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Radio frequency identification implementation in the supermarket industry

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  1. Introduction
  2. The impact of RFID on the value chain
    1. The primary activities
    2. The support activities
  3. The impact of RFID on the supermarket industry
  4. The costs of RFID implementation
  5. Conclusion
  6. References

This paper discusses the implementation of Radio Frequency Identification (RFID) in the supermarket industry. RFID is based on the transmission of radio frequency waves by RFID tags to RFID readers. The RFID tags are attached to products or pallets and can be embedded with a wide variety of information ranging from product characteristics to supplier details. There are two kinds of tags: active and passive. Active tags can send out radio frequency waves by themselves whereas passive tags need an incoming signal, sent by a reader, to generate an outgoing wave. This radio frequency wave contains the information that is embedded in the tag. A reader then picks up the wave and the information is sent to the company's information system1. The Electronic Product Code (EPC)2 is technology standard. The key question of this paper is whether the RFID implementation is able to create or maintain a competitive advantage.

[...] The RFID implementation is still in its ?substitution?12 phase, so the entrant can still use the old technology without facing major disadvantages. Although RFID is superior to the bar code system, as mentioned above, it is also very expensive to implement, use and maintain at the moment (see infra 5. the costs of RFID implementation). Though the costs of RFID are expected to decrease in the future, the existing companies probably are already able to operate at a much lower cost and it might take the entrant too long to achieve the same level of efficiency. [...]

[...] Below, the impact of RFID on the primary and secondary activities of the supermarket industry is being analysed ?RFID and Corporate Responsibility: Hidden Costs in RFID implementation? by Barut M., Brown R., Freund N., May J. and Reinhart; p288- old and by Field A. Table the impact of RFID on the value chain Support activities Firm infrastructure Human resource management Technology development Procurement Inventory control Managing and accountancy efficiencies More skilled inventory managers Learn to use data Adaptation of the supermarket's information system Installation of readers Improved communication with suppliers Automation of the ordering process Customer Management More More behaviour of stock outs efficient efficient inventory inventory Advertising Less theft control updating optimisation Inbound Operations Outbound Marketing logistics logistics and sales Primary activities Automatic checkout and payment Service Margin Source: information gives you competitive advantage? by Porter M. [...]

[...] There are major advantages, such as cost efficiencies and knowledge about customer behaviour, but the costs of RFID are still high as the technology implementation is still in the infant stage. Hence caution is needed when implementing the technology. Therefore many companies start off with a small project and gradually implement the technology throughout the entire company. Additionally, a firm must take the impact of the implementation on its brand equity into consideration, as a bad reputation can liquidate all the advantages. [...]

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