Literature Review of Value Added through Incorporation of RFDI in Supply Chain Management
Introduction
This literature review is going to focus on providing a comprehensive and detailed analysis of the various research theories and empirical evidence that exist regarding how the RFID technology can be employed in adding value to the supply chain management practices of companies (Sarac, Absi and Dauzère-Pérès 2010, pp.78). Information technology is one of the essential resources in creating organizational value (Kohli and Devaraj 2004, p.55). Business' are exploring different options of integrating the usage of RFID across the supply chain to see how they can improve internal and external business processes; business articles often promote operational cost savings and improved inventory management as the key benefits of its use (Heim, Wentworth Jr. and Peng 2009, p.56). If RFID can, in fact, reduce costs and increase competitiveness, then this should, in theory, result in the benefit of both the adopting firm and the end customer. Value addition is an essential concept in business as it allows firms to have appealing features customers perceive to be of higher value. RFID uses the tracing, tracking, and identification features that add intelligence and capabilities to organizational activities. RFID leads to value addition and enhances the ability of the supply chain management (SCM) to offer high-quality services to its customers. The SCM helps leaders to plan and manage activities for sourcing and procurement (Stadtler 2015, p.5). Various theories have been used to explain the arguments for and against the implementation of RFID in an organization, some of which have led to a heated debate concerning the integrity of the process as well as the security (privacy) of individuals involved in the process. For this project, various theoretical frameworks and plans will be used to demonstrate the benefits of RFID installation in supply chain management.
Related Academic Discipline
RFID and Supply chain management are related to vast academic disciplines that involve the study of trade and security. Such disciplines include marketing, business management, business administration, business technology (all for SCM), information technology, cybersecurity and forensic computing (associated with RFID) companies (Sarac, Absi and Dauzère-Pérès 2010, pp.80). This topic is worth studying because it is involved in determining and evaluating the integrity of distributions processes and hence it can be utilized in making informed decisions concerning the supply of an organization's products. Value added by the program (RFID) can be evaluated as well.
Overview/ Background Information on RFID
Radio Frequency Identification (RFID) is a type of technology that involves the use of radio frequency to transfer information whereby it uses wireless radio communication technology in the efforts of efficiently identifying tagged objects. The invention of the RFID technology can be attributed to the development of the radar and the radio communication systems whereby in the 1980s, this technology had started been used for commercial purposes. The development and improvement of the RFID technology have continued to take place gradually even up to date (Cooper, Lambert and Pagh 2017, pp.4). More research is undertaken to further improve this technology in future and help in eradicating its various shortcomings. The application of RFID technology is extensive and covers areas such as automatic duty stations, tracking of goods and identification of cards that can be used for paying public transport, opening doors and promoting inventory control and management within firms.
A tag which is composed of a semiconductor chip, a reader which consists of the electronic control module and lastly a controller are the three primary components of RFID system. The tag which is also known as the transmitter helps the reader acquire information regarding a specified object and helps the controller or the database to process the available product data, aggregate it, and then automatically send the results to the business system database for authentication and recording keeping (Kärkkäinen 2013,pp.531). Through the RFID technology, an organization can control and manage its inventory levels since it is aware of the available stocks present in the store and note when they reach the re-stocking level.
Theoretical Concepts
Different theories can be used to explain the arguments for and against the implementation of RFID in an organization. Below is a comprehensive analysis of various approaches and how they support each other in shedding more insight regarding the implementation of the RFID technology in companies (Irani, Gunasekaran and Dwivedi 2010, pp.2486).
Information Systems Design and Action Theory
Implementation of sophisticated technologies such as the RFID systems in organizations for better performance and increase in productivity can be best described using the Information Systems Design and Action Theory. This theory aims at showing how the use of human-machine systems such as RFID within the firm is profoundly concerned with the design used to ensure that it is capable of meeting various needs at management, operational and strategic levels (Ngai, Poon and Suk 2009, pp.406). This theory helps in evaluating how technologies such as RFID can be manufactured using multiple designs to assist in meeting various needs of the customers. For instance, the kind of RFID system required in one company may be different from the one needed for another. Moreover, the supply chain activities of a firm may be different from that of another.
Through strictly following the Information Systems Design and Action Theory, manufacturers have managed to manufacture the RFID technology using different designs to help meet diverse needs of the suppliers, retailers and wholesalers. Studies show that most of the procurement and inventory management departments in organizations have heavily relied on the Information Systems Design and Action Theory to determine the possible guidelines, required tools, principles to be followed during application and the methodologies to be used while implementing the RFID technology within the company (Ngai, Poon and Suk 2009, pp.406). Such considerations have facilitated the acquisition and installation of the right RFID system and one that is designed according to the operations of the concerned company. Moreover, this theory helps in suppliers and retailers to analyze whether the RFID system to be acquired and installed in the business has the essential elements that make it qualify to meet their fundamental requirements and supply chain management needs effectively (Ngai, Poon and Suk 2009, pp.406).
Queuing Theory
Reduction in time wastage during waiting to be as one of the numerous benefits that are brought about by the implementation and use of the RFID technology within an organization can be bested explained using the Queuing theory. The RFID technology has proven to be very essential in eradicating the numerous time that customers tend to follow is buying products from the customers through facilitating the ability of the supplier to locate products being ordered by the client easily (Levy and Globerson 2007, pp.40). With the RFID technology being at the disposal of the businesses, most suppliers have managed to serve numerous customers within a short period. According to this theory, awareness of the service rate, number of servers, arrival rate of the customers, utilization factor, total number of customers in the systems and number servers as part of the parameters that are supposed to be employed in the queuing model, the management and all individuals responsible for implementing this technology are able to integrate it in their queuing systems (Levy and Globerson 2007, pp.40).
Social network theory
The social network theory monitors the behavior, and social aspect of various associations involved in the supply chain management and the techniques used such as RFID. Three categories of relationships exist in this level of business, and they include firm-individual, firm –firm, individual-firm (Borgatti and Ofem 2010, p.20). This theory facilitates in analyzing the above relationships for different perspectives such as financial, social and technological elements. Therefore, integration of RFID in a firm will affect the manner in which the firm relates to other parties involved in the same business. For instance, if a firm hires a transportation company to ferry their products from one place to another, tracking them can raise the issue of privacy and hence before a manager decides to implement the program he or she should consult with the various parties involved. Therefore, it is imperative they inform parties concerned about the benefits of having RFID technology utilized in the supply chain. That way, the involved associates will not feel as if the supplier has violated their privacy rights through tracking the good on transit but will instead consider this as one of the ways of protecting such sold commodities and ensure they reach to the clients in right conditions.
RFID can bring about mutual understanding between the various parties in a supply chain, thus improving processes. According to numerical studies existing about the social network theory, the RFID technology can be used to leverage the power of the social ties between the suppliers and the clients hence increasing their social connections. News ways of intelligently collecting electronic data traces from different temporal and spatial scales and across a variety of communication channels have significantly become at the disposal of the companies through the introduction of sophisticated technologies such as RFID systems. Unparalleled opportunities to investigate the interplay of dynamical processes, human mobility and real-life social networks between the suppliers and the buyers have been made possible by these data traces.
System theory
Below figure indicates how the system theory helps in improving the supply chain management of a company.
Figure 1.0
System theory brings together components of a complex supply chain to create a correlation of capital, materials, information, human and financial resources with the aim of comprehending both the internal and external attributes shaping the supply chain of an organization. Hence, a holistic perspective should exist for an organization to be able to coordinate all activities involved in the supply of products. Using RFID can help in monitoring the flow of events taking place during all stages of supply, and hence allocation of funds and human resource can be done according to necessity (Kayacan et al. 2010, p.1785). Therefore, misallocation and mismanagement of funds within an organization utilizing RFID will be a history of past.
The other key component of having this technology implemented is the acquisition of relevant information/data regarding the area of improvement within supply process. For instance, if during a specific shift or season there were delays in transportation of products, the data during this occasion can be retrieved and utilized in decision-making. RFID incorporation into the supply chain can therefore be said to enhance decision-making ability of the firm or supply chain management and thus add value to both the firm and end consumer.
According to the existing research, application of the system theoretical approach is very crucial in facilitating increment in production since it helps in modelling supply chains within the companies particularly where there exists an e-logistics environment. The use of RFID technology in the supply chain management of the companies has played a significant role in reducing the numerous complexities such as cause-effect relationships that are typically present in the logistics systems. Minimizing the lead-time, lowering costs and meeting customer demand for high-quality products are all part of the primary aims of the supply chain management of a company that the RFID technology helps in the meeting.
Network perspective
Network perspective theory argues that firms rely on an extended network of association with other firms involved in the supply chain. There are numerous competitive advantages accompanied by orchestrating an efficient and effective supply chain. Thus, the purpose of adopting network perspective during the implementation of RFID in the supply of product is to develop a long-term and reliable relationship with other parties involved in the supply network. Thus, when the firms have the capability of working together with mutual understanding concerning the monitoring of the products and the services on transit, high-profit margins can be realized because few misunderstanding and obstacles will exist during the business (Zaheer et al. 2010, p.64). The correct usage of this data synchronization can result in a sustained competitive advantage for the firm. The network perspective theory also notes that managers will have an easy time tracking the progress of the business as well as filing reports for both stakeholders and the customers, this is because, with RFID, information concerning all the events that took place within the supply chain are readily accessible.
RFID System Implementation Framework in Retail Supply Chain
Mostly, the level of Return On Investment (ROI) is normally used in businesses to determine whether the implementation of the RFID technology has been successful or not. The below figure shows the process that is followed in a successfully implemented RFID technology (Angeles 2015, pp.51).
Figure 2.0
(Angeles 2015, pp.51).
From the above figure, it is clear that the lower end of the supply chain of an organization benefits more from the use of the RFID technology that the upper end but the overall efficiency and benefits that this technology brings in the supply chain management is overwhelming. There are various challenges that organizations tend to face during the implementation process of the RFID system. For instance, there are numerous difficulties in finding the return over investment that has been facilitated by the RFID technology, high capital costs, chances of imperfect read-rates, lack of knowledgeable in-house experts who can aid in the implementation process, risks of data being comprised during wireless transmission and uncertainty that substantially surround the recommended standards to be meet (Angeles 2015, pp.51).
Empirical Evidence
Businesses are exploring different options of integrating the usage of RFID across the supply chain to see how they can improve internal and external business processes. The main aim of management is to save on operational cost and improve on inventory management (Heim et al. 2009, p. 55). If RFID can, in fact, reduce costs and increase competitiveness, then this should, in theory, result in added value for both the adopting firm and the end customer. Value addition that results from the incorporation of RFID can be seen in manufacturing, warehouse processing, management tracking, distribution processes, and direct benefits such as reduced cost for the end consumer.
RFID in Supply Chain Management
Supply chain management within companies comprises of the planning and management of various activities that are associated with conversion, sourcing, and procurement of products and the different operations that are related to logistics management. The introduction of the RFID technology in the supply chain management practices of an organization has proven to be one of the important stepping stones towards promoting longevity of firms and increasing the competitive advantage (Delen, Hardgrave and Sharda 2007, pp.617). For instance, companies have installed RFID reading frames at the doors of the docks within their warehouses to help in inventory management whereby this technology can immediately recognize the kind of cargoes arriving and provide directions of where they are supposed to be placed depending on nature and category. Manufacturers, wholesalers, and retailers have benefited from the use of the RFID technology managing their inventory since this technology can show the quantity, durability, knowledge of the exact location of the products and various useful information regarding goods coming and going out of the warehouses (Liu, Zhiqiang, Dashun and Hongjiang 2010, Pp.3279).
Through the use of the RFID technology, it is now more comfortable for the retailers and suppliers to reduce time waste and workload since this technology can facilitate the automatic recording of the inventory arriving and leaving the warehouses through reading the barcode tags on the goods instead of reading and recording such barcodes manually (Cooper, Lambert and Pagh 2017, pp.9). Again, the installation of the RFID systems in stores has proven to have the capability of reducing many cost incurred by the companies on salaries since it is now possible to customers to pack their goods on carts while shopping and as they pass through the checkout point, RFID system reads the tags on the products. That helps in eliminating employees who could have done this work manually hence enabling the firm reduce labor costs.
Moreover, suppliers can ensure better collaboration among different players in the supply chain since the RFID technology makes it easy track and trace products within the warehouses. Today, it is possible for the companies to integrate their supply chain practices through the use of the RFID technology and reduce error rates that come along with the use of other forms of supply chain management. The use of the RFID technology in companies has made it possible for the suppliers, distributors, and retailers to substantially reduce the number of inventories lost or stolen in the stores and also have a clear and better visibility of actual inventory in the warehouses hence increasing their ability to make informed decisions regarding re-ordering more goods to ensure continuity in the supply of these products (Liu, Zhiqiang, Dashun and Hongjiang 2010, Pp.3281).
Again, a substantial number of organization have taken advantage of the RFID technology to improve their supply activities in the stores through issuing to their customer's membership cards that contain RFID tags. That has made it easy for the suppliers and retailers to update the prices of the products being sold to the customers depending on the previous consumer behavior exercised by the customers. Through the information provided by the RFID systems, the suppliers and retailers can know when exactly to incorporate discounts and sale offers to motivate the clients to keep on coming back for more of the products offered. The automatic inventory update that is supported by the RFID technology has made it possible for the suppliers to lower shortage and ordering costs.
Tracking of goods and services using the RFID helps in the management of shipping containers. Shipping containers are the most popular way of transporting large cargo (Kim and Glock 2014, p.13). Transportation of the shipping containers is the duty of supply chain management team which has to ensure high transport density, standard packaging, low costs, and safe and secure transportation. According to Kim and Glock (2014, p.15) and Zelbst et al. (2012, p.329), active use of RFID tags helps in tracking the containers in real time in yards and docks. Importantly, the use of ultra-high frequency RFID will speed up the process of identification. Therefore, value addition is actualized in shipping containers. Real-time data is usually critical for ensuring excellent performance. The availability of real-time data to management significantly improves the planning processes in governance.
The supply chain management cover different steps and combines with marketing decisions, and customer demands in line with the corporate goals. The supply chain includes processes such as transportation, distribution, and manufacturing in an attempt to monitor the flow of goods to customers. According to Fan et al. (2015, p.118), supply chain processes are complex and knowledge-intensive; therefore, a company can profoundly benefit from the use of RFID. Linton (2017, p.26) further says that the use of RFID improves reliability and efficiency and makes the supply chain considerably precise. The purpose of RFID is to ensure that the right goods are available in the right place with no errors and discrepancies.
The complexity in dealing with products in containers and their delivery to warehouses are improved with the use of RFID. In the supply chain, cargo usually reaches the warehouse first before reaching the final destination. Keeping track of the large numbers of containers is complicated, time and labor consuming. The process requires a constant flow of information to ease the complexities. The incorporation of RFID in warehouses involves the installation of tags and readers that enhances the management of information on a real-time basis. The management center will thus be well equipped to monitor all containers/stock with tags effectively.
Supply chain management deals with different process. Importantly, all the process will benefit from the use of RFID as it "supports a wide range of applications from asset management and tracking to manufactured products and related customer services to access controls and automated payment" (Sabbaghi and Vaidyanathan, 2008, p.72). Usually, RFIDs are customized to meet the needs of a particular business process. The labels and readers ensure that the supply chain management can track a product through its cycle.
In particular, the incorporation of RFID increases efficiency in the distribution processes. The innovation adds value to the supply chain as it speeds up the process by which goods are distributed from region to another (Costa et al. 2012, p.354). Additionally, it improves the efficiency and accuracy with which distribution process is chosen. Eventually, business will see an overall reduction in the cost of distribution which in turn increases sales. The use of RFID increases visibility and performance of the supply chain. According to several researchers (Visich et al. 2009, p. 1291), the use of RFID makes it easier for users to identify all objects in the supply chain including people, goods, and services.
Presently several companies have experienced value addition by adopting RFID in their supply chain. For instance, RFID enabled debit/credit cards are used by millions on a daily basis, speeding up transactions creating value for the consumer. Additionally, Tokyo's subways and bus operations also make use of RFIDs (Qianli and Zhang 2016, p.3722). The application of the technology in both cases has not only increased visibility but also enhanced the use of e-money systems that increase sales within organizations. Evidently, the use of RFID improves local performance and thus, it is worth the investment.
Implications of the Findings
The findings from the above literature review show that the use of the RFID technology in organizations tends to add significant value in promoting the supply chain management practices. Most of the business that has implemented the use of the RFID technology in their operations have managed to promote their production activities through ensuring continuity of the flow of the raw materials in the company and outflow of the finished products from the stores and warehouses to the customers (Michael and McCathie 2015, pp.623). However, the use and implementation of the RFID technology to promote supply chain management have also been faced with some challenges. For instance, some businesses have become so reluctant in accepting the implementation of the RFID technology in their supply chain over security allegations.
Recent studies show that a significant portion of the retailers are afraid that they may expose the information regarding the inventories to the danger of being accessed by unauthorized individuals during the transmission process. Again, the implementation and maintenance of the RFID technology in facilitating organizational supply chain management include the high costs that are involved (Michael and McCathie 2015, pp.626). According to some retailers, the costs that are associated with tags of the RFID are significantly higher when compared to the packaging that they tend to produce. That makes it hard for the company that is involved in packaging to incur these costs without having to increase the prices of their products in return.
Conclusion
As outlined above, RFID incorporation has many benefits to the supply chain management process and hence is a technology that should be adopted by the supply chain management to remain competitive by improving efficiencies within increasingly complex and global supply chains. Management of all types can benefit greatly from its implementation owing to that data it produces and the overview of the supply chain and its players it provides, this is eluded to in the network perspective theory whereby firms rely on an extended network of association, a complete overview of the supply chain is only achievable if RFID is incorporated at every tier, which in turn creates value via increased visibility of the supply chain. The system theory compliments the notion of value creation via RFID incorporation to the supply chain as it pertains to the bringing together of all internal and external forces that encompass a supply chain, with the RFID data, better-informed decisions can be made with greater speed. There are ethical debates as to the tracking nature of the technology however its continued adoption by multiple firms within multiple industries suggests that businesses view this a minor issue. However, each firm should ensure that they observe all the rules concerning the privacy of the parties involved in the supply chains to avoid the legal charges that can be brought against the firm. One of the main issues with RFID incorporation within a supply chain is the high installation costs and the lack of uniformity in systems available which can dissuade organizations from implementing the system. I hope that end users of this report will be able to more efficiently deduce the pro's and cons of RFID implementation within supply chains and have a better understanding of how the system enables value creation for those interacting with the supply chain in question.
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