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. [...]
[...] Because of the high costs, as the implementation if RFID is still in its infant stage, companies are choosing to test the technology in a pilot project before applying it in their entire supply chain. They first learn from evaluating a pilot project, so if the project fails the learning cost will be smaller than if the technology was implemented in the whole company. Finally, RFID may have a negative impact on brand equity due to a negative attitude towards the RFID technology. [...]
[...] s There are also advantages for the marketing department, especially in the area of advertisement. Customer profiles can be refined from information on customer's behaviour by for example, embedding RFID into shopping carts. Therefore the marketing team can target the right customer groups for certain products. Additionally, the RFID technology can provide information about products that have been in the store too long and risk becoming obsolete or expired. The department can then advertise these products for a quick stock clearance. [...]
[...] When it comes to the technology's development, the implementation of RFID requires the installation of readers in order to detect the radio frequency waves transmitted by RFID tags. Furthermore, the company's information system has to be adapted to cope with the inflow of data. Customisation of the supermarket's information system is required in the process: “RFID systems are not a “plug and play” technology. Every company, transformation process and product is different and RFID has to be tailored to each circumstance.” Finally, procurement can be automated due to the installation of RFID. [...]
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