Business IT Alignment and Technology Adoption; the Case of RFID in the Logistics Domain

Article excerpt

Abstract

Radio Frequency Identification (RFID) is increasingly applied in the logistics domain. As with other emerging technologies it is complex whether, when and how an organization should invest in RFID. In this paper the decision to adopt RFID in the logistic domain is explored. The authors take a business/IT-alignment approach and investigate the relation between business/IT-alignment principles and preference for RFID applications. A comparison of thirteen organizations that operate one or more warehouses shows that managers and decision makers in companies are not necessarily in sync with the business/IT-alignment principle which implies to further mature in the areas/domains that are least developed. Organizations were more prone to invest in business/IT areas that are already well developed. We conclude that other factors influence decisions to apply this type of new technology. Yet, the framework offers the opportunity to analyze and prepare a technology decision; it provides insight in and arguments for possible RFID adoption.

Key words: Business/IT-Alignment, Logistics, Maturity, RFID

1 Introduction

1.1 New technology of Radio Frequency Identification

Radio Frequency Identification (RFID) is an upcoming wireless technology that enables items to be identified through radio waves. Typically, RFID can be described as a reader communicating with a tag, holding information in a microchip. An object or good is equipped with the tag and a reader can identify the object.

After a rather turbulent period in which RFID's possibilities have been promising, [5] states that the technology is over its hype, and into the 'trough of disillusionment'. RFID applications in asset management and tagging of cases however are application fields that are hitting the 'slope of enlightment'. This means they are becoming more and more popular and companies are finding ways to make sound business cases out of these applications [14]. Still a lot of challenges have to be overcome in areas like technology, standards, costs, ROI etc. before RFID can become a widespread technology [11], [27].

According to [9] there are two important drivers that motivate companies to start experimenting with RFID applications. The first driver is the mandate by some major channel masters and procurement agencies that foresee operational efficiencies when applying RFID. This mandate is a clear example of buyer power through great volumes as identified by Porter in his five-forces model [17]. Examples are Wal-Mart and the US Department of Defense; they demand that their preferred suppliers comply with their RFID application. In practice this means that crates and pallets are tagged with RFID chips so they can be traced through the supply chain. The second driver for RFID diffusion is the collection of immediate benefits that can be gained from implementing the technology. Companies try to gain competitive advantage by being a first-adopter. They use RFID to innovate their business and to gain strategic leverage. Research question and outline

As with many new technological innovations, companies may not be ready to take full benefit from RFID's possible advantages. From a Business/IT-Alignment (BITA) perspective, the introduction of new technology in an organization may unbalance business and IT, bringing them out of sync; [25] argue that continuous strategic alignment is needed. [10] identify four basic concepts in BITA: 1) business strategy, 2) organizational infrastructure (both related to the business domain), and 3) IT strategy and 4) IT infrastructure and processes (both related to the IT domain). Their assertion is that in an organization all four concepts should have the same level of maturity in order to realize value from IT investments. Another much cited scholar on this topic is Porter [18] who argues that business and Internet strategies should coincide. Also [26] and [8] argue that IT innovation should come in careful consideration with the business processes. …