Chapter 21: Radio frequency identification (RFID) as a catalyst for improvements in food supply chain operations – Delivering Performance in Food Supply Chains

21

Radio frequency identification (RFID) as a catalyst for improvements in food supply chain operations

K. Pramatari, A. Karagiannaki and C. Bardaki,     Athens University of Economics and Business, Greece

Abstract:

The objective of effective supply chain management is the coordination of information, materials and financial flows between organisations. The recent trends of globalisation, consumer pressure for responsiveness and reliability, and intense competition in the global trading community have made effective supply chain management a very challenging issue. New information technologies are promising for optimising supply chain operations and solving many related issues. Indeed, supply chain management information systems have greatly benefited companies that use them, minimising information processing costs and raising great potentials like information sharing and fast communication that were not feasible before. RFID is an emerging technology that can further contribute to supply chain optimisation. RFID enables accurate real time product location information provision in high volumes and at very low (or even zero) labour costs. This chapter looks closely into the technology of RFID and the way it is employed in supply chain management and, particularly, in the food supply chain by describing two applications. The first describes the requirements’ analysis, development and pilot implementation of a RFID-enabled traceability system for a company that deals with frozen food. The second describes a distributed, service-oriented architecture that supports RFID-integrated decision support and collaboration practices in a networked business environment. In the context of retail industry, a RFID-integrated ‘dynamic pricing’ service is described regarding its functionality and implementation. Several considerations from the cases are presented which could provide valuable feedback to other organisations interested in moving to a RFID-based scheme.

Key words

food supply chain

RFID

supply chain optimisation

21.1 Introduction

With the competitive differentiators of cost reduction, service enhancement and operations’ velocity, the deployment of new information initiatives has become a market mandate for every firm that struggles to streamline its supply chain. This implies that the introduction of new information technologies should be perceived and positioned as a catalyst for better business practices and not as a cost to a business or as a voluntary responsibility.

Nowadays, the emerging radio frequency identification (RFID) technology is expected to meet the above requirements and thus revolutionise many supply chain operations. RFID is a technology that uses radio waves to identify objects automatically. The identification is done by storing a serial number, and perhaps other information, on a microchip that is attached to an antenna. This bundle is called an RFID tag. The antenna enables the chip to transmit the identification information to a reader. The reader converts the radio waves reflected back from the RFID tag into digital information that can be passed on to an enterprise information system (Kelepouris et al., 2007). The advanced data capture capabilities of RFID technology coupled with unique product identification and real-time information coming from different data sources, such as environmental sensors, define a new and rich information environment that opens up new horizons for efficient management of supply chain processes and decision support.

RFID offers a wide range of applications across several industries, such as healthcare, transport and textiles. The value of RFID may diverge and its effect or change can be greater in specific industries. A predominant industry that seems to benefit largely through RFID is the food industry. All in all, the food industry represents a supply chain that is increasingly being challenged by legal compliance, safety and quality assurance, risk prevention, efficient recalls/withdrawals and the consumers’ right to know. These characteristics make the piloting and implementation of a RFID system a particularly appealing investment. As a result, RFID applications in the food supply chain range from upstream warehouse and distribution management down to retail-outlet operations, including shelf management, promotions management and innovative consumer services, as well as applications spanning the whole supply chain, such as product traceability (Pramatari et al., 2005).

However, despite all the areas of opportunity and the fact that many companies (Metro, Tesco, Delhaize, Ahold, Rewe) have pilot tested the technology or have already started roll-out, the level of RFID implementation can be considered as pre-mature. Moreover, several white papers and reports published recently either focus on related technical aspects or are mainly qualitative studies of business cases for RFID deployment (Angeles, 2005; Jones et al., 2005; Curtin et al., 2007; Attaran, 2007; Reyes and Jaska, 2007). In addition, there is a small, but growing body of literature trying to give a quantitative assessment of the deployment of RFID (Lee et al., 2004; Fleisch and Tellkamp, 2005; Atali et al., 2005; Gaukler et al., 2006; Wang et al., 2008). In view of the pre-mature level of RFID research and implementation, it is obvious that as with all novel technologies, there is a credibility gap: ‘To make robust investment decisions we need a much more credible assessment of the true value of RFID ... based on the operating characteristics of the underlying supply chain processes’ (Lee, 2007). Evidently, the value of investment in RFID constitutes a matter of considerable concern and debate for both practitioners and academics alike.

This chapter looks closely into the technology of RFID and the way it is employed in supply chain management and, particularly, in the food supply chain. Section 21.2 presents a general description of the RFID technology within supply chain management. Section 21.3 demonstrates the value of RFID based on empirical evidence by describing two applications. The first describes work undertaken for a company that deals with frozen food regarding the requirements’ analysis, development and pilot implementation of a RFID-enabled traceability system. The second describes a distributed, service-oriented architecture that supports RFID-integrated decision support and collaboration practices in a networked business environment. In the context of retail industry, the functionality and implementation of a RFID-integrated ‘dynamic pricing’ service are described. Finally, Section 21.4 provides several considerations from cases that could provide valuable feedback to other organisations interested in moving to a RFID-based scheme. While offering an immense learning value for academics and researchers, it is hoped that this chapter will help professionals and executives to understand the far-reaching applications of RFID better.

21.2 Radio frequency identification technology within supply chain management

RFID is a generic technology concept that refers to the use of radio waves to identify objects (Auto-ID Center, 2002). RFID tags have both a microchip and an antenna. The microchip is used to store object information such as a unique serial number. The antenna enables the microchip to transmit object information to a reader, which transforms the information on the RFID tag to a format understandable by computers (Angeles, 2005).

There are two types of RFID tags, with regard to the source of electric energy they use:

• Passive tags: these are the most common tags used for identification. The tags receive energy from the reflected radio waves transmitted by the reader and transmit the digital information stored in the microchip. The reading range of passive tags is limited to a few metres, owing to the way the energy is received. However, passive tags are far cheaper than active tags. The cost of a simple passive tag starts from US $0.05 and is expected to fall by 10% annually in the future.

• Active tags: these tags carry an embedded battery and transmit radio waves by themselves. The range of active tags can reach a few hundred metres but their cost is much higher than that of passive tags.

RFID technology has been extensively used for a diversity of applications ranging from access control systems to airport baggage handling, livestock management systems, automated toll collection systems, theft-prevention systems, electronic payment systems and automated production systems (Agarwal 2001; Hou and Huang, 2006; Kelly and Erickson, 2005; Smith and Konsynski, 2003). Nevertheless, what has made this technology extremely popular nowadays is the application of RFID for the identification of consumer products and the management of supply chain processes.

The application of RFID technology in the supply chain refers to the attachment of an RFID tag in every single product in the supply chain that will uniquely identify it globally. The number of tags to be deployed is immense and, for cost reasons, passive tags are the most appropriate for deployment in the supply chain. The deployment of RFID tags in the supply chain will start from pallet level, then at case level and as soon as the tag’s cost decreases sufficiently, tags will be applied to all products in the supply chain. However, it is not believed that this will happen in the next 7–10 years (Shutzberg, 2004).

The deployment of RFID in the supply chain was initially supported by the AUTO-ID research centre (http://www.autoidlabs.org/), which was founded in 1999. The AUTO-ID Centre is a not-for-profit federation of seven research universities (including MIT, Cambridge and St. Gallen) and its objective is to develop an open standard architecture for creating a seamless global network of physical objects. In 2003, the AUTO-ID Centre was substituted by AUTO-ID Labs. Since October 2003, the research and standardisation of RFID deployment in the supply chain has been coordinated by EPCglobal Inc (http://www.epcglobalinc.org). EPCglobal is a joint venture between EAN International and the Uniform Code Council (UCC). It is a not-for-profit organisation entrusted by industry to establish and support the Electronic Product Code (EPC) Network as the global standard for immediate, automatic and accurate identification of any item in the supply chain of any company, in any industry, anywhere in the world. The objective of EPCglobal is to drive global adoption of the EPCglobal Network.

According to Agarwal (2001), RFID technology is believed to benefit organisations in the following crucial supply chain issues:

• Improving product availability: RFID tagging can tame the phenomena of out-of-stock and out-of-shelf. The ability to provide the necessary solutions lies in the ability to capture the behaviour of each stock keeping unit (SKU) at each location through tagging. Moreover, readers can provide accurate data on shelf and backroom availability, as well as the time of delivery of incoming products, triggering the necessary alarms to the store personnel about a reordering or a replenishment that needs to take place.

• Mass customisation: Use of RFID technology, will provide each product with a unique product identification from very early in its life. This carries details of how a standard machine cell would have to be configured to make the product as well as the required specification of the final product. In this instance such standard cells would become highly flexible with the ability to reconfigure on the demand of product arriving, enabling mass customisation.

• Automatic proof of delivery: Using RFID tagging, the process of obtaining proof of delivery can be automated, eliminating manual errors. Products can simply be passed through tag readers at the retailers rather than have to be checked and counted manually. In addition, manufacturers will not just save on the cost of products unpaid for, but also on the man hours spent processing and negotiating the claims of the retailers.

• Security: RFID technology can increase security in the supply chain and combat retail theft. The level of theft can be reduced, as readers could warn personnel of any attempted theft in the vicinity. In addition, stolen products can be identified and restored to their rightful owners.

• Eliminating stock verification: Using RFID technology products can be passed through tag readers and the stock verification can be automated, speeding up the process and eliminating manual effort. Automated operation also eliminates errors in scanning and labelling. RFID can provide continuous, accurate and real-time information on the type of product, the amount and its location in a company’s site.

• Reducing inventory levels: RFID technology can reduce inventory across a supply chain. This can be done by:

– reducing order cycle times through better information flow

– enabling the improvement of forecast accuracy though better and quicker information on current demand patterns

– understanding promotions better through visibility of consumer behaviour

– reducing variability in ordering

– increasing speed and accuracy of planning

– increasing flexibility in responding to unexpected demand.

In the food supply chain, RFID can potentially empower a broad spectrum of applications, ranging from upstream warehouse and distribution management down to retail-outlet operations, including shelf management, promotions management and innovative consumer services, as well as applications spanning the whole supply chain, such as product traceability (Pramatari et al., 2005). Despite the broad spectrum of applications, RFID implementation currently takes place internally within a company, mainly with the objective of automating warehouse management processes or store operations when making the first move. In the future, an industry report (GCI, 2005) identifies certain application areas (specifically store operations, distribution operations, direct store delivery, promotion/event execution, total inventory management and shrink management) as major opportunities for the deployment of RFID technology in the short- and mid-term. These application areas have been selected based on their performance in comparison to the ratio of expected benefits over associated costs, including process transformation difficulties. The same report identifies further opportunities in several ‘track and trace’ activities (such as anti-counterfeiting, product diversion, recalls/reverse logistics, fresh/code-dated product management, cold chain monitoring and legal compliance), although it is noted that ‘more work is required to understand its potential applications and benefits in these areas’ (GCI, 2005). The ‘more work’ refers to the need to connect supply chain partners and streamline the flow of information for the applications to operate.

The contribution of RFID can be sought in the following applications:

• the automation of existing processes, leading to time/cost savings and more efficient operations;

• the enablement of new or transformed business processes and innovative consumer services, such as monitoring product shelf availability or consumer self checkout;

• the improvement achieved in different dimensions of information quality, such as accuracy, timeliness, and so on (Ballou et al., 1998);

• the formation of new types of information, leading to a more precise representation of the physical environment, e.g. a product’s exact position in the store, a specific product’s production, distribution and sales history, etc.

The last two applications in particular, need new decision support algorithms and tools for the associated benefits to be exploited, opening up a whole new research area for decision support systems. Furthermore, for the full benefits to be reaped, the information needs not to be exploited locally but shared with supply chain partners in a complex network of relationships and decision making.

Leading companies in the global market have already made moves towards the application of RFID technology to monitor product flow in their supply chain. Wal-Mart, the biggest retail chain in the USA, has mandated its suppliers to apply RFID tags to each pallet arriving in its central warehouse. Pallet-level tagging is expected to be rolled out chainwide in 2010, while the deadline for tagging sellable units is ‘under review’. Metro, a big retail chain in Europe, has implemented a store (called ‘the future store’) that operates using RFID tags applied to each product. Metro has optimised many internal processes in the store utilising RFID technology and provides its customers with innovative services such as semi-automatic checkout and a smart trolley, which carries a TFT display and provides the customer with information about the products on the shelves and the trolley. Furthermore, future store gives Metro the opportunity to asses the benefits of RFID in a real case, measuring the impact of RFID deployment on stock reduction, increased availability and other issues of supply chain management (Hamner, 2005). RFID technology has already been adopted by some suppliers at the product level. Gillette is the most striking example, having already applied RFID tags to some razor products.

The adoption of RFID technology in supply chain management has initiated intense research interest in the following research streams:

• Tag–RF technology: during the last decade extended research has been conducted on the technology of tag implementation and radio wave communication with readers. Since 1999, the AUTO-ID Centre has made some important steps forward in improving tag reliability and readability. Universities and companies have also contributed to this field. The research objective in this area is to make RFID tags as reliable as possible and to reduce production costs to minimum. Research into radio wave communication involves the adoption of appropriate frequencies and protocol implementation for tag–reader communication. The objective of this research area is the improvement of read speed and read reliability. In June 2005, the University of Arkansas announced the opening of the RFID Research Center, funded by a number of companies including Deloitte and ACNielsen. The objective of this research centre is to study the read rates and other deployment issues at each point in the retail supply chain. Many companies (e.g. Wal-Mart) own their own RFID research centres in which they study similar issues (rfidjournal.com).

• Information systems: there has also been significant research activity in the design and implementation of information systems that will store and use the valuable information flows that derive from the adoption of RFID in the supply chain. This research area not only includes technological issues regarding the integration of information systems with the readers and data acquisition, but also ways that this information will be used to optimise crucial supply chain operations. Recently, the biggest enterprise resource planning (ERP) providers (e.g SAP) have updated their software products to support integration with RFID infrastructure. Moreover, extended research in developing middleware that will make it easier for companies to integrate data from RFID systems with their existing enterprise applications. Hong Kong University (www.hku.hk) in collaboration with IBM (www.ibm.com) has already begun a research project in this field.

• Privacy: an important issue that has to be solved before applying RFID on the broad scale in the supply chain (i.e. at the product level) is consumer privacy and personal data protection. Consumers have already reacted in the application of RFID in products, creating boycotting campaigns against the companies that apply RFID to their products. The campaign against Gillette is a good example of this (http://www. boycottgillette.com/). EPCglobal Inc, through the Gen 2 tags specifications has tried to solve this problem, adding a bit into the electronic product code that disables the tag. Therefore, each tag can be disabled as soon as the product leaves the store (EPCglobal, 2005).

• Operations management: extended research has taken place for the exploitation of RFID for the optimisation of internal and interorganisational operations. Apart from the analytical approaches of researchers, companies all over the world have already begun to gain the benefits of RFID technology in optimising supply chain operations. RFID has the potential to revolutionise the efficiency and accuracy of manufacturing and other service operations. Indicatively, RFID has significantly contributed to the optimisation of just in time production and an increase of factory throughput, in which delivery docks are usually a serious bottleneck.

• Marketing: the marketing research stream with regard to RFID deployment is still in its infancy. However, when RFID deployment comes to the product level, consumers must be convinced that the new technology can act also for their own benefit and not to spy on their consumer preferences. Companies must take advantage of RFID to provide consumers with smart high-tech services (smart shelves, smart trolleys, etc) that will encourage consumers to adopt the new technology. These new features should be promoted in a way that will dispel any misconception the public hold that RFID will invade their private life.

21.3 RFID applications in food supply chain

21.3.1 Application A: a proposed RFID-enabled traceability system for the food industry

The application concerns a leading food company in Greece (more than 30% of market share) that is also one of the largest in Europe. Its brands are recognised by millions, reaching consumers in 30 countries whilst expanding across the world map. Its success is based first and foremost on its respect for the consumer and its tireless daily efforts to supply the best possible value in the form of healthy, quality products. The company now comprises four divisions: dairy and drinks, bakery and confectionery, foodservices and entertainment and frozen foods.

The frozen foods division is involved in the production and processing of frozen vegetables and foods in Greece and abroad. The range of the division’s products is constantly developing. It is active in the production of frozen vegetables, pre-cooked meals, mixtures of frozen vegetables and, more recently, fresh salads. Over its 35 years in the market, it has always been innovative and generated new products. Realising the potential of RFID to improve different aspects of the warehouse, the company decided to participate in a project partly funded by the General Secretariat for Research and Technology, Ministry of Development of the Hellenic Republic, investigating the requirements’ analysis, development and pilot implementation of a RFID-enabled traceability system within the central warehouse.

The warehouse and its operations

The company has a central warehouse that stocks frozen vegetables and includes a production unit where vegetables are packaged in bags. This section includes the description of the as-is operations within the central warehouse and aims to understand the relationships between various activities and identifying operations that are troublesome and can be improved by the deployment of RFID. This is accomplished by interviewing and visually examining operations including queues, bottlenecks, and human errors and, as a result, gain insight into the problems that are expected to be improved by RFID deployment.

The raw materials constitute domestic fresh vegetables (e.g. green beans, peas) or imported frozen vegetables. The incoming fresh product is frozen immediately and packaged in large containers. The imported frozen vegetables that arrive in the factory from approved suppliers from abroad are packaged directly in large containers. The semi-finished product is either from freezing and packaging domestic fresh vegetables in large containers or the packaging imported frozen vegetables in large containers. The large containers are then stored in a chamber for semi-finished products until there is a need to put them into consumer packaging. Packaging follows a rolling and controlled programme based on the sales target. Then the semi-finished product is conveyed to a machine which bags it and puts it into a sachet/pouch. Workers stack the sachets in cases and, finally, palletise the cases. Consequently, the finished product is derived by packaging the semi-finished product in sachets, cases and pallets (see Fig 21.1).

Fig.21.1 The most important processes that take place within the central warehouse.

In the receiving process, a container carrying fresh vegetable arrives at the assigned docks outside the warehouse. The products on the bed of the container are unloaded onto a conveyor, which triggers the production line.

In the manufacturing process, freezing is seasonal, based on a harvest that starts in May. By the end of December the last vegetables have been picked, processed and stored as semi-finished products. The actual process of freezing a food item varies depending on what is to be frozen. Peas are the most common frozen vegetable. The pea process is typical of many vegetables. A typical process for a frozen product involves the following steps:

• cultivating the peas

• picking and washing

• blanching

• sorting

• inspecting

• transferring from the oven to the freezer

In quality control, frozen foods must be carefully inspected both before and after freezing to ensure quality. When vegetables arrive at the processing plant, they are given a quick overall inspection for general quality. The peas are inspected visually to make sure that only the appropriate quality peas go on to the packaging and freezing step. Laboratory workers also test the peas for bacteria and foreign matter, pulling random samples from the production line at various points.

In the packaging process, the frozen vegetable passes on a belt to mechanical equipment that bags it and puts it in a case. Then, workers dressed in cold-weather gear for protection palletise the cases. The pallets are stored in a warehouse cooled to between − 17.8 and − 28.9 °C. They remain there until demanded by the customer.

In the storage process, although a warehouse management system (WMS) is in place, the process of storage of semi-finished products depends heavily on quality variation and first-in-first-out (FIFO). It is impractical to have predetermined fixed positions because of the characteristics of the particular product. As a result, the assignment of the semi-finished product to storage locations is haphazard, indicating that products are not stored in designated fixed locations (random storage scheme). The system considers only the production and the expiration date of the products. Product enters the warehouse to a location designated by quality control and they are released automatically by the system in a certain number of days after the production date. The finished product is stored in two chambers: one that consists of pallets of finished products and one that consists of cases of finished products.

In the picking process, whenever an order is requested, a picking list is generated. The operator of an indoor forklift truck picks up the corresponding products from the designated locations using the WMS and their own perception. This policy of marshalling products for delivery is chosen because it is easily employed and order integrity can be maintained. Multiple orders are picked consecutively and are accumulated applying a first-come-first-served (FCFS) logic that combines orders as they arrive until the maximum cubic and weight capacity of a container has been reached.

In the shipping process, before being transported, products destined for one truck are held together at a provisional position. During this time, an operator gives them a compliance check. After that, a truck arrives at the designated docks and all products are loaded on the bed of the truck. Then, the truck departs for its destination.

Alternative radio frequency identification implementation

Alternative RFID implementation scenarios result from the recognition of inefficiencies within the warehouse. The implemented RFID scenario should satisfy and improve most of these inefficiencies. Through the interviews that were conducted, the inefficiencies that occur within the warehouse were found to be the following:

• need for automatic tracing of quality controls – requires electronic data entry of the files of agronomists and food technologists

• need for a more efficient picking of the semi-finished products’ pallets – they are stored without precise recording of their location

• need for automation of the replenishment process between the chamber where the finished products are stored in pallets and the chamber where the finished products are stored in cases

• need for precise tracking at the case level within the dispatch locations.

The proposed RFID implementations are:

1. electronic data entry of information regarding the quality controls (tracing): lot number relates a particular lot with information regarding the manufacturing process (quality tests of agronomists and food technologists)

2. tracking for order picking (internal traceability): efficient picking of pallets of semi-finished products using FIFO.

3. automation of storage and replenishment (in-bound, out-bound) (internal traceability): automation of the replenishment process between the chamber where the finished products are stored in pallets and the chamber where the finished products are stored in cases

4. tracking at case level:

• shipments to central warehouses and stores

• lot number relates cases with dispatch locations.

Alternative RFID implementations based on improvement opportunities are depicted in Fig 21.2.

Fig. 21.2 Alternative RFID implementations based on improvement opportunities.

Selected radio frequency identification scenarios

Among the RFID alternative scenarios, it was decided to implement the first and fourth scenario based mainly on cost considerations. A detailed description of the final scenario that incorporates the two alternatives follows.

When the freezing process is finished, the technologist performs sample tests (microbiological, natural and chemical) and according to their results, the product quality is defined. The results of these tests will henceforth be recorded electronically, in order to be able automatically to relate the lot number of the semi-finished product with the files of the technologists. The semi-finished product is then stored in the chamber for semi-finished products until it is needed for consumer packaging. Packaging follows a rolling and controlled programme based on the sales target. Then the semi-finished product is conveyed to a machine which bags it and puts it in a sachet/pouch. When, the product is packed in sachets, a change of state from semi-finished to finished product is recorded. This means that the lot number of the semi-finished product will be related to the lot number of the finished product. At this point an RFID will be used at case level. Afterwards, RFID readers will be placed in the shipping areas. During loading the overall bill of goods, the RFID tag of boxes and shipping gate will be recorded. Through the interconnection of the RFID system with the WMS which maintains all the data related to the orders and routes, the lot number of the finished product can be related to the dispatch locations. Finally, the system will provide the possibility of two types of report: (a) tracing, which will allow the data from qualitative control to be retrieved by providing a specific product lot number and (b) tracking, which will allow the current position of products with a specific lot number to be recovered. Implementation of this scenario provides full traceability, as indicated in Fig. 21.3.

Fig. 21.3 The RFID scenario offers full traceability.

Figure 21.4 summarises the implementation scenario.

Fig. 21.4 The RFID scenario.

The functionality of the proposed traceability system

The RFID-enabled traceability system functionality can be summarised as:

• Electronic data entry of the information from quality tests: cross-correlation of lot number of semi-finished product with the files of food technologists at all test stages (microbiological, natural, chemical) of the semi-finished product

• Record of the change from semi-finished to finished product: cross-correlation of lot number of semi-finished product with lot number of finished product

• Record of product shipments: cross-correlation of lot number of finished product with dispatch locations

• Generation of reports: tracing and tracking.

21.3.2 Application B: a distributed service-oriented architecture for radio frequency identification-integrated supply chain collaboration services: the case of dynamic pricing in the retail supply chain

In this section, we describe a service-oriented architecture that utilises the automatic, unique identification capabilities of RFID technology, data stream management systems and web services to support RFID-integrated supply chain decision support and collaboration services in a networked business environment. As a business context, the grocery retail sector has been selected as it is characterised by an intense supply chain environment on one hand, handling thousands of products and supply-chain relationships on a daily basis, and increased competition and consumer demands on the other. In this context, a RFID-integrated dynamic pricing service has been designed, developed, pilot-deployed and evaluated (SMART, 2007b; SMART, 2008a) in a ‘SMART’ project (IST-20005, FP6) with European grocery retailers and suppliers from the fast-moving consumer goods sector as participating user companies.

In this context, the key requirements include the following:

• An immense amount of data needs to be processed in real time: today when products are identified at product-type level through barcodes, the handling of information in real time for decision-support purposes is quite a technical challenge.

• Synchronised product information between supply chain partners must be ensured (Roland-Berger, 2003): although barcode technology has been adopted as a standard to identify products, the information is maintained at different levels in either the retailers’ or the manufacturers’ systems causing serious integrity issues when data exchange and synchronisation are required.

• Many different business relationships need to be supported: each retailer may collaborate with hundreds of suppliers and vice versa.

• Different collaboration scenarios, perhaps applied in each supply chain relationship, need to be supported: a retailer may collaborate with one supplier on efficient warehouse replenishment following continuous replenishment product (CRP)/vendor managed inventory (VMI) or on category management with another supplier etc. (Pramatari, 2006).

• Seamless information sharing and collaborative decision-support, through automated and secure inter-organisational system links, should be ensured.

In order to cope with the above requirements, the architecture employs the following technologies in an integrated network infrastructure:

• Data stream management systems (DSMS), supporting real-time analytics and decision support based on continuous queries of transient data streams.

Many applications involve data items that arrive on-line from multiple sources in a continuous, rapid and time-varying fashion. Under these circumstances, it may not be possible to process queries within a database management system. For this reason, data are not modelled as being persistent, but rather as transient data streams where ‘continuous’, not ‘one-time’, queries are produced over time, reflecting the data stream seen so far. A good example of such an application would be one that constantly receives data from electronic product code observations (e.g. RFID tagged product observations) across a supply chain. Computing real-time analytics (potentially complex) on top of data streams is an essential component of modern organisations (Chatziantoniou and Johnson, 2005).

This architecture employs a data stream management system to perform complex real time analysis efficiently on top of streams of RFID observations. In the context of the retail supply chain, the main purpose of the DSMS it to translate the data streams coming from the RFID infrastructure (tags and readers) into meaningful product-related data, enabling aggregation at various levels and to provide them with business meaning for the retail supply chain partners through the RFID-integrated services.

• Web services orchestration, enabling secure and seamless information sharing and collaboration in a distributed environment (Muehlen et al., 2005).

A web service, as defined by the W3C Web Services Architecture Working Group, is ‘a software application identified by a URI, whose interfaces and bindings are capable of being defined, described, and discovered as XML artifacts’ (W3C, 2002). In general, a web service is an application that provides a web API, supporting applicationto-application communication using XML and the web.

The term ‘orchestration’ has been employed to describe the collaboration of web services. Orchestration describes how web services can interact at the message level, including the business logic and execution order of the interactions. These interactions may span applications and/ or organisations, and result in a long-lived, transactional process. With orchestration, the process is always controlled from the perspective of one of the business parties.

Figure 21.5 illustrates a high-level logical view of the architecture. It is a distributed architecture, where the application layer runs on the system of each collaborating partner and web services implement the interface between the different partners’ systems using simple object access protocol (SOAP) requests and responses. The data layer is implemented by both a relational database management system (DBMS) and a DSMS providing the application layer with continuous real time reports after processing unique product identification data streams generated from the RFID infrastructure. The orchestration engine coordinates the exchange of messages between the partners’ web services following the logic of the specific collaborative services. The service repository component provides an interface for the orchestration engine to execute queries and discover the exposed services from the partners. The object directory component stores partners’ identifiers that can provide information for unique object instances. It accepts queries about unique object instances (electronic product codes-EPCs) and replies with the partner’s identifier which can provide the required object instance information. The partner registration and provisioning component holds all partner information and relationships among partners. It also holds application related information that affects partner relationships. Since the RFID infrastructure recognises unique object instances and not object descriptions, when higher level architectural components need to get information for a specific object, they use the appropriate Object Instance Information Service (OIIS) of the partner which can provide this information (for more information on the architecture please refer to SMART, 2008b).

Fig. 21.5 Logical view of the distributed service-oriented architecture.

Ultimately, this architecture is a generic distributed service-oriented architecture that can potentially support various supply chain collaboration and decision support services, whether these are integrated with RFID technology or not. However, in the course of the SMART project, RFID-integrated services were deployed. Each RFID-integrated collaboration service carries its own value proposition and can be characterised, on a high-level, by the information shared between supply chain partners, the level of RFID tagging (pallet/case/item level) and the location of the RFID readers (Bardaki et al., 2007). The following subsection presents the RFID-integrated ‘dynamic pricing’ service that was supported by the architecture in the course of SMART project.

Radio frequency identification-integrated dynamic pricing in retail supply chain

The generic distributed service-oriented architecture can potentially support various RFID-integrated supply chain services in retail industry. However, the research focused on eight RFID-integrated services, such as back-room and shelf visibility, smart product recall, promotion management and so on (Bardaki et al., 2007). To evaluate the business relevance of the alternative services, an industry survey was conducted, addressed to top executives representing retailers and suppliers/manufacturers of European fast-moving consumer goods (SMART, 2007a; Lekakos, 2007). In addition, a consumer survey provided useful input regarding the evaluation of innovative retail consumer services. The findings of the two surveys (SMART, 2007a) prioritised, among others, the development and implementation of the RFID-integrated dynamic pricing service.

Purpose of dynamic pricing

Dynamic pricing is suitable for products that require frequent price adjustments and it supports different product instances to be sold at different prices (a strategy that is widely used for example in airline tickets). It can be used in the food industry to generate demand for products with a short lifecycle, such as fresh or frozen products that are approaching their expiration date and are soon to become out-of-date gathered stock. Generally, this service can be applied to any product where both the retailer and the supplier have decided to adjust its price according to its expiration date, sales volume, the available stock, and so on. Dynamic pricing requires manual monitoring of the products’ expiration date and available stock with the purpose of pricing mark-down of products approaching their ‘sell-by’ date.

Ultimately, the main concept inspiring this service is to reduce the price of products in order to motivate consumers to buy the nearly out-of-date product items. The goal of the service is to increase the customers’ satisfaction and loyalty by providing them with price mark downs; simultaneously, the freshness of the products will be better ensured and the products’ waste and the labour cost are expected to be reduced.

Functionality of the RFID-integrated dynamic pricing

The placement of RFID tags on product items enables the monitoring of individual stock items’ availability and expiration date from a distance, without requiring line-of-sight; thus, products approaching their sell-bydate can be individually priced or discounted.

Motivated by the aforementioned RFID-offered product monitoring capability, the RFID-integrated service automates the process of dynamic pricing. Specifically, the RFID-integrated dynamic pricing service provides retailers, suppliers and consumers with the following functionalities, via a friendly, graphical user interface:

• Monitor product availability: A number of charts show the availability of the selected product(s) for each expiration date. Information on product availability on the shelf and in the backroom/cold room can be provided.

• Monitor product sales: A number of charts show the performance of the selected product(s) in terms of sales volume. The users (retailers and suppliers) can be informed of the progress of the sales by studying daily or total sales. They are also given the opportunity to monitor the daily shelf replenishment of the products. It should be noted that users can select the period (in days) they are interested in.

• Set new product price: The service proposes a dynamic pricing algorithm, which uses the availability of the products, their expiration date, and so on, in order to provide retailers and suppliers with price mark-down suggestions per product expiration date and stock availability. It is worth mentioning that users can select the criteria based on which the algorithm provides the price suggestions. Then, the retailer and the supplier collaborate to confirm price mark-downs, after considering the algorithm’s price suggestions.

• Electronic shelf display for the consumers: A small electronic display is placed on the shelves to inform consumers in real time about the price mark-down and the shelf availability of the products per expiration date. In this way, the information provided to the back-office via the ‘promotion availability’ functionality also reaches consumers.

Implementation of the RFID-integrated dynamic pricing

A step-by-step approach was adopted to decide on ‘realistic’ RFID-integrated implementation of the dynamic pricing service by assessing its technical feasibility and to what extent the potential benefits gained by RFID outweigh the value of investment in such an initiative. This approach is based on a detailed business process analysis, technical laboratory experiments and a cost–benefit assessment (Bardaki et al., 2008).

Based on the results of the technical tests, the cost versus benefit and the business needs of the users, the dynamic pricing service was implemented as follows in the course of the SMART project:

• Packaged fresh minced meat, kept in the fridge, has been selected to test the service.

• Both case and product item tagging have been selected to satisfy the needs of the service.

• An RFID reader with antennas will be placed at the conveyor belt of the supplier’s packaging facilities to capture the electronic product code (EPC) of the products and cases tagged.

• An RFID reader with antennas will be placed at the exit–entrance of the cold room to capture the delivery of cases and the replenishment of the sales floor (case-level reading).

• An RFID reader will be placed in the regular shelf in the fridge to monitor the product availability (item-level reading).

Figure 21.6 depicts the topology of the RFID readers and the level of tag reading at each location in the dynamic pricing service.

Fig. 21.6 Topology of RFID readers in a dynamic pricing service.

21.4 Conclusions

This chapter looks closely into the technology of RFID and the way it is employed in the supply chain and describes two applications. The first concerns the requirements’ analysis, development and pilot implementation of a RFID-enabled traceability system for a frozen food company. The main implication is that the introduction of an RFID-enabled traceability system would alleviate the ill effects of manual processes caused by automation, eliminate transaction errors, labour intervention and the required cycle time while increasing the throughput speed of product and inventory accuracy. In addition, it would increase the visibility across the supply chain by providing better tracing (electronic data entry of information regarding the quality controls) and precise tracking at case level within the dispatch locations.

Following developments in the RFID field and in supply chain collaboration, the second application describes a distributed, service-oriented architecture that supports RFID-integrated decision support and collaboration practices in a networked business environment. In the context of retail industry, a RFID-integrated ‘dynamic pricing’ service is described regarding its functionality and implementation. The main findings can be categorised into two foci: the proposed architecture and the dynamic pricing service implications. The architecture can potentially support various supply chain collaboration and decision support services, whether these are integrated with RFID technology or not. RFID can help in the introduction of a service that allows individual stock items to be separately identified, as they move off the shelves, and be individually priced or discounted, by monitoring product’s availability on the shelf and in the store and guaranteeing freshness of products by relying on the constant monitoring of the expiration date and reduce waste, labour time and cost.

21.5 Sources of further information and advice

The following is a collection of online materials that anyone can draw upon. This collection is partial since there are thousands of sources in RFID. No endorsement is intended for any source listed, nor any slight intended for any source not listed.

Overviews

• RFID Journal: A guide to understanding RFID (http://www.rfidjournal. com/article/gettingstarted)

• Wikipedia: RFID (http://en.wikipedia.org/wiki/RFID)

• HowStuffWorks: How RFIDs Work (http://electronics.howstuffworks.com/rfid.htm)

• Other online RFID Resources:

– RFID News (http://www.rfidnews.org/)

– RFID Gazette (http://www.rfidgazette.org/)

– RFID Weblog (http://www.rfid-weblog.com/)

– RFID Times (http://rfidtimes.org/).

Organizations

• EPCglobal Inc. (http://www.epcglobalinc.org/home)

    EPCglobal leads the development of industry driven standards for the electronic product code (EPC) to support the use of radio frequency identification in today’s fast-moving, information rich, trading networks.

• Auto-ID Labs (USA) (http://www.autoidlabs.org/)

    The Auto-ID Labs are the leading global network of academic research laboratories in the field of networked RFID. The labs comprise seven of the world’s most renowned research universities located on four different continents. These institutions were chosen by the Auto-ID Center to architect the Internet of Things together with EPCglobal.

• RACE networkRFID (http://www.race-networkrfid.eu/)

    RACE networkRFID is designed to become a federating platform for the benefit of all European stakeholders in the development, adoption and usage of RFID. The network considers its mission is to create opportunities and increase the competitiveness of European Member States in the area of RFID through leadership, development and implementation. At the same time it will position RFID technology within the mainstream of information and communications technology (ICT).

• Ubiquitous ID Center (Japan) (http://www.uidcenter.org/index-en.html)

    The Ubiquitous ID Center was set up within the T-Engine Forum to establish and popularise the core technology for automatically identifying physical objects and locations and to work toward the ultimate objective of realising a ubiquitous computing environment.

• RFID Alliance (http://www.rfidalliancelab.org/index.shtml)

    The RFID Alliance Lab, housed at the University of Kansas, is a notfor-profit testing facility that provides objective benchmarking reports on RFID equipment.

Companies

• Large companies with a large volume of RFID production

– Texas Instruments (http://www.ti.com/rfid/)

– Philips Electronics (http://www.nxp.com/products/identification/)

• Smaller companies with a primary focus on RFID solutions

– Alien Technology (http://www.alientechnology.com/)

– Intermec (http://www.intermec.com/)

– Impinj (http://www.impinj.com/)

– Ascendent ID (http://www.ascendentid.com/)

• Large companies with an RFID solution capability

21.6 Acknowledgement

Application A has been partly funded by the General Secretariat for Research & Technology, Ministry of Development of the Hellenic Republic. Application B is partly funded by the SMART research project (IST-2005), Information Societies Technology Programme, 6th Framework, Commission of the European Union (www.smart-rfid.eu).

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