INFORMATION SYSTEM (IS))

Implementing Information System (IS)

Introduction

We've all heard the publicity about radio-frequency identification (RFID). Now it's time to take a more practical look at the opportunities brought about by this up-and-coming technology. One thing appears certain: Supply chain managers need to start figuring out how they can leverage this technology for competitive advantage. For this variation on the old maxim will likely hold true: There are three certainties in life—death, taxes, and RFID.

A buyer went to a huge office-supply chain store to purchase a box of pens. He knew the precise brand, type, and color of pen (blue) that he wanted. After a few minutes, he found the slot on the bottom shelf that should have held the boxes of blue pens. The slot was full—but not of blue pens. It was full of black pens in the same type of generic, white boxes that also hold the blue pens. As he left the store without making a purchase, the buyer realized that this store likely had no idea that the blue pens were out of stock. Worse yet, the retailer had no idea that it had not only lost the sale of $15 of pens and $50 dollars of other items but also the customer's loyalty when he found a similar box of blue pens at a competitor down the street. The retailer's inventory process failed because it incorrectly slotted similar-looking items, causing a delay in the reorder of the blue pens (David 2008 16).

The retailer wasn't the only one upset by the customer's purchase of a different product at a competitor's store, either. The pen manufacturer also was affected, as were its suppliers upstream in the supply chain. The good news in all of this, however, is that an emerging technology may help retailers and their supply chain partners avoid these kinds of problems in the future. Specifically, radio-frequency identification (RFID) has the potential to fundamentally change the way companies deal with inventory and information sharing—and in doing so, dramatically improve supply chain management.

This report begins with an outline of current RFID technology. It then examines the potential opportunities for using RFID within the supply chain, offering examples from manufacturing, distribution, transportation, and retail. Discussed next is the possible impact of RFID on supply chain structure and dynamics. The article concludes with an overview of the managerial implications of implementing this technology.

RFID: Status and Potential

Radio-frequency identification, consists of an inactive radio-frequency tag with a printed antenna and a radio-frequency (RF) emitter/reader. The tag emits a signal using energy coming from an RF emitter/reader. The signal from the tag on a product or pallet specifies a unique 96-bit product identification code. RFID passive radio-frequency tags, which can be about the size of a dust particle (350 microns), are projected to cost a penny or less each by the end of the decade. Currently, the cost to produce RFID tags ranges depending on the application and the features; the lowest cost reported to date is approximately ...