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INTRODUCTION:

Supply chain management (SCM) refers to the management of activities that procure

raw materials, transform those materials into intermediate goods and final products, and deliver

the products through a distribution system to the end-user.

There are numerous key factors that play an important role in the successful management

of supply chains in today's dynamic environment.

Among those are: paying utmost attention to the needs and desires of the end

customer, designing flexibility into the supply chain for rapid response to changing conditions,

utilizing the latest communication and logistics technologies, employing a sound measurement

system for making the right decisions, and always communicating through the total supply

chain.

Several key issues should be addressed in the design and management of supplychains. The most critical among those are distribution network configurations, inventory control

system, product design, information technology, supply chain integration and strategic

partnering.

Recent advances in SCM:

As we move on in the 21st century, like all other functions supply chain management is

in a state of metamorphic flux. Several new technologies are creeping into SCM which arereshaping this crucial business function. Some of these forces and technologies have been

described in brief.

1. Information Technology:

The Internet as well as the intranet (connecting the workstations within an organization)

and extranet (electronic network among business partners, e.g., EDI) have revolutionized the

management of supply chains. The power and flexibility of these networks offer businesses

more control over the flow of products, services and funds than ever before. Dramatic resultshave been obtained from using information to improve supply chain performance.

The Web has created a rare opportunity for organizations to access global markets. It

allows for mass customization, stronger business relationships, a greater degree of channel

coordination, and enhanced communications with customers and business partners.

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E-commerce:

Electronic commerce has revolutionized how business is conducted in today's world. It is

now a reality in both business-to-customer and business-to-business transactions and is rapidly

accelerating in both areas.

Internet based procurement:

Business-to-business sales on the Web are starting to gain popularity. Companies around

the world are getting serious about Internet-based procurement (IBP) because the return on a

relatively modest investment is high and the risk is very low, at least for many items, companies

buy routinely. There are two distinct parts of the IBP market:

Direct-Material Procurement, which involves the acquisition of products directly required for

production. These include the components and materials from key upstream supply chain

partners.

Indirect-Material Procurement, which is the purchase of products that are indirectly used in the

production process. They include office supplies; maintenance, repair and operating supplies

(MRO).

2. Outsourcing Logistics to third party logistics providers :

'Outsourcing' refers to the purchase of goods or services that were previously provided

internally. 'Logistics' is defined by the Council of Logistics Management as "that part of the

supply chain process that plans, implements, and controls the efficient, effective flow and

storage of goods, services, and related information from the point of origin to the point of

consumption in order to meet customers' requirements.

Traditionally, logistics activities were handled internally, particularly in medium to large size

corporations. In the United States, third party logistics services have gained momentum over the

past decade.

3. Business Process Reengineering:

Business process reengineering (BPR) efforts call for 'radical' restructuring of processes to

eliminate waste, improve quality, increase service level and enhance customer satisfaction.

Most BPR efforts are confined to one company; however, BPR across multiple members of the

supply chain should become increasingly common. By thinking in terms of supply chains instead

of individual operations or functions, companies can improve their competitive strategies.

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Advances in information and communication technologies have made it possible to have real-

time connectivity among supply chain partners.

4. Automatic Identification Techniques

Automatic identification, or auto ID for short, is the broad term given to a host of technologies

that are used to help machines identify objects.

Auto identification is often coupled with automatic data capture. That is, companies want to

identify items, capture information about them and somehow get the data into a computer

without having employees type it in. The aim of most auto-ID systems is to increase efficiency,

reduce data entry errors, and free up staff to perform more value-added functions, such as

providing customer service. There are a host of technologies that fall under the auto-ID

umbrella. These include bar codes, smart cards, voice recognition, some biometric technologies

(retinal scans, for instance), optical character recognition, and radio frequency identification

(RFID).

INTRODUCTION TO RFID:

In general terms, Radio Frequency Identification (RFID) is a means of identifying a person

or object using a radio frequency transmission, typically 125 kHz, 13.56 MHz or 800-900MHz.

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.

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Key components of RFID:

An RFID tag consists of a microchip attached to an antenna. RFID tags are developed using a

frequency according to the needs of the system including read range and the environment in

which the tag will be read. Tags are either active (integrating a battery) or passive (having no

battery). Passive tags derive the power to operate from the field generated by the reader.

An RFID reader, usually connected to a Personal Computer, serves the same purpose as a

barcode scanner. It can also be battery-powered to allow mobile transactions with RFID tags.

The RFID reader handles the communication between the Information System and the RFID

tag.

An RFID antenna connected to the RFID reader can be of various sizes and structures,

depending on the communication distance required for a given system's performance. The

antenna activates the RFID tag and transfers data by emitting wireless pulses.

Frequency Band Description Range

125-134 KHZz Low Frequency To 18 inches

13.553-13.567 MHz High Frequency 3-10 Feet

400-10000 MHzUltra highFrequency 10-30 Feet

2.45 GHz Microwave 10+feet

An RFID station, made up of an RFID reader and an antenna. It can read information storedinto the RFID tag and also update this RFID tag with new information. It generally holds

application software specifically designed for the required task. RFID stations may be mounted

in arrays around transfer points in industrial processes to automatically track assets as they are

moving through the process.

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Key Components of RFID Architecture

RFID over the years:

It was first developed by the British during World War II to determine whether an approaching

aircraft was a friend or foe. During the 1960s and 1970s, RFID technology became widely usedto help ensure the security of nuclear material.

In the 1990s, the automotive industry employed the technology in its remote keyless entry

systems.

RFID in its present form has been in existence for more than 20 years and has been

extensively used in applications such as toll collection, access control, ticketing, and car

immobilization devices (also called immobilizers). In recent years, the technology has received

increased attention due to a confluence of actions including technology advancement,

heightened security concerns, supply chain automation, and a continuing emphasis on costcontrol within industrial systems.

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RFID vs. Barcodes:

There is often a comparison between the advantages of RFID and bar codes. RFID is not

necessarily "better" than bar codes. The two are different technologies and have different

applications, which sometimes overlap. The big difference between the two is bar codes are

line-of-sight technology. That is, a scanner has to "see" the bar code to read it, which means

people usually have to orient the bar code towards a scanner for it to be read. Radio frequency

identification, by contrast, doesn't require line of sight. RFID tags can be read as long as they

are within range of a reader.

The components of a 96-bit electronic product code, each represented as

hexadecimals

Bar codes have other shortcomings as well. If a label is ripped, soiled or falls off, there is no

way to scan the item. And standard bar codes identify only the manufacturer and product, not

the unique item. The bar code on one milk carton is the same as every other, making it

impossible to identify which one might pass its expiration date first.

Advantages of using RFID:

RFID will have a significant impact on every facet of supply chain managementfrom the

simple tasks, such as moving goods through loading docks, to the complex, such as managing

terabytes of data as information about goods on hand is collected in real time. It has a potential

to dramatically improve supply chain by reducing costs, inventory levels, lead times, stock outs

and shrinkage rates; increasing throughput, quality, manufacturing flexibility, inventory visibility,

inventory record accuracy, order accuracy, customer service, and the collaboration among

supply chain members.

The applications fall in the manufacturing, warehousing/distribution centers, logistics and

retailing environments.

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To understand the impact of RFID in the manufacturing floor environment you have calculate

the return of investment (ROI) achieved by increase of visibility and work-in-process (WIP)

inventory accuracy. This reduces the operating cost and thus increases the profit. Lead times

and the total cycle times are shortened as a result of the increased manufacturing speeds and

reduced inefficiencies of the manufacturing line.

The automatic identification of products with RFID in the warehousing and distribution center

environments has a consequence: increased visibility and accuracy of the inventory. This

increases the warehousing efficiency and order accuracy. At the same time it reduces

shrinkage, stock outs and inventory levels. The increased warehousing efficiency has as a

consequence a reduction in the operation costs, which translates into increased profits and also

a reduction in lead times. Reduced lead times means increased customer service as well as

decreased inventories along the supply chain. Ultimately, reduced inventories increase ROI.

The use of RFID systems to track asset provide a distinctive set of benefits. RFID tags enable

an increased visibility and accuracy of the asset pool. This visibility and accuracy impacts six

main areas: operating costs, shrinkage, lead times, inventory visibility and accuracy, customer

service and integration among parents. RFID streamline the management of assets (such as

machinery or containers) and increase the efficiency by reducing the equipment needed or

reducing labor, thus translating into higher profits. Reduced assets shrinkage, increase ROI.

Lead times (total cycle time) are reduced with the increased efficiency to handle the assets.

Supply-chain factor Current state RFID opportunity andchallenges

Type of demand predictable improve leannesscapabilities

Contribution margin 5 to 20% early adopters can increasethe margin, need cheap tags

Product variety Low (10 to 20 variants per

category)

Suitable to track products by

pallets or cases

Average margin of error in demand forecast 10% Room to improve

forecasting through visibilityof inventory and demand.

Average stock out rate 1 to 2% opportunities for reducing

stock out and increase

margin significantly

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RFID technology, combined with the recent Auto ID initiatives led by the Massachusetts Institute

of Technology, is gaining momentum. These advances offer a standardized and scalable

approach that can be deployed across the extended enterprise to suppliers, manufacturers,

distributors and logistics partners to provide very reliable and cost-effective visibility at the item,

case or pallet level.

RFID in context

Supply-chain visibility is a key contributor to increasing supply-chain performance, from

both a financial and a service-level perspective. Greater visibility, as well as more accurate and

timely information about supply-chain execution, allows for reduced safety stocks (thus

optimizing cash-to-cash cycles and reducing inventory carrying cost) and increased on-time

performance to customer commitments (thus driving additional revenue opportunities).

Operating cost improves, as RFID (Radio Frequency Identification) significantly reduces the

cost of cycle counting, receiving, picking and shipping. The technology also plays a critical role

in addressing shrinkage and grey-market control concerns.

Pricing and Promotion:

Demand and Revenue Management solutions track point-of-sale, on-shelf, and inbound

inventory information to support real-time, store-level pricing and promotion optimization. These

solutions provide vendors running programs in stores with the ability to optimally price and

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promote their products according to inventory position and sell-through rates. Through RFID,

manufacturers and retailers have real-time visibility to what items are selling versus those that

are not. Also, product-specific attributes can be monitored in real time, including: -

1. Product spoilage

2. Product expiration

3. Product obsolescence

By receiving real-time updates to what products are selling, price lists can be monitored

and updated. Additionally, you can develop and run markdown and promotional strategies

based on market information telling you exactly what is happening at the point of sale.

Shipping & Receiving:

The same tags used to identify work-in-process or finished goods inventory could also

trigger automated shipment-tracking applications. Items, cases or pallets with RFID tags could

be read as they are assembled into a complete customer order or shipment. The individual

readings could be used to automatically produce a shipment manifest, which could be printed in

a document, recorded automatically in the shipping system, encoded in an RFID tag, printed in

a 2D bar code on the shipping label, or any combination. Having complete shipment data

available in an RFID tag that can be read instantly without manual intervention is very valuable

for cross-dock and high-volume distribution environments. Incoming shipments can be

automatically queried for specific containers. If a sought-after item was present, it could be

quickly located and selected.

Regulatory Compliance:

Companies that transport or process hazardous materials, food, pharmaceuticals and other

regulated materials could record the time they received and transferred the material on an RFID

tag that travels with the material. Updating the tag with real-time handling data creates a chain

of- custody record that could be used to satisfy regulatory reporting requirements.

Returns & Recall Management:

Companies could supplement the basic shipment identification information by writing the

specific customer and time of shipment to the tag immediately prior to distribution. Producing

and recording this information would provide several benefits. In the event of a recall,

companies could trace specific shipments to specific customers, which would enable a highly

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targeted notification and return operation and avoid a costly general recall. For general returns,

companies couldverify that the customer returning merchandise is actually the customer who

received it, which would deter diversion, counterfeiting and other forms of return fraud.

Service and Warranty Authorizations:

Authenticating the product and customer with proprietary information could also be used to

authorize warranty and service work. Upon completion of repairs or service, a record of the

activity performed could be encoded on the tag to provide a complete maintenance history that

travels with the item. If future repairs or service are required, a technician could access the

item's complete maintenance and configuration information without accessing a database

simply by reading the tag. This application ensures workers have necessary information if no

database access is available, and eliminates the need and expense of making phone calls or

wireless data inquiries to access records.

Transportation

As with order management, RFID updates can drive substantial visibility and optimal

adaptability to your transportation plan. Proactively detecting when an order is over, short,

damaged, or incorrect enables you to take control of your transportation plan, which directly

affects your financial and service level goals.

The projected benefits and impacts of the RFID implementation are summarized in the following

table:

Concerns Surrounding RFID:

Privacy concerns

Arguably the biggest concern about the RFID technology is the worry that it will infringe on the

privacy of buyers. The RFID tags would be able to scan buyer behavior at the point of purchase

and even after that. Many people consider it a breach of privacy. This is leading to a major

public outcry against the use of RFID technology.

High investment:

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The initial investment by companies for adopting RFID is fairly large. So many organizations are

shirking away from the idea of investing in RFID technology. There are others who are

conducting an in depth cost benefit analysis before taking the plunge.

Limited range:

So far the RFID technology has a limited range in terms of frequency. Therefore many are

skeptical about the efficacy of the technology and are questioning the claims made by the

developers.

Health concerns

Since RFID technology operates on the principle of radio frequency wave emission, health

concerns are propping up. A long term exposure to radio waves causes many diseases like

cancer, ulcers and skin deformities.

Conclusion:

RFID technology and the underlying standards are readily available and mature enough to

support production-level pilots. RFID will have a substantial and positive impact on supply-chain

performance. RFID will improve operating margins, speed the flow of inventory and improve

supply-chain service levels. RFID-enabled supply chains will outperform their competitors with

regard to operating cost and excellence of execution.

CASE STUDY:

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WAL-MART'S USE OF RFID IN GLOBAL SUPPLY CHAIN MANAGEMENT

ABSTRACT:

RFID enables Wal-Mart to improve the efficiency of its global supply chain

management through greater supply chain visibility and more accurate ordering

decisions. Just in Time (JIT) ordering enables Wal-Mart to decrease the costs

associated with inefficient inventory decisions and handling. Ordering and sales are

more closely aligned, decreasing the intensity of Bullwhip effects. Problems associated

with RFID, however, include the monetary costs and the ethical questions that are

brought up about the technology. Suppliers may be reluctant to spend upwards of

$200,000 on necessary software and consumer advocacy groups worry that RFID data

could potentially be put to unethical uses. International suppliers may find it even moredifficult to justify RFID implementation expenses and global consumers may be even

more reluctant to risk privacy violations. A potential solution is for Wal-Mart to share

costs with suppliers and work in conjunction with consumer groups globally to ensure

proper data security.

BACKGROUND INFORMATION:

Global supply chain management is of utmost importance to companies as the elimination of

procedural and informational bottlenecks can immensely increase the efficiency of their

inventory decisions and order timing. The use of technology such as RFID can help companies

improve their business processes locally, nationally, and globally. As data becomes more

relevant and accurate, the risk of making a mistake due to perceived demand volatility and

bullwhip effects in the supply chain goes down. Researchers have identified both benefits \ and

costs in implementing RFID into company global supply chain management. Wal-Mart, in its

pursuit of operational efficiency, is a major proponent of the technology. Other stores lower

prices periodically to attract customers and/or sell off excess inventory, Wal-Mart, on the other

hand, focuses on keeping its prices at an everyday low in order to consistently attract the price-

minded consumer and tries to avoid having excess inventory altogether. In order to do this, Wal-

Mart has consistently put pressure on itself and its suppliers to decrease costs and increase

efficiency. As companies increase in size, their operations often times increase in complexity.

These companies like Wal-Mart implement information technology in order to decrease the

complexity and increase the efficiency of operations. Specifically, Wal-Mart has implemented

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the use of RFID chips in its supply chain management in order to increase the efficiency of its

inventory management. As inventory must be handled by both Wal-Mart and its suppliers, Wal-

Mart has encouraged its suppliers to use RFID technology as well. Because of the costs

involved, however, suppliers are reluctant to implement this technology but risk losing Wal-

Marts business to competitors who are willing to do so if they do not. Wal-Mart has mandated

the use of these tags by certain suppliers and will penalize suppliers who do not use RFID tags

$2 per pallet. It is also estimated that up to 15,000 suppliers have still not met Wal-Marts

mandate. Furthermore, Wal-Marts stated objective is to have product-level RFID tagging for all

of its 22 US distribution centers by the year 2010. As the technology improves, RFID

transponder unit cost goes down but it has not reached the point ($0.05) where item-level

implementation is viable. Suppliers also do not share equally in the cost/benefit of using the

technology. According to researchers at the University of Arkansas, there was a 16% reduction

in out-of-stocks since Wal-Mart introduced RFID technology into its supply chain. The

researchers also pointed out that the products using an electronic product code were

replenished three times as fast as items that only used bar code technology. Other than being

able to retain Wal-Marts business, suppliers find little value in RFID but must bear much of the

costs. While Wal-Mart is able to accrue most of the benefits (improved inventory management),

suppliers are faced with the cost of purchasing the technology and training staff to use it

properly.

Supply Chain Management Defined:

Supply Chain Management is the planning and control of the entire supply chain, from

production to transportation, to storage and distribution, through to sales, and back again to

production. Of importance are accuracy, speed, and cost. Supply Chain management has

evolved from a push to a pull system. In the push system, manufacturers mass-produce

products and then send them to retailers for sale. Because the products are mass-produced, the

unit costs are lower as a result of efficiencies of scale. Though good in the sense that unit costs

decrease, there remains the problem of accurately forecasting demand and production

amounts. Produce too many and storage costs go up. Produce too few and revenues decreasedue to stock-outs. As technology has evolved to include more relevant point of sale data, the

process has transformed from a push to a pull system. In a pull system, only needed supplies

are ordered and they are only ordered shortly before they are needed.

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By doing so, companies are able to increase the efficiency of resource use. There is a smaller

chance of stocking up on an item that will soon be obsolete and a smaller chance of not

stocking up on enough of a particular item. This type of system is called Just-in-time retailing,

with the primary goal being to limit the collection of inventory anywhere in the supply chain, and

to provide stores with the goods that they are actually selling.

RFID Technology Explained:

RFID stands for Radio frequency identification and, in this paper, refers to a technology that is

used to track goods through the supply chain. A RFID system consists of three main

components: a tag, a reader, and a computer system. Typically, RFID tags are made by joining

a radio antenna with a microchip and then surrounding the two with a protective case. These

tags are usually able to store up to two kilobytes of information. Stored data may include

product identification, the manufacture date, and the price of the product. These tags can then

be attached individually to the physical product itself or to the product packaging. While the

useful information is stored inside of the tag, it needs a reader to detect, collect, and decode the

information. Finally, a computer system is used to interpret, filter, and store the collected data in

a meaningful way. It is also useful for monitoring the overall health of the system, identifying

bottlenecks and other potentially useful data. RFID tags are attractive because they are easily

read. Bar Codes can become unusable if the label is ripped or soiled but RFID tags can be read

without having to be in the line of sight of the reader.

PROBLEM DESCRIPTION

The implementation of RFID technology presents two problems. The first involves the cost of

implementing the technology and the second involves the potential misuse of customer data.

Researchers have identified the component costs of using RFID technology. Individual tags

range from $0.20 to $50 while tag readers can cost $500 to $3,000. The largest cost, however,

comes from the computer software necessary to run an entire system effectively. These can

cost up to $200,000. Though these three items contribute towards the majority of cost, other

costs result from testing tags, the cost of data misinterpretations, and the cost of training

employees in the proper use of the technology. Ethical concerns also constitute a problem.

Consumer advocacy groups are concerned about the potential misuse of data collected

by RFID tags. Privacy groups are concerned that retailers will begin to use data to profile

customers by linking purchases with other personal identifiers such as credit cards and drivers

licenses. A recent report by a European Parliament task force warns that RFID can register

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consumers movements, spending, productivity, habits, and preferences. Challenges and

questions surrounding system performance, data synchronization, consumer privacy, integration

with legacy systems and non-compliance repercussions remain at the forefront of supply partner

minds. Privacy groups are concerned that retailers might use RFID to profile shoppers by l

inking their purchases to other identification numbers such as credit cards or drivers licenses. A

major concern for global corporations should be the different effects the issue may have on

different cultures. For example, if certain cultures value privacy more so than others, then a

company entering into a market in which privacy is highly valued may end up being boycotted if

it uses RFID. Tesco, a European-based multinational retailer, was almost boycotted after it

announced it was going to start tagging individual DVDs .

PROBLEM ANALYSIS

RFID implementation can drastically reduce costs associated with the downstream flow of

physical goods and the upstream flow of demand information. Companies and suppliers can

see supply in real time, enabling them to improve the timing of reorder, accurately forecast the

demand, and reduce the cost of labor as processes become more and more automated. In

addition, RFID can enable companies to identify slow-moving and obsolete items and access

information on the characteristics, location, and other information about their inventory.

Furthermore, the technologys principal benefits for manufacturers and retailers are total supply

chain visibility from the point of production to the point of consumption, and the ability to know

which customers are demanding what product, where, and when. The use of technology such

as RFID also enables companies to improve their internal accounting processes, such as

inventory costing methods. Data obtained from the use of RFID allow for proper matching of

costs to sales. Individual purchases are matched to specific costs, providing companies with an

accurate view of physical product movements and. As a result, companies are ultimately better

able to accurately construct financial reports, mark tax liabilities, and improve managerial

decision-making.

DISCUSSION OF POSSIBLE SOLUTIONS:

In this case, two identified problems were: the cost of RFID implementation and the potential

misuse of consumer data. Addressing the cost of RFID, a potential solution would be for Wal-

Mart to share implementation costs with suppliers and offer financial incentives for those who

are able to increase efficiency. For example, Wal-Mart can lease computer systems to suppliers

and offer discounts to those suppliers that are able to best increase process efficiencies using

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the technology. As for the actual cost of RFID technology, research and development within the

field as time goes on naturally lowers the price of using the technology. As Wal-Mart does not

specialize in the design and production of the technology itself, there is little that it can do to

directly influence the price. Addressing the potential misuse of consumer data, Wal-Mart and its

suppliers should first and foremost ensure that they follow ethical policies and guidelines

concerning the gathering, storage, and use of personally identifiable data. Though it may be

tempting to share this information with third parties in return for monetary rewards, doing so is

not the best strategy for gaining consumer confidence and consent in the process.

CONCLUSION

Information technology has the potential to improve many business processes. Anything that is

able to decrease costs and increase efficiency is welcome to companies that are constantly

seeking ways to decrease cost and increase the quality of products and services. Wal-Mart, for

example, is able to offer consumers an every-day-low-price largely in part because it is able to

control its costs. The cost of its products, however, is not only a function of its efficiency or lack

of it but also the efficiency/inefficiency of its suppliers. Because of the volume of products sold

by Wal-Mart, it has a great influence over its suppliers and often pressures its suppliers to find

ways to lower costs. Though it has a large influence over these suppliers, it is impossible for

Wal-Mart to operate without their assistance, and thus it is important for Wal-Mart to maintain

mutually beneficial relationships with those suppliers. Sharing benefits and costs in, instead of

mandating the use of, technology implementations is an effective way for Wal-Mart to cultivate a

mutually beneficial relationship with its suppliers. The novelty and frailty of certain technologies

like RFID, however, sometimes preclude a timely and effective implementation of them. A

technologys benefits are felt the more its use is standardized throughout the marketplace. Once

unit cost has decreased and privacy issues have been resolved, many more companies will be

able to implement RFID as an effective means to improve supply chain management efficiency.

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References:

1. www.coolavenues.com/...zone/role-of-rfid-in-supply-chain-management

2. en.wikipedia.org/wiki/Supply_chain_management

3. scm.ril.com

4. en.wikipedia.org/wiki/Radio-frequency_identification

5. http://www.ameinfo.com/66090.html

6. http://www.vizinexrfid.com/rfid-applications-in-supply-chain-management/592/

7. http://www.rfidjournal.com/supply-chain

8. www.traser-project.eu

9. supplychain.gaorfid.com

10.mason.gmu.edu/~ryellapr/walmart.doc

11. www.rfidjournal.com/store/improving-supply-chains

12.www.inboundlogistics.com

13. THE HINDU September 23, 2012.

14.www.scdigest.com

15.http://www.arkansasbusiness.com/article/85508/wal-mart-used-technology-to-

become-supply-chain-leader

16.www.bestwms.com/wms_articles.htm

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