SUPPLY CHAIN MANAGEMENT

TERM PAPER
ON

RFID IN SUPPLY CHAIN

Submitted to

Dr. P.R.S SARMA

Submitted by

SUBHASHISH RAY (1224109252)

SECTION-B

MBA (IB) - 2009-11

RFID IN SUPPLY CHAIN :HOW IT WORKS &
WHY IT PAYS
AIM: The main objective of this paper is to draw the significance of Radio Frequency
Identification Device in Supply chain.

Supply chain is defined as "the process of planning, implementing and controlling the
efficient, cost-effective flow of raw materials, in-process inventory, finished goods and
related information from the point of origin to the point of consumption for the purpose
of conforming to customer requirements."

RFID: HOW IT WORKS

RFID system includes tags, readers and software to process the data. Tags are usually
applied to items, often as part of an adhesive bar-code label. Tags can also be included in
more durable enclosure and in ID cards (smart cards) or wristbands. Readers can be
unattended standalone units, integrated with a mobile computer for handheld or forklift
use or incorporated into bar-code printers. The reader sends a radio signal that is received
by all tags present in the RF field tuned to that frequency. Tags receive the signals via
their antennas and respond by transmitting their stored data. The tag can hold many types
of data, including a serial number, configuration instructions, activity history or even
temperature and other data provided by the sensors. The read/write device receives the
tag signal via its antenna, decodes it and transfers the data to the computer system
through a cable or wireless connection.

INTEGRATING RFID WITH SUPPLY CHAIN

Companies can benefit from RFID technology in several ways. For one, the technology
allows for increased supply chain visibility at all stages of the process. This increased
visibility can lead to greater speed and efficiency in transporting products as well as
reducing loss that leads to unnecessary costly expenditures and waste. For one, the
technology provides a more precise assessment of the amount of product actually
electronically inventoried, as opposed to the actual number of unit’s in-store or onsite.
Manufacturers, retailers, logistics providers and government agencies are making
unprecedented use of RFID technology to track, secure and manage items from the time
they are raw materials through the entire life of the product. Manufacturers can especially
benefit from RFID because the technology can make internal processes more efficient
and improve supply chain responsiveness- for example, early RFID adopters in the
consumer goods industry reduced supply chain costs between 3 and 5 percent and grew
revenue between 2 and 7 percent because of the added visibility RFID provided. Many
drivers have seen RFID in action at automatic toll collection stations used at bridges,
tunnels and turnpikes, in business, RFID is commonly used to identify pallets, containers,
vehicles, tools and other assets, monitor inventory, and route materials through
production process. RFID can provide immediate and tangible benefits throughout the
supply chain. Organizations which have understood the technology’s capabilities and
limitations could increase their inventory visibility while streamlining their operations.

SOME APPLICATIONS OF RFID

RFID finds its application in the following spheres of supply chain:

Inventory Control: The main benefits to using RFID comes from improved inventory
tracking, especially when the technology’s capabilities are used to collect information
and provide visibility in environments where tracking was not done before.
Manufacturers, distributors, logistics providers and retailers can extensively use RFID for
inventory application, and in carefully planned systems, may share the same tags to
reduce implementation costs. Because it can read through packaging, without concern to
orientation, without direct line of sight between object and reader and can withstand
exposure to dirt, heat, moisture and contaminants that makes bar codes unusable, RFID
removes blind spots from inventory and supply chain operations. By using the highly
accurate, real time and unattended monitoring capability of RFID to track raw materials,
work-in-process and finished goods inventory manufacturer can improve visibility and
confidence into their inventory to enable overall inventory levels. Readers covering
warehouse racks, shelves and other storage locations could automatically record the
removal of items and update inventory levels. If an item was misplaced or needed
urgently to complete an order, fixed positions readers or a worker with a mobile
computer and RFID reader could automatically search for the item by reading for its
specific ID number.

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 on an RFID tag that
travels with the material. Updating the tag with real-time handling data creates a chain-
of-custody record that is use to satisfy regulatory reporting requirements. RFID tags are
also an effective way to satisfy the tire traceability requirements of the TREAD act.

Returns and Recall management: Companies 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 provide
several benefits. In the event of recall, companies can trace specific shipments to specific
customers, which would enable a highly targeted notification and return operation and
avoid a costly general recall. For general returns, companies can verify that the customer
returning merchandise is actually the customer who received it, which can deter
diversion, counterfeiting and other forms of return fraud.

RFID in transportation: Another way that RFID technology can enhance the supply
chain process is through the use of vehicle scanning. For instance, truck drivers use RFID
tags in their vehicles to pass through automated toll collection scanners that are used at
transportation hubs, such as tunnels and bridges. This capability saves time and boosts
the efficiency of the supply chain services.

RFID with Supply Chain Software: As RFID is combined with other existing supply
chain software applications, new uses for the technology become apparent. For example,
because of RFID’s temperature-detection properties, and RFID tag that is installed in a
pallet of perishable goods, for example, could be programmed to send out a warning
signal the moment that the product had reached an unsafe temperature. This type of early
warning system could minimize future instances of spoiled food being sold to the public,
and even save lives.

RFID in the Pharmaceutical Supply Chain: The world health organization (WHO) has
estimated that from 5 to 8 percent of the trade in pharmaceuticals worldwide is
counterfeit. The U.S and Food and Drug Administration stated in its anticounterfeiting
report that RFID represents one of the most important tools to help improve the safety of
the drug supply chain. e.g. Pfizer announced in November 2004 that it will put RFID tags
on all sealable units of a particular kind of medicine sold in U.S by the end of 2005.

Firm using RFID in its Supply Chain

BAX Global Pte Ltd an international shipping company, implemented RFID in

September 2005 in Singapore, for streamlining operational process within a warehouse
operated on behalf of a high-technology manufacturing client. A specific requirement of
this client is for goods receipts into and goods dispatches out of the warehouse to be
completely reconciled on a timely basis. This requirement was previously fulfilled using
a manual process, which involved warehouse operators recording the entry and exit of
individual units and keying the information into BAX’s Global Warehouse Management
System. Human errors and uncertain system updates latencies were inherent to this
process; and whilst the manual process performed satisfactorily for current volumes,
there were concerns about its scalability to meet the demands of higher throughputs
anticipated.

The advent of RFID technologies presented an exciting opportunity for overcoming the
challenges. By affixing passive RFID tags to individual units and deploying transponder
gantries at the entry and exit points of the warehouse, information about goods receipts
and dispatches are now captured with very high accuracy without human intervention as
soon the unit concerned “cross the line”. The ability of the RFID solution to rapidly
capture information from big batches of units in a single pass through a gantry also puts
to ease the concerns with future increases in volumes. A further benefit of the
implementation is enhanced security and inventory. With near-instantaneous
reconciliation of goods receipts and dispatches made possible by the real time feeds of
accurate information, any movement into and out of the warehouse not cleared by the
system are now immediately detected and brought to the attention of the operations
manager via SMS.

BAX Global has found the use of RFID technology to be an effective solution for this
client and foresees much potential for its leverage in innovative applications both within
and outside the warehouse.

CONCLUSION

Use of RFID presents a vital component in the supply chain across various spheres. RFID
promises to revolutionize supply chains and usher in a new era of cost savings, efficiency
and business intelligence. The potential applications are vast as it is relevant to any
organization engaged in the production, movement or sale of physical goods. This
includes retailers, distributors, logistics service providers, manufacturers and their entire
supplier base, hospitals and pharmaceuticals companies, and the entire food chain.
It has the potential to improve efficiency and visibility, cut costs, delivers better asset
utilization, produce higher quality goods, reduce shrinkage and counterfeiting, and
increase sales by reducing out-of-stocks.