Marketing Intelligence & Planning

Emerald Article: Radio frequency identification (RFID): Invaluable technology or a new obstacle in the marketing process? Bo Rundh

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To cite this document: Bo Rundh, (2008),"Radio frequency identification (RFID): Invaluable technology or a new obstacle in the marketing process?", Marketing Intelligence & Planning, Vol. 26 Iss: 1 pp. 97 - 114 Permanent link to this document: http://dx.doi.org/10.1108/02634500810847174 Downloaded on: 28-01-2013 References: This document contains references to 52 other documents Citations: This document has been cited by 3 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 2523 times since 2008. *

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Bo Rundh, (2008),"Radio frequency identification (RFID): Invaluable technology or a new obstacle in the marketing process?", Marketing Intelligence & Planning, Vol. 26 Iss: 1 pp. 97 - 114 http://dx.doi.org/10.1108/02634500810847174 Bo Rundh, (2008),"Radio frequency identification (RFID): Invaluable technology or a new obstacle in the marketing process?", Marketing Intelligence & Planning, Vol. 26 Iss: 1 pp. 97 - 114 http://dx.doi.org/10.1108/02634500810847174 Bo Rundh, (2008),"Radio frequency identification (RFID): Invaluable technology or a new obstacle in the marketing process?", Marketing Intelligence & Planning, Vol. 26 Iss: 1 pp. 97 - 114 http://dx.doi.org/10.1108/02634500810847174

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Radio frequency identication (RFID)

Invaluable technology or a new obstacle in the marketing process?
Bo Rundh
Karlstad University, Karlstad, Sweden
Abstract
Purpose The papers purpose is to show how product coding by radio frequency identication (RFID) can provide better benets with respect to supply-chain management than barcode reading, and to discuss important practical obstacles to adoption of the new technology, particularly the high set-up and implementation cost. Design/methodology/approach This paper analyses feasibility studies of RFID systems in relation to the structure and application of the technology in an industrial supply chain. Findings RFID technology offers the prospect of improved efciency by more sophisticated inventory management, delivering lower costs and improved results. It also offers opportunities to reduce theft and counterfeiting. More accurate demand analysis furthermore improves marketing planning. However, a main disadvantage is the high set-up and implementation cost. Other technical concerns are reliability and electronic interference. Perceived obstacles thus militate against adoption. Originality/value This paper evaluates the implementation of RFID from a managerial point of view, balancing benets against challenges. Keywords Identication, Product development, Supply chain management, Radio frequencies Paper type General review

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Received April 2007 Revised September 2007 Accepted October 2007

Introduction Seeking a sustainable and defensible competitive advantage has become the priority for any manager competing in the international marketplace. The bases for success are abundant and the source of competitive advantage can be found in a rms ability to differentiate itself in relation to competitors (Morgan and Strong, 2003). Another strategic direction to reach competitive advantage for any rm is to operate at a lower cost and hence at greater prot than competition (Porter, 1990, 1996; Christopher, 1998). New technology for supporting logistics management has the potential to assist the organisation in achievement of both a cost and a value advantage in a supply chain. Such new technology can be the implementation of radio frequency identication technology (RFID) into the supply chain (Glover and Bhatt, 2006). RFID has become the generic name for technologies that use radio waves to identify and track objects in a supply chain, or elsewhere automatically. New technology can also improve the possibilities for more efcient demand analysis and supporting marketing activities. Better information will also help to improve inventory management by tracking movement of products and direct inventory to where it is needed in a value chain. RFID has the prerequisite to become a leading technology that offers manufacturers, distributors and retailers improved supply chain performance by operational efciency,

Marketing Intelligence & Planning Vol. 26 No. 1, 2008 pp. 97-114 q Emerald Group Publishing Limited 0263-4503 DOI 10.1108/02634500810847174

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with reduced inventory and out-of-stocks (Attaran, 2007). In terms of supply chain management, information is a key to superior performance (Erickson and Kelly, 2007). The intention with this paper is therefore to address the impact with such new technology on marketing issues within a supply chain. The aim of the paper is to contribute with an analysis of feasibility studies in relation to the structure and application of RFID technology in a supply chain. The rest of the paper is organised as follows; in the next section the technology of RFID is discussed followed by a section about RFID in the literature and feasibility studies. Since, this paper uses a network perspective with actors, resources and activities (A-R-A) for analysing purposes, the network model is discussed in the literature review. In the next section, the challenges for RFID systems are discussed, followed by market opportunities and a section about different obstacles to introducing the technology. The following sections are the discussion of the analysis and the paper end with conclusions of potential benets and challenges facing managers implementing such a system. Radio frequency identication technology Manufacturers and other actors (e.g. retailers) in a supply chain have traditionally used bar-coding as a way to track and keep control of products in a logistic system. Bar-coding use a digital language to encode data so that it may be read optically by a computer-based scanner. Bar-coding has several advantages in relation to manual handling in terms of data accuracy, data transfer speed and exibility. A main disadvantage of bar-coding is that each item either a single product, batch or truck need to be scanned manually, even though many attempts have been made to automate scanning procedures with mixed results. Another disadvantage is that bar-coding can only store a limited amount of information. A third disadvantage is that when a tag is printed, the information contained in the tag cannot be changed. New information requires a new tag. Harsh environments can also damage the tag so it cannot be read by a scanner. Even if the RFID technology is not new and was used, for example, by the British military to track planes and vehicles during World War II, several large retailers are now looking at the technology as a mean to effectively manage their supply chains (Glover and Batt, 2006; Prater et al., 2005). The RFID technology creates a readable and rewriteable tag system for goods as they move along the supply chain. The technology gives also the opportunity to create smart products that can feed m, 2006). A RFID information into the supply chain in an automated fashion (Bostro system has three basic components namely an antenna, a transceiver (with decoder) and a transponder (RF tag). Data were generated and stored by a computer in a similar way to a barcode system. The antenna generates a magnetic eld which activates the magnetic tag and enables communication between the tag and the transponder. In many cases the antennae and transceivers are packed together as a reader. The range of the system depends on the tag (transponder) and the operating frequency. Low-frequency systems have shorter reading distance and lower system costs, whereas high-frequency systems can reach higher scanning speeds and distances, but also at a higher cost (Figure 1). The RFID tag contains an integrated circuit where information can be stored. Tags are either in an active or passive format, where active tags surround a power supply. Active tags have read-write capabilities, greater memory capacity and a better range than passive tags. On the other hand, active tags are bulkier and more expensive than

Antenna

Reader

Radio frequency identication

Control Module

RF Module

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Transponder (Tag)

Host Computer

Figure 1. Basic RFID system

passive tags and their lifetimes are limited. Passive tags are similar to barcodes since they normally are read-only. Passive tags have also lower memory capacity and lower operating distance. However, they are much less expensive and more durable and smaller than active tags. Even though technical and costing are different, they can be made in an unlimited number of congurations for different applications. When a RFID tag on a product or in a batch passes within the operating distance of a reader, it detects the readers activation signal via the antenna. The reader decodes the actual encoded data from the tags integrated circuit and the data are passed to the host computer for further processing. This enables the actor that has invested in an active system to use the RFID tag to actually contribute to the process with information in the supply chain by, e.g. delivery instructions or inventory information. The RFID technology can contribute with several advantages for actors in a supply chain (Meredith, 2006). One of them is that RFID technology does not require direct contact, or visual contact to operate properly. Tags can be read in different environments and other harsh conditions. The new generation of readers enables the user to read the tags very quickly (responding in less than 100 milliseconds) and have also the ability to read multiple tags simultaneously. This gives the opportunity to scan an entire area of inventory in a stock instead of scanning each unit separately. One of the most important advantages with RFID systems is the capability of enabling product surveillance since inventory can be tracked at any point in the supply chain. Instead of communicating supply and demand for a product at every point in the supply chain, RFID technology enables the possibility to create a network of actors that can communicate with each other. Products can communicate with machines but also with other products and shelves can track their own inventory level and send a signal when it is necessary for a rell. Recent technology developments have brought prices down and conductive inks for printable tags and antennas are new developments that will enhance the application base for the RFID technology. Literature review RFID in the literature There have been many conferences and seminars during recent years about the implementation of RFID technology. In others, the implications for retailers, packagers

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and brand owners have been discussed. Wal-Marts decision for implementation of RFID by its suppliers will probably force many rms to develop strategies for its use within the actual supply chain (Prater et al., 2005; Vijayaraman and Osyk, 2006). Even rms that are not facing supplier mandates are now taking serious interest in the new technology (RFIDnews, 2007a). The RFID technology has suddenly become an emerging industry with many new expectations for solving intelligence problems within international distribution systems and retail chains (Sandberg, 2006). Despite the expected inuence on many industries the implementation of RFID technology has reached modest research interest from a managerial point of view. A recent study has been conducted about the implementation of RFID in relation to barcodes in libraries (Yu, 2007). Previous studies have covered diverse areas in relation to the introduction of RFID technology. One study has discussed RFID and the innovation cycle (Shef, 2004), whereas other researchers have discussed some of its potential applications, benets and challenges for retailers (Jones et al., 2004). An obvious potential sector for RFID is food retailers since they have been at the forefront of technological innovation and development within the retail sector of the economy (Jones et al., 2005a, b). Another study has discussed the market drivers leading to RFID implementation in the grocery industry (Prater et al., 2005). In one of the few empirical studies conducted about implementation of RFID, the researchers are investigating the warehousing industry. The results from that study show that there are still a number of concerns about investing in RFID technology in relation to the benets that can be rewarded e g in warehousing (Vijayaraman and Osyk, 2006). Another research direction concerns the implications for management when RFID is in work in the daily business (Wyld, 2006). RFID has also been discussed from concept to implementation and the researchers argue for that the technology is a logical evolution for a successfully integrated supply chain (Speakman and Sweeny Iansiti and Levien, 2004, p. 2). Furthermore, RFID has been discussed on a conceptual basis addressing its capabilities and applications in various industries (Attaran, 2007). Since, RFID technology is experiencing widespread adoption across many industries, baggage handling and security has been studied within the commercial aviation industry. The authors believe that is essential for airlines to look into the possibility of using RFID tracking systems as a means for closing the service expectation delivery gap (Wyld et al., 2005). The RFID device serves mainly the same purpose as a barcode or a magnetic strip on a credit card. A signicant advantage of RFID technology is that the RFID device does not need to be positioned precisely in relation to the scanner or swiped through a special reader. A main disadvantage has been the price of the device in relation to the package, e.g. a grocery product such as a milk or juice carton (cost of tag/margin on the product). The rst research question in this paper refers to: RQ1. How can RFID technologies contributes to competitive advantage for a single supplier in a supply chain? The second research question refers to: RQ2. What are the implications of the technology from a marketing point of view? The literature and feasibility studies will be analysed by a network perspective and the A-R-A model.

A network perspective Firms in industrial markets operate in a texture of available technology. On an aggregated level technical interdependencies are characterised by technological systems or paradigms. The technological connection reected in these paradigms and their evolution is a major force shaping the context of a rm and its relationships with third parties. Business relationships can be seen as links that shape and reect kansson and Snehota, 1995, p. 3). Analysis of the existing technology (Ha implementing a new technology enhances therefore the relevance of the industrial network model. When the view of a rm as a production unit is applied, it is the activity structure of the network that is most signicant for analysis in relation to the effects of the technology. A supply chain Any rms success in a business market depends to a great extent on its relationships with customers and suppliers. In most industries relationships are built up during considerable time. A relationship between different rms can be explained over a continuum from pure transactional relationships to collaborative relationships or partnerships (Ford et al., 1998). The working relationships are embedded in business kansson and Snehota, 1995). networks comprised of connected relationships (Ha Working relationships and business networks are complex phenomena that also exist at multiple levels. A business network can be considered as a set of two or more connected business relationships. Connected in this sense means the extent to which exchange in one relation is contingent upon exchange (or non-exchange) in the other relation (Anderson et al., 1994). Two connected relationships can also be directly or indirectly connected with other relationships as a part of a larger business network. A focal relationship can also be connected to several different relationships that either the supplier or customer has, where some are with the same third parties. A considerable amount of research has been devoted to explain relationships and business networks kansson and Snehota, 1995). The business network can be analysed (Easton, 1992; Ha kansson and Johansson, 1992). by using a model of three components A-R-A (Ha Actors are rms such as suppliers and customers that perform activities and control resources. Actors perform activities such as transactions and create value by transforming these resources in the mind of the customers. Resources can be of many kinds and refers to anything that actors explicitly value for their business processes. This means that resources can take many forms such as technology and technical know-how, equipment, personnel or capital for investments which a rm can use to generate greater value for itself or other stakeholders. In some situations, a rm can possess a given resource for strategic purposes, but may instead look for other rms to develop the resource collaboratively. This can be in the form of a partnership or an alliance. Iansiti and Levien (2004, p. 1) argue that strategy is becoming, to an increasing extent, the art of managing assets that one does not own. In a framework of the supply chain management literature, Tan (2001, p. 40) argues that in a truly integrated supply chain, the nal consumers pull the inventory through the value chain instead of the manufacturer pushing the items to the end-users. Harland (1996) explain supply chain structure as a dynamic interconnected supply network, whereas Hewitt (2000) describes a development stage beyond integrated business networks as demand chain communities. The focus of this paper is the evolving structure of the supply chain and

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how main actors are using the resources (e.g. new technology) for creation of competitive advantage. This is in line with Cooper et al. (1997) how they describe the integration of business processes across the supply chain as a fundamental part of supply chain management. Actors in a supply chain In a packaging supply chain, there are different actors involved at each added value level. In the rst stage, the producers are depending on different suppliers of raw materials. The reliance on external actors is depending on the grade of vertical integration in the following stages of the supply chain. This is highlighted when it comes to further converting or added value processes such as lamination or coating of different materials. The vertical integration can be both in the form of a technical or a commercial integration in the supply chain. In SCM research literature, the traditional purchasing and logistic functions have evolved into a broader strategic approach to materials and distribution management known as supply chain management (Stank and Goldsby, 2000; Alvardo and Kotzab, 2001; Tan, 2001). Other research interests have covered global sourcing (Kotabe and Murray, 2003); management practise (Basnet et al., 2003; Bales et al., 2004) and integration within a supply chain (Cousineou et al., 2004). Resources in a supply chain The resources within a supply chain are controlled by the different actors. However, basic resources of strategic value are also controlled by single or jointly controlled by actors outside an industry. These resources are either in the form of raw materials or as supplies necessary for the production process in the form of products or services for the business. Resources are heterogeneous and have attributes in an unlimited number of kansson and Johansson, 1992; Ha kansson and Snehota, 1995). Some of dimensions (Ha the resources have also an alternative use either within other industries, or for further processing. Activities in a supply chain From a theoretical point of view, activities occur when one or several actors combine, kansson and develop exchange or create resources by utilising other resources (Ha Johansson, 1992). These activities take the form of transforming and processing different resources by adding value at different stages in the supply chain. Another important element is also the transfer activities either to further processing or directly to customers. Single activities can be linked to each other in different ways. A main difference can be within industries with a high degree of vertical integration in comparison to competitive rms at a lower level of integration. Many activities are therefore tightly coupled to each others while others are more loosely coupled. However, a complete activity cycle is seldom controlled by a single actor. RFID a new resource in the packaging concept The main function that rms have granted to packaging has traditionally been related to the mission of protecting the products satisfactorily from producer to consumer. However, new customer needs have favoured consideration of new requirements on the design and development stage of packaging including logistic, commercial and

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environmental functions (Dimitratos et al., 2003; Hogg, 2003). The logistic function is dened by the way a product takes from the producer to the consumer and the packaging must full the physical requirements within the supply chain. The commercial function concerns the needs from marketing communication, knowledge of customer demand and its potential impact on the purchase decision process. Numerous factors have made packaging to an important marketing tool. The environmental function relates to the re-utilization, recycling and reduction of packaging materials as well as the general ecological awareness. The function also includes the market environment with consumer, competition and legislative requirements. The RFID tag can be considered as function of the packaging concept and thereby considered for marketing purposes e g pricing purposes on the shelf in the store. Suppliers to global manufacturers need to consider the implementation of RFID tags into the packaging rensen, 2006). concept (So Challenges for RFID The RFID technology is based on an automatic identication method relying on storing and remotely retrieving data using devices in the form of tags or transponders. An RFID tag cannot only be attached to or incorporated in a product or package but can also have many other applications, e.g. in passports (Aval, 2006). The purpose with the tag is for storing or tracking information about a product or package with the help of using radio waves. Chip-based RFID tags contain silicon chips and antennas. Tags that are passive do not require any internal power, whereas tags that are active require a source of power. However, in contrast there is also a growing consumer concern about the implementation of the RFID tags in shops since consumer groups are concerned about the possibility that suppliers use the tags for monitoring consumers once that they have left shops with their purchases. Legal and ethical standards exist around such issues in the USA and Europe, but they are not necessarily clear or absolute (Erickson and Kelly, 2007). The RFID technology has obviously become an important development project in many areas but the breakthrough is supposed to come when the price has reached such a level that it can be used for general transport and distribution systems. Areas that are of special interest refer to use within packaging of food and other commercial goods and thereby replacing barcodes. One of the big opportunities by using the technology is the ow of information that can be transferred in the supply chain between the supplier and the end customer (Glover and Bhatt, 2006; Spekman and Sweeney II, 2006). The new technology can be an important device for reaching competitive advantage for rms in the supply chain, but customer reactions can also be an obstacle and encumber the introduction of new technology and thereby delay the introduction of products. The active or passive tag can either be incorporated in the product, or package of the product. Another possibility is to incorporate the tag in a pallet for monitoring purposes during the passage of the supply chain. In many product areas, it seems that supplier wants to implement the tag in the package (e.g. consumer electronics, food products), whereas consumer interests are concerned about implementation into the product itself due to the risk of monitoring the use or consumption of the actual product. An increasingly interesting direction to achieving a cost advantage comes not necessarily from reaching volume by economies of scale, but through logistic management.

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In several industries logistics costs represent such a signicant proportion of total costs that it is possible to make major cost reductions through fundamentally reengineering logistics processes (Christopher, 1998). Another strategy is to base the commercial activities on service excellence. This can be supported by using new technology for reaching better responsiveness and reliability from suppliers by reduced lead times, just in time and value-added services. RFID can be an important device in supporting different logistic processes by giving the possibility to introduce added value services in the supply chain. Competitive advantage can thereby be derived from the way in which rms organise and perform activities within the supply chain (Erickson and Kelly, 2007). In order to gain competitive advantage over its rivals, a rm must deliver value to its customers through performing activities more efciently than its competitors, or by performing the activities in a unique way that creates greater differentiation in relation to competitors (Barney, 1991; Peteraf, 1993; Slater, 1996; Christopher, 1998). The RFID technology can support such processes by reaching a higher efciency in the supply chain (Vijayaraman and Osyk, 2006). Market for RFID systems Even if RFID technology has been functioning since the World War II, signicant technology advances in recent years have spurred widespread interest and adoption of the technology across several industries. Among the technology advances, the main contributions are smaller tags and improved scanning devices which have contributed to reduced costs for implementing RFID solutions. As rms become more adept at leveraging their IT infrastructure, they are also looking at other possibilities for reaching competitive advantages from investments in technology. With reduced costs for RFID technology and renewed motivation for using technology for improved efciency, many new applications are emerging. Barcode is the primary technology that RFID may replace in the future, but as the costs of the technology continue to decline, its application is certain to grow. Initially used for military applications RFID technology is now available for many applications within the commercial sector like transportation and distribution; commercial road and rail transport rms to track their eet, and for tracking commercial products within a supply chain. Other applications concern electronic toll collection systems and point of purchase systems; car parking and tracking individual products, or for identication of cattle. RFID tags have also been used to protect expensive personal products such as cars, yachts, watches, instruments and so on. Since, RFID tags are location-sensitive, they can even be used to enhance personal safety in general, or for monitoring purposes. At Legoland in Denmark, parents can use RFID-enabled wristbands provided by the park to monitor childrens whereabouts. The possibilities for application of RFID are numerous and by implementing this technology rms can achieve cost savings as well as improving the service they can n, 2006; Rehn, 2006). Even though RFID technology can be used within provide (Oldee many areas, the most obvious impacts are supposed to be among retailers in the area of inventory management. When Wal-Mart decided that its top 100 suppliers should begin providing pallets to its stores with tags by early 2005, they started a new era in supply chain management. This directive caused suppliers in the supply chain to focus on implementing RFID technology and to nd necessary solutions. This was only the beginning of the Wal-Mart revolution in this area and many more suppliers were

tagging pallets and boxes and some individual items by the end of 2006. Another retail rm such as Target has also required RFID tags on all cases and pallets that enter their supply chain, whereas Benetton has been slowing down their implementation because of publicity (Attaran, 2007). RFID offer practical benets to any rm who needs to keep track of physical assets and suppliers can improve their planning and execution by incorporating the technology in the supply chain. Obstacles to introducing RFID technology One of the largest technological obstacles to the implementation of RFID technology in the retail sector, or any other industry, is the lack of world-wide standard format (Erickson and Kelly, 2007). If, for example, each retailer uses a different format the cost of implementation may be prohibitive. However, industry organisations are working in favour of a standardisation even if single retailers might be unwilling to share their competitive advantage reached by more efcient inventory tracking or supply chain efciency. Another obstacle is associated with RFID scanners and tags. RFID tags emit UHF waves which are absorbed by water and other liquids and the waves are also reected by metals which can lead to incorrect reading. Still other suppliers may refuse to comply with a strict implementation schedule due to high-costs associated with developing it. The adoption by big retailers like Wal-Mart and Tesco will serve to drive down the costs of tags, an argument that can be used to convince other actors about the benets for investing in a new technology. Although there are various benets to implementing RFID, there are still many rms in the initial stages of conducting research and gathering information about the technology (Vijayaraman and Osyk, 2006). Examples from Sweden shows that big grocery retailers like ICA, Axfood and Coop have made a few trials, but are hesitating to implement the technology due investment costs and general uncertainty. Trials have also been made within IKEA. Firms within other industries have implemented RFID to some extent for example, sund (to identify and VOLVO Technology (for tracking purposes) and SSAB Oxelo track material). The implementation of the technology has not been without problems, especially in relation to the industrial environment causing problems with tags and disturbance of the radio waves. Previous research also shows that companies who introduce the technology need to undertake a fundamental strategic review of their business processes and relationships with suppliers and distributors (Jones et al., 2005b). Except technical, organisational and legal obstacles, business benets of RFID will not arrive without incentives for manufacturers and retailers to adopt the technology (Attaran, 2007). The information network RFID could transform some activities in the supply chain and the most obvious impact will be on actors (e.g. retailers) in relation to the area of inventory management. Firstly, RFID can be used as a complement to bar-coding and track products or pallets with products throughout the supply chain. This will give actors enhanced supply chain efciency in relation to prevailing approach cost by scanning different items. RFID has also the effect of decreasing human error in inventory management since there is no need to scan items individually as they pass through a supply chain. This will also have an effect on the total amount of work necessary for handling different items in the supply chain. With more accurate information about changes in demand streams

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management will be in a better position for making quicker and more efcient decisions about stock levels. This can enable management to eliminate inventory loss through error and theft, but it can also give management a better overview of the actual stock situation or any other required information at different stages in the supply chain. However, an important request is that the readers can identify and communicate with the different tags to reach the unique information from each tag. This requires standardised global networks for identication of the electronic product code (EPC) as a product ows from the supplier to a distributor and then to a retailer before it reaches the supermarket and the end customer (Figure 2). EPC global Network is a vision coupled with an evolving set of standards that has the aim to provide a standard framework for product information exchange. As RFID tagged products moves through the supply chain, various actors need standard-based means to share their tracking information on products based on the product tags. Actors in an information network with RFID When a RFID tagged product ows from a manufacturer to a distributor and then to a retailer, an RFID network can provide the actors with different kinds of information at each stage. The number of actors is depending on the actual product and its supply chain, where an RFID tag can be deployed either in the product, in the package or on the pallet. At its basic level a RFID system has different components at each stage. The tag (active or passive); a reader in a store or a warehouse; RFID middleware for applications and a data base for information service. Another actor can be business partners that will share information services and a third actor in the information network can be a data centre at a corporate level (Figure 3). Resources in an information network with RFID Every component in the information network with RFID is a resource for the total system. Tags. An important resource in the RFID system is the tag which contains several important characteristics. One of them is the packaging since tags can be built into
Tag incorporated in the product Possibilities for Scanning a Product via RFID S1 Anybody there? Distributor

Filler

Retailer

Figure 2. Supply chain for a consumer product

Sn 3 here!

Data Centre at Corporate Level RFID database

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Business Partners

Store Applications

RFID Middleware

Readers RFID tags

Figure 3. Actors in a RFID system

PVC buttons, paper labels or plastic cards among many other solutions. They can also be built into products and should be able to stand heat, e.g. when painting in an auto-assembly line. Another characteristic is coupling which refers to the communication between reader and tag. The choice of coupling affects the ability to communicate over a distance, the price of tags and conditions that might cause interference in the communication. RFID tags are either active or passive. In tags which are passive an electromagnetic eld or a pulse of radio frequency energy emitted by the reader powers the tag. In active tags, a battery powers the microchip, but active tags still need power from the reader for communication purposes. A third type of tags consists of two-way tags which powers its own communication and can even be able to communicate with other tags without a reader. Other characteristics refer to the information storage capacity since tags have different amount of storage capacity. Many types of RFID systems also conform to particular national and international standards in order to work in different environments. Readers. Readers are used to recognise available RFID tags and are comprised of different subsystems to capture RFID tag events. A reader transmits energy

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through one or more antennas and the tag pick up this energy and convert it to electrical energy via induction. The tag then sends the identity back to the reader in a code form. Readers have been developed for different uses and in many forms and sizes. They can be either stationary or portable for handheld activities. The range for reading within a RFID system is depending on the distance between a tag and a reader. The range that can be achieved is determined by specied variables such as: frequency used; available power at the reader and within the tag; size of the reader and tag antennas; environmental conditions and structures (Wyld, 2006). Higher frequencies can achieve far greater distances than tags operating at lower frequencies (Table I). Middleware. Identifying tags is only a rst step in managing a RFID system. The capacity to read and select information in big volumes when items move through a supply chain is another issue since tag codes can generate large volumes of data with complex interrelationships. One important benet with using RFID middleware is that it can standardize ways of dealing with the amount of information that tags can produce. There are at least three primary advantages with using RFID middleware in the form of; providing connectivity with readers; processing raw RFID data and provide an application level interface to manage readers and capture ltered events. Activities in an information network with RFID The RFID network provides different activities or services for the actors using them. Among the activities the following can be separated (Glover and Bhatt, 2006). Assigning unique identities. This is where the EPC comes in working as an identication system for the particular item. Tracking items would not be possible without the capacity to identify an item uniquely (such as manufacturer, product type and serial number). Assigning a unique identity is a necessity for tracking a particular product within a supply chain. Detecting and identifying items. The system for identication of items consists of EPC tags and readers, where each tag contains a microchip connected with an antenna. A tag is applied to an item either by the manufacturer or by an actor somewhere done the supply chain. The EPC readers use radio frequency waves to communicate with the tags. EPC readers then deliver information to local business information systems using some middleware.

Name LW HF Table I. RFID frequency range

Frequency range 30-300 khz 3-30 Mhz

Read range for passive tags 50 cm 3m 9m . 10 m

Application Access control; animal identication; close reads of items with high water content Building access control, smart cards; airline baggage tracking; electronic article surveillance Item management, e.g. boxes and pallets Vehicle identication

UHF 300 Mhz-3 Ghz Microwave . 3 Ghz

Collecting and ltering events. EPC middleware provides suitable specications for services that enable data exchange between EPC readers and business information systems. Storing an querying events. The EPC information system enables actors and users to exchange data with business partners based on the actual EPC. Locating EPC information. In order to enable business partners to share EPC data it is necessary to provide devices and services that can locate the storage for required data. Discussion Any new technology introduces both costs and benets and RFID networks are no exception. RFID technologies offer practical benets to anyone who needs to keep track of physical items either in the form of an animal, or products in a supply chain. One important benet for manufacturers is the possibility to improve supply chain activities by increasing efciency and demand planning. The introduction of a RFID system will inevitably affect the supply chain and its actors. The new technology will kansson and affect business relationships among actors which also are in line with Ha Snehota (1995) ndings. The advantages of RFID systems versus barcode technology can be summarized by: . no line of sight requirement; . the RFID tag can stand a harsh environment; . a relative long-read range; . portable database is possible; . multiple tag read/write; and . tracking pets, products, luggage and equipment in real time. Effects on actors The introduction of a new technology has effects on actors in a supply chain in several ways. At a corporate level RFID technology gives opportunity for a rm to collect information that can be used for a better demand planning in a supply chain. It can also provide management with a more effective inventory planning and control. The information can furthermore be shared with business partners for reinforcing the relationships between the actors. Information can even be used for marketing purposes, e.g. market segmentation or for pricing purposes in a store. Nike has even deployed RFID tags in sporting shoes which can be read via an Ipod (RFIDnews, 2007b). Effects on resources RFID technology offers opportunities to new applications when it comes to trace and track products in a supply chain. Furthermore, it opens up the possibility to develop smart products within a supply chain, but even in relation to other market activities. The greatest number of tags supplied in 2006 was fore smart cards/payment key fobs and the second largest segment was for pallet and cases. The third area was for animals followed by smart tickets and secure documents (Swedberg, 2007). Effects on activities UK-based retailer Marks & Spencer continues to extend its successful RFID tagging at item level from 42 to 120 stores by spring 2007. Marks & Spencer has seen a sales

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increase by being able to have a close visibility of stock availability (Idtechex, 2007). The intention is to tag all its 350 million items of apparel yearly. Within the USA, pilot tests by some clothing manufacturers at 7 per cent sales increase has been reported, when using RFID because of the greater visibility of the inventory on the shop oor (Jones et al., 2004). Retailers will also be able to track products that are selling rapidly and then to restock shelves with such fast moving items (Jones et al., 2004). A main concern is tracking customers movement without their knowledge which has been expressed by groups protecting customers right in society. The RFID technology offer possibilities for improving the efciency in the supply chain by a more sophisticated inventory management giving opportunity to lower costs and improving results (Kearney, 2003). It can even offer better opportunities for improving security in relation to theft (e.g. for products like mobile phones) and counterfeiting which is important for the pharmaceutical industry. A more accurate demand analysis can even improve marketing efforts. RFID technology offer also opportunities for product promotion and an interactive display of related products as discussed by Jones et al. (2004). Clothing retailers, for example, see RFID technology as a means to more quickly identify fast moving styles, colours and sizes, that go beyond the more generic categories represented by barcodes (Erickson and Kelly, 2007). The potential for security is also enhanced. A major concern about RFID comes from different consumer groups and refers to legal and ethical standards in using the technology (Erickson and Kelly, 2007). RFID tags on individual items in the supply chain are not a problem, but tags on individual items at the consumer are. Conclusion Information is crucial to supply chain performance since it provides the basis upon which managers make decisions. RFID is a most recent technology that present tools for improved supply chain management by collaboration among different actors in a value chain. RFID technology including tags with characteristics of access to batches; possibilities for storage of mass data and capability to be reprogrammed have a clear advantage in comparison to barcodes. However, one of the main disadvantages is the cost for tags if applied to certain products especially within the consumer sector. Other technical concerns in RFID systems are referring to reliability (e.g. reading range) and interference from noise. High-implementation costs are therefore impediment for the development of the technology in many supply chains. The implementation of a RFID system have the possibility to create a competitive edge for a rm by introducing a better supply chain management efciency by providing real-time visibility into what is in the stock, or on the store shelves. RFID offer a technology where tags are unique and a product can be individually tracked as it moves between different actors in a supply chain. This gives management the opportunity to create a supply chain visibility to every item in the supply chain. Using RFID-EPC will able a manager to count how much inventory there is on the shelf in a store and to use other unique information to a product, e.g. expire date. The possibility to reduce inventory levels and inventory management expenses through implementation of RFID technology can save big amounts for actors in the supply chain. In contrast to barcodes, RFID is not a line-of-sight technology and products can be traced without a person placing the tag in the direction of the reader. The RFID technology also permits products to communicate

directly with inventory systems and can thereby reducing the need for labour and possibility of human error. The revenue can furthermore be improved by greater visibility and fewer stock-outs. A better understanding of demand patterns can support promotional efforts and direct inventory to where it is needed. The cost of product losses (theft or supply chain leakages) can be reduced since the technology enables management to track merchandise movement. Actual and accurate information is a key variable to superior performance in terms of supply chain management. The adoption of RFID can obviously have an impact on business performance by increasing revenues, improving efciencies and lowering costs for rms implementing the technology. RFID can be a useful tool in organisations that understand the capabilities and limitations of the technology. A main contribution is also coming from pioneering RFID rms investing their research efforts into product development in order to decrease the costs of tags and sort out technical problems so that the RFID can be made available on a much larger scale. An introduction of RFID technology will also stress different actors to integrate generated data with other functional databases and other applications in a supply chain. This will force managers to undertake a fundamental strategic review of their business processes and relationships with suppliers and distributors, a phenomenon that has also been discussed by Jones et al. (2004). The opportunity to use a stream of real time data opens up many new possibilities for marketing purposes, but can also be an obstacle when it comes to privacy for the single customer. Smarter tags incorporating blocking and encryption systems can protect customers privacy and an unauthorized reading. Uncertainty about applications within the own industry, and high-investment costs are prohibiting factors for a further diffusion of the technology at the moment.

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Further reading Capgemini (2005), Consumer education is key to boosting awareness and overcoming misconceptions about RFID, available at: www.capgemini.com/resources/news (accessed 10 January 2007). Harland, C.M., Lamming, R.C. and Cousins, P.D. (1999), Developing the concept of supply strategy, International Journal of Operations & Production Management, Vol. 19 No. 7, pp. 650-73. Corresponding author Bo Rundh can be contacted at: bo.rundh@kau.se

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