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

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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The traditional supply chain which was supply driven has been replaced by a demand driven chain.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, telecomm