MITIP 2009, 15-16 October, Bergamo

RFID TECHNOLOGY IN THE TEXTILE&APPAREL INDUSTRY: A

PERFORMANCE ASSESSMENT MODEL
Giovanni MIRAGLIOTTA, Alessandro PEREGO, Angela TUMINO
Department of Management, Economics and Industrial Engineering
Politecnico di Milano
Piazza Leonardo da Vinci 32, 20133, Milano
Italy
E-mail: giovanni.miragliotta@polimi.it; alessandro.perego@polimi.it; angela.tumino@polimi.it

Abstract:
In the Textile&Apparel supply chain Radio Frequency Identification (RFId) technology promises to offer
significant benefits both in terms of operational efficiency and more accurate tracking and tracing of
goods. However many companies are still biding time, mainly because of a lack of confidence in the
investment profitability. Moreover, literature still lacks sound quantitative models to assess the value of
such applications. This paper presents an activity-based model to evaluate the costs and the benefits
that stem from the adoption of RFId in the Textile&Apparel supply chain. An application of the model to
the jeans supply chain is provided as well.

Keywords:
Radio Frequency Identification (RFId), Textile, Benefits, Model, ROI.

1. INTRODUCTION
Technological innovations, socio-economic changes, emphasis on production costs, and
increasing international competition have led to remarkable changes in the Textile & Apparel
industry over the last twenty years. These factors have prompted industrial companies to
externalise an increasing amount of their activities [10] [11], focusing on product design,
marketing and distribution. Since the competition has shifted from company vs. company
to supply chain vs. supply chain [3] [5] [6], supply chain management has become a key
competitive factor. In this scenario, a substantial interest has arisen in those technologies,
as RFId (Radio Frequency Identification), which may enhance supply chain performance
and traceability.
Companies operating in the Textile & Apparel industry can benefit from RFId in several
ways: better production management (e.g. work-in-progress monitoring), more precise
inventory management (e.g. product availability, running capital productivity), higher
visibility, brand protection and anti-counterfeiting, and eventually reduced thefts. Therefore,
global supply chain leaders have launched pilot projects to introduce RFId in their
companies. For instance in the US just after Wal-Marts mandate about one Textile &
Apparel manufacturer out of four has implemented RFId Solutions [4], while in Italy there are
over 40 on-going projects [12]. Despite this good news, many companies are still biding
time, primarily because of a lack of confidence in the benefits and, consequently, in the
impact on ROI (Return On Investment), which in turn generates a greater perception of risk.
Even if there is a growing body of literature both in the academic and generalist press on the
evaluation of RFId projects, there are few sound, quantitative models to assess the benefits
of RFId applications in the Textile & Apparel industry [9]. In fact, most of the available

MITIP 2009, 15-16 October, Bergamo

contributions provide only qualitative analyses of the benefits (e.g. [2]) or data gathered
through empirical evidence (e.g. [1]), which can hardly be generalised.
Following these introductory remarks, the paper is structured as follows. After the
presentation of the objectives and the methodology in Section 2, Section 3 describes our
original model. Section 4 presents in detail the results obtained when applying the model to
a test-bed supply chain, while Section 5 draws some conclusions and suggests future
research paths.

2. OBJECTIVES AND METHODOLOGY

In line with the premises, the paper presents a general model which analyses the impact of
RFId technologies on the Textile & Apparel supply chain. In this sense, the model is meant
to investigate the mechanisms by which RFId affects the current supply chain processes.
The model is then applied to a specific Textile & Apparel supply chain, i.e. the jeans supply
chain modelled out of the real supply chain of an high-end jeans manufacturer, and the
quantitative results are presented.
In order to reach these objectives, the research programme has been divided into three
phases, which resort to ad hoc methodologies. The first phase is devoted to assessing the
Textile & Apparel supply chain processes, thus direct in-depth interviews with companies
operating in the industry have been carried out. The second phase concentrates on the
development of the model, resorting to an Activity-Based Modelling as done by other
authors (e.g. [8],[13]), its coding into a usable IT tool and its validation. The developed
model intends to reproduce the entire supply chain and include all the activity drivers, so as
to be able to precisely assess the costs and benefits of RFId adoption and possibly support
the decision-making process for managers in this industry. Finally, the third phase runs the
model for a reference jeans supply chain, and analyses the results.

3. THE MODEL
3.1.

The reference supply chain and the studied processes

The reference supply chain considers two main actors: the manufacturer, who buys the raw
materials from the fabric suppliers and manages the entire production network (e.g. his
plants, outsourcers, etc.), and the retailer, who receives the finished products from the
manufacturer and distributes them to the final customer through a network of proprietary or
franchising stores. In some cases, the manufacturer is in control of the distribution process
as well. The model includes all the production and handling activities to transform the
purchased fabrics into finished products, and to ship them to the stores.
Retailer

Manufacturer
Production
Phase 1

...

Production
Phase n

Distribution
Centre

Suppliers
(fabric)

Stores

Customers

Figure 1: The reference supply chain

MITIP 2009, 15-16 October, Bergamo

The model includes all the handling activities from the receiving of fabric rolls from the
suppliers to the shipping of finished products to the points of sale. Pallets and/or roll
containers are used to move work-in-progress goods through different production sites. Full
pallet loads of finished goods are then shipped to the retailer distribution centres, where they
are temporarily stocked and then shipped to the stores. The order assembly in the
distribution centres is quite complex, since retail stores require small and mixed batches.
Therefore, the full pallet loads have to be unwrapped and individual cases are picked to
prepare the order. Table 1 summarises the macro-activities considered for each stage of this
chain. All these activities have been studied in depth and the associated consumption of
resources has been modelled using an activity-based approach.
MACRO-ACTIVITY

Manufacturer
Production phase

Retailer
Distribution centre

X
X
X
X
X
X
X
X
X
X

X
X
X

Receiving
Putting away
Storage
Picking & Process
Anticounterfeit insertion on items
Quality controls
Inventory controls
Order assembly
Shipping
Complaints management

X
X
X
X

Table 1: The macro-activities considered in the model

3.2.

The RFId scenarios

Three RFId scenarios using different levels of tagging have been analysed: R1 RFId tags
on tertiary packaging only (e.g. pallets, roll containers); R2 RFId tags on both tertiary and
secondary packaging (e.g. boxes, cases), and R3 RFId tags on items, secondary and
tertiary packaging. In all scenarios, the RFId tags are initialized according to the Electronic
Product Code (EPC) standard, which states that a unique identifier must be written on the
tag. For both R1 and R2, we assumed the RFId EPC technology to be perfectly reliable (i.e.
100% reading rate in both scenarios), being this not an unrealistic assumption, as the
experimental activity of the Italian GS1 EPC-lab in Milan (Italy) showed 100% accurate
identification of the RFId-tagged cases and pallet loads was easily achieved in the Textile
industry [7]. The assumption for the item level tagging scenario instead depends on the
specific product and its supply chain and, more specifically, on the resistance of RFId tags to
production treatments. Since standard RFId tags applied on items can fail to survive to some
production treatments, the third scenario has to be split into two sub-scenarios, namely
R3standardtag and R3supertag. While the former (R3standardtag) consists in applying
one - or more - standard RFId tags to every garment, in the latter (R3supertag) the RFId
tags are provided with a special casing (supertag) able to improve their resistance.
Since only few companies in the Textile & Apparel industry use barcodes to cover each
identification need in the process, we assumed as a benchmark that no automatic
identification technology is used to support the processes (M). Anyway, the model can be
easily applied also when barcodes are used for the identification needs.

3.3.

The assessment of the benefits

The model allows to assess benefits related to savings in resources (i.e. workload, materials
and space) and increases in productivity within the operational material handling processes.
In this regard, each macro-activity shown in Table 1 was first split into a hierarchy of
elementary activities. Then, the impact of RFId in terms of reduced resource requirements

MITIP 2009, 15-16 October, Bergamo

was estimated, leveraging on the experience of the EPC-Lab in terms of operational

resource consumption measurement. For the sake of illustration, the model regarding the
Receiving macro-activity will be detailed in Table 2. Five activities were considered: truck
unloading, preliminary controls, in-depth controls, labelling, and error management.
Macro-activity: RECEIVING
Activity

Elementary activity

Resource consumption drivers

Truck
unloading
Preliminary
controls

Truck unloading

Time to unload the truck (t_unload)

Product identification
Check of the shipping
note
Communication

In-depth
controls

Gather information on
products
Case counting

Time to identify the products (t_id)

Time to check the correspondence between the received goods and
the shipping note (t_ship_note)
Time to communicate that the products have been received
(t_comm)
Time to manually read or automatically obtain the information of the
expected products (t_products)
Time to count a case within the pallet/roll container (t_count_case)
Number of cases in a pallet/roll container (n_case)
Time to check a case (t_check_case)
Number of cases in a pallet/roll container (n_case)
% of checked cases (%_cases)
Time to manually count the items in a case (t_count_item_man)
Time to count the items according to their weigh
(t_count_item_weigh)
Number of items in a pallet/roll container (n_item)
% of manually checked items (%_items_man)
% of manually items by weigh (%_items_weigh)
Time to compare the received goods with the declarations in the
shipping note (t_doc_check)
Time to create a new SKU Stock Keeping Unit (t_sku)
Time to print a label (t_label_print)
Time to stick the label on the sku (t_label_apply)
Time to manage an error detected at the receiving (t_error)
% errors detected at the receiving (%_error)
Flow of entering products (flow_receiving)

Case check (samples)

Item counting

Labelling

Error
management

Check of the
documents
Creation of a new SKU
Label printing
Label applying
Error management

Formula
t_receiving = t_unload +
t_prel_contr +
t_depth_contr + t_label
+ t_error_man
t_prel_contr = t_id +
t_ship_note + t_comm
t_depth_contr =
t_products +
t_count_case * n_case
+ t_ check_case *
n_case * %_cases + t_
count_item_man *
n_item * %_items_man
+ %_items_weigh *
t_count_item_weigh +
t_doc_check
t_label = t_sku +
t_label_print +
t_label_apply
t_error_man = t_error *
flow_receiving *
%_error

Table 2: The benefits evaluation Receiving

3.4.

The assessment of the operational and capital expenditures

The implementation costs of an RFId project include both the initial investment (Capital
Expenditure, CapEx) and the recurrent annual costs (Operational Expenditure, OpEx). More
specifically, the CapEx includes the costs of hardware (e.g. readers, antennas, tags),
software (middleware and software development/integration), and project management
(design, implementation, test and change management, project management). These costs
have been evaluated by starting from the physical infrastructure of each stage of the supply
chain (e.g. number of loading/unloading docks, number of forklifts) and then deriving the
number and costs (using average purchasing prices) of the equipment to be purchased. The
OpEx includes the cost of tags, the maintenance of the RFId infrastructure, and the
information transmission costs.

4. RESULTS
4.1.

The jeans supply chain

This Section describes the results obtained by running the assessment model for a
reference jeans supply chain. Since the paper objective is to draw some generalisable
conclusion, the real supply chain of an high-end Jeans manufacturer in Italy has been

MITIP 2009, 15-16 October, Bergamo

modelled and then modified in order to represent the most common structure of the jeans
supply chain (cf. Figure 2).
Suppliers
(Fabric)

Manufacturer
warehouse

Plant - Tailoring
Fabric rolls

Logistic operator

Laundry - Dyeing

Pallets / roll
containers (WIP)

Store

Ironing
Full pallets
(finished products)

Mixed pallets
(finished products)

Figure 2: The jeans supply chain

The manufacturer receives the fabrics from multiple suppliers, and puts them away in the
central warehouse. A network of sub-contractors is in charge of the production process,
which starts with the tailoring phase, i.e. the jeans cutting and sewing. Then, the jeans are
put on pallets or roll containers and directly shipped to the laundry, where they are washed
and eventually dyed. The laundry ships the products back to the manufacturer warehouse,
who gives them to the last sub-contractors for the ironing phase. The distribution to the
stores is entrusted to a logistic operator, who receives the products from multiple subcontractors, picks them at the case level and ships them to the stores. Table 3 reports the
main inputs which characterise the jeans supply chain.
Plant
Tailoring

Laundry
Dyeing

Warehouse

Ironing

Logistic
operator

3,000,000
1
/
/
/
/
/*
10%

3,000,000
15
100%
1%
/
/
5
10%

3,000,000
5
10%
1%
2
0,1%
10
10%

Annual flow of goods [items]

3,000,000
3,000,000
No. of facilities
3
10
% manual controls in receiving
100%
75%
% errors in receiving
1%
1%
No. of inventory controls [controls/year]
2
2
% errors in inventory controls
0,01%
0,1%
Average Inventory Level [days]
25
30
% outbound manual controls
10%
10%
* the storage activity inside the warehouse has not been included in the analysis

Table 3: The main inputs

4.2.

The RFId scenarios

All three technological scenarios described before (cf. 3.2) have been considered, i.e. RFId
tags on tertiary packaging only (R1), RFId tags on both tertiary and secondary packaging
(R2), and RFId tags on items, secondary and tertiary packaging (R3). Since standard RFId
tags applied on items proved to be insufficiently resistant to some production treatments, i.e.
dyeing (cf. Figure 3), the third scenario has been split into the two sub-scenarios
R3supertag and R3standardtag. In fact, since the supertag is quite expensive (about 20
cent/tag), an alternative solution has been explored as well, i.e. the use of two standard
tags (standardtag, about 5 cent/tag), being the second tag applied after the dyeing
(critical) phase. The first tag can be used just once or eventually re-used. In this paper we
analyse the case in which the RFId tag is re-used, i.e. they are taken away before the
dyeing phase, and then re-used on other products. A second standard tag is applied after
the dyeing phase.

MITIP 2009, 15-16 October, Bergamo

Figure 3: Test results - Standard RFId tags after dyeing (courtesy of EPC Lab)

Table 4 summarises the RFId infrastructure needed to support the different activities which
are considered in the model.
Activity

Area

RFId infrastructure

Receiving
Put-away
Inventory controls
Picking & Process
Production monitoring
Production re-stocking
Quality controls
Order assembly and packaging
Counting
Shipping

Receiving/shipping
Warehouse
Warehouse
Warehouse
Production
Warehouse
Production
Order assembly
Order assembly
Receiving/shipping

RFId gate
RFId handheld, RFId tags on locations
RFId handheld, RFId tags on locations
RFId reader integrated with the order picker
RFId gate / RFId handheld
RFId gate / RFId handheld
RFId handheld
RFId handheld, RFId printer
RFId gate / RFId handheld
RFId gate

Table 4: The RFId infrastructure

4.3.

The application of the model

The model allows to evaluate the benefits by comparing the cost of the performed activities
in a manual base-line scenario (M) to the expected cost in the RFId scenario. The overall
results are reported in Figure 4, which shows the benefits achieved in the three considered
RFId scenarios (R1, R2, R3).
Benefits: Breakdown per SC player

Benefits: Breakdown per activity

Logistic
operator

Laundry - Dyeing

Warehouse
Plant - Tailoring

Ironing

Receiving

Picking & Process

Shipping

Put-away

Inventory controls

Item tagging

Storage

Order assembly

20.9

0.81

20.9
20

20

3.37

16
7.47

12
8

cent/item

cent/item

16

0.35

12

3.7

3.04

R1

2.52

0.65
0.57
0.86
0.65
0.54

2.72

5.8
9.87

9.89

R2

Scenario

0.62
-0.40
R3

0.81

3.7

1.81

0.80
0.62
0.00
0.52
0.00
0.50
1.56

0.99
1.06
0.65
0.56

0.53

5.8

R1

6.83

0.32
0.52
0.00
0.51
1.64
R2

R3

-3.41

Scenario

Figure 4: The results of the model - benefits

R1 (i.e. RFId tags on tertiary packaging only) is the scenario that enables the lowest
benefits. Nevertheless, they are far from being negligible, since they amount to little less
than 4 cent/item (about 18.5 /pallet). Most of the benefits are obtained in the receiving
activities, and all the supply chain members enjoy similar unitary benefits. The R2 scenario

MITIP 2009, 15-16 October, Bergamo

(RFId tags on both tertiary and secondary packaging) enables much higher benefits (little
less than 6 cent/item, about 30 /pallet). This time it is the logistic operator who gains more
from the technology, since he handles individual cases that are shipped to the stores.
Therefore, receiving and order assembly are the activities which are more positively
impacted by the technology. Finally, the R3 scenarios offer the highest benefits, little more
than 20 cent/item (about 100/pallet), thanks to the possibility of automatically count the
items. Looking at the breakdown of the operational benefits by macro-activity and by supply
chain stage it should be noticed that not all the supply chain members benefit from the
technology in the R3 scenarios. In fact, while the laundry and the ironing significantly reduce
their operational costs, the tailoring increases its own costs, due to the introduction of an
additional activity, i.e. the item tagging. Moreover, most of the benefits are of course
obtained in those activities requiring a counting of all the garments, e.g. receiving and order
assembly.
Table 5 shows the calculation of both the discounted payback time and the Net Present
Value, which have been computed using a ten-year time horizon (NPV) and a discount rate
of 6%.
R1
Warehouse
Plant Tailoring
Laundry
Dyeing
Ironing
Logistic
operator
Supply
chain

R2

NPV ()
R3supertag

R3standardtag

R1

R2

Payback time (years)

R3supertag
R3standardtag

65,000

150,000

250,000

250,000

85,000

165,000

-5,055,000

-365,000

-95,000

-55,000

2,140,000

-790,000

-120,000

-35,000

1,605,000

1,605,000

-410,000

10,000

290,000

290,000

10

-475,000

235,000

-770,000

990,000

Table 5: The results of the model - Net Present Value and Pay-Back Time

If we consider the R1 scenario, despite the not negligible benefits, a positive NPV cannot be
realised at the supply chain level. In fact, only the warehouse and the plant-tailoring do
benefit from the technology, while the other supply chain members have to sustain costs
which are too high in relation with the enabled benefits. The R2 scenario, instead, leads to a
positive NPV from a supply chain perspective, even if the payback time is quite long.
Moreover, the investment is still not profitable for the laundry and the ironing. The item level
tagging enables significant benefits. However, in order to use only one tag for all the
production phases, a supertag is needed. Since the cost of such a tag is about 20 cent,
i.e. equal to the enabled benefits, it is therefore clear that a positive return on investment
cannot be achieved. Therefore a sensitivity analysis considering lower tag prices has been
carried out, which showed that a 15% cost decrease (i.e. 17cent/tag) makes the investment
become profitable on a 10-year time horizon. Moreover a 25% price reduction (i.e. 15
cent/tag) leads to a pay-back time of 7 years. In the last scenario (R3standardtag) the
investment proves to be profitable, even if not all the actors can benefit from the technology.

5. CONCLUSIONS
In this paper we presented a model able to offer a reliable, quantitative and general answer
to the question is RFId profitable for the Textile and Apparel Industry?. The model has
been presented in details, then applied to a real supply chain, that of a high-end jeans
manufacturer in Italy, and has produced interesting results. Even thought the figures could
not be generalisable, some of the quantitative evidences are probably valid for other actors
in the Apparel supply chain too. A first evidence is that, like other industries such as Fast

MITIP 2009, 15-16 October, Bergamo

Moving Consumer Goods (FMCG), the Secondary Packaging Level RFId adoption could be
a viable solution to approach this technology, with positive results and limited
implementation complexity. Of course, the full potential of the technology is revealed when
an Item level adoption is pursued: contrary to the FMCG case, the Item level adoption is
profitable in this case (lower volumes, higher unit selling prices) but problems may still arise
because of the uneven benefits distribution among players in the supply chain. This fact may
not represent a barrier in those chains in which the same player owns the (main)
manufacturing and distribution stages, even under different company names.
The scenario above is quite reinforced if we consider that there are several other benefits
stemming from the Item Level adoption of the RFId which are not considered in this model,
like counterfeiting fighting through serialisation and product traceability, improved store
visibility and inventory management, etc., which are more difficult to estimate but yet
represent the real deal in this industry, which is traditionally more focused on design, quality
and customer relationship management rather than logistic optimisation. The integration of
these aspects in the evaluation model is currently under investigation, and represents the
most interesting research development direction in the area.

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