In our previous article we discussed the technology, benefits and barriers to implementations of Radio Frequency Identification (RFID). In this article we discuss where this technology can be applied. Essentially, it is argued that RFID systems help companies to cut costs, improve customer service, reduce labour, increase accuracy and improve supply chain throughput. RFID systems applications can be used by different industry sectors like the military, retail, industrial, life sciences, logistics, and financial. The military and the life sciences sectors have been the first in using this technology (Das et al, 2002; Harrop et al, 2003; IDTechEx Ltd, 2003a), although within a more expensive and sophisticated context than we may find in most consumer goods supply chains. Surveys of the application of RFID technology find it is being used mostly for industrial/manufacturing - 44.5 percent of the RFID market (Perez, 2003) - and transportation/distribution - 30.3 percent of the RFID market (Perez, 2003)

Delgardo, Tiago

Wilding, Richard D.

English

Cranfield CERES

1Logistics & Transport Focus, Vol. 6 No.4 May 2004 pp. 42-48RFID Demystified:Part 2 Applications within the supply chain.ByDr Richard Wilding & Tiago DelgardoCentre for Logistics and Supply Chain Management, Cranfield School ofManagement.IntroductionIn our previous article we discussed the technology, benefits and barriers toimplementations of Radio Frequency Identification (RFID). In this article wediscuss where this technology can be applied.Essentially, it is argued that RFID systems help companies to cut costs, improvecustomer service, reduce labour, increase accuracy and improve supply chainthroughput. RFID systems applications can be used by different industry sectorslike the military, retail, industrial, life sciences, logistics, and financial. The militaryand the life sciences sectors have been the first in using this technology (Das etal, 2002; Harrop et al, 2003; IDTechEx Ltd, 2003a), although within a moreexpensive and sophisticated context than we may find in most consumer goodssupply chains. Surveys of the application of RFID technology find it is being usedmostly for industrial/manufacturing - 44.5 percent of the RFID market (Perez,2003) - and transportation/distribution - 30.3 percent of the RFID market (Perez,2003).However, the retailing sectors currently only account for 4.3 percent of the RFIDmarket (Perez, 2003) but it is forecast that substantial growth will occur in thissector. In the last few years retailing has been relying mainly in a large-scale useof Electronic Article Surveillance (EAS) systems. EAS tags are commonly2attached to items to protect from theft. Additionally some applications may beused across industry sectors like the retail and industrial sector for cross-industrylogistics functions.RFID systems should not be seen as a substitute for other identification systemslike barcodes. Their multifunctional capability can provide additional features thatallow the use of this technology for other applications that consequently addvalue. RFID can be used to address the following important issues within avariety of business sectors: Asset/product Tracking  Real time theft detection -Shrinkage Product Handshaking  Real time tampering detection Anti-counterfeiting  Market research Safety and Security  Entertainment Access Control  eCommerce fulfilment Condition monitoring  Controlling grey markets Transactions  Industrial and Warehousing Positioning/Locating  MerchandisingWe will proceed to discuss the main applications but it will be seen that many ofthe above are interrelated. The discussion will focus on the most relevantapplications within logistics and supply chain management.Asset and product trackingMilner (2000, p.14) provides a clear definition of the use of low cost RFIDtechnology for asset and product tracking. He says it “can be used to monitor andmanage the physical movement of materials and finished products, to generateand deliver a flow of critical information, and to form the basis for enhancedworking between supply chain partners”. This application is of particular interestfor the supply chain management in warehousing and distribution, as theseactivities, accordingly to MIT (Harrop et al, 2003), account for 75 percent of aretail product cost. Tracking items like assets or products allows knowledge to begained on the history of the item and the process it has been through (Graham,32003). This capability enhances the control of operations by reducing stocklosses and improving the supply chain visibility.The use of this technology for asset tracking is mainly used for vehicles andcontainers tracking (e.g. fleet management, military logistics, postal services,food and clothing retail) where the tags cost is very small comparing to thetagged asset value. The use of RFID technology on an item level is still restrictedby the tags cost and other problems regarding physical features, e.g. size;metallic and electric interferences (Finkenzeller, 2003).Product handshakingProduct handshaking is concerned with the guarantee of the correct associationbetween products/parts by auto-rejecting un-authenticated products/parts (Das etal, 2002). Therefore, by using RFID tags, counterfeited or wrong products/partswill not be able to be used even if they are the exact copy of the genuineproduct/part. The product handshaking feature can be used for safety reasons,assuring that sensitive parts are correctly assembled, avoiding the costsassociated with serious consequences or product recall, e.g. pharmaceuticalindustry.This feature can also be used as an anti-counterfeiting measure, and as a result,products like printers can be prepared to only operate when using the correctcartridge, ensuring that companies will be unaffected by sales reductions onproducts’ accessories.Anti-counterfeitingThe anti-counterfeiting function of RFID technology is normally associated as anadditional feature provided by RFID chip-based tags and is partly addressed inthe asset and product tracking and product handshaking functions. However,counterfeiting is a major concern for all industries and some companies are justlooking for this type of functionality from RFID technology.4Safety and security functionsElectronic Article Surveillance (EAS) has been used extensively by the retailindustry, and although it is not an RFID technology, this feature can be easilyincluded in the functionality of RFID tags. Furthermore, the safety and securityfunctions of RFID technology are partly addressed in the access control, producthandshaking and product/asset tracking functions. In addition to item or personidentity confirmation it is possible to use RFID technology for tamper detection inpackages (e.g. medical products) or documents (e.g. detection of rewrittencheques). Finally, a common place use of RFID technology for security purposesis the cars ignition systems, which are equipped with a reader and will only startthe engine if the RFID tag inserted in the car key is recognised, this is alsoforming part of the keyless ignition systems found on many vehicles where thevehicle senses the RFID tag and opens the doors of the vehicle.Access ControlRFID systems can be used to verify automatically the access status ofindividuals to premises in what it can be considered a security feature. Thisfeature is already being used with other systems that require the direct contactbetween a transponder and a reader (e.g. magnetic stripe cards, contact smartcards incorporating a chip) or infrared scan of barcode cards. The advantage ofRFID systems in this case is the opportunity of having a contactless accesssystem that only requires a minimum reading range without having to be in lineof sight (Finkenzeller, 2003). This allows faster and accurate rates of accesswith reduced maintenance cost because the readers can be protected fromenvironmental conditions and vandalism.5Condition MonitoringRFID tags with sensor functions can monitor physical conditions, liketemperature, humidity, or if the product suffered any knocks. This feature is beingused by the United States Military (IDTechEx Ltd, 2003a) to monitor the conditionof munitions but it may be used in the food retailing industry where the chillproducts condition can be continuously measured. If some condition is altered thesystem can flag up a warning or set off a corrective procedure. Conditionmonitoring can be also used for anti-tampering purposes, detecting changes insome physical conditions of the product (IDTechEx Ltd, 2003b) or detecting if thetag is being peeled off (Harrop et al, 2003). This type of application is also beingused in “cold chain” applications within the pharmaceutical/health industry todetect if products, have been subjected, during transit, to temperatures outsidetolerance limits set by the authorities.Transactions supportRFID technology also provides the capability to handle financial transactions withthe same security provided by the common contact smart cards but also havingthe benefit of being contactless (Finkenzeller, 2003; Das et al, 2002). This it isargued is more convenient to both companies and consumers. Working towardsthis application development, Texas Instruments announced in February 2003 aproximity payment transaction platform that allows financial transactions withgreater security and higher data rates (Murray, 2003). The advantages it isargued will be a reduction of queues to pay, a reduction of costs associated withpayment cards because RFID cards will last longer and can be reused unliketraditional magnetic strip cards that ware out. Also greater functionality could beincluded in the card. An example of the application of this technology can beseen in the road tolls payment systems where vehicles tags are identified byreader at the tolls’ entrance and exit and fares are automatically calculated and6debited on tag owner bank account – e.g. Via Verde-Portuguese tolls-fees’transactions1.Positioning/locating functionsThe real time information about the position or location of something (e.g.animals, stolen goods, persons, freight) is an important application for RFIDtechnology. However, at the present moment, for the majority of applications, thiswill require expensive RFID hardware as it is necessary to have higher levels ofrange. This function informs where something with a RFID tag is located, eitherbecause it passed an interrogator or an interrogator is detecting it.RFID systems used in these types of applications are limited to restricted areas,for example warehouse yard management. Presently, GPS systems have moresuccess in this field.Merchandising support functionsThe implementation of RFID technology focusing on merchandising functions isalready being tested. One example that clearly illustrates it is the trial beingconducted in an Extra store in Rheinberg, Germany - The Metro Future Store2(Benoit, 2003). One of the applications for RFID tags is being tested in “Pantene”shampoo bottles to achieve a more direct communication with the customer.When a tagged shampoo bottle is lifted from the shelf, it activates the displayscreen above the shelf starting a commercial advert or communication tailored tothat product.Nevertheless the use of RFID technology for marketing functions will be mostlydependent of item level tagging and at the present this is still not feasible in theshort term within the FMCG retail industry. Few organisations are doing this as1 For further details on this system see http://www.viaverde.pt/vv_ct_01.asp?id=7&idioma=32 Information on this project can be accessed in the internet address http://www.future-store.org7yet. However Prada (the fashion retailer) has applied it to high value product atthe Prada store in New York.Other possible uses could be monitoring customer behaviour by using RFIDloyalty cards and providing tailored marketing approaches accordingly tocustomers’ shopping habits (Harrop, 2000).Industrial and WarehousingThe use of RFID technology has many applications in the industrial andwarehousing environment. Many of those as product handshaking, near real timeinventory control, or condition monitoring have already been discussed.Additional applications for RFID technology can be found in these areas.Warehouse picking can be made accurately and automatically (Graham, 2003),and warehouses’ yard management can be optimised so that vehicles andcargos can be identified as they enter a compound and are directed to the rightlocation to be unloaded or loaded. An other example is the application in RFID toconveyor picking systems that results in increased efficiency due to the higherlevels of accuracy performed by RFID systems.Multi-functionalityRFID technology offers the opportunity to integrate different applications underthe same system, which will lead to cost savings and improved customer service.In Asia, transport contactless smart cards can be used to buy items from vendingmachines and shops (Finkenzeller, 2003). In the retail environment, RFID smartcards used for payments may also be used as loyalty cards and having othervalue-adding services.8ConclusionTable 1 summarises the Applications that are possible with this technology asadvocated by various commentators on the subject. The is little doubt that RFIDwill find applications in a variety of environments and will have a significantimpact on supply chain performance.In our final part of RFID Demystified. We will proceed to discuss the actual caseswhere the technology has been applied.9Table 1: RFID Applications per Application Area as referred by some authorsAuthorsApplicationAreas ApplicationsMilner(2000)Harropet al(2003)Graham(2003)Finkenzeller(2003)Das etal(2002)Beck(2002a)Murray(2003)Overby(2002)Monitor/managemovement ofgoods    Locatingproducts   Position ofassets   Assettracking andmanagementOptimizedwarehouse yardmanagementAnticounterfeitingfeatures  Product handshaking  Increasedsecurity ofgoodsPrevention ofinternal andexternal theft Picking errordetection    Condition/environmentmonitoring  ImprovedStockManagement&Availability On-shelfavailability    Reducedchecking    Reducedinventorycounting Reducederrors inproduct/datahandling Improvedinventoryaccuracy    Transactionssupport     Increasedinteraction withcustomers  Improvedcustomermonitoring tools CustomerfocusapplicationsMulti-functionsintegrationapplication  10Further Reading and BibliographyBenoit, Bertrand (2003) Check out the supermarket of the future: RETAILING: An ambitious'roboshop' experiment in small-town Germany will help to shape the next generation of stores, TheFinancial Times, May 14, 2003, Wednesday London Edition 1, P. 16Das, Rhaghu and Harrop, Peter J (2002) Chip Smart Labels: The Intelligent RFID, IDTechExLtd.Finkenzeller, K (2003) RFID Handbook - Fundamentals and Applications in Contactless SmartCards & Identification, John Wiley and Sons LtdGraham, D. Douglas (2003) Warehouse of the Future, Frontline Solutions, April, pp. 21-24, 26Harrop, Peter J (2000) Low Cost RFID: Smart Labels, IDTechEx Ltd.Harrop, Peter J and Henry, Teresa (2000) Chipless smart labels. The Ultimate RFID, IDTechExLtd.Harrop, Peter J: Eberhardt, Noel; Howe, Andrew; and Das, Raghu (2003) Total AssetVisibility, IDTechEx Ltd.IDTechEx Ltd. (2003a) Smart Labels USA 2003 Conference Review, Smart Label Analyst, Issue27, April, pp.1-11IDTechEx Ltd. (2003b) Smart Tagging in Healthcare 2003 Review, Smart Labels Analyst, Issue28, Feb 2003, pp. 13-14Milner, Colin (2000) Strategic partnerships - their role in the introduction of auto ID and mobilecomputing technologies, Supply Chain Practice, 2000, Vol. 2 No. 3 pp: 12-23Murray, Charles J (2003) RFID tags coming to store near you, Electronic Engineering Times,3/31/2003, Issue 1263, pp.38 and 60Overby, Christine Spivey (2002) Winning In A Wal-Mart World, Forrester TechStrategy Report,November 2002, Forrester Research Inc.Perez, Bien (2003) RFIDs keep tag on clothes all the way to wardrobe - Radio-linked consumergoods improve supply chain tracking to purchase point, South China Morning Post (HongKong), March 18, 2003, TECHNOLOGY POST; p. 4

Check out the supermarket of the future: RETAILING: An ambitious 'roboshop' experiment in small-town Germany will help to shape the next generation of stores, The Financial Times,

Chipless smart labels.

Conference Review, Smart Label Analyst, Issue 27, April, pp.1-11 IDTechEx Ltd. (2003b) Smart Tagging in Healthcare

RFID Handbook - Fundamentals and Applications in Contactless Smart Cards & Identification,

RFIDs keep tag on clothes all the way to wardrobe - Radio-linked consumer goods improve supply chain tracking to purchase point, South China Morning Post (Hong Kong),

Total Asset Visibility, IDTechEx Ltd.

RFID Demystified: Part 2. Applications within the supply chain.

http://dspace.lib.cranfield.ac.uk/bitstream/1826/2764/1/RFID%20Demystified-Part%202-2004.pdf

RFID Demystified: Part 2. Applications within the supply chain.

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