have certain limitation such as line - of - sight read capability only, limited information, inability to identify individual produces and inability to be read inside containers. Radio frequency identification (RFID) tags have the capability to address these concerns. Moreover RFID tags can facilitate automatic audit the inventory and prevent pilferage from warehouses and retail outlets, thereby providing accurate inventory. With the tracking capability of RFID tags, it would be easier to detect counterfeit products and recall defective products.


A review of the literature reveals that very few empirical investigations have been undertaken to

quantify the benefits of RFID and Barcoding technologies. The number of articles that discuss

RFID technology and its adoption has risen from almost zero in the early 1990's to nearly nine

thousand by 2005. Much of the literature promotes the benefit and cost savings that companies can gain by implementing RFID, from reductions in waste to more accurate stock information and faster scanning of inbound product (Atkinson, 2005; Clarke, Gosain, & Thillairajah, 2005;

RFID technology has been promising to enhance support supply chain management efforts A. Gunasekaran and E.W.T. Nga , 2005 , The future success of RFID and other mobile services will be strongly affected by the ability of businesses to offer the right products and services to consumers. RFID has the potential in other areas of operations, such as manufacturing, after-sales service support, and total product life cycle management H. Lee and O. Özer 2007. An RFID system can beused to identify many types of objects, such as manufactured goods, animals, and people. RFID technologies support a wide range of applications—everything from asset management and tracking to manufactured products and related customer services to access controls and automated payments.

One of the biggest benefits RFID provides is that items can be traced across the supply chain and can be located in a warehouse within seconds. This is a very attractive advantage to businesses as they seek to make their supply chains more efficient and reduce waste, theft, and errors (Karkkainen, 2003; Prater, Frazier, & Reyes, 2005; Ranky, 2006; “RFID still brings more questions”, 2007; Sheffi, 2004; Wyld 2006). While adoption rates within supply chains have increased rapidly in the past few years (Furness, 2005; Ranky, 2006; Wyld 2006), there are still many retailers that have held back from RFID implementation as they believe that the technology is still not entirely proven and will wait to see the benefits other retailers can generate (Lai, Hutchinson, & Zhang, 2005; Prater et al., 2005; Stevenson, 2004; Vijayaraman & Osyk, 2006).

Among organizations, a supply network characterized by rich information exchange, which can be enabled by RFID, increases the feasibility of implementing alliances of firms that exchange information to coordinate production and distribution, outsource functions and services, and partner with suppliers and intermediaries [Lee, Padmanabhan et al., 1997; Straub, Rai et al.,2004]. Without RFID it will likely be too difficult to extract, share, coordinate, and control information as products work their way through the value chain of one firm to another. Short shelf-life goods present some of the biggest challenges for supply chain management (Shulman, 2001; Dilger, 2000). Supply chain management is challenging, and important, in the field of short shelf-life grocery goods owing to a high number of product variants, strict traceability requirements, short shelf-life of the products, and the need for temperature control in the supply chain (Kantor et al., 1997; To¨ yryla¨,1999; Bubny, 2000; Raman et al., 2001).

Furthermore, the large volume of goods moved in the supply chain makes efficient practices a necessity, as small percentual changes in operational cost add up to significant amounts, thereby impacting on profit margins. Efficient supply chain management is, therefore, of paramount importance in the field of short shelf-life goods. The goal of cost efficiency and a continuous cool-chain makes fast handling a requirement in the supply chain. As large volumes of goods are handled, all savings in time in handling become an important competitive advantage. From the temperature control point of view, all operations that are not performed in chilled premises need to be completed promptly. For example, expediting the loading and unloading of trucks, reduces the risks of contamination of goods (Shulman, 2001). The high number of product variants greatly increases the complexity of supply chain control, and thus often degrades supply chain performance by causing scheduling, capacity planning and inventory management to be more complex(Cooper and Griffiths, 1994; Raman et al., 2001).

Spoilage is an additional problem in the short shelf-life product supply chain, and it is caused principally from excess stock and flawed stock rotation. Effective stock rotation ensures that products are taken from the storage in the correct order, as determined by their sell-by dates (Shulman, 2001). The scope of the problem is extensive. For example, in one Nordic retailer, the spoilage costs of are in excess of 10 percent of total sales for all short shelf-life products. Moreover, in the European grocery sector, products that are not purchased before their sell-by date are estimated to cause yearly costs of billions of dollars (Leicester University and Cranfield University, 2001).

It is becoming increasingly difficult to ignore the importance of security and privacy aspects in research and industrial appliance of RFID , S. Sarma, S. Weis, and D. Engels. RFID , August 2002 . Nevertheless, to the best of our knowledge, there are surprisingly few literature review on RFID in a security and privacy context. Juels' survey, Ari Juels, September 2005. Gives a good introduction and overview on some of the central topics in RFID security. Lehtonen et al, M. Lehtonen, T. Staake, F. Michahelles, and E. Fleisch., July 2006 limit the scope of their examination to product authentication and a discussion of the trade-off between complexity and security in different RFID authentication methods.

There are, however, additional costs and issues associated with implementing a project such as RFID that companies must consider. These include internationally agreed-upon operating standards, consumer privacy concerns, further system technological integration, data storage issues, software/hardware maintenance and upgrade costs, and employee training (Clarke et al., 2005; “E-Pedigrees,” 2007; Fontelera, 2007; Furness, 2005; Lai, et al, 2005; Porter, 2006; Strauch, 2007; Vijayaraman & Osyk 2006). Brewer (2007) warns against casual adoption of RFID while it remains in its technological infancy, recognizing the cost and return on investment (ROI) advantages of tried and tested barcode technology.



“The competition in the future will not be between company and company but between supply chain and supply chain”

.... Linda Dillman, Executive Vice President and CIO for Wal-Mart Stores Inc.


The supply chain is the series of links and shared processes that exist between suppliers and customers. These links and shared processes involve all activities from the acquisition of raw materials to the delivery of finished goods to the end customer. Raw materials enter into a manufacturing organization via a supply system and are transformed into finished goods. The finished goods are then supplied to the consumers through a distribution system.


Most supply chains exhibit certain basic features as shown in Fig 1. These are as follows:

  1. The supply chain includes all activities and processes to supply a product or service to a final customer.
  2. Any number of companies can be linked in the supply chain.
  3. A customer can be a supplier to another customer so the total chain can have a number of supplier - customer relationships.
  4. While the distribution system can be direct from supplier to customer, it can contain a number of distributors such as wholesalers and retailers.
  5. Products or services usually flow from supplier to customer whereas demand information flows from customer to supplier. i.e. Physical products move “downstream” while demand information flows “upstream”.


Supply chains generally have the following functional components:

  1. Demand Planning
  2. Manufacturing Planning and Scheduling
  3. Distribution Planning
  4. Transportation Planning


This is a planning process to predict the demand for product and services based on forecasts. Accurately forecasting customer demand improves customer service while decreasing costs by reducing demand uncertainty.


This is a planning process that optimally schedules manufacturing orders with production capacity.


This is a planning process that meets customer demand based on available inventory and transportation resources. This includes distribution resource planning which determines the need to replenish inventory at branch warehouses.


This is a planning process to optimally schedule, load and deliver shipments to customers while considering constraints such as delivery date, mode of transportation, carrier etc.


Supply chain Management is defined as a set of approaches used to efficiently integrate suppliers, manufacturers, warehouses and retailers so that merchandise is manufactured and distributed in the right quantities to the right location at the right time and at optimal cost. It is the combination of art and science that goes into improving the way a company finds the raw components it needs to make a product or service, manufactures that product or service and delivers it to customers.

Supply Chain Management is hence the process of improving the flow of material, information and money through the entire supply chain from the supplier to the final customer as depicted in Fig 2.


The following are five basic components of supply chain management.

  1. Plan: This is the strategic portion of supply chain management. A company needs a strategy for managing all the resources that go toward meeting customer demand for its product or service. Planning involves developing a set of metrics to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers.
  2. Source: The company should choose the suppliers who will deliver the goods and services the company needs to create its product or service. The company must develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. It must also put together processes for managing the inventory of goods and services it receives from suppliers, including receiving shipments, verifying them, transferring them to its manufacturing facilities and authorizing supplier payments.
  3. Make: This is the manufacturing step. It involves scheduling of the activities necessary for production, testing, packaging and preparation for delivery. As the most metric-intensive portion of the supply chain, it is important to measure quality levels, production output and worker productivity.
  4. Deliver: This is the part that many insiders refer to as "logistics." This involves coordinating the receipt of orders from customers, developing a network of warehouses, picking carriers to get products to customers and setting up of an invoicing system to receive payments.
  5. Return: This is the problem part of the supply chain. It involves creation of a network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products.


Before the advent of the Internet, supply chain software was mainly limited to improving the ability to predict demand from customers and make own supply chains run more smoothly. But the cheap, ubiquitous nature of the Internet, along with its simple, universally accepted communication standards have thrown things wide open. Now, theoretically anyway, any company can connect its supply chain with the supply chains of its suppliers and customers together in a single vast network that optimizes costs and opportunities for everyone involved.

Each of the five major supply chain steps mentioned above composes dozens of specific tasks, many of which have their own specific software. Supply chain software can be separated it into software that helps to plan the supply chain and software that helps to execute the supply chain steps themselves.

Supply chain planning (SCP) software uses math algorithms to help improve the flow and efficiency of the supply chain and reduce inventory. SCP is entirely dependent upon information for its accuracy. There are planning applications available for all five of the major supply chain steps previously listed, the most valuable being demand planning, which determines how much product a company should make to satisfy different customers' demands.

Supply chain execution (SCE) software is intended to automate the different steps of the supply chain. This could be as simple as electronically routing orders from manufacturing plants to the suppliers for the raw material you need to make the products.

In effect, Supply chain management software is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. Supply chain management software represents a conscious effort by the supply chain firms to develop and run supply chains in the most effective and efficient ways possible.


Depending on the business needs and the supply chain management software, one can hope to gain several benefits from utilizing supply chain management software in one's environment. Some of the benefits may include are:

  • Lower excess and obsolete inventory
  • Reduced order cycle time
  • Reduced operations costs
  • Instant analysis to identify problems and determine solutions

These are just several benefits that one may achieve by implementing supply chain management software for business. Since there are several supply change management software packages available, it is always a good ideal to make sure that supply chain management requirements are determined and implement a trial version before choosing the supply chain management software solution.


SCM, Supply Chain Management is a process-oriented system of purchasing, producing, and delivering product to customers. Its scope includes both internal enterprise processes and external business contributions from suppliers, transporters, channels and end-users.

SCM systems are often extensions of existing ERP systems, interfaced to encompass all areas of the complete supply chain. These areas include demand, supply, manufacturing, transportation and distribution.

There are a few critical factors to consider when evaluating new software. The selected software solution should be one that ensures the fastest, easiest and most effective implementation.

  1. Match to current business practice: Does the product allow for unique business practices? Is it flexible where required or can it be customized?
  2. Integrated verses interfaced: If different packages are required, can they be interfaced? What effect will this have on overall performance?
  3. Implementation: What is the process and how long will it take? Does it provide for user acceptance and adequate training?
  4. Technology needs: With respect to new and/or utilization of existing hardware? Client/ server capacity, scalability, software upgrades and support?
  5. Price: Does the selected solution meet budget requirements? Implementation of new software should increase company functionality with a minimum of disruption to ongoing business-and is an achievable goal with an appropriate evaluation program.

The critical factors as discussed above need to be evaluated. In cases where there is a backbone application (ERP) already taking care about the organization then SCM application may be integrated with that if it meets the SCM requirements. In cases where this is not available or not possible then selection of alternate or interfaced application may be the appropriate solution for your company.


Lower cost of goods sold is achieved by making the inventory smaller and therefore turn more often; while making sure that stocks are large enough will result in increased sales because products are available when customers call for it. Inventory management is balancing those two opposing factors for optimum profitability.

Inventory turnover is the measure of how well the business is managing its inventory. It shows how many times a year the inventory is turning (or moving) through the organization. The higher the turnover, the better; However, there is a larger probability that stock may not be available when the customer needs it.

An Internet-enabled supply chain may have just-in-time delivery, precise inventory visibility and to-the-minute distribution-tracking capabilities. With technology advances, supply chains have moved from the paper-heavy activity to a strategic weapon that can help avoid disasters, lower costs and make money. All the businesses establish their supply chains around product lines and people. But today, customer orders touch multiple product lines and multiple channels of distribution. Modern supply chains focus on the customer — and on delivering one order at a time rather than moving one product line at a time.

Most of the today's supply chain optimization stars often come from the retail industry. Since retailers add no value to the product itself (because they are not manufacturers, after all), intelligent and efficient product distribution can be a top competitive differentiator. Wal-Mart famously led the way a decade ago, leveraging its colossal buying power to make suppliers play a greater role in managing inventory.


Supply chain visibility is a key contributor to increasing supply chain performance both from a financial and a service-level perspective. With competition changing from among individual companies to among supply networks, visibility to both intra- and inter-organizational information is critical for rapid response in the supply chain. Participants at all points along the supply chin must provide timely and accurate information.

Companies without good information carry excess inventory to ensure they can deliver what they have promised. Information visibility of orders, plans, supplies, inventory and shipment is crucial to successfully coordinating events across the network and allow for proactive action. Greater visibility as well as more accurate and timely information about supply chain execution, allows for reduced safety stocks and increased on-time performance to customer commitments. The impact of visibility of information at various points in the supply chain is summarized below.


(i) Inventory Tracking:

Inventory visibility in manufacturing enables manufacturers to avoid building up of buffer stock. Some of the areas where visibility is critical are:

  • Visibility to inbound raw materials and/or urgently required components
  • Visibility to location of work-in-progress inventory within the manufacturing operations
  • Visibility of expiry dates of sensitive raw materials
  • Visibility of scrap/rework material

(ii) Production Management:

Production management addresses the details of creating a product and consists of various processes which require timely and accurate information to operate effectively and efficiently. These are as follows:

  • Resource Allocation
  • Operations Scheduling
  • Production Execution
  • Quality Management
  • Product Tracking and Genealogy to facilitate recalls

(iii) Asset Utilization:

The utilization of assets is a key factor in the overall effectiveness of manufacturing operations. The availability of assets such as containers, trays and racks is critical to production efficiency. With better visibility to each asset, fewer assets will be required, less time will be spent on tracking the assets and costs for the assets can be better utilized.


consumers demand higher levels of service with more competitive pricing, retail distribution becomes more complex. These demands are passed through the supply chain and in many cases; the distribution centers shoulder much of the responsibility. They must deliver the products to the stores with greater accuracy but with lower costs. Some of the functions in which visibility plays a crucial role are:

(i) Receiving and Check-in:

When pallets and cases are received, the merchandise contained in them needs to be identified and matched with the advance shipping notes. Any discrepancies observed are to be immediately communicated to the supplier. Any error creeping into the inventory at this stage would get propagated through the system leading to mismatches at later stages which could be difficult to detect.

(ii) Storage:

When the merchandise is received, the location of storage needs to be correctly recorded to ensure that the items can be easily located when needed.

(iii) Order filling and Shipping:

When a retailer's order needs to be filled, the items which need to be shipped must be correctly identified, inventory adjusted for the quantity being shipped and the shipping documents should reflect the correct quantity loaded onto the truck. Again any error creeping into the system would get propagated through the system. It would also lead to avoidable irregularity claims by the consignee.

(iv) Inventory Accuracy:

The inventory held in the distribution center at any point needs to be accurate to avoid overstocking or under-stocking, both of which have associated costs.


Transportation is the segment of the supply chain that consumes the most resources in the form of capital and expenses. It takes the most amount of time for product to pass through. Thus visibility of raw materials and fished goods as they are in transit is most vital for an efficient supply chain. Safety stock and asset utilization are two areas which are affected by visibility in the transportation segment.

(i)Safety Stock:

Detailed information on shipments coupled with defined processes to deal with exception situations will cause lead-time variability to decrease. Higher the visibility of movement of materials through the supply chain, it will be easier to manage the processes and deal with exceptions. Unplanned lead-time variability result in either higher levels of safety stock or in stock-out situations.

(ii) Asset Utilisation:

Many companies have a major investment in material handling and material transportation assets. Maximising the use of these assets is critical to ensure that the asset pool and its associated capital expenses are minimized. Visibility in the deployment of these assets plays a major role in reducing overall supply chain costs.


In addition to specific improvements across the supply chain, organisations are also constantly striving to improve customer service to create a tighter bond between supply chain members and build customer loyalty. Real time tracking of goods throughout the supply chain provides excellent opportunities for improving customer services. Goods tracking is also important for direct end customer service. There are many areas where real time goods tracking can deliver significant improvements. For example, lost luggage is estimated to cost the airline industry in excess of $ 100 million annually. Any improvements in this area will not only reduce the cost of compensation payments to customers but also significantly improve customer service.


Supply chain visibility exposes weak links and hidden costs. End-to-end process improvements, enhanced by RFID and other emerging technologies, are delivering visibility across global supply chains to help organizations manage risk and create value.

The globalization of our economy is exerting pressure on today's supply chain like never before. Global sourcing may offer significant cost advantages, but it also means long-distance supply lines, extended lead times and increased risk. But despite this and an ever-changing regulatory environment, more and more companies are global sourcing to generate value for their customers and shareholders.

As global sourcing reshapes the market, so too must the usual methods for mitigating supply chain risks change. Business as usual doesn't work anymore; it's become too expensive. Companies routinely buffer their supply chain with added inventory in case of marketplace and operational glitches. However, the longer lead times required by global sourcing demand a larger buffer. This not only pushes costs higher but also puts more inventory at risk.

"There is so much waste in a supply chain" says Janiece Webb, Senior Vice-President, Motorola. "We create buffers and we create inventory, and we talk about how we're just in time. We're not just in time. That's because we don't have the kind of visibility we need."

Even more unsettling is the sense that most global businesses don't appreciate the full gamut of supply chain risk. Mitigating the supply chain risk is very important. But even before that, understanding the risk, quantifying where the break points are and what is needed in case of the risk materializing are very, very important.

In fact, it's the nature of global commerce that presents these challenges. With an extended supply chain, you have to factor in all kinds of risks and hidden costs when moving from a two- or three-day travel time to three- or four-week travel time. Any critical disruption in the shipping channel affects when the product reaches the customer. For example, severe weather, labor strikes or a health crisis, such as SARS, have significant implications for a global supply chain.

What's more, product counterfeiting is a major threat to global commerce. Counterfeiting now accounts for 5-to-10 percent of all global trade, or $440 billion annually worldwide, says the European Union. According to the World Health Organization, 5-to-8 percent of the worldwide trade in pharmaceuticals is counterfeit.


Security and inventory levels are serious concerns because today's global commerce lacks visibility. One might not know his cargo's whereabouts from the moment it leaves the plant until it is unloaded at the warehouse. Blind spots exist in trucking products from the manufacturing plant to the seaport or airport. You also lack visibility into the goods' security and status as they travel overseas and cross international borders. The same is true once the shipment arrives at the port until it reaches the distribution center. Products are moving back and forth globally in huge numbers. The fact of the matter is there are huge gaps.

The statistics paint a more distressing picture. Some 5.8 billion tons of cargo - or 80 percent of the world's volume - move by sea each year. Who's guarding the security of the nearly 11 million containers being transported by 46,000 vessels among 4,000 global ports? In the United States, only 5 percent of containers are physically inspected.


True visibility goes beyond knowing what's happening right now in your supply chain. It gives you the ability to be more predictive or more proactive to understand if there's a problem coming down the road and how to solve that problem, maybe before it happens.

The three main characteristics of supply chain visibility have been identified as:

  • Panoramic: It collects data from every function, everywhere it's needed.
  • Actionable: It tells you what to do. It's not just sharing information; it outlines the action that's required.
  • Accountable: It connects action to a specific business goal or a specific business metric, and makes sure you're getting the benefit.

Visibility enables managers to deal with supply chain disruptions more effectively, so there's less impact on the business. Better planning results in reduced inventory and fewer out-of-stocks. Recent studies indicate that retail businesses lose about 4 percent of sales due to out-of-stock goods.

In addition, organizations can increase responsiveness and enhance the client experience. By integrating supply chain solutions with customer relationship management tools, you're able to improve service and offer better promotions because you know more about your clients and what they want.

Another benefit is the flexibility to turn ships at sea into "virtual warehouses". If you know precisely what's in each shipment and where it is, you can commit those goods to orders. You're going from three days of in-transit inventory to 30 days, so your ability to make those commitments to orders is a huge benefit in terms of reducing out-of-stocks and reducing inventory.


Motorola, which ships approximately 250 million kilos of components and finished goods per year with an estimated sales value of $36 billion, is closely analyzing its supply chain. The company realized that it needs to take the cost out of it if it wants to be more competitive and beat their peers in the industry.

That's the way companies are going to have wars going forward. It's going to be my supply chain against your supply chain. The ultimate goal is to achieve real-time visibility across the supply chain. Real-time communication networks, using Bar codes, radio frequency identification (RFID) and other technologies, are essential to delivering such visibility.

Therefore, if one could have real-time data coming in and being filtered into their supply chain systems, such as sophisticated warehouse management systems and ERP (enterprise resource planning) systems, then companies would have a competitive weapon with them.


Various track-and-trace technologies, such as bar coding, passive and active RFID, cellular and satellite technology, are reshaping the supply chain. State-of-the-art sensor and scanning tools go one step further, measuring humidity, temperature, chemical conditions, light, radiation and motion. For example, fruit growers who employ chemical sensors can gauge when their produce will spoil. With this real-time data, producers could expedite the supply chain to ensure that their fruit is ripe when it reaches the supermarket.

They involve identification of the objects and subsequent tracking of the object by means of the identifier as the object moves along the supply chain. Many proven technology such as barcodes can deliver critical benefits and have become a requirement of doing business, as well as a valuable tool for attaining competitive advantage through process improvements. The technologies vary in accuracy, performance and cost. In its simplest form, the identifier can be a tag which contains some fixed information about the object that it is associated with and is physically attached to it. Examples of such information include the stock keeping number of a product or the shipment serial number of a package. Two common tagging devices are the barcodes and RFID tags.




The concept of radio frequency identification (RFID) goes back to the Second World War. Great Britain pioneered the use of radio wave based navigation and identification of friend or foe aircraft for night operations by the Royal Air Force. The military has continued to use more advanced versions of this technology for many applications. More recently, commercial businesses have begun RFID technology for manufacturing and supply chain applications. In the 1980s Compaq Computer started using RFID tags to trace components through the production process. The railroad industry in US has used RFID to track rail cars while the agricultural industry has used tags to track livestock.


Automatic identification is a term given to a host of technologies that are used to help machines identify objects. It is often coupled with automatic data capture to help companies to identify items, capture information about them, and get the data into a computer without having employees type it in. This all is done to increase efficiency and to reduce data entry errors. There are a host of technologies that fall under the Automatic identification umbrella. These include bar codes, smart cards, voice recognition, some biometric technologies (retinal scans, for instance), optical character recognition, and radio frequency identification (RFID).


In recent years, automatic identification procedures have become very popular in many service industries, purchasing and distribution logistics, industry, manufacturing companies and material flow systems. Automatic identification procedures exist to provide information about people, animals, goods, and products.

The barcode system that revolutionized identification systems few years ago, are being found to be inadequate in some cases. In spite of the fact that barcodes are extremely cheap, they have low storage capacity and they cannot be reprogrammed.

Storing of data in a silicon chip could be a technically optimal solution.

Radio frequency identification, or RFID, is a generic term for technologies that use radio waves to automatically identify people or objects. There are several methods of identification, but the most common is to store a serial number that identifies a person or object, and perhaps other information, on a microchip that is attached to an antenna, (the chip and the antenna together are called an RFID transponder or an RFID tag). The antenna enables the chip to transmit the identification information to a reader. The reader converts the radio waves reflected back from the RFID tag into digital information that can then be passed on to computers that can make use of it. The power required to operate RFID tag is transferred from the reader using contact less technology. Because of the procedures used for the transfer of power and data, contact less ID systems are called RFID systems (Radio Frequency Identification). Encryption algorithms are used to ensure security and integrity of the data passing between the tag and reader.


A typical RFID system consists of four main components. These are:

  • Tags
  • Antenna
  • Readers
  • Host computer


RFID tag is a wireless system comprising of a tiny microchip and antenna unit that is capable of storing and transmitting information. The reader emits a radio wave to scan the microchip via the antenna. When the RFID tag gets within range of the reader, the tag reflects the information programmed in its memory. The tags can be read from a distance without physical contact or line of sight. The distance from which the reader can reliably communicate with the tag is called the read range.


There are different varieties of tags which are tailored for different purposes. Tags can be classified as follows:

(i) Based on energy supply: Passive or active tags

Passive tags do not have a power source of their own. These tags are powered indirectly via the electromagnetic radio waves from the reader. Passive tags have a limited range and do not require maintenance. They are simpler to produce and are well suited for many supply chain applications for product or asset identification.

Active tags contain a battery to provide the microchip with power. This type of tag can send information to the reader independently. Active tags have a read range of up to 300 meters thus making them suitable for pinpoint asset location usage. However they are more expensive than passive tags

(ii) Based on ability to change the data that can be stored in the tag: Read only, Read-Write or Write-Once-Read-Many (WORM) tags

Tags can be Read-Only, Read-Write only or Write-Once-Read-Many (WORM) type tags. The data on Read-Write tags can be totally changed or overwritten by any reader. The data on these tags can be augmented or changed as the tag moves along the supply chain. These tags are reusable but are more expensive than the Read-Only tags. Information is written into Read-Only tags only once by the manufacturer and cannot be changed. They are used for product or asset identification and location, but the data cannot be augmented with additional information as it moves along the supply chain. It cannot be reused either. WORM tags can be rewritten once by a reader. These are also not reusable and are cheaper than read/write tags. Based on these characteristics, the tags are divided into the classes given below:


Read/Write Capability


Passive, Read Only


Passive, Write Once Read Many


Passive, Multi Read/Write


Active Multi Read/Write


Active, Networking Tags


Readers work with tags to transmit or receive data. They can be portable devices or fixed terminals located at key locations within a facility such as entrances, dock doors, forklifts, conveyors or assembly lines. Readers include an antenna or an antenna array for sending and receiving signals and a processor for decoding data. As data is collected, it is sent via cabled or wireless local area networks to a host computer. Readers can communicate with tags in different ways. The most commonly used method of communicating with passive tags at close range is by inductive coupling. The reader's antenna creates a magnetic field around the tag's antenna thus transferring energy to the tag. The tag can then send back its data to the reader.


There are a number of RFID technologies that operate at different frequency ranges. The application determines what technology should be used based on frequency, required read range, memory capacity and the desired system performance. The frequencies which are generally used are:

(i)Low frequency (LF):

These tags work at a frequency of around 125 KHz and have a read range of less than 50cms. The reading speed is relatively low and the tags are relatively insensitive to interference.

(ii) High Frequency (HF):

The tags operate at a frequency of 13.56MHz and can be read at distances of one meter. These tags use more energy than low frequency tags.

(iii) Ultra High Frequency (UHF):

These tags operate at a frequency between 860 MHz and 930MHz. They can be read from further away and at higher speeds than HF tags. It also uses more energy than HF tags. It is more suitable for supply chain applications. However these tags are less appropriate for use in moisture laden atmosphere.


The RFID architecture (Fig. 3) consists of the following building blocks:

  • A passive RFID tag which when exposed to the electromagnetic waves of the RFID reader broadcasts its information.
  • An RFID reader which activates the tag and reads its response.
  • A host computer which filters the information from the reader. It only sends meaningful information to the next level.
  • An application server which communicates with the host computer to transport information over the Internet.

The RFID information can also be directly routed to the supply chain execution systems such as WMS, Point of Sale or supply chain event management environment. However this puts additional load on these systems.


Integration of the RFID data with existing software is an important aspect to the introduction of RFID technology. The data collected by the RFID reader's needs to create value such as more supply chain visibility or better planning. Most of the back-end infrastructure, such as the information processing systems needed to store, transmit and act upon the data captured through RFID is already in place in a number of companies. These include enterprise resource planning (ERP), warehouse management system (WMS), supply chain management (SCM) and related distribution and logistics systems. The next few years are likely to see an increase in the RFID middleware in the supply chain. The communications infrastructure is also largely in place with the Internet and advances in wireless communications. The software which would be developed will be more and more integrated with wireless communications solutions such as GSM and GPS for real time tracking and tracing.


The Electronic Product Code (EPC) is the electronic equivalent of the Universal Product Code (UPC). All RFID tags would have an EPC to identify the product. The EPC is a unique 96 bit number and it is the only information stored on the computer. The EPC code identifies a specific item in the supply chain. Standards for the EPC are being developed by EPC-Global which is a joint venture of the EAN International and the Uniform Code Council.

Like the Universal Product Code (UPC) or barcode, the EPC is divided into numbers which identify the manufacturer, product and version. In addition, the EPC uses eight additional digits to identify unique items. The general structure of the EPC consists of four elements: Header, EPC Manager, Object Class and Serial Number.

The RFID Object Code has four parts. These are:

  • The Header (8 bits) specifies the version number.
  • The Electronic Product Code (EPC) manager field (28 bits) provides the name of the enterprise (typically the manufacturer).
  • The object class field (24 bits) specifies the class of product typically the stock keeping unit (SKU).
  • The serial number field (36 bits) uniquely identifies the individual item.

The code possibilities of the 96 bit tag can accommodate as many as 268 million companies, each having 16 million classes and each class having 68 billion serial numbers.



The cost of tags has been fallen significantly in recent years. The business case for many applications is highly dependent on the cost of tags. The price of a passive tag is presently around 10 cents while the cost of active tags is in excess of 1US$. The prices are expected to fall as the demand for the tags pick up. Analysis show that with a demand of 30 billion tags per year, the cost of a passive tag would drop down to 5 cents by 2007.


Presently readers cost about US$ 500 or more. It is expected that with mass adoption of the technology and increase in demand, readers would become more affordable and would cost as low as US$ 20 by 2007.


The costs for integration of the RFID technology with existing business applications is a significant part of the total implementation costs. The cost of off the shelf software would be around US$ 60,000 while the overall implementation costs would be around US$ 2,000,000. The price of the software is expected to fall once several implementations have been carried out and as competition increases between software suppliers.


One of RFID technology's most important attributes is that the tags do not require line of sight to be read or close proximity to the reader. This means that readers can be located at the entrance to a warehouse for automatically tracking goods moving in and out of the warehouse. Additionally they do not require human intervention. Hence they are ideal for ‘clean environments' such as scientific or electronic production areas.

RFID tags can be read through most materials. They can be read through visual and environmental obstacles such as fog, paint and grime - where barcodes or other optically read technologies cannot perform. Thus the content of a shipping container can be verified easily without the costly overhead of an “Open Box Inspection” and manual counts and comparisons with shipping manifests.

Unlike barcodes, RFID tags are programmable and can hold a wide variety of information including product identification, location and destination details. Additional information such as weight and size can also be included where required. RFID tags are also capable of identifying each individual item unlike a bar code which can only identify the class of the item. Also unlike barcodes, RFID tags are not susceptible to being physically damaged or to damage from dirt or grease. Another big advantage is the speed of reading of RFID readers. While bar codes can be read one at a time only, many RFID tags can be read simultaneously.

A comparison of bar codes and RFID tags is given below:



Can only be read individually

Many tags can be read simultaneously

Must be visible to be read

No line of sight required

Cannot be read if damaged or dirty

Can deal with rough and dirty environments better, since tags can be integrated into the packaging materials

Are usually read manually, thus incurring labour costs.

Are read automatically thus saving on labour costs

Information cannot be changed

Limited information

Information can be changed, if desired.

Quantity of information depends on application

Table 1: Comparison between bar codes and RFID tags

RFID is a stable automatic identification technology that holds great promise for improving business. It should be considered for any application that could realize a clear benefit in terms of efficiency, reduced loss, or improved service. RFID is not necessarily "better" than bar codes. The two are different technologies and have different applications, which sometimes overlap. Bar codes are inexpensive and effective for certain tasks. It is likely that RFID and bar codes will coexist for many years. Because RFID tags are reusable, do not require line of sight to read or write, enable unattended reading, and offer read/write data storage; they can improve efficiency in many operations by reducing labor and materials costs.


Depending on the dissemination of information stored on the RFID tags, RFID solutions fall into two categories:

  • Closed loop applications
  • Open loop applications


In closed loop applications the assets that are tagged remain inside the organization's premises with an objective to increase internal operational efficiencies. These assets are reused thus the tags chosen should have a long life and are used through tens or hundreds of cycles. As the tags are reused so, the cost of tags is not an important issue in Closed loop applications. Thus Closed Loop Applications have been around for more than a couple of decades and have proven ROI. Some of the examples of this nature of RFID application are RFID usage in Production Management, Asset and Yard management. Tags are placed on products or assets or at locations where either the operations or the products are to be tracked. The cost and life of the tag depends on whether they are read-only or read & write. These tags are governed by ISO 15693 standards.

RFID tags can be used to track the Work-In-progress of an item in an assembly line. The tag can contain Bill of Material, details about operations etc. The planned and actual configuration can be verified at any point during the assembly. The tag information could later be read to produce a shipping list and invoice. The central production database can be automatically be updated by assembly line personnel with the use of RFID tags for the finished goods inventory. The tag could also remain with the item for later use by the field personnel during installation and maintenance. This leads to reduction in defects and rework, reduction in labor expenses, and better planning of operations.

RFID tags can also be used to track the location/operations of asset (Container, Tote) inside the plant. The tags on these assets can be read by readers mounted at Operational stations to find out the location of these assets. These tags can also be interrogated to see if the asset has been used for any hazardous operations. The use of RFID reduces the labour costs as well as the idle times since the assets can be located and observed continuously. Thus the asset utilization is improved and the asset visibility increased.


The objective for Open Loop applications is to increase the efficiency in collaboration for the Supply Chain Partners. Thus the data on the tags attached to products are read by various supply chain partners. These applications use single use tags which are placed on pallets, cases & items to track products. In open chain applications the tracked object is not returnable and therefore the RFID tag is lost after use. Since the tags are not re-usable, the cost of tags is an important factor in realizing the ROI for these applications. Open loop applications are gaining increasing popularity due to retailer mandates. The data for open loop solutions move across company supply chains and run into terabytes depending on the applications.

In both types of applications, RFID automates the collection of information, making it more accurate and less costly than what is feasible with bar codes. On route to their end destination, goods often pass through several depots. As they move in and out of each depot, their location is identified automatically by an RFID tag system. The information is then automatically sent to a central monitoring application where it is used to direct the goods to an appropriate part of the depot or next transport vehicle. Information can also be shared with the sender and end customer. Goods arriving late, or at the wrong destination, are immediately flagged up and reassigned to the correct place - all without human intervention and in real-time. In this way, accuracy and timeliness of goods flowing throughout the supply chain is significantly enhanced. This requires an enterprise wide information management infrastructure that can handle the information quickly and direct it towards the right business application.


Generally speaking, the RFID technique can be applied to the following areas:


The movement and tracking of goods through the manufacturing and supply chain process is still a difficult to manage, complex procedure in spite of all the sophisticated Warehouse Management Systems integrated with Supply Chain Systems, Enterprise Systems, and Electronic Data Interchange (EDI). According to a study, items on average have been unavailable on store shelves 7 to 8 percent of the time. If a consumer goes to buy brand A and finds that it is not in the stock, he might purchase brand B. In this case, the manufacturer of brand A suffers. It can also degrade consumer satisfaction. Out-of-stocks can be very irritating when an item has been promoted by a retailer. The consumer might not trust the ads in future. With RFID solution, inventory can be updated in real-time without product movement, scanning or human involvement. The fully automated system allows inventory status to be determined and shipping and receiving documents to be generated automatically. The system could also trigger automatic orders for products that are low in inventory. The main advantages can be summarized as:

  • Provides total asset visibility
  • Gives full inventory history
  • Allows reduced inventory-stocking levels
  • Facilitates "Just-in-Time" deliveries
  • Reduces errors
  • Reduces overall cost of operations


RFID can be used to monitor and track patients, doctors and medical equipments. They can be given bracelets which embed RFID tags. Tracking doctors can be invaluable in case of emergencies. The location of patients requiring constant attention can also be monitored all the time. Such tags can further be used to exchange patient's medical data over wireless. Access control can be implemented to disallow access to unauthorized persons. The main advantages can be summarized as:

  • Continuously track each patient's location.
  • Track the location of doctors and nurses in the hospital.
  • Track the location of expensive and critical instruments and equipment.
  • Restrict access to drugs, pediatrics, and other high-threat areas to authorized staff.
  • Monitor and track unauthorized persons who are loitering around high-threat areas.
  • Facilitate triage processes by restricting access to authorized staff and "approved" patients during medical emergencies, epidemics, terrorist threats, and other times when demands could threaten the hospital's ability to effectively deliver services.
  • Use the patient's RFID tag to access patient information for review and update through a hand-held computer.


The RFID tags can be used to track the progress of an item in an assembly line. The exact features that have been incorporated into an item can be known at any point during the assembly. The tag information could later be read to produce a shipping list and invoice. The tag could also remain with the item for later use by the field personnel during installation and maintenance. The Central Production database can be automatically updated by assembly line personnel with the use of RFID tags for the finished goods inventory. This prevents manual creation of data sheet which is a tedious, time-consuming and error-prone task. The main advantages can be summarized as:

  • Maintains current item information on the tag - ideal for managing production of complex or customized products and assemblies, eliminates the need for separate paperwork on assembly status and content.
  • Can automatically notify the central product database when each process has been completed.
  • Field personnel could use RFID tag to determine product features, date of manufacture, revision levels, etc.
  • Real-time tracking of inventory, part kits and sub-assemblies.


The RFID tags can be used to prevent unauthorized people from parking their vehicles. They can also be used to charge parking fees without making the customer wait in long queues. Main advantages can be summarized as:

  • RFID tags can be affixed to automobiles for activating hands-free access to communities and parking lots
  • The RFID reader can also trigger surveillance cameras or video recorders whenever a vehicle enters or exits the controlled area
  • Each access can be recorded in the RFID reader or host computer's database to maintain a history of access activities and administer billing of daily, weekly, or monthly fees


The RFID system can be used to track the location of rented-out automobiles. This can be used to limit the automobiles within specific areas like state boundaries. In addition, the movements of the automobiles from and to the lot can also be monitored. The main advantages can be summarized as follows:

  • Facilitates just-in-time delivery of cars as they are needed.
  • Enables full control of inventory content and location for cars in the facility.
  • Gives automatic notification when a car enters or leaves the lot.
  • Initiates an alarm when a car "disappears" from the lot.
  • Eliminates manual record keeping, thereby increasing accuracy and staff productivity.


The RFID technology provides a lot of advantages over the traditional bar code system. With the bar code system, the reader and the item having the bar code must come in physical contact to be useful. However, RFID works remotely over a distance, as RFID tags can read from a distance. Plus, it is not limited by line of sight. Bar codes can undergo damage and run a risk of erroneous reading of the code. Its main advantages can be summarized as follows:

  • RFID tags can be read up to 100 feet.
  • RFID tracker software allows RFID asset tags to be linked with the owner's access control badge to control movement of critical and high-value items into, out of, and within the facility.
  • Removes manual intervention which is labor intensive, costly, and error-prone.


The RFID tags can be used to restrict movement of personnel in sensitive areas. One of the main areas of concern is to implement security without causing inconvenience to the passengers. By issuing tickets with RFID tags, the movement of passengers can be streamlined and controlled efficiently. These RFID tags can have the passenger information like flight details and personal details stored onto them. As such, the RF readers can check on the boarding passengers without having to stop them. Further advantages can be summarized as:

  • Secure passenger concourses and boarding areas for only authorized passengers.
  • Secure restricted areas for only authorized employees.
  • Quickly locate employees in critical environments.
  • Streamline customer ticketing and boarding while maintaining a high level of security.
  • Badge tamper sensor - identifies when badge is removed.


RFID is a technology which is yet to see better days. It is a technology still in its nascent stage. The following are its turn-offs:

  • One major cause for concern for the implementers of RFID technology is the lack of any standards.
  • Another problem area is global restrictions in frequency and power levels of radio frequency technology.
  • Even some of the vendors are unwilling to give up royalties on proprietary technologies or change their legacy systems.
  • End user confusion is a vast problem. RFID is being touted as a system which can replace bar codes. Similarly, some other expectations have been unjustifiably raised.
  • Price is still an issue. Thus, the key is to promote and implement the technology where the cost is justified. It comes as a rude shock to people who think RFID tags can replace bar codes without any significant investment.
  • Last but not the least is the privacy concern people have. It is a common misconception that RFID tags can be used to track the whereabouts of a person. The ground reality however is that the detection can work only over a limited area. Even the maximum of such an area is somewhere around 100 feet.

However, the advantages of RFID clearly justify the reason for backing it by large groups like Xerox PARC, telecommunications companies such as Nokia, and MIT's Auto ID Group which is currently funded by a number of large companies such as Coca Cola, Johnson & Johnson, Pfizer, UPS, Wal-Mart, Intel, NCR Corporation, and Philips Semiconductors.




Supply chain decision makers are interested in capturing information about three principal entities:

  • Products: Items bought, sold, and moved through the supply chain
  • Resources: Assets that abet the smooth running of the supply chain; for eg: pallets, roll cages, totes, trailers, vehicles & tools
  • People: Individuals involved in supply chain activities

Hitherto RFID usage can be focused more on supply chain resources, since tags can be reused and fewer are needed in the first place. However, attention now is turning to product-level applications, driven by the need for greater availability of materials and product, and higher visibility and accuracy in the supply chain from manufacturer through physical distribution, sale, and the returns cycle. Figure 5 illustrates a simplistic view of a supply chain.

Flow of goods Flow of Information and Reverse Logistics

The implementation process and the sequence of operation on the RFID tags by various players are as follow:

  1. Manufacturer: assigns a unique EPC number to each product to allow track and trace through out the supply chain.
  2. Packaging supplier: writes to the tag the EPC number assigned by manufacturer and embeds the tag in empty packaging materials.
  3. Raw material: are tagged to allow the product's origin to extend as far as needed.
  4. Manufacturer: receives raw material and records their EPC number in the manufacturer's database linking raw material data to final EPC.
  5. EPC number: and the product information are recorded in the manufacturer's database at the end of manufacturing process. Only products with valid EPC number can be moved through supply chain
  6. Additional EPC number: are assigned to cases, pallets and cartons as products are aggregated. The aggregation information is recorded in manufacturers database
  7. Kits: can be assembled with both tagged and untagged products. If needed a kit can have its own EPC number.
  8. Sharing data: among trading partners removes the burden of collecting and storing every detail. The EPC number serves as a key to ensure a perfect match between product and their data. Security rule prevent unauthorized parties from accessing sensitive data.
  9. Sensors: can record conditions throughout the supply chain and add this information to product history.
  10. ASN: advanced shipping notice given the wholesaler detailed EPC data about shipments before products arrive. RF scan of incoming shipments can reveal mismatched before product come of the track.
  11. Virtual agents: continually monitor EPC numbers throughout the supply chain and instantly highlight any EPC number that are odd , duplicated or out of place


In 1985 the concept of Quick Response (QR) was developed as a full cycle cross company integrated logistics and replenishment model with potential savings in General Merchandise identified at $ 25 billion annually. Almost 20 years later these benefits have only been partially achieved with significant dollars still on the table.

In 1993 a similar concept was floated in the Grocery Industry called Efficient Consumer Response (ECR) with equally impressive annual savings of $33 billion dollars touted as the prize for successful implementation. Again 10 years later only a small portion of this has been realized.

Although there were a myriad of cultural and trust issues which crippled these projects, one of the key disconnects was related to technology, specifically product data synchronization. With manufacturer and retailer systems containing conflicting, inaccurate or incomplete product data integrating logistics activities between firms was next to impossible due to the many exceptions created by bad data. Even within firms, the attempts over the last five years to implement full supply chain management systems have for the most part failed. Figures discussed at industry conferences projected $3.5 billion dollars in high end SCM software had been sold that either failed in implementation or was never implemented at all.

RFID product identification is the missing link when it comes to supply chain management and integrated logistics operations between trading partners. This is because RFID is the first truly automatic identification technology as previous technologies such as barcoding depend on a human activity component, scanning, to complete the identification process effectively.

Based on this direct connection to products solid supply chain management and systems reliability can be expected. When all of these things are put together it leads directly to the conclusion that RFID truly is the missing link when it comes to supply chain management.


However, despite all these possible benefits, with a technology as ubiquitous as radio-frequency identification will be, there's great potential for damage. The challenges pertaining to the implementation of the technology specific to the supply chains are amplified further.


The communication between reader and tag is unprotected in most cases (with the exception of some high-end ISO 14443 systems). Eavesdroppers may thus listen if they are in immediate vicinity. The forward channel from the reader to the tag has a longer range and is more at risk than the backward channel. Furthermore, the tag's memory can be read if access control is not implemented.


With the exception of high-end ISO 14443 systems which use message authentication codes (MACs), the integrity of transmitted information cannot be assured. Checksums (CRCs) are often employed on the communication interface but protect only against random failures. Furthermore, the writable tag memory can be manipulated if access control is not implemented.


Any RFID system can easily be disturbed by frequency jamming. But, denial-of-service attacks are also feasible on higher communication layers. The so called “RFID Blocker” [Jules et al. 2003] exploits tag singulation (anti-collision) mechanisms to interrupt the communication of a reader with all or with specific tags.


The authenticity of a tag is at risk since the unique identifier (UID) of a tag can be spoofed or manipulated. The tags are in general not tamper resistant.


The unique identifier can be used to trace a person or an object carrying a tag in time and space. This may not even be noticed by the traced person. The collected information can be merged and linked in order to generate a person's profile. A similar problem occurs in supply-chain applications where undesired product scans are possible. The automated reading of tags permits the counting of objects (e.g. banknotes with attached tags) which may be undesired.


Security breaches can happen at the RFID tag, network, or data level. Part of the problem with adopting existing standards, at least at one level, may be “the extremely low cost and therefore extremely light functionality on the tags,” says Burt Kaliski, chief scientist and director at RSA Laboratories, the research center of security vendor RSA Security Inc. All of the good security tools developed over the last 20 years won't fit into the hardware that's available on most of these RFID tags, he says. Encryption on a tag, for instance, would chew up too much of a tag's processing power, as well as add extra cost to tags that need to be lightweight and inexpensive for companies to keep costs in line.

Hence, the tags face four critical problems.

  • RFID tag content, content that might include an electronic product code (EPC) or price can be modified in the field.
  • Cheap tags can be read and modified by hand-held devices such as a PDA equipped with a $220 compact-flash RFID read/write plug-in.
  • The hacker community already has embraced and is distributing free software with this capability.
  • The entire RFID use process is open to exploitation.


There are plenty of opportunities on retail-store floors or during the transport of goods from one location to another to uncover and even alter data on an RFID tag. But equally vulnerable is the network at companies' distribution centers, warehouses, and store back rooms where RFID-tagged cases, pallets, or other items enter into the possession of a company or one of its stores. Unsecured wireless networks present opportunities for eavesdropping on data.

From jamming to eavesdropping, from man-in-the-middle to spoofing, there are a variety of attack methods that can be used against the users of wireless networks. RFID, being a wireless Technology, faces the same risks.









RFID systems have gained popularity, and notoriety, in recent years. A driving force behind the rapid development of RFID technology world wide has been the rise of pervasive commerce, sometimes dubbed the quiet revolution. Pervasive commerce uses technologies such as tracking devices and smart labels embedded with transmitting sensors and intelligent readers to convey information about key areas where consumers live and work to data processing systems. To gather this data, retailers can choose from a range of options.

RFID systems may be roughly grouped into four categories:

  1. EAS (Electronic Article Surveillance) systems: Generally used in retail stores to sense the presence or absence of an item. Products are tagged and large antenna readers are placed at each exit of the store to detect unauthorized removal of the item.
  2. Portable Data Capture systems: Characterized by the use of portable RFID readers which enables this system to be used in variable settings.
  3. Networked systems: Characterized by fixed position readers which are connected directly to a centralized information management system, while transponders are positioned on people or moveable items.
  4. Positioning systems: Used for automated location identification of tagged items or vehicles.

These RFID systems enable business owners to have real-time access to inventory information, as well as a broader, clearer picture of consumers' buying habits. RFID technology also enables retailers and corporations to peek into the lives of consumers in ways that were, until recently, off limits. Products embedded with RFID tags can continuously transmit

information ranging from an EPC identifier, to information about the item itself, such as consumption status or product freshness. Data processing systems read and compile this information and can even link the product information with a specific consumer.

This composite information is vastly superior-and more invasive-than any data that could be obtained from scanning bar codes, or even loyalty cards. Frequent shopper cards link consumers to their purchases, but this limited information gives retailers only a narrow view of a consumer's in-store purchasing trends. In contrast, RFID systems enable tagged objects to speak to electronic readers over the course of a product's lifetime—from production to disposal—providing retailers with an unblinking, voyeuristic view of consumer attitudes and purchase behavior.

Currently, RFID technology is still too expensive to be used by retailers en masse. The cost per electronic tag now stands at about 20 cents apiece, but is expected to fall to as little as three cents in the next three years. RFID tags will probably not become pervasive until the per chip cost dips below one penny. Retailers will still have to purchase sensors to read the tags, which can cost $1,000 each.

In spite of the costs, some retailers are willing to pay the price for the insight RFID tags provide into the lives of consumers. The last few years has witnessed a broad range of RFID pilots, and even several fully integrated systems, launched. A handful of corporations have already signed on, and are moving ahead with plans to embed products with RFID tags.


RFID has been lauded by manufacturers and retailers for its ability to provide better information about inventory and other data across the supply chain, which can increase product availability and help businesses reduce costs by trimming inventory levels.

Several major companies have already announced RFID initiatives. German retailer Metro Group has asked its top suppliers to begin attaching the special microchips to shipments. Wal-Mart and the U.S. Defense Department have also begun big RFID projects with the expectation that the technology will help prevent goods from being lost or stolen. Companies like Gillette and Procter & Gamble are experimenting with using RFID systems in stores to prevent shoplifting and to monitor stock on the shelf. Some large scale RFID use is imminent. Gillette has procured 500 million RFID tags from a startup company called Alien Technology in November 2002. Wal-Mart Inc announced the use of RFID in its stores. Microsoft said it is going to include RFID in the desktop and in-shop computers.

The scope of implementation of RFID technology can further be appreciated by looking at the initiatives of the major global players. A few of these are enumerated in the succeeding paragraphs.


Clothing maker Benetton planned to embed retail items with RFID tags. The implanted devices would enable Benetton to track individuals and inventory their belongings by linking a consumer's name and credit card information with the serial number in an item of clothing. Privacy advocates noted the potential abuses of a system, and Benetton agreed not to tag clothing with tracking devices—for now. However, Marks & Spencer, one of the largest retailers in the UK, are tagging apparel items with ultra high frequency (UHF) tags. UHF tags are a new generation of RFID technology that provide faster data transfer speeds and longer read ranges. Marks & Spencer has already used tracking devices extensively in its food supply division.


Gillette, Wal-Mart, and the U.K.-based supermarket chain Tesco have teamed up to test specially designed shelves that allow for real-time tracking of inventory levels. The "smart shelves" can read radio frequency waves emitted by microchips embedded in millions of shavers and other products. Wal-Mart plans to test the Gillette shelf initially in a store located in Brockton, Mass. If the technology is successful, Wal-Mart also plans to join forces with Procter & Gamble to test a similar system with cosmetic products, and has encouraged its top 100 suppliers to use wireless inventory tracking equipment by 2005. So far, Wal-Mart executives say the company plans to use RFID chips only to track merchandise, and will remove the tags from items that have been purchased. However, Wal-Mart's decision to implement RFID technology will likely propel the ubiquity of the tags in CPGs.


Tire manufacturer Michelin recently began fleet testing of a radio frequency tire identification system for passenger and light truck tires. The RFID transponder is manufactured into the tire and stores tire identification information, which can be associated with the vehicle identification number (VIN). Critics argue the tags could ultimately become tracking devices that can tell where and when a vehicle is traveling.


The European Central Bank is moving forward with plans to embed RFID tags as thin as a human hair into the fibers of Euro bank notes by 2005, in spite of consumer protests. The tags would allow currency to record information about each transaction in which it is passed. Governments and law enforcement agencies hail the technology as a means of preventing money-laundering, black-market transactions, and even bribery demands for unmarked bills. However, consumers fear that the technology will eliminate the anonymity that cash affords.


Alexandra Hospital in Singapore recently began a new tracking system in its accident and emergency (A&E) department in the wake of the Severe Acute Respiratory Syndrome (SARS) scare. Under this system, all patients, visitors, and staff entering the hospital are issued a card embedded with an RFID chip. The card is read by sensors installed in the ceiling, which record exactly when a person enters and leaves the department. The information is stored in a computer for 21 days. Officials say that the technology enables health care workers to keep tabs on everyone who enters the A&E department, so that if anyone is later diagnosed with SARS, a record of all other individuals with whom that person has been in contact can be immediately determined. Other hospitals in Singapore are expected to adopt similar technology.


In 1997, ExxonMobil developed the wireless payment application known as Speedpass. Since then, six million consumers have utilized the payment option at 7,500 Speedpass-enabled locations. Now, a wide range of merchants and retailers are looking for ways to implement radio frequency (RF) wireless payment systems. Sony and Phillips are leading the way. The two corporations will soon begin field testing an RFID system called Near Field Communication (NFC), which will enable RFID communication between PCs, handheld computers, and other electronic devices. The companies envision that consumers will log on to their personal online portal by swiping their smart cart—embedded with a Sony or Philips RFID—which will be read by a RFID reader plugged into the USB port on the computer. Next, consumers would shop online, say, for tickets to a local event. The consumer would pay for the tickets online, download them to their PC and then transmit them with NFC technology to an RFID tag in their mobile phone. Then, at the event, consumers would wave their cell phone near a reader in the turnstile, and be automatically admitted.


Microsoft announced new software designed to help small and midsize companies better manage their supply chains wirelessly. The company has added radio frequency identification technology, which combines silicon chips and radio frequency technology to track inventory, to its Microsoft Axapta Warehouse Management software. Microsoft has been testing the new RFID software with KiMs, a Danish snack food company, since December 2003. KiMs, which was already using Axapta, is using the new software to monitor pallets or cartons of finished goods as they move out of production and into a third-party warehouse. The company said that the new software provides much greater knowledge of the exact location of products at various points in its supply chain. Microsoft's software will now allow smaller companies to take advantage of the innovative wireless technology. Microsoft has made also made several other moves to support RFID. It would be creating tools, using the company's .Net Web services framework that will allow retailers to interact with customers, improve operations management and incorporate RFID.


Federal Express, headquartered in Memphis, Tennessee, is the world's largest express parcel delivery company. FedEx delivers approximately 3.2 million parcels daily and operates a fleet of more than 42,500 vehicles worldwide. FedEx couriers have one less thing to keep track of these days—their vehicle keys. The company's couriers use an automatic keyless entry and ignition system that has RFID transponders embedded within a velcro wristband. The system is being tested in 200 FedEx delivery vehicles.


Chevrolet Creative Services uses a "red light, green light" system based on RFID to control and track the 3,500 crates coming and going from their Wixom, Michigan storage warehouse. The crates contain materials needed for specific tradeshows. RFID tags are now mounted on each crate carrying a unique ID. The bay doors are equipped with RFID readers and readout antennas are located in the floor. When a crate passes over the antenna on its way to being loaded onto a truck, the tag ID is compared to a manifest held in a host database. If the ID matches the database info, a green light signals “go” to ship the crate. A "no match" activates a red light. The database also records the time and date.

Chevrolet has realized the benefits of:

  • Eliminating the human error factor inherent in their old manual system with paper manifests.
  • Eliminating emergency shipping charges.
  • Greater speed and efficiency and better record-keeping.


A bonded warehouse in the UK stores expensive single malt whiskies which are subject to theft even by the warehouse employees. Pallets carrying these stocks are also subject to being misplaced in error, thus delaying on time deliveries. To prevent these problems, it was necessary to ensure that forklift trucks moving pallets would pass correctly along pre-set routes. Deviations might mean that employees were taking product off to a hiding location intentionally for later theft, or were just misplacing stock in error. To create this security system, the company built a grid of transponders suspended from the ceiling. The forklift trucks are equipped with RFID readers. Routing details are downloaded to the forklift truck from a central computer via a radio frequency communication link. This includes correct loading location, exact sequence of transponders along the route, and the delivery bay location. If the on-board reader detects deviations, the truck is immobilized and a supervisor is needed to reset the vehicle. Automatic weighing is also used in combination with the system.

Other companies are also introducing RFID products. IBM and Dutch electronics maker Philips announced on Monday that they are working together on an RFID product. Philips' semiconductor unit will make the radio chips that can be stuck on items, and IBM will provide the computer services and systems.




The lack of visibility in the supply chain is resulting in loss of efficiency in the supply chain and reduced overall profitability in the Indian industry. Introduction of RFID technology across the supply chain would lead to an improvement in the supply chain efficiency and hence the profitability of the enterprise.


In order to accomplish the objectives of the study, it is essential to articulate the manner in which it is to be conducted, i.e., the research process is to be carried-out in a certain framework. The Research Methodology, which follows, is the backbone of the study. An Exploratory Research with the secondary data study was conducted. Primary data was collected with the help of a questionnaire. A conclusive research was also conducted, which involved Causal research in the field.


A total of 75 organisations were selected with an attempt to cover a wide cross section of the Indian industry. The organisations were located pan-India, right from Cochin in Kerala to Kolkata in West Bengal. The organisations from the following industries were approached:

  • Automotive
  • Pharmaceutical
  • Consumer Durables
  • Shipyards
  • Electronic Goods
  • Paint Manufactures
  • Engineering
  • Retail outlets


Primary data was collected with the help of a Questionnaire. A detailed questionnaire was prepared which was forwarded to 75 companies, pan-India which included a wide variety of units across various industries such as Automobile, logistics, warehousing concerns, Airport Cargo sections, Pharmaceutical, Software & hardware industries, Public sector undertakings and large retail outlets like Big Bazaar.

The questionnaire was forwarded via e-mail to the organisations based outside of New Delhi. Personal visits were undertaken to the organisations based in New Delhi/NCR. During these visits, apart from filling up the questionnaires, informal discussions were carried out with the personnel regarding the various processes/activities related to supply chain management.


Secondary data was collected by external sources like books, newspapers and journals; new age sources like the internet. Some White papers and articles were also referred to get an insight on the working of Supply Chain RFID. Access to different articles with respect to RFID technology on the internet enabled to gather some useful information and facts about the same.


The questionnaire method has been adopted to gather necessary inputs from the Indian industry. The questionnaire is placed at Appendix-B. The questionnaire was forwarded to 50 companies out of which a total of 30 responses were received till the first week of March 2010. The questionnaire was answered by the Material Managers/Operations Managers of the organisations who are conversant with the various processes in the procurement of raw materials and inventory accounting in their respective domains. The list of participating firms is placed at Appendix-C.

The questionnaire consisted of questions on the existing method of inventory management, use of supply chain management software and other aspects of supply chain management. The questionnaire also designed to gather information on the need, perception and barriers towards RFID and readiness of these firms to embrace RFID technology in the near future.

The questionnaire addressed the following aspects:

  • In-house Supply Chain management activities
  • Need for Supply Chain management
  • Supply chain inefficiencies
  • Pre-requisites for Supply Chain management initiatives
  • Benefits of Supply Chain management software
  • Inventory turn-over ratio
  • Perception towards RFID technology implementation
  • Need for adopting RFID in the supply chain
  • Barriers to RFID implementation
  • Compelling factors for RFID implementation
  • Impact of RFID technology
  • |



A total of 30 responses were received till the first week of March 2010. The responses were quantitatively analyzed by Bar-diagrams. The analysis threw up some very interesting trends and patterns and helped gather useful insights as regards the management of the supply chain activities as well as the perception towards RFID technology implementation in the various organisations. The analysis of the data is as follows:

(*All figures are in percentage)


A whopping 86% of the respondents said that their focus on in-house SCM activities included all the activities like dealing with suppliers, handling distribution of finished goods to customers, logistics management and managing production activities.


The respondents were asked to indicate the type of inventory management system existing in their respective enterprise. Analysis reveals that almost 30% of the firms are yet to computerize the inventory. 10% of firms have stock locator system and 40% of firms have warehouse management system. 20% of the respondents have ERP packages which include the inventory management system. While implementation of barcode technology would be economical at current prices to meet the immediate requirement of the firm using manual records, RFID technology would deliver maximum benefits in the long run. RFID technology could enables manufactures to tighten down stock and buffers through real-time tracking and automatic synchronization, tightening up response time and inventory management. For the firms which have warehouse management system, incorporating RFID tags would substantially enhance the visibility besides reducing inventory management costs.


Only 10% of the firms are currently using dedicated supply chain management software. However as more than 40% of the responders use either warehouse management system software or ERP system, RFID technology along with SCM software can provide enabling data at a much greater level of accuracy, timeliness and detail than other alternatives. For example RFID technology may close the link between a manufacture's ERP system and MES. Today, the MES application does not have easy access to detailed information, and therefore, the ERP has no idea of what is really happening on the shop floor, (e.g. subcomponents not being where they were expected, trained people not showing up when they should and machines going down). RFID can provide the MES with the accurate, timely and detailed information if requires to operate effectively. When the information is available to the MES and ERP applications, they can adjust accordingly, both locally in the factory and centrally on the ERP, enabling the most efficient use of resource.


The respondents were asked to indicate the relative importance of various factors which could help in improving the inventory turnover ratio. The factors considered were:

  • Reduction in safety stock levels
  • Reduction in shipping delays and lead times
  • Improved accuracy in inventory
  • Improved communication between supply chain partners
  • Improved demand forecasting

The analysis of the responses reveals that 37.5% respondents view improved demand forecasting to be most crucial in improving the inventory turnover ratio and hence the profitability. Improvement in communication with trading partners, improved accuracy in inventory holding and reduction in shipping delays and lead times are considered next mast important factors for a better inventory turnover ratio. Significantly reduction in safety stocks is not considered as vital. A possible explanation for this is the lack of clear visibility in the supply chain and consequent need for overstocking to cater to any situation. This has an immense impact on working capital and hence profitability of the firm.


The respondents were asked to rank various activities which they considered important for improving the supply chain efficiency of the enterprises. The following activities were considered:

  • Inability to track inventory during transportation
  • Stock outs due to lack of information from vendors
  • Inventory shrinkage due to pilferage
  • Difficulty in locating stocks on storage points
  • Holding excessive stocks to overcome shortfalls

The analysis of the responses indicates that stock outs due to lack of information from supply chain a partner is a major contributor to supply chain inefficiencies. Inability to track goods during transit is another major concern. As discussed before, holding excessive stocks to avoid stock outs , inventory shrinkage due to pilferage and difficulty in locating stocks is also hampering supply chain efficiency ,use of RFID tags would go a long way in obviating these problems.


While being queried about the need for an effective SCM 50% of the respondents agreed that an effective SCM is required to gain competitive advantage. However, the role of SCM is increasing visibility in the supply chain seems to have missed the target (6%). Among other issues, increasing inventory turnover has ranked second (18.75%) in respect of the role of SCM.


Regarding the prerequisites for any SCM initiatives the respondents ranked involvement of supply chain partners (38.5%) as the most important prerequisite. Existence of sound ERP software and sufficient budgetary outlay have also been adjusted as important prerequisites. Surprisingly, involvement of management in the initiations of SCM systems is not recognized by many firms. This could be attributed to the old habits of doing business and caution exercised by the old habits of doing business and caution exercised by the firms in investing in SCM models.


Most of the respondents (38.5%) agree that the best benefit one could accrue from a sound SCM is to maximize value of the customer. Through the respondents did not rate increase in visibility in supply chain as driven from investing in SCM systems considerable number of respondents accepts that one of the min benefits of SCM was increasing visibility in the supply chain. Linking the supply chain partners by the SCM system is also recognized as important benefits.


50% of the respondents see RFID technology as a path to gaining competitive advantage. 30% of the respondents see it's application any in select processes of the organization .compliance to standards has not been rated as important , leading one to believe that the technology and it's nuances of standards has not yet percolated to major portion of the industry . This will inevitably happen once the popularity of the technology and the benefits are completely understood. Firms do recognize that pressure from major players in the supply chain will necessitate the RFID implementation.


More than 30% of the respondents view RFID technology as useful to prevent pilferage. While counterfeiting is a major concern, firms do recognize the role of RFID in its prevention. However, the role of RFID in effective management of assets and increase in revenue has not been recognized clearly. Here again, compliance of mandate has been universally ignored proving the fact that knowledge of the standards and issues there of are still unknown to the industry.


37.75% of the respondents have indicated that organizational (un) preparedness is one of the biggest barrier in implementation process. Coat of implementation as well as insufficient knowledge of the technology and its prerequisites is the next barrier as perceived by 25% of the respondents. Only 6% of respondents have rated lack of business value. However, the extent of knowledge of the RFID and its standards are proof enough that business value is not even recognized by almost all of the respondents.


50% of the respondents recognize that there is a imminent need for adoption of RFID technology to have global delivery capabilities. World over , the technology is stabilizing. With standard being firmed up and the benefits of the system being acknowledges, it is obvious that firms that's are in the global market will need to comply to the RFID adoption if they do not want to be out of business. However nearly 20% of the respondents would like to wait and watch for the technology to be proved by the early adopter. Similar proportion of respondents also agree that ease of interfacing RFID system with existing systems is crucial for progressing with adoption of the technology.


43.5% of the respondents have indicated that the impact of RFID technology would be most in logistics and transportation. The industry's awareness of the impact of RFID on the various processes of the manufacturing industry is clear, but the firms are uncertain about the various other areas of implementation of the technology.

While RFID enabled supply chain or part of it can improve beneficial, the cost of tags and scanners remains prohibitive. RFID will provide better visibility to be movement of shipments; assets tracking (trucks, containers and so on) improve tracks and trace capabilities and reduce or eliminate processes related to manual scanning and shipment errors.

The biggest hurdle is cost .further depends on the manufacturer or the supplier deploying the technology. There are no widely accepted standards, especially in terms of middleware to drive cost down and trigger broader uptake .nobody want to take the initiative to be the first and implement the technology to end up at a cost disadvantages even if it is for the short term. Moreover back-ends systems have to be upgraded to analyze the data and help in decision making.

The technology is evolving and so are standards and systems supporting it. As the technology gain acceptance, adopters will face the daunting task of gathering and managing massive amount of data. Organization that have already built data warehouses and mined the same using necessary tools will be at an advantage.


With the current cost of RFID tech. investment in tagging for consumer packing is not likely to be profitable. However if tagging is applied at the transport unit level i.e. transport cartoons, then many of the potential benefits can be achieved with a considerable reduction in capital investment.


The impact of RFID on the concerned areas will be as follow:

  • Reduced safety stock inventory - the need for safety stock inventory will decrease due to the reduced lead time and reduced lead time variability on both the inbound and outbound segments of the supply chain.
  • Labour reduction - labour costs will decrease through the automation of processes and removal of many of the verification and auditing steps.
  • Inventory shrinkage - inventory shrinkage will be reduced by increased accuracy, reduction in errors during receiving process and reduction in pilferage.
  • Improved communication between trading partners - communication between trading partners will improve due to sharing of information, visibility in supply chain and reduction in wrong claims.
  • Improved demand forecasting - the availability of point of sale information through supply chain will result in improved demand forecasting to all partners in the supply chain which would further reduce costs and improve profitability.

Although the potential benefits of RFID are huge, there are substantial technical and financial challenges that need to be addressed before the promise of RFID can be fully realized. They are: `1

  • Costs involved in implementing RFID technology
  • Willingness and capability of trading partners to participate
  • Maturity of RFID technology to withstand tag collision, reader interference, frequency of operation etc.

As a result, companies should not rush into a full scale implementation of RFID applications before the technology and financial justification have been proven. The companies must start their pilot programs which would be the test bed for the technology, communications and processes associated with the technology. When the preparatory phase is completed RFID is implemented on large scale, important conditions should be met. The technology must work reliably. There must also be a clear distribution of costs and benefits between the parties involved. Finally, the necessary system integration must be completed, including possible data synchronization with vendors and suppliers.


* We can encourage suppliers of short shell life product to used RFID as it will reduce the out of stock rate of supplier's product. The reduction of the rate of stock out often benefits suppliers more than the retailers, as the consumer almost invariably picks a substituting product.

Short shell life products belong to categories with most brands switching when there is stock out. The saving potential is large as the average stock out rate in supermarket is between 7-10% while in short shell life product the rate is on average as high as 18%, due to the difficulties of managing the short shell life products supply chain. Therefore it should be possible to encourage suppliers to invest in RFID system. Further benefits can also be achieved with for example- automated proof of delivery application, automatic invoicing, and proactive replenishment.

  • Companies which are having RFID tags can offset high investment cost by renting these tags in their off season.
  • There should be a group effort of inbound logistics, manufacturers and outbound logistics


  1. RFID Explained', Das, Raghu; White paper at
  1. ‘Supply Chain RFID: How it works and Why it pays', White paper at
  1. N. Singh, Emerging technologies to support supply chain management, Communications of the ACM, vol. 46,no. 9, pp. 243-247, September 2003.
  1. H. Lee and O. Özer, Unlocking the Value of RFID, Production and Operations Management, vol. 16, no. 1, pp.40-64, 2007.
  1. M. Karkkainen, Increasing efficiency in the supply chain for short shelf life goods using RFID tagging, International Journal of Retail and Distribution Management, vol. 31, no. 10, pp. 529-536, 2003
  1. A. Gunasekaran and E.W.T. Ngai, Build-to-order supply chain management: A literature review and framework for development, Journal of Operations Management, vol. 23, no. 5, pp. 423-451, 2005
  1. Ari Juels. RFID security and privacy: A research survey. Manuscript, September 2005
  1. ‘RFID for supply chain: Just Basics', White paper at, April 2005



(Please tick/rank suitable options)

Name of the organisation:................................................................................................

Name and Designation of Respondent:.............................................................................


Q1. Which part of the in-house supply chain management activities do you lay focus on?

a) Dealing only with suppliers

b) Handling distribution of finished goods to customers

c) Logistics management

d) Managing production activities

e) All of the above

Q2. What kind of inventory management system does your company have?

(a) Manual (b) Stock locator (c) Warehouse Management System (d) ERP system

* Please rate the following as per the level of importance/agreement:

Q3. What is the need for supply chain management?


Q.4 What contributes to inefficiencies in the supply chain?


Strongly Agree




Strongly Disagree

Holding excessive stock

Difficulty in stock location

Reduction in inventory due to pilferage

Stock outs

Inability to track inventory during transportation

Q5. What is the most important prerequisite for supply chain management initiative?


Strongly Agree




Strongly Disagree

Company outlook/involvement of management

Budget allocations

Existence of ERP software

Trained manpower

Suppliers involvement

Q6. What do you think are the benefits of supply chain management software application?


Very Important







Maximize customer value

Increase visibility in supply chain

Links all supply chain participants

Linking manufacturer and supplier

Predict demand

Q7. What factors do you think could help in improving the inventory turn-over ratio?


Strongly Agree




Strongly Disagree

Improved demand forecasting

Improved communication between partners

Improved accuracy of inventory

Reduction in shipping delays

Reduction in safety stocks

Q8. What is your perception towards RFID technology implementation in a company?


Strongly Agree




Strongly Disagree

Pressure from major players

Compliance to standards

Select process (point solution for specific app)

Competitive advantage

Q9. According to you, what is the need for adopting RFID?


Strongly Agree




Strongly Disagree

Prevent pilferage and counterfeiting

Enhance customer experience

Mandate compliance

Increase Asset efficiency

Increase corporate control over mechanisms

Increase Revenue

Reduce costs

Q10. What do you perceive as the biggest barriers to RFID implementation?


Strongly Agree




Strongly Disagree

Insufficient knowledge of RFID

Lack of vendor participation

Organizational readiness to accept RFID

Cost of implementation

Lack of sufficient business value

Technology maturity

Q11. What according to you is the most compelling factor for RFID adoption?


Strongly Agree




Strongly Disagree

Ease of interfacing with existing technologies

Reduction in cost of implementation

Wait and Watch approach (follow the leader)

Global delivery capabilities

Q12. In which field do you see the biggest impact of RFID technology?


Strongly Agree




Strongly Disagree


Work-in-progress inventory control

In-store management

Warehouse management

Improved order fulfillment

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