RFID Technology in Manufacturing Systems
and its Effect on Improvement of Supply Chain
M.S in Industrial Engineering, Purchase Expert in planning and monitoring, Pars Khodro company
Department of Industrial Engineering, Faculty of Engineering, University of Tehran- Iran
Key words: RFID Technology, Smart tag, Middleware, Inventory Control.
This paper has considered concepts, components and RFID technology characteristics with due attention to warehouse and inventories management. After that the effects of using recognition technology through radio waves on ordering policy, inventory costs, the amount of demand and total profitability in an organization have been studied. Further, security subjects and the strategy of creating it in financial management range and chain production is mentioned. Finally, the facts of installation and this technology’s results in direction with warehouse and inventory management and business development were presented.
The increase of the accessible amount of information with the aid of information technology development has made a flexible environment for the growth and development of decision support systems. This information has gained more strength with the use of sagacity and the use of smart systems or in other words making smart process by the help of pf new methods and modern techniques has made smart business environment. Supply chain also by considering the importance and its key role in global contest arena is not an exception of this norm and it's making smart process with different looks and in its process of different aspects is always the center of attention. Supply chain is a chain which contains all related activities of good flow and material conversion communication from the input to the product delivery to the consumer.
In this structure the duty of supply chain management is the management of all networks from suppliers to final consumers for reaching the best egress for the entire system. In so doing, organization and schedule must get and use supply chain technologies and information systems to do their best to decrease the supply chain cycle and their process integration. One of the ways to do this is by knowing technologies through RFID's waves. RFID stands for Radio-Frequency Identification which means identifying a code by radio technology and is based on a definite frequency. In recent years, this system has been the center of attention of developed technologies with conservative high vision and also producing factories automatic systems with an emphasis on control on its costs. Identified system with RFID waves is a very trusty and efficient embedment for codec system which is being used today.
RFID in retail
Stocking the right products in the right quantity at the right time is a key to ensuring that the customer enjoys a superior shopping experience. Customers are increasingly demanding that merchandise and offerings be tailored and customized to their needs, forcing stores to more quickly react to unique aspects of each market and consumer base. As a result, almost all retailers are struggling with the ability to deliver superior customer service while keeping rising operating expenses under control — particularly labor, the largest operating cost contributor.
Retailers have experience with the benefits of bar code technologies, and RFID can complement and extend these benefits. RFID is an important evolution in data capture and management, providing the ability to further increase visibility, automation, and integrity, while opening the door for a host of new customer service improvements and applications. The initial move to RFID tagging makes the most sense in areas where additional tracking and automation can provide added value to retail businesses.
How is RFID used in warehouse and distribution centers operation?
RFID can be use in many inventory management process in warehouses and goods distribution centers which is consists of receiving goods from out of the warehouse placing it in warehouse. RFID has a high potential for capital backing in usage that the advantages of RFID in way of dominance on before limitation in order to making new business process.
The parts below are describing the role of RFID in done process in warehouse and distribution in details and summaries.
Receiving goods from the out of the warehouse:
In the warehouse entrance in the time of receiving good cartons and pallets or those which doesn't have any things in, will be automatically placed on the entrance door or by mobile readers' labels which are on crane. Labels put on crane are benefit since they can be used in different parts of the warehouse. While stable readers-labels can only control a limit area (only carton entrance door). After a making relationship cartons label pallet and reader-labels, inputs will be read on labels and send to the inventory management software then this software will update with new one. These software systems prepare consumers order easily like their needs and will put them in their hands. Also this system is able to transfer the information in emergency case while other goods should be saved and transfer step by step[9,10].
Picking goods up from warehouse:
Like the previous level RFID can do teams somehow without error in these step goods automatically and inscription by reader label put on crane and this is controlled by Inventory Management system to confirm picked up goods based on ordered list. Use of RFID readers label on vehicles to estimate Stock Keeping Unit and the quality of cartons need to trusty process of quality[9,10,11].
RFID in supply chain management
Supply chain management is defined as “all management functions related to the flow of materials from an organization's suppliers to its customers”, with often the main objective being the maximization of customer satisfaction at the lowest possible cost. Bose and Pal contend that auto-ID technologies such as RFID “are likely to affect every aspect of SCM, helping to improve demand management, customization, and automatic replenishment of out-of-stock goods while reducing inventory and distribution costs, as well as counterfeit versions of name-brand items”. Tagging every item in a supply chain promises to help send the right product to the right destination at the right time, reducing the cost of operations and transportation and minimizing distribution lead times.
Twist contends that “although there are many obstacles, RFID proposition is large and the technology will gain significant traction in the next three to five years and gain widespread use in the next five to ten years”. It is suggested that the deployment of RFID will result in greater efficiency in operations and supply chain management. In turn it is argued that RFID should result in further pay-offs in terms of value creation in marketing because of better responsiveness and relationship to customers and efficiency in financial performance because of reduced working capital. Manufacturers, retailers, logistics providers and government agencies are making unprecedented use of RFID technology to track, secure and manage items from the time they are raw materials through the entire life of the product. Manufacturers can especially benefit from RFID because the technology can make internal processes more efficient and improve supply chain responsiveness. It must also be noted however that aside from the financial implications that RFID incurs, the organization will also be faced with an enormous inflow of data, which to succeed (they) must turn into information and thus knowledge.
RFID technology is going to generate mountains of data about the location of pallets, cases and cartons. It is going to produce oceans of information about when and where merchandise is manufactured, picked and shipped. It is going to create rivers of numbers, which will have to be stored, transmitted in real-time and shared with warehouse management and others. It is fair to say that what is most important from a strategic business perspective is the application of RFID, and its power to reshape the business strategy as opposed to simply improving the functional strategy. In other words this means not only doing things better but also doing things differently.
Ever since Wal-Mart adopted and mandated the use of RFID tags for its suppliers, there has been a growing interest in the use of RFID in the supply chain. RFID is being touted to improve supply chain efficiency and to increase profitability, and has been widely embraced by manufacturers, distributors, retailers, and logistics companies. Gartner predicts that the RFID market will grow from $504 million in 2005 to $3 billion in 2010. Driving this growth are the retail giants, such as Wal-Mart and Gillette, who have reported optimistic news detailing real and anticipated savings due to their pioneering RFID efforts.
But not all is well in the RFID world. There have been conflicting statements about the value derived from RFID. Industry Week reported that manufacturers have been finding the financial justification for implementing RFID rather difficult, and are unable to make a good business case. Instead, manufacturers and suppliers may be adopting RFID solely to comply with demands from key customers like Wal-Mart or government/defense agencies such as the Department of Defense (DoD). Many seem to be limiting their projects to the bare-minimum needed to comply with these demands. These facts have cost apprehensions as to whether RFID will become a cost-reducing panacea for supply chains, or instead a cost-producing machine.
A key determinant of the success of a firm’s RFID implementation will be the degree to which its business processes can be changed to leverage RFID technology most effectively. To derive benefit from any technology, firms need to redesign their business processes or to identify innovative uses that the said technology can be put to. Clarke have emphasized that RFID should be used less as a glorified barcode and more as a tool to leverage business intelligence for strategic planning. They suggest that RFID could be used to plug information black holes in the supply chain, helping to reduce stock outs and improve fill rates.
RFID technology as a key component of an enterprise mobility solution, combined with appropriate business process improvements, can result in clear benefits in the following key areas:
· Automation - reducing manual processes through automated scanning and data entry improves productivity, allowing resources to be reallocated to higher value activities.
· Integrity - improving the integrity of real-time supply chain information with increased authentication and security and tracking capabilities reducing errors, shrinkage, and counterfeiting while improving customer satisfaction — information is only valuable if it is correct.
· Velocity - reducing workflow issues by minimizing the time spent finding and tracking needed assets, in turn increasing product flow and handling speeds.
· Insight - providing the real-time information needed to make faster, better and more informed decisions and the ability to be more responsive to the customer.
· Capability - providing new applications and quality to meet supply chain partner demands and enhance customer experiences.
The use of this technology in inventory control in industry can answer the questions below:
- Where are the goods or the properties of companies?
- What do the properties of the company consist of?
- What is the best way of keeping the company's properties?
- What has been the company's property?
- What has been the company's property in the recent six months?
- On which part of the production cycle have we missed the company's properties?
- Which parts of the production cycle need to raise and lower the limit of accuracy?
In an example, we can refer to a supply chain of a factory in which RFID is connected to pallets to be able to understand quickly where the parts have come from and in
which parts of the chain are placed now. (figure 2)
Figure2- Using RFID Technology in inventory control
This technology makes the possibility or the possibilities in way of easing and automatic management of goods in warehouse and asset and arranging in warehouse. RFID's labels will be put on each goods and can consist of more information of different goods such as: first material or tools or fixed equipment and keeping and or any needed information of the collection properties are definite based on similar characteristics with tags collection and by means of user's needed definition. Even coming and going (traffic) of company's staff in warehouse with identified or personnel's cards can be checked and seen through control passages. Automatically asset management of the good in any moment and by users will and in a short time is able to receive all information and warehouse inventory. This system benefits the preservation of vain and unnecessary purchasing costs by attention to this point that all entries and emersions of the goods from warehouse will be controlled and stored so in case of not inscription of the permissive emersion of a good the alarm system will make noise and will prevent the emersions without justification. This system is able to produce various reports such as:
- consume cases
- The number of consume and ordering points.
- The pursuits of goods and properties
- The amount of consuming a good the situation of good in warehouse.
- Consuming date
- Depreciation report
- Present inventory
- Guarantee control and their report of left time of goods guarantee
- The insurance value of goods
The goal of inventory management is the store level keeping in possible minimum amount without facing with shortage. In this issue, RFID technology can present trusty information in the relation with useable parts and the amount of store in each place with high speed and almost without human interface.
- decrease of certainty store level
- the prevention of material unwilled
- accuracy and high speed of material flow
- the decrease of high costs related to emergency order
- it is not needed to search missed part (in case of using Real - time locating system)
- automatic control of inputs and outputs
- protecting of Vendor managed inventory system
General RFID benefits for businesses
In this section we will examine the benefits of RFID for general businesses. These advantages are common for different types of business regardless of their level in the supply chain. RFID can deliver tangible benefits for many types of enterprise businesses:
a. Reduce Out-Of-Stock: When an item is out-of-stock, most of the time the customer either does not buy the item or buys a competitive product. For example in grocery stores, as much as 8.3% percent of revenue is lost each year due to out-of stock conditions. In broader studies of the retail marketplace, the overall economic impact is estimated to be $69B in lost revenue due to out-of-stocks. Eliminating out-of-stock conditions via better RFID product tracking, inventory visibility and forecasting can have an immediate to p-line revenue impact by retaining lost sales and recapturing lost market share. If an out-of- stock does occur, RFID enables a retailer to restock three times faster than that of the non-tagged items within the same store.
b. Improve Inventory Management: Inventory accuracy is important to help improve visibility and insight into what specific raw materials have arrived, helping to assure the right materials are available and to better manage just-in-time production models, track work in process, and speed finished goods through the supply chain. The use of RFID improves these processes, and helps minimize costly inventory errors, reducing production delays and lowering production reconfiguration costs that often result from material or demand planning issues. Because it can be read through packaging, without concern to orientation, without direct line of sight between object and reader and can withstand exposure to dirt, heat, moisture and contaminants that make bar codes unusable, RFID can remove blind spots from inventory and supply chain operations. Additionally, visibility can be improved into distribution and retail channels to more accurately and in real time track delivered goods and better manage and match demand. Accurate and real-time visibility throughout the supply chain helps to improve inventory forecasting, manage just-in-time workflow and eliminate excess inventory. If an item was misplaced or needed urgently to complete an order, fixed-position readers or a worker with a mobile computer and RFID reader could automatically search for the item by reading for its specific ID number. Savings are realized by reducing required inventory via lower safety stock requirements, a net 10-30% savings. Better inventory management also leads to proportional reductions in out-of-stock, lower inventory carry costs and reduced write-downs on obsolete inventory.
c. Reduce Shrinkage (loss and theft): Losses due to theft are estimated to cost retailers over $30B per year, and are estimated conservatively at 1.7% of overall sales. With RFID, pallets, cartons and individual products can be tracked through the supply chain to pinpoint product location and eliminate inventory errors that can cause shipments to go missing. To secure inventory from theft and diversion, readers could be set to sound alarms or send notification if items are placed in unauthorized areas of the facility or removed from storage without prior approval. AMR Research estimates an 18% average reduction in shrinkage using RFID. An Auto-ID Center study found consumer goods manufacturers would reduce shrink (inventory loss) by an estimated 10 percent by implementing secure storage areas.
d. Reduce Supply Chain Errors: By replacing manual bar code scanning with automated RFID information capture, data entry errors can be eliminated, reducing not only inventory and tracking mistakes, but also the costly labor required to resolve such mistakes. Additionally, because RFID automates data entry, more collection and tracking can occur throughout the process, helping to more specifically pinpoint asset location and workflow. And not just labor costs are driven higher by mistakes — retailers and manufacturers each lose $2M for every $1B in sales due to bad data and predict that eliminating bad data could save $10B per year.
e. Improve Capital Asset Tracking and Management: In many businesses important assets such as shop equipment and containers are often difficult to track, maintain and secure. RFID can be used effectively to better locate movable assets, ease maintenance scheduling and assure maintenance performance, as well as help prevent loss. In applications such as warehousing and distribution where containers and tugs need to be tracked, scheduled and maintained, workflow can be optimized and losses prevented.
f. Reduce or Eliminate Counterfeiting and Improve Security: In many industries, counterfeit or non-secure goods introduced into the supply chain cause large direct losses of revenue. RFID increases brand protection and helps mitigate safety, security, regulatory and liability risks. Improved tracking using RFID can identify and isolate issues more efficiently and effectively than manual bar code scanning by introducing automated and more frequent checks and balances.
g. Improve Accounts Receivable (AR): With more accurate and real-time tracking of what has shipped, the accounts receivable process can become much more efficient, with shorter billing and payment cycles. For example, RFID allows vendors to automatically produce customer invoices as soon as items are shipped and enables payment automation as well. This helps to reduce the time to collect and the improved accuracy and elimination of manual data entry or tracking errors helps reduce AR disputes.
h. Meet Market Mandates and Protect Revenue Opportunities: Many industry leaders have set the stage by making RFID functionality and compliance a prerequisite for to participating in their ecosystem. RFID can help meet these mandatory requirements, or provide an advantage for those who proactively implement the technology over those that are struggling to meet these new market demands. Longer term, RFID can help create new revenue generating applications and innovation to help grow market share. In many cases, RFID is not just a business benefit, but a requirement for doing business.
i. Regulatory Compliance: Companies that transport or process hazardous materials, food, pharmaceuticals and other regulated materials could record the time they received and transferred the material on an RFID tag that travels with the material. Updating the tag with real-time handling data creates a chain- of-custody record that could be used to satisfy FDA, DOT, OSHA and other regulatory reporting requirements.
j. Returns & Recall Management: Companies could supplement the basic shipment identification information by writing the specific customer and time of shipment to the tag immediately prior to distribution. Producing and recording this information would provide several benefits. In the event of a recall, companies could trace specific shipments to specific customers, which would enable a highly targeted notification and return operation and avoid a costly general recall. For general returns, companies could verify that the customer returning merchandise is actually the customer who received it, which would deter diversion, counterfeiting and other forms of return fraud.
k. Service and Warranty Authorizations: Authenticating the product and customer with proprietary information could also be used to authorize warranty and service work. Upon completion of repairs or service, a record of the activity performed could be encoded on the tag to provide a complete maintenance history that travels with the item. If future repairs or service are required, a technician could access the item’s complete maintenance and configuration information without accessing a database simply by reading the tag. This application ensures workers have necessary information if no database access is available, and eliminates the need and expense of making phone calls or wireless data inquiries to access records[6,7].
RFID in manufacturing
Manufacturers are evolving to confront new challenges and opportunities, such as implementing and managing a lean supply chain, adapting to expanding globalization, and dealing with increasing competition, labor costs and compliance requirements.
To help meet these challenges, manufacturers are looking to implement RFID solutions to reduce costs, improve asset utilization, and improve business quality, flexibility and scalability. RFID can specifically help manufacturers advance from current barcode systems (or fragmented solutions) to help drive lower costs, improve decision-making, and streamline processing and tracking of raw materials, work in process, and finished goods throughout the just-in-time supply chain[6,7]. RFID implemented throughout the manufacturing environment can help streamline the processing of raw materials, work in process and finished goods, resulting in improvements in many business areas. We discussed some of these improvements in the previous section and here we will bring specific advantages for manufacturers in supply chain:
a. Receiving of raw materials: RFID Portals at dock doors and points of ingress allow instant verification of the entire contents of a shipment by reading an RFID-tagged case, container or pallet. The content's status and information is updated and automatically communicated to the factory's WMS/ERP system at the point of entry. Proof of receipt and accounts payable processing can all be automated, improving accounts payable productivity and reducing payment inquiries and disputes.
b. Tracking Work-In-Process: RFID-tagged raw material and sub-assembly parts are routed and tracked throughout work stations along the assembly line and the entire production process. RFID automates the validation of sequence and components and speeds build times. If an issue is found, accurate tracking can help to reduce quality issues and errors. Customization requirements can be built into the system and validated immediately, eliminating costly reworks.
c. Tracking History: RFID can track the history of the production and finished goods which are important information for shipping and possible recalls.
d. Shipping: RFID tags on outgoing pallets and containers can associate vast amounts of information with the finished goods being shipped. This information can include shipment contents, product history, origin and destination points, order information and handling instructions. RFID can track "pedigree" information - where the product is, where it has been, who accepted it and at what stage. RFID helps to eliminate shipping delays by increasing staging accuracy and ensuring that the right shipment is on the right outbound truck. RFID allows you to "certify" the shipment. Establishing agreements with trading partners to leverage RFID data as "proof of delivery" can speed the processing of accounts receivable invoicing and significantly reduce disputes, claims or returns.
e. Inventory and Net Fixed Asset Optimization: Increased knowledge of raw materials, work in process and finished goods, as well as increased visibility into manufacturing assets used to transport and produce these goods, can help to improve scheduling, better manage inventory, reduce carrying costs and improve net fixed asset utilization. As contract manufacturing becomes increasingly important, visibility into supplier as well as customer activity becomes critical in order to achieve supply chain synchronization. Inventory tracking and visibility is directly related to information management described earlier. The better a manufacturer is able to collect, manage, and use information to drive production assets and processes, the more visibility it can provide to its trading partners. Depending upon investments in automation and MES, RFID could be used in varying scales, either locally or across the entire facility to provide visibility into incoming raw materials, WIP, production sequencing, packaging, palletizing, and warehousing operations, as well as final shipping to the next destination in the supply chain.
g. Counterfeit Prevention: In many industries it is vital to track goods in order to prevent the insertion of counterfeit goods into the supply chain. In pharmaceutical manufacturing, it is especially important to track the entire lifecycle of raw materials, production and shipment. RFID can help to assure that only properly tagged and uniquely identified and tracked items are introduced into the supply chain and sold and distributed.
h. Visibility: Real-time information collected throughout the manufacturing process can help improve accuracy and visibility, enabling the accurate measurements of key performance indicators, optimized performance and improved production and inventory planning[7,8].
RFID solutions can ultimately help manufacturers reduce operating expenses and improve margins by:
- Reducing labor costs and improving productivity via automation of current manual inventory tracking tasks and reducing handling errors. Bar coding is very common in today’s manufacturing environment. However in many bar coding activities, manual intervention is required for capturing data. An immediate impact of RFID is eliminating those requirements, thereby freeing up labor to perform other, more value added tasks. Effective deployment of RFID also has the potential to quickly provide accurate and reliable data that exceeds the bar coding or manual capabilities available today. This can have major impact, particularly in high-volume and high-speed manufacturing operations, where speed, accuracy, and timeliness are critical for throughput and performance.
- Improving product quality as line-sequencing and parts verification applications are improved. Also reducing the number of production reconfigurations by assuring the right inventory is available to meet production and shipment schedules and demands.
- Lowering required inventory levels (working capital savings) and associated carry cost expenses by optimizing inventory levels and reducing safety stock. Manufacturers can reduce obsolete inventory write-downs through better planning and visibility and lower inventory shrinkage by keeping better track of goods helping to eliminate losses and theft.
- Improving production asset visibility helping to track their location and reduce maintenance issues. Reducing claims and returns by assuring the right goods are sent where they should be. Proactively mitigating accounts receivable and accounts payable disputes.
- Improving revenue opportunities, reducing out-of-stocks and improving promotional execution by having the right inventory available to match demand. Meeting new customer mandates and regulatory compliance. Improving customer experience and satisfaction by improving timeliness, quality and availability.
The process improvements and bottom-line benefits that RFID can provide are significant:
- Reduce labor required for almost all primary warehouse worker functions including receiving, put-away, inventory, and pick/pack/ship and transportation management.
- Increase receiving, picking and order accuracy – reducing error handling, reworks and returns. Reduce stock levels by helping to implement cross-docking, improve inventory accuracy and demand generation visibility. Reduce out-of-stock items by assuring inventory is available to meet orders and demand.
- Increase error-free shipments and improve delivery times. Reduce theft by helping to assure that goods are tracked and secured throughout the warehouse and distribution process.
- Increase customer satisfaction by ensuring that the right goods reach the right customer at the right time.
One of the main benefits of RFID is pursuit of containers of having goods by RFID labels on pallets and other vehicles can control their movement in a special area. In a step pursuit of tools is not limited to the containers and other crane and equipments can be indeed.
However by this methods organization can be basic storage information for reuse of things which are exited from warehouses or environment and can be managed efficiently. Organization with a fine pursuit of tolls in warehouses can program their issue, increase the efficiency and finally using less costs. By this way a perfect secure way for much availability to tools and equipments in presented and no more tools will be missed. This cases more efficiency in tools and things management. In more cases equipments with high value or expensive tools with active RFID labels pursuit since buy cost will stop the effect of missing or stealing. Doing RFID causes and organization more flexibility and decrease the amount of things in the warehouse but the manual done of it is with some problems which in some cases cause less efficiency some of these problems are listed in below:
- priority management of inputs and outputs of inventory in warehouse
- system disability in case of incomplete things management
- system disability in become deteriorate Things management
Conclusion and future search
In case of warehouseing RFID can change many of available process from manual situation to automatic one and need to many number of staff will be decreased more over the use of RFID in warehouse management causes a cost related to human and time to be less and less and increase accuracy in this issue of producing and consumers order. Today many of warehouses and distributions center in world are using RFID system and confess that their capital backing is developing. How ever many of the companies don't have clear understanding of using this technology and use it only in parts which have some serious problems in rate and etc. if RFID system is started with a flexible subsystem and we use all its advantages and disadvantages the capital backing will be more efficient by deleting time-consuming and extra process.
The goal of using RFID in container depots is to enhance efficiency, thus providing better customer services while lowering the cost of operations.
1) With the RFID-based system, the drivers can access the system anywhere inside the container depot via handheld devices. Information on the containers will be updated and sent to the system via a wireless system to the backend computer system. This reduces human errors, and drivers no longer have to wait for the system computer operator in the depot control office to become available.
2) The system can determine where to put the containers based on developed algorithms and prescheduled orders. The system can inform workers where to put and get the containers. The time needed to train new staff is shortened. Dependence on the experience of staff to pick up and deal with the containers is greatly reduced.
3) All of the containers are identified by RFID tags. Workers can access detailed information about the containers easily via their handheld devices. The system can inform the workers where the containers of the customers are located. In case mismatch containers are found, an alert can be sent to the operators.
· There is a need to calculate deployment costs and estimate the business risks and value of adopting an RFID system to satisfy customer demands before implementing the system.
· It is necessary to carry out a detailed survey of RFID systems before deciding on what type of RFID technology to adopt so that the technology can be harnessed to yield satisfactory results.
· There is a need to be aware that implementing an RFID system is not just an IT issue. Rather, it involves behavioral issues and issues of organizational culture, although most organizations view the adoption of RFID as strictly an IT issue.
· It is necessary to have a very detailed solution analysis from the selection of tags to the locations of the readers to integrate the RFID system with the existing system. Every implementation requires a detailed solution analysis.
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 . Food and Drug Association
 . Department of Transportation
 . Occupational Safety and Health Administration