With regard to the number of benefits associated with the integration of supply chain management and RFID technologies, a lustrous representation is brought out of the technology’s performance. Nonetheless, it is quite tasking and expensive when it comes to the adoption of the RFID technology, especially in relation to setting cost as it is very high. It is this high implementation cost that posses a great challenge to medium-sized and small retailers. This is a totally different case when it comes to Walmart since this technology has enhanced its efficiency and also save a lot.
There are quite a number of positive aspects associated with RFID technology that Walmart has gained. One of the major benefit of this technology as experienced by Walmart is the minimized “bullwhip supply chain effect” and the improved management of the firm’s liquidity. As much as this technology is influential and beneficial, there a number of aspects relating to it that are still tentative. In addition, the modern supply chain management is turning out to be more multifaceted. It is this aspect that makes the measurements of several simulations quite challenging. However, the integration of RFID technology has long term benefits to any given company.
Apart from the above mentioned aspects regarding RFID, as outlined in the literature review, supply chain management is one of the most important aspects of an organization. However, depending on human counting in inventory management, it is prone to frequent errors. As indicated by Chopra and Meindl (2013), Radio frequency identification (RFID) technology can significantly improve inventory management and provides useful ways to improve supply chain administration in an organization. The radio frequency identification is superior to bar codes since it can be monitored and tracked to determine the quality and type of the incoming and outgoing goods. The RFID technology allows a company to track inventory within its supply chain.
An organization which does not have an efficient supply chain management will have issues of liquidity and this affects how the organization will compete effectively with other businesses in the industry. Nonetheless, the use of Radio Frequency Identification (RFID) in the supply chain from the suppliers, manufactures, and transporters will enable the organization to provide goods and services in a timely manner. At the same time, it will reduce the handling costs of goods brought into the organization. This notion is supported by Lazar and Moss (2005) who noted that the key factor that distinguishes organizations is the supply chain and the best solution to make supply chain more efficient is by using RFID technology (Mashburg, 2005).
Another aspect depicted by the literature is that the cost of setting up RFID technologies is considerably high. However, the initial cost can be recovered through a successive application and implementation of the RFID. The benefits gained using RFID are much higher as compared to the cost of laying down the necessary infrastructure such as RFID tags, antennae, and RFID readers. Use of RFID technology is very efficient in reducing the cost of warehouse process. With a successful installation of the technology, the organization can reduce the number of workers in the store or the costly double check on the inventory. This increases the speed of inventory taking and improves the productivity of the supply chain.
Organizations face loss of information due to theft, misrouting and misplacement of the goods in their warehouses. The use of RFID technology eliminates this stock loss saving millions. RFID technology offers security and helps to check on counterfeit products during the distribution process. There is also better utilization of goods and services from the organization when using RFID technology as compared to regular inventory assessment methods. In the case of Walmart, the use of RFID technologies in the supply chain management has enabled the organization to have a competitive edge over its competitors. Deru, Kozubal and Norton (2010) depicted that there was a 62% reduction in product demand from 6 to 15 in Walmart as opposed to other supermarkets that did not employ the services of RFID technologies. Researchers were able to conclude that RFID technology was able to create pick up lists that were used in the collection at retail centers, as well as the sales sections. This reduced the likelihood of conveying inaccurate information due to duplication of costs.
As depicted in the study conducted by Tajima (2007), the adoption of RFID technology had been relatively positive for Walmart. The study revealed that the stock ran out, the replenishment was three times faster in Walmart as compared to other control stores that do not apply RFID technology. This shows that if an organization uses RFID technology, the chance of the business running out of stock is low.
Therefore, introducing RFID technology can help to reduce the bullwhip effect efficiently. This effect includes increase in fluctuations as orders are made from the producers, wholesaler and eventually to the retailer (Wang, 2014). For Walmart, the extent of bullwhip not only increased shipping cost but also decreased both profitability and customer service. The adoption of RFID technology has substantially reduced the bullwhip effect and at the same time, increasing opportunities along the supply chain (Field, 2005).
In addition, RFID technology helps significantly in reducing stock out cases. RFID technology increases the efficiency of detecting a stock out before they happen as compared to traditional human inventory control techniques. It is worth to note that, RFID technology helped Walmart to achieve its goal of enjoying economies of scale and maintain a super lean supply chain. The Walmart model, where the supplier plays a large role in inventory management (as observed in the relationship between Walmart and P&G) has helped to reduce stock out cases. The supplier surveys its stocks on display at Walmart stores via real time satellite links. As a result, the supplier knows when to transport, store and even produce without having to stockpile merchandise in warehouses.
Generally, it is evident that the use of RFID technology has given Walmart a competitive advantage over other organizations in the supermarkets industries. With RFID technology, the organization has been able to avoid pitfalls existing in the traditional methods of human inventory control system (Dighero, 2005). Therefore we can confidently say that RFID technology has achieved tremendous success in the adoption process as well as reducing inefficiencies in supply chain management.
It is notable that business organizations that make use of RFID technology are far much efficient as compared to those which do not have. Therefore, it is important for a firm to adopt the technology. Firms with enough capital that can be able to cover the initial installation cost of RFID technologies should adopt the technology to realize the enormous advantages associated with the use of RFID technology. This adoption will significantly reduce the cost of production and eventually increase the revenues of the firm. With all the benefits of the technology, the firm can finally realize the economies of scale.
Firms that are not financially stable should keep away from using the technology because of high rollout cost. This ideology will protect such companies from the failed RFID implementation and also minimize their financial strain because of the high implementation cost compared to the size of the firm.
Firms should adopt the RFID technology in phases, at first; the companies can run the two systems in parallel; that is, the use of RFID technology and the traditional human inventory control system. A firm should do so until it is comfortable to fully implement the RFID technology before it can do away with the traditional human inventory control system.
Further Research Areas
The radio frequency identification technology is a wide area and can be adopted in many sectors of the economy. Therefore, any firm that has the financial capacity to adopt and implement this technology should take such initiative and benefit from it. For those companies that face financial constraints, it might be quite challenging to adopt such technology since it is quite expensive to implement. This means that the operations of the firm may be affected since most of the resources would be directed towards the implementation of the RFID technology.
It is such aspects that call for further studies to be directed towards the use of RFID technology in manufacturing industries, service industries and also in the government procurement process.
Use of RFID technology in payment system is also an extensive area that has not been explored intensively. The digital payment system, such as the use of visa cards and the paperless payment systems can be examined to increase further opportunities in the adoption of RFID technologies in the corporate world.
Finally, more research should be done to examine the use of radio frequency identification RFID technique in relation to online businesses. Today, most firms engage in buying and selling goods using e-commerce. This field provides vast opportunities for organizations to explore and take advantage of using RFID technology. Integrating RFID technology is the key to future success in the supply chain management system.
Chopra, S., & Meindl, P. 2007. Supply chain management. Upper Saddle River, N.J.: Pearson Prentice Hall.
Deru, M., Kozubal, E., & Norton, P. 2010. Walmart experimental store performance stories. [Golden, CO]: National Renewable Energy Laboratory.
Dighero, C. 2005. RFID: The Real and Integrated Story. Intel Technology Journal, 09(03).
Field, A. M. 2005. Mixed RFID signals. The Journal of Commerce, 4(40), pp. 15-18.
Kumar, S. & Budin, E. M. 2006. Prevention and management of product recalls in the processed food industry: a case study based on an ecporters perspective. Technovation, 14(2), pp. 739-750.
Lazar, L. & Moss, H. 2005. Radio Frequency Identification Technology: An introduction. Washington D.C, Proceedings of the 2005 Southern Association for Information Systems Conference.
Leach, P. 2004. Ready for RFID?. The Journal of Commerce, 5(42), pp. 12-14.
Lee, Y., Cheng, F. & Leung, Y. 2005. A quantitaive view on how RFID will improve a supply chain, New York: IBM Research.
Mashburg, T. 2005. Brown Goes Bluetooth. Technology Review, 108(6), p. 42.
Mo, J. & Lorchirachoonkul, W. 2012. Extended system design for RFID enabled supply chains with non-RFID technologies. IJBIS, 10(3), p.348.
Wang, K. (2014). Intelligent and integrated RFID (II-RFID) system for improving traceability in manufacturing. Adv. Manuf., 2(2), pp.106-120.