International Journal of Operations & Production Management

Emerald Article: A quantitative model for the introduction of RFId in the fast moving consumer goods supply chain: Are there any profits? Giovanni Miragliotta, Alessandro Perego, Angela Tumino

Article information:
To cite this document: Giovanni Miragliotta, Alessandro Perego, Angela Tumino, (2009),"A quantitative model for the introduction of RFId in the fast moving consumer goods supply chain: Are there any profits?", International Journal of Operations & Production Management, Vol. 29 Iss: 10 pp. 1049 - 1082 Permanent link to this document: http://dx.doi.org/10.1108/01443570910993483 Downloaded on: 28-01-2013 References: This document contains references to 64 other documents Citations: This document has been cited by 7 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 2107 times since 2009. *

Users who downloaded this Article also downloaded: *

Giovanni Miragliotta, Alessandro Perego, Angela Tumino, (2009),"A quantitative model for the introduction of RFId in the fast moving consumer goods supply chain: Are there any profits?", International Journal of Operations & Production Management, Vol. 29 Iss: 10 pp. 1049 - 1082 http://dx.doi.org/10.1108/01443570910993483 Giovanni Miragliotta, Alessandro Perego, Angela Tumino, (2009),"A quantitative model for the introduction of RFId in the fast moving consumer goods supply chain: Are there any profits?", International Journal of Operations & Production Management, Vol. 29 Iss: 10 pp. 1049 - 1082 http://dx.doi.org/10.1108/01443570910993483 Giovanni Miragliotta, Alessandro Perego, Angela Tumino, (2009),"A quantitative model for the introduction of RFId in the fast moving consumer goods supply chain: Are there any profits?", International Journal of Operations & Production Management, Vol. 29 Iss: 10 pp. 1049 - 1082 http://dx.doi.org/10.1108/01443570910993483

Access to this document was granted through an Emerald subscription provided by INSTITUTE OF BUSINESS ADMINISTRATION For Authors: If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service. Information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com With over forty years' experience, Emerald Group Publishing is a leading independent publisher of global research with impact in business, society, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, as well as an extensive range of online products and services. Emerald is both COUNTER 3 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.
*Related content and download information correct at time of download.

The current issue and full text archive of this journal is available at www.emeraldinsight.com/0144-3577.htm

A quantitative model for the introduction of RFId in the fast moving consumer goods supply chain
Are there any prots?
Giovanni Miragliotta, Alessandro Perego and Angela Tumino
Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Milano, Italy
Abstract
Purpose The purpose of this paper is to describe an analytical model to assess the costs and benets of radio frequency identication (RFId) applications in the fast moving consumer goods (FMCG) supply chain. Design/methodology/approach The paper is based on an in-depth literature review and a classication of the main contributions regarding the assessment of RFId applications. The impact of RFId technology on supply chain processes has been modelled using an activity-based approach. An extensive, six-month discussion and renement process with the logistics and supply chain managers of 30 FMCG companies is conducted to validate the model and to collect the required inputs. Findings Pallet- and case-level taggings have been explored. The former scenario shows limited benets, whereas the actual potential of RFId becomes clear in the latter. The protability of these projects is signicantly affected by the costs of RFId tags and by the characteristics of the base-line supply chain in terms of efciency, quality requirements and, of course, product features. The model provides a clear assessment of how and when a positive return on investment can be achieved, even with todays technology (in terms of costs and performances). Originality/value This is one of the rst attempts to provide a comprehensive analysis of the costs and benets of an RFId application, taking into account all the major factors involved. The model can be a valuable support to manufacturers and retailers in evaluating their investments. Keywords Radio frequencies, Fast moving consumer goods, Return on investment Paper type Research paper

The introduction of RFId in FMCG supply chain 1049

Received 3 June 2008 Revised 2 February 2009 Accepted 22 May 2009

1. Introduction Radio frequency identication (RFId) technology is considered to have great potential to improve the efciency and accuracy of many processes and even to enable a substantial redesign of the supply chain in the fast moving consumer goods (FMCG) industry (Angeles, 2005; Dutta et al., 2007; Cannon et al., 2008; Cantor and Macdonald, 2009).
The authors would like to thank GS1 Italy, which supported this research project, and Bolton Alimentari, Cameo, Campari, Carrefour, Conad, Coop Italia, Crai, Despar-Aligroup, Despar-Sadas, Diageo, Esselunga, Fater, Ferrero, Fhp, GlaxoSmithKline, Heineken, Henkel, , Nordiconad, Procter&Gamble, Johnson&Wax, Lavazza, Lombardini, Manetti&Roberts, Nestle Selex, Sisa, and Unilever for their precious collaboration in the research workgroup. The authors would also like to thank the reviewers for their valuable comments and suggestions.

International Journal of Operations & Production Management Vol. 29 No. 10, 2009 pp. 1049-1082 q Emerald Group Publishing Limited 0144-3577 DOI 10.1108/01443570910993483

IJOPM 29,10

1050

Immediately, after Wal-Marts mandate in 2003, a substantial interest in RFId arose worldwide, leading to several pilot projects introduced by supply chain leaders (e.g. Metro Group, Tesco, Sainsburys, Marks & Spencer, Albertson, Target, Gillette, Procter & Gamble). These projects mainly aim to provide initial results on the strengths and weaknesses of RFId. Indeed, many companies are still biding time, primarily because of a lack of condence in the benets and, consequently, in the impact on return on investment (ROI; Dutta et al., 2007; Reyes and Jaska, 2007; RFId-IPO, 2007), which, in turn, generates a greater perception of risk. For instance, upstream suppliers generally feel they are required to invest in this technology only to pass on the benets to their powerful retail customers and they still have a limited sense of how to exploit RFId within their own processes (Agarwal, 2001). In the Italian FMCG supply chain, there are only a few examples of feasibility analyses or tests (RFId-IPO, 2005, 2006, 2007). Despite their declarations of interest in RFId, manufacturers and retailers are reluctant to invest in this technology. Among the various barriers they usually cite along with technological and organisational issues the difculty in assessing the value of RFId applications is the most common (Agarwal, 2001; RFId-IPO, 2007, Cannon et al., 2008). This is why in 2005, GS1 Italy, the Italian subsidiary of GS1, the global standard organisation which promotes the electronic product code (EPC) RFId standard for FMCG, decided to set up a working group to assess and quantify the costs and benets stemming from the application of RFId in the FMCG supply chain. The working group included Politecnico di Milano, Accenture and representatives of 30 major manufacturers and retailers operating in Italy (e.g. Henkel, Lavazza, Procter&Gamble, Unilever, Carrefour, Coop Italia, Nordiconad, Esselunga), who provided the knowledge input for the subsequent work presented in this paper. Following these introductory remarks, the paper is structured as follows: Section 2 provides a classication of the main scientic contributions on the evaluation of RFId applications. After the presentation of the objectives and the methodology in Sections 3 and 4, respectively, Section 5 describes our original model. Section 6 describes in detail the results obtained when applying the model to a test-bed supply chain and discusses the main business implications. Finally, Section 7 draws some conclusions and suggests future research paths. 2. Literature review There is a growing body of literature both in the academic and generalist press on the evaluation of RFId projects. Even if there are several qualitative analyses of the benets of RFId applications, there are few sound, quantitative assessments, as most studies are incomplete and based only on a limited number of test projects. In general, the available contributions on the evaluation of RFId projects can be classied as follows: . qualitative analyses of the value of RFId; . quantitative analyses based on empirical evidence (e.g. case studies) or expert evaluations; and . quantitative studies based on structured assessment models. These contributions will be briey discussed in the following paragraphs, paying particular attention to those focusing on the FMCG supply chain. A taxonomy of the

quantitative models is given at the end of the section, in order to position the present paper within the existent body of knowledge. 2.1 Qualitative analyses of the value of RFId The papers in this cluster provide a general introduction to RFId technology and a qualitative analysis of its implications. This is the largest group in terms of number of available papers, which can be classied into three sub-groups. A rst set of contributions describes the strategic implications of applying RFId to supply chain management (Keen and Mackinttosh, 2001; Srivastava, 2004; Gunasekaran and Ngai, 2005; Michael and McCathie, 2005; Pramatari et al., 2005; Barratt and Choi, 2007; Boone and Ganeshan, 2007; Bhattacharya et al., 2007). In particular, some of these studies focus on the advantages and disadvantages of RFId, both in general (Srivastava, 2004; Michael and McCathie, 2005) and within specic industries (e.g. the retail industry, Bhattacharya et al., 2007). RFId technology is also recognised as a facilitator in collaboration practices such as collaborative planning, forecasting, and replenishment (CPFR) and an enabler of smarter supply and demand chains (Pramatari et al., 2005). With respect to supply chain strategy, Gunasekaran and Ngai (2005) maintain that RFId may support the development of emerging supply chain congurations. Other papers provide a taxonomy and a qualitative evaluation of the benets achievable through RFId technology (Helders and Vethman, 2003; Lapide, 2004; Angeles, 2005; Curtin et al., 2007; Sellitto et al., 2007). Curtin et al. (2007), for example, analyse how RFId affects individuals, business processes, organisations and markets. The authors focus only on the benets of the technology, while others seek to offer a wider (qualitative) comparison of the strengths and weaknesses of RFId (Jones et al., 2005; Attaran, 2007). Finally, various contributions analyse the implementation process and the ensuing issues. The focus in such papers is two-fold: on the one hand, the implementation of RFId technology is described and analysed (Johansson, 2005; Curtin et al., 2007), while other studies aim to provide a roadmap for successful adoption (Gale et al., 2004; Chuang and Shaw, 2005; Wu et al., 2006; Reyes and Jaska, 2007). 2.2 Quantitative analyses based on empirical evidence or expert evaluations These studies seek to provide both a taxonomy and a quantitative evaluation of the benets stemming from the adoption of RFId. Since these analyses are mainly based on empirical evidence (e.g. case studies, eld studies), most refer to the FMCG supply chain, where the rst pilot projects were launched. A rst important group of contributions is found in the white papers issued by the Auto-ID Labs, a global network of academic research laboratories in the eld of RFId. The labs comprise seven of the worlds leading research universities, including the Massachusetts Institute of Technology and the University of Cambridge. Some of the studies aim to assess the impact of RFId on the supply chain as a whole (Chappell et al., 2002b), while others focus on specic players such as manufacturers (Chappell et al., 2003b), distribution centres (DCs) (Alexander et al., 2003a) or the retail stores (Chappell et al., 2003a). Other papers look at specic issues that are particularly relevant to the FMCG supply chain, e.g. product shelf-availability and out-of-stock (Alexander et al., 2002),

The introduction of RFId in FMCG supply chain 1051

IJOPM 29,10

1052

shrinkage (Alexander et al., 2003c), product obsolescence (Alexander et al., 2003b) and demand planning (Chappell et al., 2002a). In addition to the Auto-ID Labs papers, other work can also be considered in this group (Karkkainen, 2003; Loebbecke, 2005; Hardgrave et al., 2006; Delen et al., 2007; Langer et al., 2007; Fosso Wamba et al., 2008; Kim et al., 2008). Loebbecke (2005) examines RFId applications in the retail supply chain using the example of the early Metro Group pilots in Germany and suggests that IT innovations (including RFId) in combination with the marketing paradigm of future stores have contributed to a sales increase and a reduction in out-of-stock. On the basis of the RFId trial conducted at Sainsburys, Karkkainen (2003) discusses the potential of RFId technology to increase efciency in the supply chain of short-life products. Hardgrave et al. (2006) present a study commissioned by Wal-Mart in which they examine the inuence of RFId on out-of-stocks. 2.3 Quantitative studies based on structured assessment models These studies aim to develop mathematical and simulation models to assess the impact of RFId on supply chain performance. Some contributions focus on just a few areas of impact, e.g. stock out reduction or improved inventory management (Atali et al., 2004; Fleisch and Tellkamp, 2005; Bendavid et al., 2007; Gaukler et al., 2007; Lee and Ozer, 2007; de Kok et al., 2008; Liu et al., 2008, Szmerekovsky and Zhang, 2008; Rekik et al., 2008a, b; Wang et al., 2008). For instance, Fleisch and Tellkamp (2005) analyse the impact of RFId on inventory accuracy, arguing that the technology might reduce the costs of shortage, holding, and handling, as well as the consequences of not detecting missing or mismatched items in the incoming delivery. Further contributions in this direction are provided by Atali et al. (2004) and Lee and Ozer (2007), who use a simulation model to quantify the indirect benets of RFId in inventory accuracy, shelf replenishment policy and inventory visibility across the entire supply chain. Gaukler et al. (2007) present a model to assess the benets of item level RFId for two supply chain members. The authors also investigate the improvement in inventory replenishment decision making as a result of increased information visibility. Nevertheless, comprehensive analyses of the costs and benets of an RFId application that go beyond an evaluation of only a few factors are relatively uncommon in literature. 2.4 Quantitative studies: a detailed review and a taxonomy The previous paragraphs provide a general picture of the main analyses on the evaluation of RFId projects. Since the present study concerns a quantitative assessment model to evaluate RFId applications in the FMCG supply chain, a deeper insight into the quantitative studies presented above is of fundamental importance to highlight the innovative contribution provided by this paper. In particular, four dimensions of analysis have been introduced: (1) Processes. Which processes are considered by the authors (e.g. material handling, inventory management, and demand planning)? (2) Supply chain topology. Which types of supply chain have been studied (e.g. single company, dyadic two-tier supply chain, networked multi-echelon supply chain)? (3) Methodology. How do the authors assess the benets (e.g. through case study, survey, mathematical model, simulation, and experts evaluation)?

(4) RFId scenarios. Which are the main technological scenarios examined (RFId on pallet loads, RFId on cases, RFId on items, RFId on returnable assets)? Table I gives the taxonomy developed as a function of the above dimensions. While the rst attempts were mainly based on empirical evidence, more attention has been paid in recent years to mathematical and simulation models. However, these models mainly analyse individual companies and do not provide an evaluation of the overall benets along the supply chain. Moreover, the analyses mainly consider item level tagging (ILT), which both for technological and economic reasons is still somewhat futuristic in the FMCG industry. Finally, most of the models focus on a limited subset of benets (e.g. out-of-stock reduction, inventory replenishment) and do not provide a comprehensive evaluation of the protability of the investment. Indeed, only a few analyses aim to evaluate the overall benets introduced by case-level or pallet-level tagging. An attempt in this direction was made by Tellkamp (2003) who proposed a ROI model for the FMCG supply chain. Unfortunately, the author does not describe the evaluation model but rather presents only the results obtained in the item-level tagging scenario. Veeramani et al. (2008), on the other hand, analyse only the receiving and shipping processes, and do not consider the other benets that can be obtained in the remaining material handling activities (e.g. putting away and picking). The model proposed in the present paper seeks to address many of the shortcomings in the existing contributions. First, the study refers to a realistic supply chain, including all its players (manufacturers and retailers) and nodes (plants, plant warehouses, manufacturers DCs, retailers DCs and supermarkets). Second, it includes a complete and detailed set of activities, both operational (e.g. receiving, putting away, and picking) and administrative (e.g. addressing the contentious issues between two supply chain members, such as a dispute about the quality and quantity of the goods received). Consistent with the process model, an overall cost function can be calculated as the key performance indicator for RFId introduction. Furthermore, the paper presents an in-depth analysis of the results, including a variance analysis, thus enabling a broad understanding of both the outcomes and the managerial implications of RFId investment decisions. Finally, the structure of the model and its main inputs are described in detail, so as to ensure the contribution is scientically veriable. 3. Objectives and research questions This paper aims to ll the gap highlighted in Table I, i.e. it aims to present a general model which analyses the impact of the RFId introduction on a FMCG supply chain and its processes. In this sense, the model is meant to investigate the mechanisms by which RFId impacts on the current supply chain processes and help to answer the following research questions: RQ1. What are the main benets afforded by an RFId application? Which processes/activities and which actors in the chain are expected to benet the most from RFId adoption? RQ2. What are the main costs (both capital and operational expenditures) of such an application in various sensible (i.e. non-futuristic) technological scenarios? In which processes/activities and stages of the chain are they concentrated?

The introduction of RFId in FMCG supply chain 1053

1054

IJOPM 29,10

Paper Experts X Case study Case study Experts, survey X X X X X X X Simulation Simulation Case study Case study X X (continued ) X X X X X X X X X X X X X Experts Experts Case study Case study Case study Mathematical model

Alexander et al. (2002)

Chappel et al. (2002a) Chappel et al. (2002b) Alexander et al. (2003a)

Alexander et al. (2003b)

Alexander et al. (2003c)

Chappell et al. (2003a) Point of sale

Chappell et al. (2003b)

Karkkainen (2003)

Tellkamp (2003)

Atali et al. (2004) Inventory management Fleisch and Tellkamp (2005) Inventory management

Loebbecke (2005) Point of sale

Hardgrave et al. (2006)

Table I. An overview of the main quantitative studies Supply chain topology Methodology RFId scenarios Pallet Case Item Asset Four-tier supply chain (four plants, ten manufacturer DCs, four retailer DCs, 800 points of sale) Single company retailer Single company manufacturer Four-tier supply chain (four plants, ten manufacturer DCs, ve retailer DCs, 800 points of sale) Four-tier supply chain (plants, manufacturer DCs, retailer DCs, points of sale) Four-tier supply chain (plants, manufacturer DCs, retailer DCs, points of sale) Single company manufacturer Three-tier supply chain (plant, retailer DC, point of sale) Four-tier supply chain (plants, manufacturer DCs, retailer DCs, points of sale) Single company Three-tier supply chain (plant, distributor, retailer DC) Single company retailer

Processes

Inventory management out-of-stock

Material handling Demand planning Material handling

Inventory management shrinkage

Inventory management obsolescence

Production management, inventory management, material handling Material handling and inventory management Material handling

Material handling and inventory management

Material handling and inventory management Inventory management out-of-stock

Paper Mathematical model, case study X X X X X X X X X X X X X X X Simulation Case study Simulation Mathematical model Case study Survey Simulation Mathematical model Mathematical model

Processes

Supply chain topology

Methodology

RFId scenarios Pallet Case Item Asset

Bendavid et al. (2007)

Demand planning, production management, material handling

Gaukler et al. (2007) Langer et al. (2007) Lee and Ozer (2007) de Kok et al. (2008) Two-tier supply chain (twomanufacturers, one retailer) Single company retailer Point of sale Point of sale Point of sale

Five-tier supply chain (one plant, two retailer DCs, 90 points of sale, one distributor, one recycler) high value products Single company Single company Single company Single company

Fosso Wamba et al. (2008)

Kim et al. (2008)

Liu et al. (2008)

Rekik et al. (2008a)

Rekik et al. (2008b)

Szmerekovsky and Zhang (2008) Veeramani et al. (2008)

Inventory management Material handling shipping Inventory management Inventory management shrinkage Material handling shipping, receiving, put-away Inventory management, material handling store, demand planning Inventory management dynamic pricing Inventory management shrinkage Inventory management inventory inaccuracy Inventory management

Wang et al. (2008) Five-tier supply chain (plants, plant warehouses, manufacturer DCs, retailer DCs, points of sale)

Two-tier supply chain (one Mathematical model manufacturer, one retailer) Three-tier supply chain (one plant, Mathematical model one manufacturer DC, one retailer DC) Single company Simulation Mathematical model

(This paper)

Material handling, inventory management, administrative issues Inventory management replenishment Material handling, inventory management, administrative issues

The introduction of RFId in FMCG supply chain 1055

Table I.

IJOPM 29,10

RQ3. Which parameters have the greatest inuence on RFId project protability? RQ4. What are the likely RFId-adoption paths that could be successful in this industry? To answer these questions, the model is divided into two parts, namely the assessment of benets and the assessment of capital and operational expenditures. The combination of these two components will allow us to evaluate the protability of the investment and so address our research issues (Figure 1). 4. Research methodology As stated in the Introduction, a research project was started in 2005 with the aim of developing a general model to analyse the impact of the introduction of RFId on the Italian FMCG supply chain and its processes. The developed model intended to reproduce the entire supply chain and include all the relevant activity drivers, so as to be able to assess in depth the costs and benets of RFId adoption and possibly support the decision-making process for managers in this industry. Since a model of general validity was sought, an analytical approach rather than a discrete time simulation was preferred because of the formers exibility and the greater transparency of the assumed relationships (it is enough to scan the equations in the model to understand the hypothesised relationships in terms of direction and intensity). The research programme was therefore divided into three phases. The rst phase (February 2005-October 2005) was devoted to assessing in detail the FMCG supply chain processes. The second (November 2005-April 2006) concentrated on the development of the model, its coding into a usable IT tool and its validation. Finally, the third phase (May 2006-December 2006) dened a proper test-bed and a set of relevant RFId implementation scenarios (including sensitivity analysis of the most uncertain parameters), ran the model and analysed the results. The three phases used ad hoc research methodologies in line with their specic objectives. In the rst phase, direct interviews with companies in the FMCG industry were carried out. In this regard, the cooperation with GS1 Italy was fundamental in gaining access to the most important actors in the Italian market (see acknowledgements for a list of the companies involved). The interviews involved the distribution and warehousing managers, chief controller ofcers, and operational employees of
Benefits (e.g. impact on supply chain productivity, reduction of out of stocks) Capital and operational expenditures (e.g. cost of the tags, maintenance cost)

1056

Figure 1. The structure of the assessment model

Investment profitability (e.g. net present value, pay-back time)

27 prominent companies. Semi-formalised questionnaires have been preferred, since they gave us the possibility to discuss the proposed questions and topics more freely. A draft of the questionnaire was prepared and validated with a couple of test companies, in order to check its completeness and clarity. The nal questionnaire was sent to the interviewees before the meetings. The main objective was to get a broad understanding of the supply chain operating processes in the respective companies, in order to generalise these activities into a exible, parametric model. Such a model should ideally be exible enough to reproduce all of the observed processes, together with any other sensible congurations that might have been overlooked during empirical observation (Fosso Wamba et al., 2008). In the second phase the interviews and the collected data were used to develop the analytical model. In this task, the literature review provided some useful inputs, but the activities relied mainly on the experience of the research group (Miragliotta et al., 2007, 2008). The modelling methodology is based on the well-established activity-based modelling approach (Kaplan and Bruns, 1987), as used by other authors (Subirana et al., 2003; Laubacher et al., 2005). The framework of the model is illustrated in detail below. The second phase ended with a validation test, in which we applied the model to evaluate the cost structure of various real supply chains. The observed errors were considered to be unbiased and acceptable. In the third phase, a focus-group methodology was adopted to dene the supply chain to be modelled (how many stages, which relationships, which volumes, etc.), the RFId scenarios to be tested, and the range of parameters for the sensitivity analysis. More specically, the nal conguration was obtained by sharing ideas with senior managers from the 27 collaborating companies, and using a modied Delphi technique. More specically, two sub-groups with representatives of companies operating in the same stage of the chain (i.e. producers and retailers) were set-up. Six meetings were organised on a monthly basis and group interviews, i.e. guided discussions addressing the above-illustrated topics, were carried out. In this last phase, computation runs were also performed using the deterministic data set generated by the process above. For this reason, no statistical analysis was required, while the sensitivity analysis helped to highlight non-linear relationships in the overall model and to point out the most crucial parameters that will affect the investment decision. 5. The model 5.1 The reference supply chain and the studied processes The reference supply chain is a generalisation of the most common FMCG supply chain (BCG-ECR, 1996). It is structured in ve stages, three regarding the manufacturers network (plant, plant warehouse, and DC) and two involving the retailers network (DC and point of sale) (Figure 2). It is assumed that products ow along this supply chain in full pallet loads until they are picked by case in the retailer DC. The point of sale receives mixed pallet loads. The model includes all the handling activities from the end of the manufacturer production line to the receiving docks at the point of sale. At the end of the manufacturing process, an identication label is applied on every case and pallet load to ensure their traceability along the supply chain. The full pallet loads are transferred to the plant warehouse, usually located in proximity to the plant, where they are temporarily stocked and then shipped in full truck loads to the manufacturer DC.

The introduction of RFId in FMCG supply chain 1057

IJOPM 29,10

1058

Here, the pallet loads are received and checked against possible errors before being moved to their storage location. Using the orders received (picking list), the forklift driver extracts the full pallet loads to be shipped. The pallet loads are then moved to the shipping dock, where they are checked and loaded onto the truck. The same processes are carried out in the retailer DC, but here the order assembly is more complex, since retail stores receive mixed pallet loads. Therefore, the full pallet loads have to be unwrapped and individual cases are picked to prepare the order. When the products arrive at the point of sale, some are stocked in the store backroom, while others are directly moved to the sales area, where they are put on the shelves. In addition to the daily activities described above, inventory controls are periodically carried out in all the warehouses in order to guarantee correspondence between the physical inventory and the data in the information systems. Table II summarises the macro-activities considered for each stage of this chain. All these activities have been studied in depth and the associated consumption of resources has been modelled using an activity-based approach. The results were extensively reviewed and validated by the logistics directors of the FMCG companies who joined the working team in the rst stage of the study (Methodology). Transportation activities have been excluded on the assumption that they are substantially unaffected by the
Manufacturer Plant Plant warehouse Distribution centre Retailer Distribution centre PoS

Figure 2. The reference supply chain

Macro-activity Packaging (production line end) Receiving Putting away Storage Inventory controls Order assembly Shipping Complaints management Out-of-stock management Contentious issues management Shrinkage management
a

Plant X Xa

Supply chain Manufacturer Plant warehouse DC X X X X X X X X X X X X X X X

DC X X X X X X X X X

Retailer Point of sale X X

X X

Table II. The macro-activities considered in the model

Note: In the manufacturer plant the putting away activity includes only the movement of the pallet loads to the plant warehouse

introduction of RFId, with the exception of reduced reverse ows due to reduced delivery errors. Since the largest cost of return activity is on the management side and not on the transportation side, this assumption is quite acceptable. 5.2 The RFId scenarios Two RFId scenarios using different levels of tagging have been analysed: (1) RFId tags placed on pallet loads (R1); and (2) RFId on both pallet loads and cases (R2). In both scenarios, the RFId tags are initialized at the end of the production line according to the EPC standard, which states that a unique identier must be written on the tag applied to pallet loads or cases. In the R1 scenario (tags only on pallet loads), the benets at the point of sale are negligible and, therefore, this echelon of the chain is not included in the computations. The impacts on the point of sale, at least up to the point at which the cases are broken into single items, are, however, considered in the R2 scenario. Unlike several models in the literature (Table II), in the present proposal, we did not consider an ILT scenario. There is much debate about the technological and economic feasibility of such a scenario. While ILT is deemed to ensure great benets at the point of sale, the rst two years of activity of the GS1 EPC-lab in Milan (www.indicod-ecr.it) showed that current technology performance means RFId EPC is far from a reliable identication solution for a signicant number of products. Moreover, as will be discussed in the Results section, ILT is still largely infeasible from the economic point of view. For these reasons, ILT has been excluded from our study, at least at this stage of the technology introduction process and taking account of the overall FMCG sector. Of course, different considerations would emerge for particular categories, e.g. textile-apparel, consumer electronics, or processes, e.g. promotions management, customer relationship management (Section 6). For both R1 and R2, we assumed the RFId EPC technology to be perfectly reliable (i.e. 100 percent reading rate in both scenarios). This is not an unrealistic assumption. In the experimental activity of the GS1 EPC-lab, 100 percent identication of the RFId-tagged cases and pallet loads proved to be an achievable target, even with challenging products containing liquids or metals, although some packaging redesign might be required for certain products (EPC Lab, 2008). As a benchmark, we chose a base-line scenario (B) which assumes that every DC and store is equipped with a Wi-Fi network and that barcodes , i.e. standard European Article Number/Uniform Code Council labels on cases and serial shipping container code on pallet loads, plus barcodes on rack locations and loading/unloading docks are used for all the identication needs. This is a very challenging benchmark, if we consider that several companies and nodes in the average FMCG supply chain (not only in Italy) do not comply with these requirements. Nevertheless, the base-line scenario was chosen in order to assess the mid-term potential value of RFId innovation not only in todays business scenario but also in future ones as well. As will be described later, the reference scenario has been further detailed into three different levels of efciency (see the sensitivity analysis below), so as to appreciate more fully the improvement potential and the return on investment for RFId projects.

The introduction of RFId in FMCG supply chain 1059

IJOPM 29,10

1060

5.3 The assessment of the benets In line with the project scope, different broad classes of benet were considered. Indeed, we included both benets related to savings in resources (i.e. workload, materials, and space) and increases in productivity within the operational material handling processes, as well as benets that accrue through better visibility in the supply chain. The latter include out-of-stock reduction, reduced contentious issues and reduced product shrinkage. This distinction is very practical, since it differentiates those productivity benets which are directly achievable and easily measurable from those which are subsequent to the increased visibility and information availability, but which may require a substantial re-thinking of the process in order to be fully exploited. For the material handling productivity-related benets, each macro-activity shown in Table II (i.e. packaging, receiving, putting away, storage, inventory controls, order assembly, shipping, and complaints management) was rst split into a hierarchy of elementary activities. Then, the impact of RFId in terms of reduced resource requirements based on relevant operational resource consumption drivers was evaluated by leveraging the experience gathered at the EPC-Lab. Conversely, for visibility-related benets, an articulated cause-effect relationship was derived from the literature and used as the basis for the development of the assessment model. For the sake of illustration, the model regarding the Receiving activity in the retailer DC (material-handling productivity-related benets) will be detailed here. Six standard activities were considered: truck acceptance, truck unloading, re-labelling (when needed), controls, re-palletisation (when needed), and denition of the pallet load stocking location (Table III). Upon arrival at the retailer DC, the truck driver hands the shipping documents to the receptionist. Then, the truck is opened and unloaded at the correct dock. If a non-standard bar-code serial shipping container code (SSCC) is used, the retailer has to print new labels and apply these to the pallet loads, in order to support the internal material handling activities. Then, controls are performed to check that the manufacturer has shipped the right products and that the expiry date is acceptable. Sometimes, pallet loads need to be lowered (re-palletised) to t within the warehousing racks. Finally, all data are recorded in the information system, the pallet location in the warehouse is identied and goods are put-away. Non-standard activities e.g. the management of an incorrect shipment have also been modelled. For each elementary activity, the proper resource consumption drivers have been indicated and the computation formula to assess the overall Receiving cost (cost_receiving in Table III) obtained. Application of this formula to the various RFId supply chain scenarios allows us to estimate the cost differences and thus the productivity-related benets. The structure of the model regarding all the other material handling activities (i.e. packaging, putting away, storage, inventory controls, order assembly, shipping, and complaints management) is similar. Overall, more than 300 cost drivers are required as inputs to the model, which includes about 200 elementary computation formulas. For the interested reader, the complete model is accessible on request and made available for self-consultation on the White Papers page at www.rdsolutioncenter.it As regards the visibility-related benets, i.e. stock out reduction, reduced contentious issues and reduced product shrinkage, all the causal models that have been developed and the related assessment formulas are presented below, as these issues are covered less in literature, and the models are more specic.

Macroactivity Elementary activity Truck acceptance Resource consumption drivers Formula

Activity

Retailer DC Receiving Truck acceptance

Truck unloading (Re-labelling)

Controls

cost_receiving t_receiving*cost_labour/ usage_factor

t_receiving t_acc t_unload t_label t_control t_error t_repal t_location

Time to accept the entering truck (t_acc) Truck unloading Time to unload the truck (t_unload) Move to the printer Time to move to the printer (t_label_moving) Mean number of pallet loads per ingoing truck (N_pal_in) Move back to the pallet load Time to move back to the pallet load (t_pallet_moving) Print the label Mean number of pallet loads per ingoing truck (N_pal_in) Time to print a label (t_label_print) Stick the label on the pallet Time to stick the label on the pallet load load (t_label_sticking) Identify the pallet load Time to identify the pallet load (t_id_pl) Count the cases on the pallet Time to count the cases on the pallet load load (t_counting) Re-count the cases on the Time to control of the manual counting pallet load [B] (t_counting_ctrl) Control the case Time to control the case (t_case_ctrl) Number of checked cases per pallet load (N_cases_ceck) Percentage of checked pallet loads (perc_ceck) Quality controls Time to quality control (t_quality_ctrl) (Errors management) Time to compile the shipping note (t_compil) Time to reload the rejected pallet load (t_reload) t_label t_label_making t_label_sticking t_moving/N_pal_in t_pallet_moving t_control t_id_pallet_load t_counting t_quality_ctrl t_counting_ctrl t_case_ctrl* (continued )

The introduction of RFId in FMCG supply chain 1061

Table III. The benets evaluation receiving in the retailer DC

1062

IJOPM 29,10

Macroactivity Elementary activity N_cases_ceck*perc_ceck Resource consumption drivers Formula

Table III. t_error (perc_err_compil*t_compil perc_err_call*t_call) (perc_err_returned* t_reload) (perc_err_admin*t_admin) Take a new pallet Unwrapping Percentage of errors that require to compile the shipping note (perc_err_compil) Percentage of errors that require to call a supervisor (perc_err_call) Percentage of errors that require administrative activities (perc_err_admin) Time to call the supervisor (t_call) Time for administrative activities (t_admin) Time to take a new pallet (t_pallet) Percentage of re_palletisation (perc_rep) Time to unwrap the pallet load (t_unwr) t_repal perc_rep*(t_pallet t_unwr t_posit t_lay t_adj 2*t_wrap t_label t_counting t_id_pl t_is) Positioning Positioning time (t_posit) Move one or more layers to Time to move the layers (t_lay) the new pallet Adjust the new pallet load Time to adjust the new pallet load (t_adj) Wrapping of the new pallet Wrapping time (t_wrap) load t_location (t_id_pl t_wms t_is) (continued )

Activity

(Re-palletisation)

Macroactivity Elementary activity Wrapping time (t_wrap) see the re-labelling activity Wrapping of the original pallet load Labelling of the new pallet load Count the cases on the pallet load Identify the new pallet load Resource consumption drivers Formula

Activity

Time to count the cases on the pallet load (t_counting) Time to identify the pallet load (t_id_pl) Communication with the IS Time to communicate the data to the information system (t_is) Denition of the Identify the pallet load Time to identify the pallet load pallet load location (t_id_pl) WMS interrogation Time for WMS interrogation (t_wms) Load the data on the IS Time to load the data on the information system (t_is)

The introduction of RFId in FMCG supply chain 1063

Table III.

IJOPM 29,10

1064

Starting with out-of-stock management, various authors argue that RFId has great potential to reduce the stock outs at points of sale, generating benets for both the manufacturer and the retailer (Alexander et al., 2002; Hardgrave et al., 2006; Veeramani et al., 2008). The estimates for out-of-stock incidence in FMCG range from 4 to 6 percent of total turnover (Gruen et al., 2002; ECR Europe, 2003). Hardgrave et al. (2006) maintain that this phenomenon is mainly due to errors at the store (e.g. delays in re-ordering, delays, and errors in shelf re-lling) and to supply chain inefciencies. In agreement with Hardgrave et al., we can say that RFId could reduce stock outs through: . automatic identication of goods, which increases the accuracy of both the shipping and the receiving processes; and . improved product visibility along the supply chain, which increases the accuracy of the inventory information and, consequently, the service level at both the manufacturer and the retailer facilities. At the retail store, increased visibility can trigger a stock out on the sales oor, while there may be stock in the backroom. Figure 3 shows the above cause-effect relationships, as proposed in literature and as validated by the experts during the face-to-face meetings in the third phase of the project. Table IV presents the main inputs and formulae used to evaluate these benets (referred to as benets_oos in the Table). Specically, the model attempts to evaluate the increased sales enabled by RFId due to the greater product availability on the retail shelf. Moving to the reduced number of contentious issues, there is agreement that the RFId-enabled automatic identication of pallet loads, cases, locations and loading docks during picking and shipping activities can considerably reduce the possibility of errors (Veeramani et al., 2008). Most contentious issues have to do with disputes about the quantity and quality of the received goods with the retailer claiming to have been sent fewer or different or defective goods. The use of RFId can dramatically reduce the number of such events, rst of all because fewer errors occur in the process and, second, because the content of each unit load can be controlled at the case level before leaving the manufacturers premises. Moreover, RFId-enabled supply chain visibility can shorten the reaction time when errors occur, thereby reducing error management costs. The causal model and the formulae to estimate this cost item (referred to as benets_cont) are reported in Figure 4 and Table V, respectively.
Out-of-stock Enabling factors Automatic identification Improved process accuracy Increased controls Error reduction (product inversions, destination inversions, shrinkage) Out-of-stock reduction Real time inventory update

Figure 3. The assessment of out-of-stock reduction

Supply chain visibility

Inventory visibility along the supply chain

Improved inventory management

Benet

Root causes impacted by RFId Input

Formula (to assess the annual benets)

Out-of-stock reduction benets_oos benets_sc benets_store

Supply chain errors

Errors within the store

Annual sales (ann_sales) Average prot margin (perc_marg) Percentage of lost sales due to out-of-stock (perc_lost) Percentage of out-of-stock in the store without RFId (perc_oos) Percentage of out-of-stocks due to errors in the supply chain (perc_sc) Percentage of out-of-stock reduction with RFId (perc_oos_red_sc) Annual sales (ann_sales) Average prot margin (perc_marg) Percentage of lost sales due to out-of-stock (perc_lost) Percentage of out-of-stock in the store without RFId (perc_oos) Percentage of out-of-stocks due to errors within the store (perc_store) Percentage of out-of-stock reduction with RFId (perc_oos_red_store) benets_sc ann_sales* perc_marg*perc_lost* perc_oos*(perc_sc 2 (1perc_oos_red_sc)) benets_store ann_sales *perc_marg*perc_lost* perc_oos*(perc_store 2 (1-perc_oos_red_store))

The introduction of RFId in FMCG supply chain 1065

Table IV. The assessment of out-of-stock reduction

IJOPM 29,10

Contentious issues Enabling factors Improved process accuracy Increased controls Error reduction (product inversions, destination inversions) Increased responsibility at each stage of the supply chain Contentious issues reduction

1066

Automatic identification

Figure 4. The assessment of contentious issues reduction

Supply chain visibility

Benet Contentious issues reduction

Root causes impacted by RFId Shipping errors

Input Percentage of contentious issues due to shipping errors (perc_ship) Percentage of reduction of contentious issues due to shipping errors (perc_cont_red_ship) Number of full time equivalents to manage the contentious issues (n_fte) Annual cost of a full time equivalent (c_fte)

Formula (to assess the annual benets) benets_cont cost_as_is_ ship 2 cost_rd_ship perc_ship*cost_as_ is 2 ((1 2 perc_cont_red_ ship)*perc_ship*cost_as_is) cost_as_is n_fte*c_fte

Table V. The assessment of contentious issues reduction

Finally, different authors (Alexander et al., 2003c; de Kok et al., 2008) point out the potential of RFId to reduce inventory shrinkage, which still represents a signicant issue in the FMCG supply chain for both manufacturers and retailers. ECR Europe (2003) estimates that shrinkage leads to a sales reduction of 0.56 percent for manufacturers and 1.75 percent for retailers. RFId-enabled automatic identication offers two advantages. First, it can reduce one of the main causes of shrinkage, i.e. process errors. Second, the increased visibility is likely to reduce the risk of stolen goods in the distribution process, since leakages will be immediately tracked and attributed to the actor responsible for that stage. For example, if RFId scanning of wrapped pallet loads at shipping and receiving points became common practice, then any missing item could be immediately detected and charged to the actor responsible for the transportation process. Figure 5 and Table VI illustrate the hypothesised causal relationship and the evaluation model for this kind of benet (labelled benets_shr in the table), focusing on the reduction of process errors and its impact on annual sales. Given this structure, the model is able to assess costs and benets in the three technological scenarios (B, R1, R2). For each scenario, a report is provided which includes:

(1) the total logistics costs by supply chain stage and activity; (2) the (differential) benets of the RFId technology by supply chain stage and activity; and (3) by comparing the three scenarios, a clear assessment of RFId adoption benets is obtained. 5.4 The assessment of capital and operational expenditures The implementation costs of an RFId project include both the initial investment (capital expenditure, CapEx) and the recurrent annual costs (operational expenditure, OpEx) in function of the RFId scenario (R1 vs R2). In particular, the CapEx includes the costs of hardware (e.g. readers, antennas, and tags), as shown in Table VII, the software (middleware and software development/integration), and project management (design, implementation, test and change management, project management). These costs have been evaluated by starting from the physical infrastructure of each stage of the supply chain (e.g. number of loading/unloading docks, number of forklifts) and then deriving and costing (using average purchasing prices) the equipment to be purchased. The OpEx includes the cost of tags (on pallet loads and/or cases), the maintenance of the RFId infrastructure, and the information transmission costs.
Shrinkage Enabling factors Reduced process errors Automatic identification Immediate tracking of leakages and thefts Shrinkage reduction

The introduction of RFId in FMCG supply chain 1067

Figure 5. The assessment of shrinkage reduction

Benet

Root causes impacted by RFId

Input Annual sales (ann_sales) Percentage of shrinkage on the annual sales (perc_shr) Percentage of inventory discrepancies and thefts among the causes of shrinkage (perc_shr_inv) Percentage of process errors among the causes related to inventory discrepancies and thefts (perc_shr_proc) Percentage of reduction of shrinkage due to the reduction of process errors (perc_shr_proc_red)

Formula (to assess the annual benets) benets_shr ann_sales* (perc_shr_proc_as_is 2 perc_shr_proc_rd) ann_sales*perc_shr_as_is *perc_shr_proc_red perc_shr_proc_as_is perc_shr*perc_shr_inv* perc_shr_proc Table VI. The assessment of shrinkage reduction

Shrinkage Inventory reduction discrepancies

IJOPM 29,10
RFId Hardware R1 Plant R2 Yes Yes Yes Labelling station cases Labelling station pallet loads Unloading docks Loading docks Storage locations Forklifts Order pickers Wrapping station Hand-held Gate between backshop and sales areas No Yes Yes

Manufacturer Plant warehouse DC R1 R2 R1 R2 Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Retailer DC R1 Yes Yes Yes Yes No No Yes R2 Yes Yes Yes Yes Yes Yes Yes R1 No No No Pos R2 Yes No Yes

1068

Table VII. The HW infrastructure for CapEx estimation

6. The application of the model 6.1 The structure of the analysis The model has been applied to a simulated supply chain, whose parameters were chosen with the help of the industry experts who took part in the research project to reproduce the ows, the product mix and the physical infrastructure of a typical FMCG supply chain consisting of medium-large manufacturers and medium-large retailers (Table VIII). This reference supply chain is only apparently dyadic, since we are merely considering one manufacturer and one retailer managing the same ow of goods, but from the manufacturer perspective this represents the outbound ow directed to
General parameters Flow of cases per year (cases/year) Manufacturer plant Packaging lines Forklifts Warehouses Area (m2) Pallet locations (storage) Pallet locations (picking) Inventory (days) Forklifts Order pickers Unloading docks Loading docks Point of sale Total number of stores served by the retailer DC Backroom area (m2) Pallet locations Unloading docks

30,000,000 8 4 Manufacturer plant warehouse 7,500 8,400 5 6 6 100 100 80 2 Manufacturer DC 38,000 42,000 25 12 15 15 Retailer DC 42,000 36,500 9,200 25 15 35 20 25

Table VIII. The inputs to the model the main ow and infrastructural parameters

multiple retailers, while from the retailer perspective the inbound ow coming from multiple manufacturers is modelled. The ow for the two actors (manufacturer and retailer) is the same so that the respective costs and benets can be compared. With regard to the parameterisation of the reference supply chain, the following procedure was followed. Preliminary data were rst collected during the extensive face-to-face interviews (Section 4); then, industry experts were involved using a focus group methodology in order to choose the most suitable parameters to be used in the reference chain, on the basis of both their experience and the data collected from their supply chains. The protability analysis compares two RFId scenarios (R1 tag on pallet loads and R2 tag on cases and pallet loads) with a baseline scenario (B), of which three different performance levels were tested (Table IX): (1) Average, i.e. a supply chain representing an average case for the industry in terms of quality requirements, service level and handling efciency. (2) Efcient, i.e. the initial handling cost per pallet or case is below average, due to less frequent quality controls, lower service level requirements, higher handling efciency, higher process quality; this case provides a reliable lower bound of the benets stemming from RFId. (3) Inefcient, i.e. the initial handling cost per pallet or case is above average, due to more frequent quality controls, higher service level requirements and lower
Efcient Product features Average number of cases per full pallet load Average number of cases per mixed pallet load Average number of cases per each order line Percentage of re-palletisation retailer DC Quality requirements Percentage of inbound controls retailer DC Percentage of inbound controls PoS Percentage of outbound controls retailer DC Percentage of non availability of cases at the picking level Percentage of errors outbound controls retailer DC Outbound controls retailer DC time (s) Efciency Time for a single bar-code scan (s) Counting of the cases in a pallet load (s) Controls of a pallet load PoS (s) Out of stocks (OOS) OOS at the retail store Average losses due to OOS manufacturer Average losses due to OOS retailer Shrinkage Percentage of losses due to shrinkage manufacturer Percentage of losses due to shrinkage retailer Contentious issues Percentage of losses due to contentious issues manufacturer Percentage of losses due to contentious issues retailer 60 52 2 50% 50% 8% 5% 2.5% 0.2% 8 6 15 15 6% 40% 25% 0.28% 0.875% 0.01% 0.02% Average 50 40 1.5 75% 100% 12% 10% 5% 0.6% 15 7 20 20 8% 45% 30% 0.56% 1.75% 0.02% 0.03% Inefcient 50 40 1 75% 100% 15% 20% 8% 0.6% 20 10 25 25 10% 50% 35% 0.84% 2.625% 0.04% 0.05%

The introduction of RFId in FMCG supply chain 1069

Table IX. The inputs to the model the main performance parameters

IJOPM 29,10

handling efciency, lower process quality; this case provides an upper bound of the benets expected from RFId applications. Table X reports the main unit costs for the RFId hardware. In addition to these, a very signicant parameter is the cost of the tag, and three values have been used in the sensitivity analysis: (1) current tag costs, i.e. e0.17 for tags on pallets and e0.10 for tags on cases; (2) mid-term tag costs, i.e. e0.14 for tags on pallets and e0.07 for tags on cases, considering the expected cost of tags in 2-3 years; and
Component Quantity Costs (e) 2,250 520 400 200 200 500 4,070 2,250 1,040 400 200 200 500 4,590 2,250 1,040 1,000 1,250 5,050 2,250 520 200 1,000 3,970 10,000 5,000 1.6 4.4 6 20 20 40

1070

Table X. The inputs to the model the unit hardware costs

RFId infrastructure to identify the UHF tags on pallet loads (R1) UHF reader 1 UHF antenna 2 Movement sensor 1 Trafc light 1 Monitor 1 Installation 8 hours Total cost RFid infrastructure to identify the UHF tags on pallet loads and cases (R2) UHF reader 1 UHF antenna 4 Movement sensor 1 Trafc light 1 Monitor 1 Installation 8 hours Total cost RFId infrastructure forklifts UHF reader 1 UHF antenna 4 Wireless terminal 1 Installation 20 hours Total cost RFId infrastructure wrapping station UHF reader 1 UHF antenna 2 Monitor 1 Installation 16 hours Total cost RFId infrastructure production line labels on the cases UHF printer Production line 1 RFId infrastructure production line labels on the pallet loads UHF printer 1 RFId infrastructure UHF kit to identify a pallet location UHF tag 2 Installation 4 minutes Total cost RFId infrastructure UHF kit to identify a loading/unloading dock UHF tag 2 Installation 20 minutes Total cost

(3) long-term tag costs, i.e. e0.10 for tags on pallets and e0.05 for tags on cases, our best estimate of the expected costs in 5-7 years. It is assumed that the on pallet RFId tags usually cost more than those attached to cases, as best performance (i.e. omni-directional) tags are explicitly requested by retailers to ensure maximum exibility in logistics activities, Conversely, the characteristics of the tags used on cases depend on the specic product, meaning that their average cost is lower. 6.2 The results in the RFId on pallet loads scenario (R1) The model allows evaluation of the benets by comparing the cost of the performed activities in a base-line scenario to the expected cost in the RFId scenario. For illustrative purposes, Table XI illustrates the results obtained for the receiving activity in the retailer DC when an efcient base-line supply chain is considered. The model facilitates understanding of the overall benets , e.g. 15 percent cost reduction in the receiving activity carried out in the retailer DC as well as in every elementary activity , e.g. a productivity increase of 45 percent in performing the required controls. The overall results are reported in Table XII, which shows the benets achieved in the three baseline supply chains when the RFId tags are used only on pallet loads (R1). In this scenario, the benets are comparable with the cost of applying the EPC tag and may vary from 1.13 ecent/case (about 0.65 e/pallet load) when we consider an efcient baseline supply chain, to 2.69 ecent/case (about 1.5 e/pallet load) when the inefcient
Costs in the base-line scenario (ecent/case) 0.04 0.44 0.06 0.36 0.81 0.08 1.75 Costs in the R1 scenario (ecent/case) 0.04 0.44 0 0.20 0.82 0 1.50 Benets (ecent/case) 0 0 0.06 0.16 2 0.01 0.08 0.25

The introduction of RFId in FMCG supply chain 1071

Activity Retailer DC receiving Truck acceptance Truck unloading Re-labelling Controls Re-palletisation Denition of the pallet load location Total

Table XI. The results of the model the receiving activity in the retailer DC efcient base-line vs R1 scenario

Efcient Traditional base-line scenario (B1) (COST per case (ecent/case)) RFId on pallet loads scenario (R1) (COST per case (ecent/case)) RFId on pallet loads scenario (R1) (DCOST ( BENEFIT) (ecent/case)) RFId on pallet loads scenario (R1) (%DCOST ( % BENEFIT)) 49.14 47.84 1.13 2.3

Average 63.76 61.84 1.92 3.0

Inefcient 75.41 72.72 2.69 3.6 Table XII. The results of the model the benets in the RFId on pallet loads scenario (R1)

IJOPM 29,10

1072

baseline is used. Other interesting results emerge from the breakdown of the operational benets by macro-activity and by supply chain stage (Figure 6) The visibility-related benets proved to be negligible. Overall, the manufacturer and the retailer enjoy similar benets. The automatic identication of the pallet loads, the loading/unloading docks and of the storage locations generates improvements for the manufacturer mainly in the receiving and putting away activities. There are also benets in despatching as a result of automatic identication and the elimination of controls. Similarly, the retailer benets from the use of the technology mainly in the receiving and putting away activities in the DC, as the automatic identication of the pallet loads permits automatic checking of compliance with the transportation documents. Conversely, order preparation is not signicantly affected by the RFId technology when the tag is applied only to pallet loads, and the same is true for out-of-stocks, contentious issues and shrinkage. CapEx and OpEx in function of the cost of the EPC-RFId tags are reported in Table XIII. They have been assessed by using the unit costs reported in Table X and sizing the required infrastructure on the basis of the features of the warehouses which were summarised in Table VIII (e.g. the number of loading/unloading docks is used to dene the number of RFId gates). Table XIV shows the calculation of both the payback time and the net present value (NPV) taking into account a transitory period (one year) during which we have assumed that only 50 percent of the benets can be achieved. The NPV has been computed using a ten-year time horizon and a discount rate of 8 percent, whereas the payback time is based on non-discounted cash ows. If we consider the efcient base-line supply chain with few quality restrictions, a positive NPV cannot be realised, irrespective of the cost of the RFId tags. Furthermore,
Benefits: Breakdown per SC player 3
2.69

Benefits: Breakdown per activity 3 2.5

0.94 1.92 0.01 0.18 0.60 0.01 0.13 0.19 0.61 0.44 0.88 2.69 0.01 0.25

2.5
1.92 1.44

2 cent/case

2 cent/case

1.5
1.13

1.5
1.13

0.98

1
0.45 1.36 0.94 0.68

0.5
0.43 0.50 0.07 0.68 0.07

0.5

0 0.5

0.06

0 Efficient Average Supply chain Retailer Manufacturer Other activities Shipping Inefficient

Efficient

Average Supply chain

Inefficient

Figure 6. The results of the model the benets in the RFId on pallet loads scenario (R1)

Order preparing Putting away

Receiving Packaging

Manufacturer

Retailer

Supply chain

Capital expenditures (e) Hardware (e) Software (e) Project management (e) Current tag costs 175,000 60,000 85,000 30,000 60,000 70,000 30,000 60,000 50,000 30,000 55,000 105,000 20,000 55,000 85,000 20,000 55,000 65,000 20,000 115,000 190,000 50,000 115,000 155,000 50,000 Long-term tag costs 140,000 Current tag costs 180,000 Long-term tag costs 140,000 Current tag costs 355,000 Long-term tag costs 280,000 115,000 115,000 50,000

Operational expenditures (e) Maintenance (e/year) RFId tags (e/year) EDI (e/year)

950,000 600,000 100,000 250,000 Mid-term tag costs 160,000

750,000 550,000 50,000 150,000 Mid-term tag costs 160,000

1,700,000 1,150,000 150,000 400,000 Mid-term tag costs 320,000

The introduction of RFId in FMCG supply chain

Table XIII. The results of the model CapEx and OpEx in the RFId on pallet loads scenario (R1)

1073

IJOPM 29,10

Pay-back (years) Base-line supply chain Efcient Unit tag cost Manufacturer Retailer . 10 . 10 . 9 8 7 5.5 5 4.5 1 1 1 8 6.5 5.5 3 3 3 Supply chain 1 . 10 . 10 8.5 7.5 6 4 4 3.5

NPV (millione) Manufacturer Retailer 2 0.75 2 0.65 2 0.5 2 0.22 2 0.11 0.035 0.37 0.48 0.62 2 1.1 21 2 0.8 2 0.06 0.07 0.25 1.1 1.25 1.43 Supply chain 2 1.8 2 1.65 2 1.3 2 0.28 2 0.04 0.285 1.47 1.73 2.05

1074
Table XIV. The results of the model NPV and pay-back time in the RFId on pallet loads scenario R1)

Current Mid-term Long-term Average Current Mid-term Long-term Inefcient Current Mid-term Long-term

this case appears to be unattractive both for the manufacturer and the retailer. Better results are obtained when the average baseline supply chain is considered, even if the pay-back time remains quite long. With the current costs of the technology, the RFId application is still not protable, but when the costs of the tags decrease, a positive NPV can be realised. Even if it is the manufacturer that usually reaps most of the benets, the retailer has slightly better investment protability, due to the lower investments sustained. Finally, moving to the inefcient baseline supply chain, which presents a lower starting efciency and more restrictive quality requirements, a positive NPV can be reached even at the current cost of the technology; both the manufacturer and the retailer have positive returns and the pay-back time is about ve and three years, respectively. 6.3 The results in the RFId on pallet loads and cases scenario (R2) Table XV illustrates the results obtained from RFId adoption on pallet loads and cases for the receiving activity in the retailer DC when an efcient base-line supply chain is considered. As expected, case-level tagging offers higher benets e.g. 83 percent cost reduction in performing the required controls, which leads to a 22 percent cost reduction in the receiving activity. Table XVI shows the total benets in the three base-line supply chains. The benets achieved in this scenario are much higher than in the previous case, ranging between 6.20 ecent/case in the efcient supply chain conguration and 23.21 ecent/case in the inefcient base-line conguration. As shown in Figure 7, it is now the
Costs in the base-line scenario (ecent/case) 0.04 0.44 0.06 0.36 0.81 0.08 1.75 Costs in the R2 scenario (ecent/case) 0.04 0.44 0 0.06 0.82 0 1.36 Benets (ecent/case) 0 0 0.06 0.30 2 0.01 0.08 0.39

Activity Retailer DC receiving Truck acceptance Truck unloading Re-labelling Controls Re-palletisation Denition of the pallet load location Total

Table XV. The results of the model the receiving activity in the retailer DC efcient base-line scenario

retailer that obtains most of the total benet. In addition to the previously described advantages, there are also signicant gains in the handling activities performed on cases (e.g. picking, controls on mixed pallet loads, and receiving in the retailer DC and at the point of sale) and in visibility-related benets (i.e. mainly shrinkage and stock outs), which account for 25-35 percent of the overall benets. Results for CapEx and OpEx are reported in Table XVII. Table XVIII gives details of the NPV and pay-back time. Once again, if we consider an efcient base-line supply chain, the results are anything but good from a supply chain perspective. Better results can be obtained for base-line supply chains (average, inefcient) that perform less well. Unlike the results in the R1 scenario, protability differs signicantly between the two actors in the supply chain. While the manufacturer always has a negative NPV irrespective of the
Efcient Traditional base-line scenario (B1) (COST per case (ecent/case)) RFId on pallet loads and cases scenario (R2) (COST per case (ecent/case)) RFId on pallet loads and cases scenario (R2) (DCOST ( BENEFIT) per case (ecent/case)) RFId on pallet loads and cases scenario (R2) (%DCOST ( % BENEFIT)) 90.79 84.59 6.20 7.0 Average 105.61 93.17 12.44 11.8 Inefcient 117.46 94.25 23.21 19.8

The introduction of RFId in FMCG supply chain 1075

Table XVI. The results of the model the benets in the RFId on pallet loads and cases scenario (R2)

Benefits: Breakdown per SC player 24

23.21

Benefits: Breakdown per activity 24

23.21 0.10 1.21 0.15 4.65

20

20

16 16 cent/case
12.44 20.18 12.44 0.09 0.85 0.09 3.10

2.14

12
10.26 6.20

cent/case

12

10.83 6.20 0.03 0.55 0.06 1.55 0.34 2.19 0.44 1.17 0.06 0.93 4.66 0.61 1.98 0.07 0.88 2.73 0.07

4.79 2.18 3.03 1.41

0 Efficient

4 Average Supply chain Retailer Manufacturer Other activities Shipping Out-of-stocks Inefficient Efficient Average Supply chain Order preparing Putting away Contentious issues Receiving Packaging Shrinkage Inefficient

Figure 7. The results of the model the benets in the RFId on pallet loads and cases scenario (R2)

1076

IJOPM 29,10

Capital expenditures (e) Hardware (e) Software (e) Project management (e) Current tag costs 3,095,000 65,000 3,000,000 30,000 Long-term tag costs 1,595,000 65,000 1,500,000 30,000 Current tag costs 375,000 170,000 105,000 100,000 Long-term tag costs 335,000 170,000 65,000 100,000 Current tag costs 3,470,000 235,000 3,105,000 130,000

Operational Expenditures (e/y) Maintenance (e/y) RFId tags (e/y) EDI (e/y)

Table XVII. The results of the model CapEx and OpEx in the RFId on pallet loads and cases scenario (R2) Manufacturer 1,000,000 650,000 100,000 250,000 Mid-term tag costs 2,295,000 65,000 2,200,000 30,000 2,650,000 1,700,000 150,000 800,000 Mid-term tag costs 355,000 170,000 85,000 100,000 3,650,000 2,350,000 250,000 1,050,000 Mid-term tag costs 2,650,000 235,000 2,285,000 130,000 Retailer Supply chain Long-term tag costs 1,930,000 235,000 1,565,000 130,000

Pay-back (years) Base-line supply chain Efcient Unit tag cost Manufacturer Retailer 1 1 1 1 1 1 1 1 1 3.1 3 2.9 1.5 1.5 1.5 1.0 1.0 1.0 Supply chain 1 1 1 . 10 4.8 3.1 2.0 1.6 1.4

NPV (million e) Manufacturer Retailer 2 21.2 2 14.5 2 10.1 2 19.6 2 13.0 2 8.5 2 17.9 2 11.3 2 6.8 4.4 4.6 4.8 15.5 15.6 15.8 35.6 35.7 35.9 Supply chain 2 16.8 2 9.9 2 5.3 2 4.1 2.6 7.3 17.7 24.4 29.1

The introduction of RFId in FMCG supply chain 1077

Table XVIII. The results of the model NPV and pay-back time in the RFId on pallet loads and cases scenario (R2)

Current Mid-term Long-term Average Current Mid-term Long-term Inefcient Current Mid-term Long-term

base-line supply chain and the costs of RFId tags, the investment is always protable for the retailer. These ndings emphasise that when the RFId tags are applied to both pallet loads and cases, the sharing of the benets and costs becomes the signicant issue. 7. Conclusions There is a contrasting situation regarding RFId technology in the FMCG supply chain. On the one hand, there is considerable interest in the question, and large retailers worldwide are pushing and fostering its adoption. On the other, manufacturers and logistics operators are still doubtful, questioning what RFId promises in terms of ROI and actual process improvements. In order to bring together these contrasting opinions and to reduce the information asymmetry between the actors involved with the issue, this paper presents an RFId protability assessment model and the results of its application to the FMCG supply chain. The main numerical outcomes of the model have been addressed in the previous sections. All the results have been extensively discussed with the industry experts involved in the research project both to verify the model accuracy, i.e. compliance with the real processes, and the robustness of the numerical outcomes. The experts appreciated the possibility of having a comprehensive overview of the real issues in implementing RFId technology in the FMCG supply chain today: the relationship between the overall benets and the tag costs, the importance of the base-line scenario, the most feasible implementation scenarios, the most impacted activities, and the most protable actor in the chain (to name just a few). In fact, the relationship between each single element is easily understood from a theoretical point of view, and the developed model provides a signicant contribution to quantifying the weight of each factor in the investment protability indicators. The validity of the model is guaranteed by the methodology which ensures coherence between the model and its input parameters and the real FMCG supply chain processes. In addition to the specic numerical results, practitioners can also benet from the strategic perspective deriving from the overall picture. This picture brings together all the above factors in a closely inter-connected way, explaining the situation seen in the industry worldwide, which we would call the RFId paradox. If an application to pallet loads were pursued, numbers would probably be sustainable at present. However,

IJOPM 29,10

1078

signicant investments would be needed to achieve limited benets (with respect to the money spent and to the full potential of RFId). Moreover, as the model testies, prots would be concentrated in the hands of manufacturers, as their processes are probably easier to optimise. In this scenario, retailers would see very few benets. Consequently, the R1 scenario is undermined from the outset and will probably never be deployed. Conversely, the R2 scenario (RFId application on pallets and cases) has the potential to offer greater benets to retailers, who are, in fact, strongly fostering its adoption worldwide (see Wal-Mart, Tesco, Marks & Spencer, Metro). However, substantial costs (CapEx and OpEx) will have to be borne by manufacturers, who may be reluctant to do so, as they will see little benet in such applications, given that their part of the process is the simplest and most optimised. As apparent from the paper, there are two means to avoid this situation. One is to cut the tag cost (thus reducing the nancial burden on manufacturers), and technology will probably make this possible. The critical issue is to use cheaper tags without compromising the 100 percent reading reliability necessary for the administrative usage of the technology (as that described here). The second approach is to design a cost-sharing agreement between manufacturers and retailers to divide the tag costs in proportion to the achieved benets. This is a challenging situation, since sensitive data will have to be shared and information asymmetry is part of the conventional way of doing business in this industry. Nevertheless, the model could reasonably help in this direction. The work presented in this paper has a few limitations. The most important is that it does not consider ILT. Even though currently economically (and technologically) infeasible on a large-scale, there is unanimous agreement that ILT would enable new scenarios in terms of dynamic stock management and advanced customer interaction. However, ILT appears to be a more viable option for particular products in particular supply chains (e.g. textile, consumer electronics). A more focused study, which considers specic supply chains and processes would therefore be needed. Indeed, to be explored in full, this scenario could require using simulation tools which are better suited to assessing the complex dynamic processes that would result from ILT adoption (e.g. reaction to product unavailability, dynamic order allocation, promotions management, etc.). Our model shares the same pros (i.e. exibility and visibility) and cons (i.e. approximation and staticity) of any analytical model. Finally, even if multiple values have been considered for the most uncertain parameters, a more extensive sensitivity analysis could provide additional insight, e.g. the impact of the labour cost on the investment protability. Three main directions for future research can be outlined. First, the benets related to the improved effectiveness and service (e.g. prompt information) could be better investigated, since there is clear evidence that a positive return on investment at case level is heavily dependent on these variables. Second, all our results have been obtained under the assumption of the perfect reliability of the technology (100 percent reading rate in each scenario). This is a result that has still to be consolidated, especially in the R2 scenario, even though extremely positive outcomes have been reported by EPC research centres in the USA and Europe. In this regard, it might be interesting to introduce a further variable into the model, i.e. the degree to which some processes will have to be modied (with the corresponding costs), if 100 percent reliability is to be achieved. Third, the model currently considers all the activities from the end of the production line to receipt at the point of sale, but does not evaluate the

benets within the store, which might represent a signicant part of the advantages for retailers and, if shared, for manufacturers. All these research lines are currently being developed out of the initial model.

The introduction of RFId in FMCG supply chain 1079

References Agarwal, V. (2001), Assessing the benets of auto-ID technology in the consumer goods industry, White Paper, Cambridge, Cambridge University Auto-ID Centre. Alexander, K., Birkhofer, G., Gramling, K., Kleinberger, H., Leng, S., Moogimane, D. and Woods, M. (2002), Focus on retail: applying auto-ID to improve product availability at the retail shelf, White Paper, Auto-ID Center, MIT, Cambridge, MA. Alexander, K., Gilliam, T., Gramling, K., Kindy, M., Moogimane, D., Schultz, M. and Woods, M. (2003a), Focus on the supply chain: applying auto-ID within the distribution center, White Paper, Auto-ID Center, MIT, Cambridge, MA. Alexander, K., Gilliam, T., Gramling, K., Grubelic, C., Kleinberger, H., Leng, S., Moogimane, D. and Sheedy, C. (2003b), Applying auto-ID to reduce losses associated with product obsolescence, White Paper, Auto-ID Center, MIT, Cambridge, MA. Alexander, K., Gilliam, T., Gramling, K., Grubelic, C., Kleinberger, H., Leng, S., Moogimane, D. and Sheedy, C. (2003c), Applying auto-ID to reduce losses associated with shrink, White Paper, Auto-ID Center, MIT, Cambridge, MA. Angeles, R. (2005), RFID technologies: supply-chain applications and implementation issues, Information Systems Management, Vol. 22 No. 1, pp. 51-65. Atali, A., Lee, H. and Ozer, O. (2004), If the inventory manager knew: value of RFID under imperfect inventory information, working paper, Stanford University, Stanford, CA. Attaran, M. (2007), RFID: an enabler of supply chain operations, Supply Chain Management: An International Journal, Vol. 12 No. 4, pp. 249-57. Barratt, M. and Choi, T. (2007), Mandated RFID and institutional responses: cases of decentralized business units, Production and Operations Management, Vol. 16 No. 5, pp. 569-85. BCG-ECR (1996), Redesign the supply chain, research report. Bendavid, Y., Lefebvre, E., Lefebvre, L.A. and Fosso Wamba, S. (2007), B-to-B e-commerce: assessing the impacts of RFId technology in a ve layer supply chain, Proceedings of the 40th Hawaii International Conference on System Sciences, 3-6 January, Big Island, Hawaii. Bhattacharya, M., Chu, C. and Mullen, T. (2007), RFID implementation in retail industry: current status, issues, and challenges, College of Information Sciences and Technology The Pennsylvania State University. Boone, T. and Ganeshan, R. (2007), The frontiers of eBusiness technology and supply chains, Journal of Operations Management, Vol. 25, pp. 1195-8. Cannon, A.R., Reyes, P., Frazier, G.V. and Prater, E.L. (2008), RFID in the contemporary supply chain: multiple perspectives on its benets and risks, International Journal of Operations & Production Management, Vol. 28 No. 5, pp. 433-54. Cantor, D.E. and Macdonald, J.R. (2009), Decision-making in the supply chain: examining problem solving approaches and information availability, Journal of Operations Management, Vol. 27, pp. 220-32. Chappell, G., Ginsburg, L., Schmidt, P., Smith, J. and Tobolski, J. (2002a), Auto-ID on demand: the value of auto-ID technology in consumer packaged goods demand planning, White Paper, Auto-ID Center, MIT, Cambridge, MA.

IJOPM 29,10

1080

Chappell, G., Ginsburg, L., Schmidt, P., Smith, J. and Tobolski, J. (2003b), Auto-ID on the line: the value of auto-ID technology in manufacturing, White Paper, Auto-ID Center, MIT, Cambridge, MA. Chappell, G., Durdan, D., Gilbert, G., Ginsburg, L., Smith, J. and Tobolski, J. (2003a), Auto-ID in the Box: the value of auto-ID technology in retail stores, White Paper, Auto-ID Center, MIT, Cambridge, MA. Chappell, G., Durdan, D., Gilbert, G., Ginsburg, L., Smith, J. and Tobolski, J. (2002b), Auto-ID on delivery: the value of auto-ID technology in the retail supply chain, White Paper, Auto-ID Center, MIT, Cambridge, MA. Chuang, M.L. and Shaw, W.H. (2005), How RFID will impact supply chain networks, Proceedings of the Engineering Management Conference, September 11-13, IEEE International. Curtin, J., Kauffman, R.J. and Riggins, F.J. (2007), Making the MOST out of RFID technology: a research agenda for the study of the adoption, usage and impact of RFID, Information Technology and Management, Vol. 8, pp. 87-110. de Kok, A.G., van Donselaar, K.H. and van Woensel, T. (2008), A break-even analysis of RFId technology for inventory sensitive to shrinkage, International Journal of Production Economics, Vol. 112 No. 2, pp. 521-31. Delen, D., Hardgrave, B.C. and Sharda, R. (2007), RFID for better supply-chain management through enhanced information visibility, Production and Operations Management, Vol. 16 No. 5, pp. 613-24. Dutta, A., Lee, H.L. and Whang, S. (2007), RFID and operations management: technology, value and incentives, Production and Operations Management, Vol. 16 No. 5, pp. 646-55. ECR Europe (2003), Optimal Shelf Availability, ECR Europe, Kontich. EPC Lab (2008), Experimentation of RFId technology in EPC standard, available at: www. indicod-ecr.it Fleisch, E. and Tellkamp, C. (2005), Inventory inaccuracy and supply chain performance: a simulation study of a retail supply chain, International Journal of Production Economics, Vol. 95 No. 3, pp. 373-85. Fosso Wamba, S., Lefebvre, L.A., Bendavid, Y. and Lefebvre, E. (2008), Exploring the impact of RFId technology and the EPC network on mobile B2B eCommerce: a case study in the retail industry, International Journal of Production Economics, Vol. 112 No. 2, pp. 614-29. Gale, T., Rajamani, D. and Sriskandarajah, C. (2004), The Impact of RFID on Supply Chain Performance, University of Texas at Dallas, Richardson, TX. Gaukler, G., Seifert, R. and Hausman, W. (2007), Item-level RFID in the retail supply chain, Production and Operations Management, Vol. 16 No. 1, pp. 65-76. Gruen, T.W., Corsten, D.S. and Bharadwaj, S. (2002), Retail out-of-stock: a worldwide examination of extent, causes and consumer responses, Research paper, Emory University, Atlanta, GA (GMA et al.). Gunasekaran, A. and Ngai, E.W.T. (2005), Build-to-order supply chain management: a literature review and framework for development, Journal of Operations Management, Vol. 23 No. 5, pp. 423-51. Hardgrave, B.C., Waller, M. and Miller, R. (2006), Does RFID Reduce Out of Stocks? A Preliminary Analysis, Information Technology Research Institute, University of Arkansas, Fayetteville, AR. Helders, B. and Vethman, A.J. (2003), Beyond 2005: how RFID will change the global supply chain, Chain Store Age, Vol. 79 No. 12, pp. 39-48.

Johansson, M. (2005), Identication of the main factors inuencing an RFID implementation in the automotive and pharmaceutical industries, Masters thesis, Department of Science and ping University, Linko ping. Technology, Linko Jones, P., Clarke-Hill, C., Hiller, D. and Comfort, D. (2005), The benets, challenges and impacts of radio frequency identication technology (RFId) for retailers in the UK, Marketing Intelligence & Planning, Vol. 23 No. 4, pp. 395-402. Kaplan, R.S. and Bruns, W. (1987), Accounting and Management: A Field Study Perspective, Harvard Business School Press, Boston, MA. Karkkainen, M. (2003), Increasing efciency in the supply chain for short shelf life goods using RFID tagging, International Journal of Retail & Distribution Management, Vol. 31 No. 10, pp. 529-36. Keen, P. and Mackinttosh, R. (2001), The Freedom Economy: Gaining the M-commerce Edge in the Era of the Wireless Internet, McGraw-Hill, New York, NY. Kim, E.Y., Ko, E., Kim, H. and Koh, C.E. (2008), Comparison of benets of radio frequency identication: implications for business strategic performance in the US and Korean retailers, Industrial Marketing Management, Vol. 37 No. 7, pp. 797-806. Langer, N., Forman, C., Kekre, S. and Scheller-Wolf, A. (2007), Assessing the impact of RFId on return center logistics, Interfaces, Vol. 37 No. 6, pp. 510-4. Lapide, L. (2004), RFID: whats in it for the forecaster?, The Journal of Business Forecasting Methods & Systems, Vol. 23 No. 2, pp. 16-19. Laubacher, R., Kothari, S.P., Malone, T. and Subirana, B. (2005), What is RFID Worth to Your Company? Measuring Performance at the Activity Level, research brief, MIT Center for eBusiness, Cambridge, MA. Lee, H. and Ozer, O. (2007), Unlocking the value of RFId, Production and Operations Management, Vol. 16 No. 1, pp. 40-64. Liu, X., Tang, O. and Huang, P. (2008), Dynamic pricing and ordering decision for the perishable food of the supermarket using RFId technology, Asia Pacic Journal of Marketing and Logistics, Vol. 20 No. 1, pp. 7-22. Loebbecke, C. (2005), RFID technology and application in the retail supply chain: the early metro group pilot, Proceedings of the 18th Bled Conference on e-Integration in Action, Bled, Slovenia. Michael, K. and McCathie, L. (2005), The pros and cons of RFID in supply chain management, Mobile Transformation Enterprise Transformation Through Mobile Technologies and Applications 2005 Proceedings of the International Conference on Mobile Business (ICMB05) in Sydney, Australia, IEEE Computer Society, Washington, DC, pp. 623-9. Miragliotta, G., Perego, A. and Tumino, A. (2007), RFId technology in a container port: an activity-based model to assess costs and benets, in Lalwani, C.S. (Ed.), Global Supply Chains: Developing Skills, Capabilities and Networks, Proceedings of the Logistics Research Network (LRN) Annual Conference, Hull, UK, The Chartered Institute of Logistics and Transport, Corby, pp. 101-6. Miragliotta, G., Perego, A. and Tumino, A. (2008), RFId in the pharmaceutical industry: an activity-based model to assess the costs & benets for the wholesalers, in Lyons, A.C. (Ed.), Supply Chain Innovations: People, Practice and Performance, Proceedings of the Logistics Research Network (LRN) Annual Conference, Liverpool, UK, The Chartered Institute of Logistics and Transport, Corby, pp. 551-6.

The introduction of RFId in FMCG supply chain 1081

IJOPM 29,10

1082

Pramatari, K.C., Doukidis, G.I. and Kourouthanassis, P. (2005), Towards Smarter supply and demand-chain collaboration practices enabled by RFID technology, Consumer Driven Electronic Transformation, Berlin, Springer, Heidelberg, pp. 241-56. Rekik, Y., Sahin, E. and Dallery, Y. (2008a), Analysis of the impact of the RFId technology on reducing product misplacement errors at retail stores, International Journal of Production Economics, Vol. 112 No. 1, pp. 264-78. Rekik, Y., Sahin, E. and Dallery, Y. (2008b), Inventory inaccuracy in retail stores due to theft: an analysis of the benets of RFId, International Journal of Production Economics, Vol. 118 No. 1, pp. 189-98. Reyes, P.M. and Jaska, P. (2007), Is RFID right for your organization or application?, Management Research News, Vol. 30 No. 8, pp. 570-80. RFId-IPO, Italian permanent Observatory on RFId Technologies (2005), RFId From present to Future, research report (English version available), Italian Permanent Observatory on RFId Technologies. RFId-IPO, Italian Permanent Observatory on RFId Technologies (2006), RFId alla prova dei fatti, research report (in Italian). RFId-IPO, Italian Permanent Observatory on RFId Technologies (2007), RFId: alla ricerca del valore, research report (in Italian). Sellitto, C., Burgess, S. and Hawking, P. (2007), Information quality attributes associated with RFID-derived benets in the retail supply chain, International Journal of Retail & Distribution Management, Vol. 35 No. 1, pp. 69-87. Srivastava, B. (2004), Radio frequency ID technology: the next revolution in SCM, Business Horizons, Vol. 47 No. 6, pp. 60-8. Subirana, B., Eckes, C., Herman, G., Sarma, S. and Barrett, M. (2003), Measuring the impact of information technology on value and productivity using a process-based approach: the case of RFId technology, MIT Sloan Working Paper No. 4450-03, available at: http:// ssrn.com/abstract478582 or DOI: 10.2139/ssrn.478582. Szmerekovsky, J.G. and Zhang, J. (2008), Coordination and adoption of item-level RFId with vendor managed inventory, International Journal of Production Economics, Vol. 114 No. 1, pp. 388-98. Tellkamp, C. (2003), The auto-ID calculator: an overview, White Paper, Auto-ID Center, MIT, Cambridge, MA. Veeramani, D., Tang, J. and Gutierrez, A. (2008), A framework for assessing the value of RFID implementation by tier-one suppliers to major retailers, Journal of Theoretical and Applied Electronic Commerce Research, Vol. 3 No. 1, pp. 55-70. Wang, S., Liu, S. and Wang, W. (2008), The simulated impact of RFId-enabled supply chain on pull-based inventory replenishment in TFT-LCD industry, International Journal of Production Economics, Vol. 112 No. 2, pp. 570-86. Wu, N.C., Nystrom, M.A., Lin, T.R. and Yu, H.C. (2006), Challenges to global RFID adoption, Technovation, Vol. 26 No. 12, pp. 1317-23. Corresponding author Angela Tumino can be contacted at: angela.tumino@polimi.it

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints