Page 277 - Electronic Commerce

Chapter 5

These bar codes allow companies to scan materials as they are received and to track
them as they move from the materials warehouse into production. Companies can use
this bar-coded information along with information from their EDI systems to manage
inventory flows and forecast materials needs across their supply chains.
Large online retailers such as Amazon.com, Target, and Kohl’s maintain fulfillment
centers from which they ship products that customers have ordered online. Tracking
systems, called real-time location systems (RTLS), in these fulfillment centers use bar
252
codes to monitor inventory movements and ensure that goods are shipped as quickly as
possible.
In the second wave of electronic commerce, companies are integrating new types of
tracking into their Internet-based materials-tracking systems. The most promising
technology now being used is Radio Frequency Identification Devices (RFIDs), which are
small chips that use radio transmissions to track inventory. RFID technology has existed
for many years, but until recently, it required each RFID to have its own power supply
(usually a battery). RFIDs can be read much more quickly and with a higher degree of
accuracy than bar codes. Bar codes must be visible to be scanned. RFID tags can be
placed anywhere on or in most items and are readable even when covered with packing
materials, dirt, or plastic bands. A bar-code scanner must be placed within a few inches of
the bar code. Most RFID readers have a range of about six feet.
An important development in RFID technology is the passive RFID tag, which can be
made cheaply and in very small sizes. A passive RFID tag does not need a power source. It
receives a radio signal from a nearby transmitter and extracts a tiny amount of power
from that signal. It uses the power it extracts to send a signal back to the transmitter.
That signal includes information about the inventory item to which the RFID tag has been
affixed. RFID tags are small enough to be installed on the face of credit cards or sewn into
clothing items.
In 2003, Walmart began testing the use of RFID tags on its merchandise for inventory
tracking and control. Walmart initiated a plan to have all of its suppliers install RFID tags
in the goods they shipped to the retailer. Walmart wanted suppliers to do this within three
years. Having all incoming inventory RFID tagged would allow Walmart to manage its
inventory better and reduce the incidence of stockouts. A stockout occurs when a retailer
loses sales because it does not have specific goods on its shelves that customers want to
buy. Many of Walmart’s suppliers found the RFID tags, readers, and the computer systems
needed to manage tagged inventory to be quite expensive. These suppliers pushed
Walmart to slow down the implementation of its plan. Walmart responded by encouraging
suppliers to use RFID tags, but focused its energies on developing pilot projects within
Walmart to test RFID-based inventory management systems. Whether Walmart’s RFID
initiative will be seen as successful in the long run is still unclear.
Many industry observers have concluded that general acceptance of RFID tagging will
not occur in most industries until 2016 or later. Although the cost of a passive RFID tag is
now below six cents, even that small cost can be prohibitive for companies that ship large
volumes of low-priced goods. The cost of RFID tags is expected to continue dropping, and
as it does, more and more companies will find them to be useful in an increasingly wide
range of situations. You can learn more about current developments in this technology by
visiting the RFID Journal online. Figure 5-11 shows a typical passive RFID tag.

Copyright 2015 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.