Wal-Mart Case Study RFID and Supply Chain Management

FINAL PAPER

By Group 2

Group Members: Angrish, Sangita Chivu ula, Ven ata S. DeWitt, Brendon Patel, Raxesh Shamsi, Shazeb Yellapragada, Ramachandra

Date: November 30, 2005

Table of Contents INTRODUCTION 4 WHY RFID OVER BAR-CODE? 4

RFID INFRASTRUCTURE 5 INTRODUCTION TO SUPPLY CHAIN MANAGEMENT 7 WAL-MART INTRODUCTION AND ITS BUSINESS PROCESSES 9 OPERATIONS 9 BUSINESS MODEL 10 Mar et Strategy of Wal-Mart 10 Organizational Development 10 Competitive Advantage 11 Mar et Opportunity 11 SUPPLY CHAIN MANAGEMENT AT WAL-MART 11 Procurement and Distribution 11 Logistics Management 12 Inventory Management 12 RFID IN WAL-MART 13 EFFICIENCY IN SUPPLY CHAIN WITH RFID 14 WAL-MART SUPPLIERS 15 Kimberly-Clar 15 Kraft Foods 15 Gillette 15 CURRENT USAGE OF RFID 16 RFID IN MILITARY 16 SUCCESSFUL RFID IMPLEMENTATION IN DIFFERENT INDUSTRIES 17 Vol swagen 17 Supermar et tries out smart tagging 17 Sun Microsystems sets up RFID test centre in Scotland 17 I.B.M. Expands Efforts to Promote Radio Tags to Trac Goods Texas Instruments 17 EPC global Networ 18 LIMITATIONS AND CHALLENGES OF RFID 18 FUTURE OF RFID 20 FUTURE APPLICATIONS 20 REFERENCES: 22 Introduction

Technology is inevitable in every sphere of life today; it has always made thing s easier. Wal-Mart wor s on the same strategy, from the above description; we ca n understand how diversified Wal-Mart is and the volume of cargo it needs to han dle for each of its businesss. Traditionally, it had started with computerization of individual stores with small billing machines and had then led to centralize d billing for record eeping. The technology has grown by leaps and bounds and h as become increasingly challenging to maintain large databases of information an d maintain records. Powerful computers networ ed with high performance clusters maintain and store this data. This gives a picture as to how technology plays a vital role in todays businesses. Traditionally, technology has been upgraded in billing systems and for storage p urposes. A new area where technology could be applied to, where many expenses co uld be saved was in inventory management and logistics. Wal-Mart being so huge, needed to eep trac of men and material sent across different countries and had to maintain hundreds of warehouses across the world. Bar-codes have been initia lly identified as a suitable technology to meet the purpose. But due to the limitations of barcodes, a new emerging technology called RFID ha s been identified to meet the demands. RFID is low cost Radio Frequency Identifi cation system which requires minimum human intervention to carry out tas s rangi ng from billing to materials trac ing and supply chain management. It is a small wireless device which can store good amount of data and can virtually be tagged to anything.

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RFID is an electronic tagging technology as shown in figure 1 that allows an obj ect, place, or person to be automatically identified at a distance without a dire ct line-of-sight, using an electromagnetic challenge/response exchange.

Fig 1: RFID Devices [Source: The Magic of RFID, Roy Want, INTEL RESEARCH, Octobe r 2004 ] Why RFID over Bar-Code? The ability to read without line-of-sight is the best advantage of RFID over bar -code systems. RFID readers can sense items even when the tagged items are hidde n behind other tagged items. This enables automation. The challenging part of im plementing RFID is that tagged items should not be missed by the reader due to i nterference, multipath fading, transient effects etc. Missed reads are an unfort unate reality with RFID systems. RFID uses a serialized numbering scheme such as EPC (Electronic Product Code). Each tag has a unique serial number. Serial numb er information is extremely powerful in understanding and controlling the supply chain and provides much more detailed behavior of the supply chain than can non -serialized bar codes such as UPC (Universal Product Codes) and EAN (European Ar ticle Numbering). Serial numbers have many advantages such as food freshness/exp iration. This can tell how for how long an item has been in the supply chain whe re as such information is not captured in bar code system. Hence items can be re ached the right place at the right time. Furthermore RFID implementation monitor s theft too. For example if number of items reached at the retailers outlet is le ss than that was departed from suppliers location, it can be easily trac ed for. In all these ways, RFID systems have stronger sensor networ ing system or monito ring system than bar code systems. RFID Infrastructure Many software systems used in enterprise systems today are not designed to handl e serial numbers as required by the RFID systems. The problem in synchronizing R FID systems to software system can be best described as the problem in synchroni zing a spea er to a hi-fi amplifier. If the hi-fi amplifier is not synchronized to spea er there will be distortion in sound signal. Li e wise there will be mis match in capabilities and requirements if RFID system is not synchronized with e nterprise software properly. A solution to this problem is to introduce a layer between RFID readers and the application software commonly nown as RFID middlew are. It has two levels of functionality: a lower level device and data managemen t and a higher level interpretation level. Data management layer provides some functionality of filtering of data due to in termittent appearances and disappearances. This can be achieved by setting some time threshold levels. For example you could tell the software to record tags as missing only after they have not been seen for a certain number of seconds. Thi s is important because if the reader cannot read certain tags due to interferenc e of certain objects, the software should not conclude that the tagged item is b eing sold or stolen. This mechanism would reduce false reads. Device management is one of the most challenging part of RFID implementation. RF ID readers interact with other devices such as motion sensors, programmable logi c arrays and human interfaces. RFID readers operate in ISM (Industrial, Scientif ic and medical) bands at 13.56 megahertz, 915 megahertz and 2.45 megahertz. Beca use implementing RFID is an extensive ubiquitous tas , there is a complication o f different bandwidth standards around the world. For example, Japan has very di fferent bandwidth standard than U.S.A. Security intrusion is also an issue in R FID deployment because RFID readers operate automatically unli e bar code scanne

rs which are operated by humans.

Fig 2: Two Levels of Functionality [Source: Integrating RFID, Sanjay Sarma, Oats ystems and MIT, October 2004] After the data management layer yields data, the data interpretation layer must extract inference from such data and forward it to the applications that deploy RFID. This inference mechanism is a very sophisticated tas . For example if a ta gged pallet carrying tagged items out of the door should not be confused with th e one that just passes by the door and does not go outside it. This high level o f reasoning involves a lot of inferences and associations. Tags can be associated with each other when they are assembled. Integrating RFID into the enterprise is one tas but extracting value for the en terprise at the systemic level is another challenging tas which requires lot of control and effort. Fig 3: Architecture with Independent EPC Visibility Layer [Source: Integrating R FID, Sanjay Sarma, Oatsystems and MIT, October 2004]

The EPC visibility layer eeps trac of RFID data in many level of detail. The a rchitecture for such a system can be shown as in figure 2.The enterprise EPC sys tems can then be a single source of all EPC data. The enterprise system can eep a true and multi resolution record of all EPC data permitting different applica tions to access EPC data at the appropriate resolution. The Auto-ID center has d eveloped a software called savant which serves as the edge and the enterprise so ftware. They also built a prototype of the ONS. EPCglobal operates ONS. EPCgloba l also sell EPC codes to users who want to place EPC tags on their products. EPC global run a number of hardware and software modules of the EPC system. The EPCg lobal system includes a number of standards for communicating with readers, for middleware of the edge, and for the edge and enterprise EPC systems. This emerge nce of EPCglobal system has changed the way supply chain is operated today.

Introduction to Supply Chain Management Supply chain management (SCM) is the coordination of a networ of facilities and distribution options that performs procurement of materials, processing the mat erials into finished products, and distribution of the products to customers. S CM is seen as involving five core processes. These include planning, sourcing, ma ing, delivering, and returning. Fig 4: Typical supply chain showing interrelations between all involved parties. [Source: Auto-ID: Managing Anything, Anywhere, Anytime in the Supply Chain, Bos e and Pal, ACM August 2005] SCM exists in both service and manufacturing environments. A typical supply cha in consists of many interactions between suppliers, manufacturers, distributors, retailers, with the ultimate goal of providing either a service or a product to customers. This also wor s in reverse with the customer at the head of the pro cess when returning a product. SCM is used as a means to integrate planning, purchasing, manufacturing, distrib

ution, and mar eting organizations that normally do not wor together to achieve a common goal. Each wor s toward goals specific to their own organization that accomplish narrow objectives. SCM is a way of integrating these varying functi ons so that they wor together to maximize the benefits for all involved. There are three levels of SCM: strategic, tactical, and operational. Fig 5: Three Levels of SCM [Source: Auto-ID: Managing Anything, Anywhere, Anytim e in the Supply Chain, Bose and Pal, ACM August 2005] Strategic SCM deals with future planning than in loo ing at mar et evaluation, c apacity issues, new products, and technology changes. This planning is addressi ng issues that may be factors several years out. This is accomplished at the ex ecutive management level. Tactical SCM involves a shorter planning cycle. It is more concerned demand pla nning, inventory planning, and supply planning. This is determined at a less se nior level than Strategic SCM. Operational SCM is current planning activities measured in at most wee s. Opera tional SCM involves the majority of the operations. It includes demand fulfillm ent, scheduling, production, transport, and monitoring. There are many decisions that are made when loo ing at SCM. They follow the abo ve categories. Strategic decisions are made over longer periods of time and lin ed to a corporations strategy. Operational decisions are more short term and lo o at day to day activities. Four major decisions are considered. The include decisions on location, production, inventory, and transportation. A geographica lly strategic placement of the production facilities is ey to creating a succes sful supply chain. Decisions on what products to be produced have to be made wi sely and strategically. Also, where these products (which locations) will be ma nufactured is very important to SCM. Inventory decisions and management is crit ical. Some inventories are necessary to hedge against uncertainty, but this com es with a cost. Managing these inventories efficiently will be of benefit to th e corporation. Transportation decisions include cost versus benefit. Air trans portation is costly, but fast and reliable. Other modes of transportation may b e cheaper, but the sacrifice is having to hold inventories due to delays that ma y occur. If the above decisions are made with careful and strategic thought as well as with concern for integration, the supply chain should be efficient and s uccessful. The overall goal of SCM is to optimize supply chains in an attempt to provide mo re accurate and time sensitive information that can be used to improve process t imes and cut costs. Supply chains have been around for decades and a constantly being improved. The newest opportunity for improvement is the introduction of radio frequency identification (RFID) tags. RFID technology will provide real-t ime information that will allow manufacturers to get better readings of customer s and mar ets thus further improving supply chains. RFID will help retailers pr ovide the right products at the right places at the right times. Ultimately, ma ximizing sales and profits Wal-Mart has been leading the charge with RFID technology. Having the largest r etailer adopt and begin to use RFID technology has given strong bac ing to the t echnology and will only further and quic en the expansion of RFID. They have be gun requiring all their major suppliers to implement RFID technology on all prod ucts supplied to Wal-Mart.

One example of what Wal-Mart has done with SCM and its suppliers is that of its relationship with Proctor & Gamble. These two built a software system that hoo

ed Proctor & Gamble up to Wal-Marts distribution centers. This system would then monitor supply levels and when products run low, automatic alerts are sent out to require the shipment of more products to that distribution center. Wal-Mart has ta en this as far as going to the individual store locations. The shelves a re monitored in real time via satellite lin s that send inventory messages whene ver Proctor & Gamble products are scanned at a register. This allows Proctor & Gamble to be fully aware of up to the minute product inventories at the actual s tore locations and ship additional products as necessary. This concept is a hug e step in ma ing SCM as efficient as it can be.

Wal-Mart Introduction and its Business Processes Wal-Mart is one of the largest Fortune 500 companies, which is spread across the globe. It is an arguably the largest retail chain which deals with everything f rom food to consumer electronics. In terms of the revenue generated, it leads th e fortune 500 companies li e GE and Microsoft. Simply put, it has everything a h omema er can ever thin of. Affordable price range coupled with aggressive onlin e and mar et strategy has lead to wide acceptance for Wal-Mart in towns and citi es ali e. Wal-Mart is probably the only largest fortune 500 corporations in the world, which directly services the common man. Operations Wal Mart operations are comprised of three business segments: Wal-Mart Stores SAMS CLUB Wal-Mart International. Wal-Mart Stores segment is the largest segment, which accounted for approximatel y 67.3% of their 2005 fiscal sales. This segment consists of three different ret ail formats, all of which are located in the United States. This includes the fo llowing sections: Super-centers, which average approximately 187,000 square feet in size and offer a wide variety of products and a full-line supermar et; Discount Stores, which average approximately 100,000 square feet in size and off er a wide variety of products and a limited stoc of food products; and Neighborhood Mar ets, which average approximately 43,000 square feet in size and offer a full-line supermar et and a limited variety of general merchandise. SAMS CLUB segment consists of membership warehouse clubs in the United States whi ch accounted for approximately 13.0% of 2005 fiscal sales. SAMS CLUBs in the Unit ed States average approximately 128,000 square feet in size. Wal-Mart International operations are located in Argentina, Canada, Germany, Sou th Korea, Puerto Rico and the United Kingdom, the operations of joint ventures i n China and operations of majority-owned subsidiaries in Brazil and Mexico. This segment generated approximately 19.7% of 2005 fiscal sales. Here, it operates s everal different formats of retail stores and restaurants, including Super-cente rs, Discount Stores and SAMS CLUBs. For the fiscal year ending January 31, 2005, Wal-Mart topped $10 billion in net income for the first time in their history and added almost $29 billion in sales . Business Model A Business model is central to any successful business. Wal-mart is no exception . Wal-mart has always been innovating and improving its business model to suite

its organizational goals and also meet customer requirements, and so has managed to stay on top year after year. Wal-mart has employed a mixed-business model fo r its business for the same. To understand the Business models used by Wal-Mart, first it is important to no w the factors, which go in defining those models, and how does it relate to WalMart specifically. Mar et Strategy of Wal-Mart Wal-Mart stresses mainly on their Everyday Low prices (EDLP) pricing philosophy, i n which they price items at a low price every day that builds & maintains custom ers trust in their pricing. Since they employ both the clic s and bric s and bric s and mortar methods to mar et their products, consumers get to choose their produ cts either the traditional way or online anytime of the day. Though Wal-Mart has not advertised in Advertising, as many of its competitors do, the trust people have built on the Wal-Mart brand has ta en them far from their competitors. Organizational Development Wal-Mart has restructured its business into two parts to handle specific organiz ational needs. Specialty Division - Tire & Lube Express - Wal-Mart Optical - Wal-Mart Pharmacy - Wal-Mart Vacations - Wal-Mart s Used Fixture Auctions - Wal-Mart Alas a Bush Shopper Retail Division Wal-Mart Stores Super centers SAM S CLUBS Neighborhood Mar et International walmart.com Competitive Advantage Wal-Mart has been an undisputed leader in offering the mar ets lowest prices to consumers. It has always given a price match guarantee, and has challenged other s tores to offer lesser prices and has agrees to reimburse the difference, the dif ference of price if any. No other store could meet this and Wal-Mart has been le ading the pac for years. Mar et Opportunity Wal-Mart employs a combination of two Business Models viz. B2B Single firm networ Business Model SAMS CLUB segment of Wal-Mart supports sma ll businesses. Its main focus in this segment is to create its own networ of tr usted partners to coordinate supply chains and provide exceptional value on bran d-name merchandise at Members Only prices. B2C E-Tailer Business Model Wal-Mart uses clic s and bric s methodology to provide millions of its customers online version of its retail store, where customers c an shop at any hour of the day or night without leaving their home or office. Wal-Mart employs Sales revenue model as it is mainly involved in sale of goods a nd services.

These two models help Wal-Mart in achieving its business perspectives related to its firms organizational needs and the second helps in its interaction with the customer and manages goods and services offered by Wal-Mart to the end users. Supply Chain Management at Wal-Mart Supply chain management at Wal-Mart can be described in 3 sections. Procurement and Distribution Wal-Marts process of procurement involves reducing its purchasing costs as far as possible so that it can offer best price to its customers. The company procures goods directly from the manufacturers, bypassing all intermediaries. Wal-Mart has distribution centers in different geographical places in US. Wal-Ma rts own warehouses supplies about 80% of the inventory. Each distribution centre is divided in different groups depending on the quantity of goods received. The inventory turnover rate is very high, about once every wee for most of the item s. The goods to be used internally in US arrive in pallets & imported goods arri ve in re-usable boxes. The distribution centers ensured steady flow & consistent flow of products. Mana ging the center is economical with the large-scale use of sophisticated technolo gy such as Bar code, hand held computer systems (Magic Wand) and now, RFID. Eve ry employee has access to the required information regarding the inventory level s of all the products in the center. They ma e 2 scans- one for identifying the pallet, and other to identify the location from where the stoc had to be pic ed up. Bar codes & RFID are used to label different products, shelves & bins in th e center. The hand held computers guide employee to the location of the specific product. The quantity of the product required from the center is entered in the hand held computer, which updates the information on the main central server. T he computers also enabled the pac aging department to get accurate information s uch as storage, pac aging & shipping, thus saving time in unnecessary paperwor . It also enables supervisors to monitor their employees closely in order to guid e them & give directions. This enables Wal-Mart to satisfy customer needs quic ly & improve level of effic iency of distribution center management operations. Logistics Management This involves fast & responsive transportation system. More than 7000 company ow ned truc s services the distribution centers. These dedicated truc fleets enabl es shipping of goods from distribution centers to the stores within 2 days and r eplenish the store shelves twice a wee . The drivers hired are all very experien ced & their activities are trac ed regularly through Private Fleet Driver handboo . This allows the drivers to be aware of the terms & conditions for safe exchang e of Wal-Mart property, along with the general code of conduct. For more efficiency, Wal-Mart uses a logistics technique called Cross Doc ing. In this system, finished goods are directly pic ed up from the manufacturing site o f supplier, sorted out and directly supplied to the customers. This system reduc es handling & storage of finished goods, virtually eliminating role of distribut ion centers & stores. Because of cross-doc ing the system shifted from supply chain to demand chain which meant, instead of retailers pushing the products into the syst em, the customers could pull the products, when & where they required. Inventory Management Considering the rapid expansion of Wal-Mart stores, it was essential to have a v

ery good communication system. For this, Wal-Mart set up its own satellite commu nication system in 1983. This allowed the management to monitor each and every a ctivity going on in a particular store at any point of the day and analyze the c ourse of action ta en depending on how the things went. Wal-Mart ensures that unproductive inventory is as less as possible, by allowing the stores to manage their own stoc s, thereby reducing pac sizes across many categories and timely price mar downs. Wal-Mart ma es full use of its IT infrast ructure to ma e more inventories available in case of items that customers wante d most, while reducing overall inventory. By ma ing use of Bar-coding & RFID tec hnologies, different processes li e efficient pic ing, receiving & proper invent ory control of the products along with easy pac ing and counting of the inventor ies was ensured. Wal-Mart owns the Massively Parallel Processor (MPP), largest & the most sophistic ated computer system in private sector, which enables it to easily trac movemen t of goods & stoc levels across all distribution centers and stores. For emerge ncy bac up, it has an extensive contingency plan in place as well. Employees use Magic Wand, which is lin ed to in-store terminals through a Radio fr equency networ , to eep trac of the inventory in stores, deliveries and bac up merchandise in stoc at the distribution centers. The order management and stor e replenishment of goods is entirely executed with the help of computers through Point of Sale (POS) system. Wal-Mart also ma es use of sophisticated algorithm to forecast the quantities of each item to be delivered, based on inventories in the store. A Centralized inventory database allows the personnel at the store t o find out the level of inventories and location of each product at a given time . It also shows the location of the product li e distribution center or transit on the truc . When the goods are unloaded at the store, the inventory system is immediately updated. RFID in Wal-Mart Wal-Mart had initiated its plan to employ RFID technology in its supply chain in June 2003. Subsequently Wal-Mart reinforced its plans and actively asserted on defining the RFID standards it will be implementing. The specification of the following RFID components was laid out in November 2003 . EPC (Electronic Product Code) specification Type of Chip that would be installed The Distribution centers that will accept RFID tagged products After the defining phase, Wal-Mart specified the RFID requirements to its suppli ers that they should comply with: EPC: 96-bit with a Global Trade Identification number TAGS: Should operate in UHF spectrum (868 MHz to 956 MHz) The TAG will carry the 96-bit serial number and will be field-programmable, that will allow the suppliers to write serial numbers to the tags while being applie d to the products. EPC compliant tags in UHF band consists of two main parts: EPC data format on the chip Class0 or Class1 communication protocol Class0 is a factory programmable tag Class1 provides the capability to the end users to write serial number on it Wal-Mart planned to implement Class1 Version2, a globally accepted protocol that incorporates both specification of Class0 and Class1. In addition, Wal-Mart is planning to enhance mobility to its existing RFID tag r eaders by implementing RFID-enabled for lift. These readers will have the capabi

lity to read the tags on the pallets and transmit data through the RFID networ , which would help the users to be better informed about the supply-chain data. Efficiency in Supply Chain with RFID The various components of Supply Chain are: Procurement, Distribution, Logistics and Inventory Management. Since the core of Wal-Mart business is perpetual improvement in its Supply Chain implementation, it believes in no-compromise on implementing an innovative IT inf rastructure and strong communication system as they are they the important lin s in the chain for a smooth functioning of the complete system. Wal-Mart tapped RFID technology with an aim to increase the efficiency of its su pply chain. This is because RFID implementation will enhance transparency of the ir supply chain and hence will help them minimize cost and labor and will streng then inventory control. According to Venture Development Corporation, With Wal-Mart selling over $245 billion worth of goods in fiscal year 2003, a 1% improvement in the out-of-stoc issue could generate nearly $2.5 billion in very profitable sales. In addition, a study by Cohen at Wharton chal s out the difference between the e xisting inventory management and the RFID enabled supply chain. In current systems, you may now there are 10 items on the shelf, and that inform ation is compiled in an enterprise planning software system. With RFID, you now there are 10 items, their age, lot number, and expiration date and warehouse or igin. "It s li e nowing there are 1,000 people in a city," says Cohen. "With RF ID, you now their names." From the above studies it indicates that employing RFID technology will help in implementing a seamless supply chain and hence yield profits. The increase in their efficiency is evident from the news article at Breitbart.c om, where it states that implementation of RFID tags in Wal-Marts inventory has h elped boost sales by eeping shelves better stoc ed. Usage of RFID has reduced o ut-of-stoc merchandise by 16% at the stores that have implemented RFID tags for more than a year. The CIO at Wal-Mart stated that, Wal-Mart has been able to restoc RFID-tagged items three times as fast as non-ta gged items. In addition to improving the availability of in-stoc merchandise, Wal-Mart aims to reduce the practice of manually placing the order and has achieved 10% reduc tion in the case. The recent studies show that 130 major suppliers ship merchandise to Wal-Mart di stribution centers with about 5.4 million tags. Wal-Mart expects to increase RFI D implementation by adding another 200 suppliers that are projected to supply to another 1000 stores. At present, Wal-Mart is at a nascent state of implementing RFID. In addition to strengthening the Supply Chain, the largest retailer is also loo ing into differ ent dimensions where RFID can be helpful. As a pilot test, Wal-Mart is wor ing o n the data collected by RFID to analyze the consumer behavior. According to Venture Development Corporation, the major implementation milestone

s of RFID at Wal-Mart are to expand Regional and domestic implementation of RFID throughout 2005. These include Regional Distribution Centers, Grocery Distribut ion Centers and Sams Club Distribution Centers in Texas. And, by 2006, Wal-Mart a ims to mandate RFID implementation for all its suppliers.

Wal-Mart Suppliers Some of the major suppliers of Wal-Mart are: Gillette, Hewlett-Pac ard, Johnson & Johnson, Kimberly-Clar , Kraft Foods, Nestl e, Purina PetCare Company, Procter & Gamble and Unilever. Kimberly-Clar Kimberly Clar is a manufacturer of paper goods products that include Kleenex, H uggies and Depend. In April 2004, Kimberly Clar tagged its Scott paper towels s hipment with RFID tags to be shipped to Sanger, Texas. Kraft Foods Kraft Foods, the largest food company employs RFID system to improve handling of its bul containers. Kraft has outsourced its RFID system to TrenStar to handle the complete supply chain. Gillette Smart razor blades have been introduced to the supermar ets. Gillette has ordere d half a billion tags to trac razors. The Gillette Company uses RFID for both p allet and case applications. All the cases in a pallet are scanned with RFID rea ders as they move along the conveyor belt. In a trial at Tesco s new mar et Road branch in Cambridge, the pac aging of Gillette Mach3 razor blades has been fitt ed with tiny chips. Current Usage of RFID RFID technology is rapidly evolving and growing, providing solutions to a wide a rray of problems. Many companies are finding value in implementing RFID systems today especially when it is applied to solve more realistic supply chain problem s. The ey factor, as with any new technology, is to understand the capabilities of RFID and evaluate how it can be useful to our operations today. Though RFID deployment is still not full fledged, it is clear that its deployment is an atta inable future goal. The value, which is the most important metric for a RFID app lication, is determined by considering the following ey factors: Basic asset and inventory visibility needs, Speed, range and reliability needed to trac the target product ROI (Return On Investment) in the context of scope for improvements RFID in Military The U.S. military has also been heavily involved in SCM. The militarys main focu s is on getting equipment and necessities to the servicemen and servicewomen who are on the battlefield. This is quite different from most businesses that ofte n lose sight of the end customer in the process. In a memo issued bac in 2003 by the Acting Under Secretary of Defense that said , The Department of Defense will be an early adopter of innovative RFID technolog ies that leverages the Electronic Product Code (EPC) and compatible tags. Our p olicy will require suppliers to put passive RFID tags on lowest possible piece p art/case/pallet pac aging by January 2005. We also plan to require RFID tags on ey high-value items. The goal of the military is to improve data quality, item

management, asset visibility, and maintenance. The DOD has done a good job at meeting this goal. They continue to be on the cutting edge in advances in milit ary logistics using RFID and SCM. The Army has experimented with a concept called anticipatory logistics. Anticip atory logistics is quite similar to the corporate worlds SCM. They both consist of seven main components. These are suppliers, procurement, manufacturing, orde r management, transportation, warehousing, and customers. Anticipatory logistic s is in an attempt to use technologies, information systems, and procedures to p redict and prioritize needs and provide supplies in a timely manner. The milita ry approach to SCM is only slightly different than that of the commercial indust ry. The military focuses on mission requirements as opposed to profit and loss statements, which are what drives a corporation. According to a benchmar initiative by Deloitte & Touche, only seven percent of companies are effectively managing their supply chains. The interesting fact is these companies are seventy three percent more profitable than other manufactur ers. This lends to the belief that proper SCM is beneficial to a companys bottom line. Efficient SCM is difficult to implement and is being widely studied. Com panies must find the right balance between inventory, transportation and manufac turing costs. If this is done properly, SCM will be successful and the company will li ely receive the rewards by way of increased profitability. Successful RFID Implementation in different Industries Vol swagen Vol swagen, Europe s largest automa er and the fourth largest auto manufacturer in the world are deploying RFID technology to speed up vehicle pic up and improv e customer service. The system is used to quic ly locate a car in the holding lo t, which has over 10,000 automobiles, and to trac the vehicles progress throug h a pre-delivery system. After the production line, every vehicle is equipped with an i-Q8 tag, an active tag that contains a unique identification number and pre-delivery tas s. The ve hicle is then delivered to the holding lot. An Intelligent Long Range (ILR) -ena bled van with an RFID reader identifies the targeted vehicle when approaching th e car. After the pre-delivery tas s are completed, the status is written to the active tag. After deploying active RFID solution, Vol swagen claims to have witnessed the be nefit of significant reduction of the vehicle delivery time and productivity has been improved by as much as four times. The solution also provides additional b enefits such as improving quality control, electronic wor -in-process trac ing, and automatic status update. Supermar et tries out smart tagging The electronic radio tags will allow staff and customers to eep trac of the go ods in the store. They will also help prevent shoplifting, trac ing the items fr om the shelf to the till and out of the door. British supermar et chain Tesco ha s started to install smart shelves that can trac items as they are placed or remo ved. If the product goes through the door without being paid for an alarm is set off. Sun Microsystems sets up RFID test centre in Scotland Sun maintains that RFID tags have the potential to cut huge costs from the suppl y chain of retailers and manufacturers and said the European centre will help fi rms with the tagging of products, integrating the information into bac -end syst ems and sharing it with their supply chain partners.

I.B.M. Expands Efforts to Promote Radio Tags to Trac Goods IBMs move into the RFID tag printer business with an RFID-capable printer designe d to help customer reduce costs and improve operational efficiencies. Also I.B.M . consultants began selling advice on consumer privacy issues related to the use of radio identification tagging of consumer goods. Texas Instruments Texas Instruments deploy RFID in the field of logistics/supply chain management. TI-RFID technology connects all phases of the supply chain, from resourcing and manufacturing to inventory and distribution. RFID creates real time information lin s that speed production, improve quality and streamline delivery. EPC global Networ The EPC global Networ uses RFID to enable true visibility of objects in the sup ply chain. The networ has five fundamental elements: The Electronic Product Code (EPC) is a unique number that identifies an item in the supply chain, whether that is an individual product or a case, or pallet, of many products being shipped. Each silicon chip of each RFID tag is encoded with a unique EPC that identifies the product. The silicon chip is wired to an antenna, and, using radio frequency identification technology, each tag communicates to an RFID reader its EPC. The Object Name Service (ONS) collects the EPC that is passed on from the reader . The ONS resides on a computer or local application system. It tells the comput er systems where to locate information on the networ about the item whos EPC it has just encountered. This information will typically reside on the Internet, ma ing it readily available on a worldwide level. Physical Mar up Language (PML) is an XML-based language that is used to define d ata on objects. Savant is the middleware technology that coordinates the movement of information over the computer systems. Limitations and Challenges of RFID Many issues still exist about the implementation of RFID that even Wal-Mart may have trouble addressing despite their decision to move forward with the new tech nology. Current challenges in RFID implementation are: Global standards: A single global RFID standard is highly unli ely to evolve. Li e barcodes, standards for RFID will probably vary between many regions of the w orld. Multinationals li e Wal-Mart may need to implement a variety of RFID stand ards and technologies across their global organizations. Technology problems: Problems such as signal distortion, reader accuracy and spe ed, and tag transmission capabilities persist ma ing RFID still not practical fo r widespread use. Some of the major technical limitations are: 1. Read-range distances are not sufficient to allow for consumer surveillan ce: Most of the RFID tags currently in use have read ranges of fewer than 5 feet . The read range of the RFID tags depends on the antenna size, transmission freq uency, and whether they are passive or active. 2. Limited information contained on tags: Although some researchers on RFID support this aspect of the technology by pointing out that the tags associated with most consumer products will contain only a serial number. However, this num ber can reveal a lot of information, which is generally used as a reference numb er that corresponds to information contained on one or more Internet-connected d atabases. This means that the data associated with that number is theoretically unlimited, and can be augmented as new information is collected. 3. Defective and poorly performing RFID tags: RFID tag manufacturers contin ue to produce faulty tags. Failure rates in early RFID pilots have been as high as 30%. Unfortunately, "relatively high reliability" is unacceptable if an RFID mandate calls for a 100% read rate.

4. Damaged RFID tags: Since tag reading happens automatically without line of sight and no human interaction, it can be difficult to now when certain tags are not read. This becomes a serious issue for business applications built arou nd RFID if 100% read rates are implicit as part of the core business application design. Data management: Lac of development of right information management tools to ma nage the data effectively, is ma ing it difficult to realize the full potential of RFID in generating a wealth of information. Companies planning to adopt RFID f ace technical concerns related to effective data capture (or reading), and to da ta volume (in database management and transmission). Cost: Any developing technology is associated with high costs and so is RFID, wh ich is highly expensive to implement. Individual tags cost about 30 cents each; t his will drop to between one and five cents per tag once billions are being prod uced . And depending on functionality, tag readers can cost anywhere from several hundred to several hundred thousand dollars. The largest cost issues, however, reside in the required size of the databases, their integration with a companys c urrent systems and the effective transmission of information. Associated costs c an approach the millions of dollars, but they are unavoidable if the full benefi ts of RFID are to be realized. Industry Standards: Many privacy advocates are insisting the companies to state their intended use of the technology due to lac of industry standards regardin g the use of personal information that could be encoded on the chips. Privacy and civil liberties: One major confrontation for RFID technology would b e to deal with the threats to consumer privacy and civil liberties. RFID tags ca n be embedded into/onto objects and documents without the nowledge of the indiv idual who obtains those items. Must be programmed, applied and verified individually, and data synchronization is usually required. A final barrier to implementation that may need managing is employee acceptance, particularly in light of potential job losses. RFID Practices that should be prohibited: Merchants must not force their customers into accepting RFID tags in the product s they buy. RFID must not be used to trac individuals absent informed and written consent o f the data subject. Human trac ing is inappropriate, either directly or indirect ly, through clothing, consumer goods, or other items. RFID should never be employed in a fashion to eliminate or reduce anonymity. For instance, RFID should not be incorporated into currency. What Should Wal-Mart Do? Wal-Mart should redefine the scope of its RFID mandate by narrowing the scope of products to those with limited amounts of metal and liquid. Suppliers would not be affected with a narrower focus on high-priced products li e prescription dru gs, apparel, and DVDs etc. It gives additional time for vendors and suppliers to perfect tag reliability for all products. Forrester recommends that Wal-Mart use its influence to help create a buying consortium, giving suppliers the collecti ve power to cut tag costs . What Should Suppliers Do? Suppliers should use their initial nowledge to shape mandates by Wal-Mart and o ther retailers. In addition to addressing the challenges they are facing in imple menting RFID with Wal-Mart, suppliers should create an internal RFID lead positi on with direct access to the CEO. Future of RFID

Fig 6: State of RFID technology deployment [Source: AMR Research, 2005] Future Applications In the pharmaceutical industry, RFID tags on drug bottles are being used

as anti-counterfeiting devices. Pet owners have begun implanting their cats and dogs with RFID chips to locate them should they become lost. In libraries, boo s are being tagged for self-automated chec out, freein g up librarians to perform other tas s. This also allows a librarian to easily l ocate a boo misplaced on the wrong shelf. The USDA is pushing to give every cow in the United States its own uniqu e identification number, ma ing it easier to trac diseases, such as mad cow dis ease, bac to the originating farm. It has been ac nowledged that RFID technology can be used for mar eting purposes or even, in a Brave New World scenario, government trac ing of its citi zens. For instance, it is possible to ubiquitously embed the chip within a produ ct, for instance a pair of jeans or a set of automobile tires. What is most frig htening, however, is the ability to implant an RFID chip under the human s in. The future of RFID is uncertain. There has been a mixed reaction from the variou s suppliers and customers who already deployed RFID into their industry. Industr y analysts are unanimous on the view that RFID is going to dominate the industry soon. RFID technology will reach the zenith by the end of 2006 and from a retai lers perspective the technology will bring a revolution, ey retailers such as T esco and, in particular, Wal-Mart of the US are pushing ahead with the technolog y that will end up affecting thousands of suppliers. So too is the US Department of Defense. It will be widely used in retail and consumer goods, automotive, he althcare, military, postal department and other scientific use but if consumers really don t li e the idea if it s too confusing for them, too much technology o r their privacy concerns are too strong will the technology survive is the quest ion to be answered. Two things are clear when it comes to RFID. First off, there has been no clear r oadmap that a company can employ while evaluating RFID opportunities or mandates . The typical approach has been one of trial and error. Secondly, the future of RFID is going to be determined more by the dominant applications rather than by the technology. Many see RFID as a technology in its infancy with an untapped po tential. While we may tal of its existence and the amazing ways in which this t echnology can be put to use, until there are more standards set within the indus try and the cost of RFID technology comes down we won t see RFID systems reachin g near their full potential anytime soon. Researchers have concluded that organizations should eep initial RFID projects at a simpler scale. This might include single stage implementation, such as trac ing cases or pallets within warehouses, or from warehouse to store, or acting as bar-code replacements 9. Before any organization can seriously contemplate using RFID to support its operations, it should have a firm understanding of the bene fits that the technology can provide. This level of understanding and experience will be necessary before moving to more complicated supply chain implementation s in ma ing RFID a big success. RFID learning curve is a long process and starti ng with small projects and then establishing standards for efficient future prod uct movement can effectively implement it. As the old saying goes, "the early bird catches the worm." Even if the true benef its will not be realized for several years, establishing the base RFID infrastru cture today is the ey driver for total supply chain adoption and benefit realiz ation tomorrow10. REFERENCES: Bose & Pal. Auto-ID: Managing Anything, Anywhere, Anytime in the Supply Chain. A CM Digital Library: Communications of the ACM, Volume 48, Number 8, Pages 100-10 6, August 2005.

Military Edict: Use RFID by 2005. RFID Journal. Retrieved from http://www.rfidjournal.com/article/articleview/604/1/1/. http://www.almc.army.mil/alog/issues/SepOct02/MS774.htm http://lcm.csa.iisc.ernet.in/supply_chain_intro.html http:// nowledge.wharton.upenn.edu http://www.ameinfo.com/66090.html http://www.logisticstoday.com/ASP/viewarticle.asp?strarticleID=106246&page=1 Smaller, Faster, Cheaper, Quieter. So What Else Is New?NetNews, June 2004 http://www.walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=453&contId=5700 http://www.tutorial-reports.com/wireless/rfid/walmart/rfid-future.php http://www.rfidgazette.org/2005/09/rfid_and_walmar.html http://icmr.icfai.org/pdf/Operations%20Case%20Study%20-%20Wal-Marts%20Supply%20C hain%20Management%20Pr.pdf http://www.rfidjournal.com/article/articleview/435/1/26/ http://www.baselinemag.com/article2/0,1540,1612149,00.asp http://www.morerfid.com/details.php?subdetail=Report&action=details&report_id=55 2 http://www.infoworld.com/article/05/08/09/33OPreality_1.html http://news.bbc.co.u /1/hi/technology/2661825.stm http://news.zdnet.co.u /hardware/emergingtech/0,39020357,39118283,00.htm http://web.mit.edu/21w.784/www/BD%20Supplementals/Materials/Unit%20Two/Security% 20Privacy%20Identity/IBM%20promotes%20radio%20tags%20NYT.html http://www.physorg.com/news4530.html http://www.searchemall.com/rd/results/rdq_logistics_supply_chain/www.ti.com/tiri s/docs/solutions/supply/logsup.shtml/searchemall_TI_RFid_(Texas_Instruments_Radi o_Frequency_Identification_Solutions)_offers_the_most_extensive_range_of_transpo nder_reader_and_antenna_products_for_a_widewww_ti_com_tiris_docs_solutions_suppl y_logsup.html http://www.rfidgazette.org/2004/06/rfid_101.html http://u .news.yahoo.com/27092005/221/rsi-aggressively-prices-rfid-labels.html http://www.theautochannel.com/news/2005/09/26/143922.html http://www.sapinfo.net/ http://www.itrportal.com/ http://www.amrresearch.com/ http://www.rfid-101.com/ http://www.rfidgazette.org/2004/06/rfid_101.html

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