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SAP Oiland Gas - Effectivenessofrfidtechnologyenhancingsupplychainmanagement
SAP Oiland Gas - Effectivenessofrfidtechnologyenhancingsupplychainmanagement
,(PhD)
Marketing Manager
INTEGRATED LOGISTICS COMPANY
Supply chain management objective is to increase the long-term performance of individual
companies and the overall supply chain by maximizing customer value and minimizing costs.
Not all companies achieve these goals with the same strategy. A supply chain is either agile or
lean and given this, a different approach to increase the efficiency and effectiveness is
adopted. Information systems are the backbone of every supply chain and they are based on
automatic data acquisition techniques to meet the goal of collecting information. RFID is a
technology with unique characteristics that make it suitable to enhance data collection
processes along the supply chain.
RFID technology has been available for many years. Recently, its application to improve
visibility in supply chain has demonstrated significant value for companies. The amount of
research and development dollars being invested will enhance capability and reduce cost
continually going forward. RFID as a major component of supply chain solutions is here in
force. Those companies implementing RFID early will gain competitive advantage. However,
implementation must be undertaken correctly by defining clearly the process and ensuring the
right technology is applied to the opportunity.
This paper clearly explains how supply chain management is enhanced by the effectiveness of
Radio Frequency identification technology.
RFID stands for Radio-Frequency IDentification. The acronym refers to small electronic devices
that consist of a small chip and an antenna. The chip typically is capable of carrying 2,000
bytes of data or less.
The RFID device serves the same purpose as a bar code or a magnetic strip on the back of a
credit card or ATM card; it provides a unique identifier for that object. And, just as a bar code
or magnetic strip must be scanned to get the information, the RFID device must be scanned to
retrieve the identifying information.
The term ―RFID Tags‖ is often used as a general term to describe not only RFID Tags but
RFID Labels and RFID Cards. It is important to know which frequency your RFID
solution operates at and what type of product the tag be affixed to before searching
for a RFID tag. If your application is to track a metal tote you would want a RFID tag
that is designed to be mounted on a metal surface (Metal RFID Tags). If you need
additional information on a particular product please click on the ―Request Info‖ link
next to the product.
UHF (Ultra High Frequency) Tags, Labels and Cards operate at a frequency of 915
MHz. These types of tags are considered ―Passive‖ – no onboard power source. The
supply chain related mandates from retailers such as Wal-Mart, Sam’s Club and Metro
require that UHF Passive RFID tags be used. These tags must comply with the
international recognized standard set by EPCglobal (UHF Gen 2). UHF frequencies
typically offer better range (20-30 ft) and can transfer data faster than LF and HF
tags, but they use more power and are less likely to pass through materials.
HF (High Frequency) Tags, Labels and Cards operate at a frequency of 13.56 MHz.
These types of tags are also ―Passive‖ – no onboard power source. RFID applications
that use HF RFID tags are typically the applications that require read distances of less
than three feet. HF tags work better on objects made of metal (RFID Metal Tag) and
can work around goods with high water content.
LF (Low Frequency) Tags, Labels and Cards are low-frequency tags (125khz) use less
power and are better able to penetrate non-metallic substances. These types of tags
are also ―Passive‖ – no onboard power source. They are ideal for scanning objects
with high-water content, such as fruit, but their read range is limited to less than a
foot.
A significant advantage of RFID devices over the others mentioned above is that
the RFID device does not need to be positioned precisely relative to the scanner.
We're all familiar with the difficulty that store checkout clerks sometimes have in
making sure that a barcode can be read. And obviously, credit cards and ATM
cards must be swiped through a special reader.
In contrast, RFID devices will work within a few feet (up to 20 feet for high-
frequency devices) of the scanner. For example, you could just put all of your
groceries or purchases in a bag, and set the bag on the scanner. It would be able
to query all of the RFID devices and total your purchase immediately. (Read a more
detailed article on RFID compared to barcodes.)
RFID technology has been available for more than fifty years. It has only been
recently that the ability to manufacture the RFID devices has fallen to the point
where they can be used as a "throwaway" inventory or control device. Alien
Technologies recently sold 500 million RFID tags to Gillette at a cost of about ten
cents per tag.
One reason that it has taken so long for RFID to come into common use is the lack
of standards in the industry. Most companies invested in RFID technology only use
the tags to track items within their control; many of the benefits of RFID come
when items are tracked from company to company or from country to country.
Some vendors have been combining RFID tags with sensors of different
kinds. This would allow the tag to report not simply the same
information over and over, but identifying information along with
current data picked up by the sensor. For example, an RFID tag attached
to a leg of lamb could report on the temperature readings of the past 24
hours, to ensure that the meat was properly kept cool.
Over time, the proportion of "scan-it-yourself" aisles in retail stores will
increase. Eventually, we may wind up with stores that have mostly "scan-
it-yourself" aisles and only a few checkout stations for people who are
disabled or unwilling.
Supply chain management objective is to increase the long-term
performance of individual companies and the overall supply chain by
maximizing customer value and minimizing costs. Not all companies
achieve these goals with the same strategy. A supply chain is either agile
or lean and given this, a different approach to increase the efficiency and
effectiveness is adopted. Companies such as Wal-Mart and Dell have
gained efficiencies by having a clear understanding and a tight
commitment to deliver customer value by maximizing not only the value
provided by their companies but also aligning their partner's interest to
create unique supply chains.
EPC Global, the standards body sets the standards for how basic product information is
encoded in the RFID chips. The vision that drives the developments of standards is the
universal unique identification of individual items. The unique number, called EPC (electronic
product code) is encoded in a Radio Frequency Identification (RFID) tag.
There are three types of RFID tags, all of which can either be read-write or read only.
Passive Tags - simply store data and draw power from a reader whose electromagnetic wave
induces a current in the tag’s antenna for short-range communication (up to 10 m).
Semi-passive Tags - use an integral battery to run the chip’s circuitry but draw power from the
reader to communicate.
Active Tags - are capable of communicating over greater distances (up to 100m) but are
currently far more expensive.
The EPC Network also capture and make available (via Internet and for authorized requests)
other information that pertains to a given item to authorized requestors.
The benefit of an EPC code is primarily derived from the ability to automatically pin-point the
exact location of goods and documents anywhere within an extended enterprise. Such ability
leads to the following benefits:
• Enhance supply-chain control. As the location of a part can be identified at every transfer
point with accuracy, the whole supply-chain can be controlled with close to 100% accuracy.
• Security and authentication. A RFID tag can be written with an identifier chosen by the
enterprise. This unique identifier can be used to authenticate a part or a document. The RFID
technology also supports encryption and other security models so that a tag cannot be easily
duplicated or forged.
• Enhanced customer service. The RFID technology can promote customer service by allowing
faster check-outs, returns, and personalization of service.
The automatic identification of products inside the store would increase the inventory visibility
and its accuracy. This will have an impact in four fronts: shrinkage, customer service, stock
outs and inventory levels. Decrease shrinkage levels, increase profits. Customer service and the
shopping experience can be enhanced by providing complementary applications enabled by
RFID. Stock out levels can be decreased as consequences of the increased inventory visibility.
Decreased stock outs increase sales and ultimately, increase profits. Decreased stock outs
levels also increase the customer service. Finally, inventory levels can be reduced, increasing
the ROI.
The projected benefits and impacts of the RFID Current state RFID opportunity and challenges
implementation are summarized in the following
table: Supply-chain factor
Product variety Low (10 to 20 variants per Suitable to track products by pallets
category) or cases
Average margin of error in demand forecast 10% Room to improve forecasting
through visibility of inventory and
demand.