Effectiveness and Efficiency of RFID Technology in Supply Chain Management: Strategic Values and Challenges

By Sabbaghi, Asghar; Vaidyanathan, Ganesh | Journal of Theoretical and Applied Electronic Commerce Research, August 2008 | Go to article overview

Effectiveness and Efficiency of RFID Technology in Supply Chain Management: Strategic Values and Challenges


Sabbaghi, Asghar, Vaidyanathan, Ganesh, Journal of Theoretical and Applied Electronic Commerce Research


Abstract

In this study, we examine the fundamental components of RFID technology in a comprehensive supply chain strategy that directly support the effectiveness and efficiency of supply chain management. We examine the appropriate business processes affected by the RFID technology, the required planning and examination for successful implementation, and many potential impacts on effectiveness and efficiency of supply chain management. We emphasize on business values and strategic advantages of RFID technology as well as the challenges and recommendations in adoption of the technology particularly when a company extends its supply chain to upstream suppliers and downstream customers, as their external integration needs to gain in capacity planning and in efficiency. Using four major supply chain processes, we highlight economic opportunities and challenges when planning and implementing RFID technology within an existing supply chain framework. We will focus on the capabilities of RFID in providing security, privacy, and integrity of supply chain processes while facilitating sharing information with upstream suppliers and downstream customers, developing alliances, establishing strategic alliances, and gaining competitive advantages.

Key words: RFID, Process, Effectiveness, Efficiency, Supply chain management, Values, Strategy

1 Introduction

The applications of Radio Frequency Identification (RFID) and Electronic Product Codes (EPC) in supply chain management have vast potential in improving effectiveness and efficiencies in solving supply chain problems. EPC is the concept of storing product identification on chips no larger than a grain of sand, then placing these chips on tags, which in turn are placed on objects so they can be uniquely identified. RFID technology can track inventory more accurately in real time resulting in reduced processing time and labor. There are many applications and possibilities for RFID/EPC as these objects in motion are traced throughout the supply chain. The complete visibility of accurate inventory data throughout the supply chain from manufacturer's shop floor to warehouses to retail stores brings opportunities for improvement and transformation in various processes of the supply chain. RFID technology can help a wide range of organizations and individuals such as hospitals and patients, retailers and customers, and manufacturers and distributors throughout the supply chain to realize significant productivity gains and efficiencies.

In this study we try to answer the following questions: (1) what processes in supply chain will be affected by RFID technology and where this technology has the potential of creating the most business values? (2) Given the integrated and interdependencies of supply chain processes, what would be the capabilities of RFID in providing security, privacy, and integrity of processes while facilitating sharing information with customers and suppliers, developing strategic alliances and ultimately gaining competitive advantage? (3) What are the challenges and recommendations in adopting and implementing RFID technology in supply chain?

We examine the fundamental components of RFID technology as parts of a comprehensive supply chain strategy that directly support the effectiveness and efficiency of supply chain management. We will examine appropriate business processes in supply chain affected by RFID Technology and will identify processes where RFID plays a critical role in creating the most value. In particular, we highlight the many business values and strategic benefits of RFID technology as well as the many challenges and recommendations in adoption and implementation of the technology in the context of integrated and interdependencies of supply chain processes.

2 Literature Review

RFID technology has been promising to enhance support supply chain management efforts [13], [14], [28], [29]. 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 [1], [6]. …

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