RFID Technology in Supermarket Industry - Assignment Example

RFID Technology in Supermarket Industry Introduction Today's business environment is becoming more increasingly complex. Our society is likewise getting more complicated too with major changes in our lifestyles. People today have come to expect more for their dollars from their suppliers, from the local grocer to those giant supermarket chains and discount stores. A large part of products are being shipped from far away places so it can reach us on time, fresh and free from any defects. If we examine it more closely, it is a staggering and wonderful chain of events that result in the mass movement of market products from the producer to the consumer. It is something that we take for granted. Big global companies like FedEx and UPS exemplify this complex process that moves certain products from the manufacturer or supplier to end users (Shepard, 2005:2). These complex sets of business activities that result in timely product delivery is also known as supply chain management. A supply chain may seem a bit complicated to the person who is not familiar with it, but in essence, it is just a series of closely-related activities making sure an intended product is delivered or a service is rendered to a customer on the right time. Contrary to what most people think, supply chains are not one-directional processes but also a two-way process. This means it can also start from the customer to a manufacturer backwards such as what happens when there are returns of certain defective merchandise. Supply chain management (SCM) involves not only products and services but also information and money (Mentzer, 2001:5). A good and properly-implemented SCM can be a potent tool to increase competitiveness and hence improve corporate performance through a higher level of customer satisfaction. There are several types of SCM and they should be a part of company strategy. A supply chain is in effect also a value chain in that each step in the process adds some value to the final outcome. Value is basically delivered in four ways (not mutually exclusive): reduction of capital and operating expenses, increasing the revenues, creating a stable position or improved position in a competitive environment and risk mitigation. To do this, businesses often resort to enablers that will allow them to accomplish these tasks. Besides supply chains that should be managed, another aspect of business, especially those in the retail industry, are its inventory control management tasks. One of these business enablers was the bar code that is very useful in retail-intensive types of business operations such as a supermarket. Concepts of the bar code are relatively simple: each product item will have a unique identifier and then this information is to be captured and recorded by some device at the checkout counter. There are several types of bar codes but the linear bar code is the most common (Muller, 2003:93). The bar code has now been replaced by a more efficient, accurate and cheaper type of technology – radio frequency identification or RFID for short. Although the bar code systems had worked well, there are many inherent limitations to it, primarily the lack of additional bits of information it can carry. Other drawbacks were physical vulnerability (either smudged, lost or damaged and therefore cannot be scanned) and bar codes require physical scanning (means there is a clear line of sight for the reader device) which often need human intervention that can add to the cost and often cause unnecessary delays (Sweeney, 2005:34). One very crucial limitation is throughput – only one item can be scanned at a time. Most retailers also want the additional information that RFID technology can provide besides product price, package size or product type to include expiration dates or a unique serial number (necessary information when tracking a product defect in a batch production process). RFID technology overcomes all these bar code limitations and offers additional advantages such as enhanced data capture and vastly improved data transmission through the use of wireless technology. Discussion As costs continue to go down regarding adoption of RFID technology, the bar code is increasingly being replaced. A radio frequency signal is used to broadcast information or data contained and maintained in the RFID chip (this is the programmable transponder or tag). The next requirements are the reader (with an antenna to pick up the radio signals) and a host. The present cost per tag is around US$0.20 to US$0.50 only and is falling quite fast while the bar code costs a bit higher. RFID systems use many different radio frequencies but there is now a trend towards standardization. The two commonly used today are EPC and ISO standards but new standards called EPC Gen2 (second generation) will soon be adopted worldwide. There is no perfect system but RFID offers several advantages such as long life span (passive RFID tag does not need a battery) and the ability to read hundreds of tags simultaneously unlike the bar code which can read only one item at a time, a serious limitation when time is crucial. The wireless standards RFID tags and readers use is called the air interface protocol. It has found many important practical uses especially in the supply chain management of a large array of consumer products found in a supermarket. When a passive RFID tag embedded in a certain product is placed within the range of a reader device, the energy from the reader will activate the tag, allowing it to transmit information or data that was stored on the RFID chip. RFID is actually two parallel technologies combined: radio frequency and the application set. Besides its use in logistics, RFID can also be used to enhance security measures and as a tool against counterfeiting (Wagner, Revell & Pernul, 2007:434). However, the greatest potentials of RFID is in logistics and supply chain management aspects of operations management. It is the one enabler that propels a company forward because of flexibility. It allows information to be dynamically changed that has significant value for everyone. There are about eight general application fields with regards to the use of RFID (Wolfram, Gampl & Gabriel, 2008:10). This paper looks at the current literature about RFID and its various applications but focused on the supermarket industry. This technology is increasingly being used by the giant retail chains to improve their supply chain management, logistics, drive up customer levels of satisfaction and to gain efficiencies in their overall operations management function. A second purpose of this paper is to look at various methods on how RFID technology can be applied to the retail industry based on three common approaches: the qualitative research method, case study method and quantitative research method. It is hoped this paper will help illuminate its readers on the various practical uses that RFID can improve our lives especially with regards to the supermarket industry in delivery and maintenance of grocery items carried by a typical supermarket chain. The latter parts of this paper explain why some methods were used over other methods by giving an analysis of their various advantages and disadvantages with regards to RFID. Finally, a research schema is also presented as a practical application of the research methods that were adopted. Literature Review – although RFID implementation can be expensive initially, its long term use can justify the expenses involved. Increasingly, supermarket chains look to RFID as the solution to drive efficiencies and innovation in their supply operations. There were initial scepticisms about the use of RFID technology although it has widespread applications in wide variety of fields such as transportation, toll-road operations, in the entertainment industry, the maritime industry and health care applications to name just a few (Jones & Chung, 2007:207). However, it is the retailing industry that had embraced RFID more enthusiastically because it helped solved one of their most persistent problems: the required stocking and carrying in the inventory of thousands of items in various types, sizes, flavours, colours and packaging. Their also carrying of perishable items and a need to rotate them requires additional information on the products' suppliers as these items have higher labour costs (Mowery, 1999:172). The early solution was the bar code known otherwise as the Universal Product Code or UPC but this was superseded by the Electronic Product Code or EPC due to advancements in scientific technology. RFID technology also has the added advantage of being compatible with a company's overall business information systems such as the ERP or enterprise resource planning software that integrates all those functional areas such as purchasing, warehousing, inventory, sales, distribution, customer service, billing, auditing and accounting (Edwards & Humphries, 2005:145). All the data captured by the RFID is very useful for making informed management decisions that can be integrated into a supermarket chain's ERP system. In other words, the automatic data capture enabled by RFID can be used anywhere along the supply chain. This translates to vast improvements in data analysis for crucial areas of supermarket operations such as warehouse and inventory management, transportation logistics and supply chain visibility. Errors are minimized or avoided completely with relevant information. For example, the data analysis mentioned here involves product costs, selling prices and customer information such as purchase volumes and buying patterns. In warehousing, it can be used to make re-order or purchase decisions based on updated stocking levels to help improve customer responsiveness by preventing stock-outs of best-selling grocery items. It is used in making transport decisions based on the costs of various transportation modes as each has its own performance characteristics and cost profiles. It is one way to avoid rush orders that can jack up transport costs by making the supply chain more responsive. Visibility means updated status information on the location of products ordered from the suppliers. The RFID technology takes advantage of advances in digital data technology infrastructure besides ERP such as warehouse management systems (WMS) and assess management systems (it handles great volumes of real-time data updates). RFID together with ERP can improve profit margins by cutting operations costs through higher efficiencies (Vaman, 2007:419). Although RFID technology allows users to efficiently collect, store and analyse all the information, expected economic benefits from its adoption depends on several factors such as an open-type supply chain that distinguishes between pallet-level tagging and specific items tagging in the retail environment (OECD, 2006:249). By making supply chains more efficient and productive, the business competition will gradually shift to the supply chain level from an enterprise level. Those who are more efficient can afford to bring down costs and offer lower prices and gain market share. The ability to manage information in real-time has benefited the retail industry in consumer goods like grocery products immensely. RFID aids in re-designing a supermarket experience by incorporating information gathered at the point-of-sale terminal (POS) such as putting perishables on higher shelves (or at least at eye levels). Perishables in general have higher gross margins (30%) compared to grocery items (20%). Although trends show that supermarket customers' average purchase have declined, they shop more often. The maximizing of display signs or re-arranging products on shelves can now be done in a more scientific or systematic manner by using the information that RFID technology generates. For the supermarket industry, two profitable applications of RFID technology are at a so-called dock door (entry point to the warehouse) and tracking of movable assets like trucks or other delivery vehicles from the storage point (warehouse) to the supermarket building. In the dock door point, a so-called interrogation zone is set up where all tags are being read by a scanner prior to the delivered items being warehoused and entered into the inventory records. This is done at the pallet level or any point in the supply chain where there are choke points. RFID is used mainly in two ways: either mainly for object tagging or for tagging with some potentials for individual referencing. The second type applies to delivery truck drivers who can be monitored all along their delivery routes: whether they are stuck in traffic, made some detours, rested longer than allowed or goods being hijacked (Yan, Zhang & Yang, 2008: 204). Qualitative Research Method – this research method relies more on the process of the decision making involved. This type of research method is particularly useful when making a social science research such as market studies involving consumer behaviours. In this regard, this method is well suited when making investigations into the psychology involved in vital areas of economic activities such as in the retailing industry (consumer products) and also in the advertising industry. Insights gained from qualitative research methods can be applied to product positioning of new product launches, for example, that will enhance their success. In the advertising profession, such insights can be used to craft the ad itself, whether to appeal to the emotions or to the intellect of the target audience. Qualitative methods rely more on text than on numbers (quantitative research method) and tries to answer important questions such as the why, how and what, instead of the how many (Morrison, 2002:16). Qualitative research involves several important factors that can impinge on the results such as the context and environment in which the research was conducted, social structures, cultural practices and traditions, social interactions and individual interpretations. A consumer research like this one would take into account contextual factors that influence behaviours. In other words, context is a powerful determinant in most consumer behaviour patterns. One big advantage of qualitative research is that only a few samples are needed instead of very large or big amounts of data to produce reliable numbers. Another benefit of using the qualitative method is it can be used to test a hypothesis to explain some puzzling behaviour, for instance. It is very useful to measure the impact, effect and relevance of certain programs such as those in advertising and marketing in the retail industry. This paradigm shift is particularly useful in consumer marketing because buying and consumption are both meaning-based decisions and activities (Scott, 2006:59). A qualitative approach allows for more diversity in responses but it is often time-consuming and costly. There are also questions about the validity of results. Case Study Method – this type of research is good for bringing understanding to very complex issues because it entails detailed contextual analysis on a limited number of events. This method is actually a variation of the qualitative research method but it has many similar elements in it. In particular, it does not rely on numbers alone to produce important insights. The prime attraction of the case study method is the opportunity to observe and analyse cases in real-life situations in contemporary time and not from a perspective of history or hindsight. The design of a case study research methodology is more of art than a science because factors like the research question, data gathering and results analysis can be pretty much subjective. A lot depends on the case study author and like what the critics of the qualitative research point out, the viewpoint of the researcher can intrude on the study results. It is often difficult for the study author to remain completely neutral and might get biased results (Stake, 1995:15). Studying the beneficial effects of using RFID technology can be very useful and also practical in the supermarket industry. The case study method lends itself to some advantages such as more focus on one particular retailer and then re-focus again on a particular operation. Using RFID, a retailer for example, can try to gather some information on what products he is selling are the best-sellers or what products gave him the best profit margins. Using this data, he can then formulate an advertising campaign either to increase the sales volumes of these favourite product items or focus on the types of customers buying them (his RFID likewise is able to give him a breakdown of customer base using credit card data, for example at POS). Although there are some criticisms about the case study method, an ability to bring real world problems in a real-time context adds renewed interest in the study itself. Metrics can be used to gauge key areas and then gathered again after a period of time to know if it is successful or not. However, there are legal considerations to look into as some of early supermarket RFID implementers faced privacy actions from consumer groups (Hansen & Gillert, 2008:197). Quantitative Research Method – this is a research method based on numerical data and is mostly used to test a hypothesis that was not proven rigorously by a qualitative method. It is the more scientific method because it based on hard proof, results taken from numbers data. In a way, it is not descriptive like qualitative methods but is reductionist and isolationist in its analysis of the results. In mathematical terms, results so obtained are considered more reliable and applicable in a general sense, meaning one can generalize the insights through the use of precise numerical measurements. Assuming the quantitative research methodology was also designed properly to exclude irrelevant variables and all the relevant independent variables are included, the results obtained have a high degree of validity. The keystone of quantitative research is use of mathematical models to explain empirical observations (Black, 1999:2). Conclusion (Third Part) For purposes of this paper, I would choose combination of the case study method and qualitative research method for use in how RFID technology is beneficial to the supermarket industry. For a start, using the case study method is more relevant considering it takes into account real-time information regarding a retailing company and actual conditions can be also observed during the writing of the case study and the gathering of data to be used in the study. The case study is more interesting and also more relevant because it is realistic based on real situations and not on some invented hypothetical scenarios. Furthermore, it is practical and is a good ground for training in making crucial business decisions in real business situations. A good part of the case study method is making decisions under time pressure using incomplete information but still trying to achieve the best results possible under such constraints. Either a case lacks some vital information or the reverse is true where there is too much information to be useful. Whatever is the case, one learns to make good decisions almost by habit because of taking into consideration all the alternatives before making a decision (Dul & Hak, 2007:3). Additionally, the qualitative research method is preferred to supplement any data that will need to be gathered about how effective RFID is to a retail business like the supermarket industry. The use of RFID tags is maximized in data gathering because it is easy to collect by the use of the POS terminal at the cashier's checkout counter. Both the case study method and qualitative research method are closely related so using them both is supplementary and will not be in conflict. Using these two methods will yield some nuanced results that are not totally possible with a purely quantitative approach. However, numerical data that will be collected by using RFID technology can be used to validate the results that will be obtained. This way, it can help to confirm some of the initial hypotheses that were made at the start of study. The numbers will help to improve and define data analysis (Yin, 2003:3). The reasons why I had chosen the two methods are relevance, accuracy, deeper understanding and diversity. Gantt Chart for RFID Research Study A Gantt chart provides a standard format for showing project schedule implementation using a timeline of necessary activities with their start and finish dates in a calendar format. It is otherwise commonly known as a horizontal bar chart (Schwalbe, 2009:224). Below is Gantt chart for the proposed study of RFID in the supermarket industry on work breakdown. Figure 1. Timeline of Required Activities in Sequential Order only Task Number Descriptions Resources Start Date End Date Duration Step One Orientation with top Mgt. Conference & Seminars 04/01/10 04/05/10 (5) days Step Two Prepare Data Collection Set up scanner and RFID tags on the Items 04/06/10 04/15/10 (10) days Step Three Gather all the Data on Best- selling items Use of POS to determine the sales volume 04/16/10 04/25/10 (10) days Step Four Data Analysis Computers 04/26/10 04/29/10 (4) days Step Five Present Final Project Result Power Point Presentation 04/30/10 04/30/10 (1) day only Figure 2. Actual number of days (dates) in April 2010 for project implementation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 References Black, T. R. (1999) Doing Quantitative Research in the Social Sciences: An Integrated Approach to Research Design, Measurement and Statistics, Thousand Oaks, CA, USA: Sage. Dul, J. & Hak, T. (2007) Case Study Methodology in Business Research. Burlington, MA, USA: Elsevier. Edwards, H. M. & Humphries, L. P. 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Yan, L., Zhang, Y. & Yang, L. T. (2008) The Internet of Things: From RFID to the Next-Generation Pervasive Networked Systems, Boca Raton, FL: CRC Press. Yin, R. K. (2003) Applications of Case Study Research, Thousand Oaks, CA: Sage. Read More