The disadvantages of using EDI are that there are too many standards and these standards are always changing. To effectively take advantage of this technology, the automation system in the company must be integrated. The system must have the same standard and format to be able to communicate with external parties (Suppliers and Customers). The cost of setting up a fully integrated EDI system may be costly and the limitation on business opportunity may be a setback for the EDI technology.
b) Bar-code system
A barcode is parallel lines and spacing (widths) which show data of certain products. These barcodes are machine readable. The two basic advantages of using barcode reader compared to manual data entry are speed and accuracy. A simple data entry error cause by manual entry will translate into additional costs for a business which ranges from the cost of rekeying the data to shipping the wrong product to the wrong customer. The cost of implementing bar-coding system is inexpensive. The saving from the advantages should be able to justify the implementation. The disadvantage of that data must be unreadable in a crumbled of torn barcode label.
c) POS system
Point-Of-Sale system is most common used technology for all retailing markets and is probably one of the greatest innovations for controlling inventory. A basic POS system records all transactions from every cash register into a relational database, produces reports of sales figures by day, week, month or year, as well as keeps track of the movement of inventories in the store. The POS system is able to generate specific reports in tables and charts to monitor the historical sales activity for every product that has been sold. This way, companies will know which products are in demand or extremely profitable, how much they should order per cycle and what minimum quantity of inventory should be kept to maintain holding costs.
d) RFID (Radio Frequency Identification Device)
RFID is the use of an object (usually a tag) incorporated into a product for the purpose of identification and tracking using radio waves. A retailer hyper mart or warehouse that uses the RFID technology can improve the productivity and control of the day to day operations. The self-recording and tracking of items from receiving, inspection, storing, picking and delivering improve the efficiency of the operation, thus provide immediate real-time, accurate data to the Inventory.
Radio Frequency Identification Device (RFID) is one of the most common technologies used in the distribution channels of supply chain. It serves a similar purpose as bar-coding but it is more superior in terms of convenience and information retrieval. For example, the RFID device does not need to be positioned precisely relative to the scanner to retrieve the identifying information and can be read at much greater distances compared to barcodes.
With RFID replacing manual barcode scanning and stock counting, the stress of human error are hugely reduced, the percentages of over or understating goods sent or received would be minimized and carrying costs will be low. Managers need not keep piles of paper reports concerning stock and verify them by manual checks. The retailer and suppliers will be able to keep a good supply of fast-selling products as they will know the selling pace of each item and their relative stock levels. Furthermore RFID can contain more information compared to barcodes. There is no way to affix additional written details on a printed barcode whereas in RFID, the reader can communicate and alter as much of the information as the tag design will allow.
Benefit of RFID Technology
- Benefit related to automation
The most obvious use of RFID is as an automatic version of bar code scanning. As a more sophisticated automation device, RFID provides the advantages of:
- eliminating or reducing labour,
- eliminating delays in recording inventory movements,
- improving the accuracy of inventory records,
- having larger data capacity for additional information such as selling price, and
- being able to detect or count inventory at any time at little or no marginal cost.
Such advantages lead to direct benefits in cost reduction.
- Benefit related to accuracy of Inventory data
Nowadays, a retailer's replenishment decisions are based on inventory information kept in a computer system (known as system inventory), which is assumed to be accurate. In actuality, the system inventory and the actual inventory count (i.e. physical inventory) are seldom synchronized due to various reasons such as shrinkage or stock loss, transaction error, inaccessible inventory, and incorrect product identification. The error between the system inventory and the physical inventory accumulates over time and is not corrected. Without RFID, the inventory reduction due to shrinkage is not known to the system, and the retailer's replenishment decision is made based on the inaccurate inventory information.
With RFID deployment, shrinkage occurs as before but the system inventory data now reflect correctly what is physically in stock. The inventory is tracked more accurately and in real time, and better replenishment decisions can be made. This brings an opportunity of reducing store inventory and improving customer service. The firm will be able to significantly reduce average inventory while keeping the customer service level at the highest. (as measured by the back order quantity).
- Benefit related to Shelf Inventory Replenishment
Shelf inventory management is critical to a retail business. This includes checking for expiration dates of perishable products which can further complicate this task. With RFID technology, shelf inventory can be tracked automatically in real time. As a result, shelves can theoretically be replenished continuously. The total shelf replenishment cost could be reasonable if one batches the replenishment quantities across products and makes a replenishment trip once an hour,
- Benefit related to Inventory Visibility
The problem of out-of-stock at retailer store is often caused by lack of a real-time replenishment signal and the inability to track individual products through the supply chain. The advantage of RFID arises from its ability to provide complete visibility of inventory throughout the entire supply chain, so that individual products can be tracked automatically in real time, providing accurate and timely information to ensure delivery of the right product, to the right location, and at the right time. More importantly, suppliers and retailers can use such inventory information and information about the velocity of product movement to adjust to rapidly changing consumer demands and preferences.
- Benefit related to Shelf Inventory Replenishment
Another potential benefit of RFID is the reduction or elimination of time delay in recording and processing the inventory data at various points in the supply chain. With RFID, the inventory data are not only more accurate but also in real time as movement of goods takes place, resulting in potential improvements in the quality of supply chain decisions.
Limitation of RFID technology
Although many companies and retailer stores can benefit using the RFID technology, it is expensive to install. On top of that, there are also a number of restrictions when using this technology.
- No RFID standard has been set yet. (The Auto-ID center has worked with standard bodies Uniform Code Council and EAN International to come up with electronic product code, but it is not yet considered a standard).
- The smart tag technology is yet to be perfected , today on an average 20% of the tags do not function properly.
- Radio waves travel in straight line therefore the tags have to be place and align for proper reading.
- It is also subject to interference by other warehouse operating devices like forklift and walkie-talkies.
- Physical limitations like reading through liquid or metals still exist
- Accurate read rates on some items can be very low
- Nylon conveyor belts and other RFs can disrupt the tag transmissions in warehouses
- Increase in expenses - the suppliers will have to equip their warehouses and transport vehicles with readers. These readers have to be connected to the computer networks for exchange of information. All these mean additional costs related to hiring technical consultants and additional hardware.
Conclusion
Any companies can benefit from this available Information Technologies/system for more resourceful, accurate and effective management of their inventory and thus increase customer service level. In order to take full advantage of such technologies, the Managers must understand the firm marketing strategy and the resources to support these systems implementation. Such strategy is critical for competitive advantage, but is also a cost factor to the Company.
Wal-Mart dreams of achieving a great RFID enabled, fool proof, error free, transparent supply chain. To this end, RFID readers are being installed at distribution centre’s and stores and buying equipment for printing tags. The expense of investments in new technology every year will be covered in the normal capital budget.
Reference
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What is RFID?, (accessed 01 Oct 2010)
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Mount Mathew, February 2010, Controlling inventory, (accessed 01 Oct 2010)
- Stephen Haag, Paige Baltzan, and Amy Phillips (2008), Business Driven Technology, McGraw-Hill Irwin, America NY
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