Page 236 -

Chapter 8
as radio frequency identification (RFID) are increasing the amount of data that is contained in ERP
systems, how business intelligence technologies are turning this data into valuable information, and

how cloud computing and mobile technologies are changing where ERP data is stored and how it

is delivered.

RADIO FREQUENCY IDENTIFICATION (RFID) TECHNOLOGY
Radio frequency identification technology, known commonly as RFID, is becoming an
216
increasingly efficient tool for tracking items through a supply chain. An RFID device,
which can be attached to products, is a small package (or tag) made up of a
microprocessor and an antenna. The location of an item with an RFID tag can be
determined using an RFID reader, which emits radio waves and receives signals back
from the tag. The reader is also sometimes called an interrogator because it
“interrogates” the tag. Because microprocessors have continued to become more
powerful and less expensive over time, the cost of RFID technology is approaching a level
at which it is becoming inexpensive enough to be cost-effective for many businesses.
Today, most materials are still tracked using bar codes and bar-code readers. However,
bar-code labels can degrade in bad weather, and an employee must point a bar-code
reader directly at a bar code to read it. RFID technology does not need this line-of-sight
connection, and can withstand most environmental stresses.
Walmart has been on the leading edge of the move to integrate RFID technology
into the supply chain. In 2003, Walmart announced that it would require its top
100 suppliers to begin tagging pallets and cases with RFID tags, which would allow
Walmart to more efficiently track products through its logistics network. (A Walmart-
sponsored report from the University of Arkansas’ Information Technology Research
Institute concluded that RFID reduced retail out-of-stock situations in stores
by 16 percent.) However, by early 2007 reports began to surface that Walmart’s RFID
initiative was not progressing as planned. Although Walmart publicly denied that it was
experiencing any issues with its RFID technology, by October 2007, the company
announced a major change in its RFID strategy, shifting its focus to the use of RFIDs in
its stores rather than in its distribution centers. Unfortunately, Walmart still faced the
reality that the cost for RFID tags was still too high to put on individual items, even
though that is the area from which the biggest benefit would come. The major
opportunity for RFID technology to reduce out-of-stock situations is not in the supply
chain between the manufacturer and the storeroom at the individual store, but between
the backroom stock area and the store shelves.
Walmart initiated its third RFID initiative in July 2010, announcing that it would
begin requiring suppliers to place removable RFID smart tags on individual apparel items.
According to Raul Vazquez, the executive in charge of Walmart stores in the western
United States, the “ability to wave the wand and have a sense of all the products that are
on the floor or in the backroom in seconds is something that we feel can really transform
our business.” The potential return on investment of technologies that can improve

Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.