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Implementation of a RFID system in a furniture industry involved in the


fashion sector: A case study

Article  in  International Journal of RF Technologies Research and Applications · January 2015


DOI: 10.3233/RFT-140062

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International Journal of RF Technologies 6 (2014/2015) 99–119 99
DOI 10.3233/RFT-140062
IOS Press

Implementation of a RFID system in a furniture industry


involved in the fashion sector: A case study

M. Bevilacqua, F.E. Ciarapica∗ , A. Crosta, G. Mazzuto and C. Paciarotti


Department of Industrial Engineering and Mathematical Sciences, Polytechnic University of Marche,
via Brecce Bianche, Ancona, Italy

Abstract. The implementation of a RFID system is discussed in this study, for the division of the offices
and furniture of an Italian company that is a leader in the furniture industry. This system allowed for a type
of “electronic identity card” to ensure the authenticity of products and their traceability. Through Business
Process Re-Engineering (BPR) methods, the “AS IS” and “TO BE” scenarios obtained as a result of the
proposed changes are analysed. In particular, two production phases are analysed in this work: the sewing
and inventory. The differences between the “AS IS” and “TO BE” systems are analysed to highlight the
improvement obtained using the RFID system. An analysis of the management and implementation costs
of new scenarios is developed.
Keywords: Radio frequency identification (RFID), product traceability, product authentication, IDEF0

1. Introduction

RFID is believed to offer many benefits for supply chain management, includ-
ing material handling efficiency, increased product availability, and improved asset
management (Angeles, 2005; Li & Visich, 2006). This instrument is also being
increasingly used as a means of controlling processes and as a tool to prevent
the counterfeiting of goods produced by a company. The increase in the num-
ber of counterfeits penetrating the open market has created the need for a product
authentication approach in the tracing and tracking of a product, anytime and
anywhere (Kwok et al., 2010). Radio frequency identification (RFID) technol-
ogy has recently been recognised as a promising vehicle to combat counterfeiting
due to its advanced automatic technology, its capability for cryptographic resis-
tance against cloning and its strong security features (Tuyls & Batina, 2006). In
the current RFID-based product authentication approaches, RFID tags are gen-
erally attached to a product’s packaging, or they are stuck onto the product
itself.

∗ Corresponding author: F.E. Ciarapica, Department of Industrial Engineering and Mathematical Sci-

ences, Polytechnic University of Marche, via Brecce Bianche, 60100 Ancona, Italy. Tel: +39 071 2204435;
E-mail: f.ciarapica@univpm.it.

1754-5730/14/15/$27.50 © 2014/2015 – IOS Press and the authors. All rights reserved
100 M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry

In this context, this research aims at developing and mapping a new procedure for
carrying out two processes of an Italian furniture company: 1) tracing production steps
and 2) avoiding and preventing product counterfeiting. In this work, we propose to
improve these processes using the RFID technology and we use an approach based on
Business Process Re-engineering (BPR) methods for modifying company procedures.
In the last decade, the company analyzed has experienced a period of economic
growth, market expansion and business diversification. It has progressively succeeded
in governing and managing a considerable increase in production volumes and, with
time, it has become specialized in the development of other products. It has grown so
rapidly, however, that it has been unable to achieve a parallel adaptation of the whole
organizational and logistics system to the changing needs of the various company
functions. Company production activities involve different departments and cause
considerable amount of paper flow although the adoption of “barcode” technology for
developing some tasks. In particular, the company needs: 1) to re-design the procedure
for tracing production activities in order to forecast a more reliability delivery date,
2) to solve company work-centers and shipping department scheduling problems and
3) to develop a rapid inventory management. The introduction of RFID will allow
the company to read literally hundreds of unique RFID tags in a single swipe from a
distance of ten feet or more, while with barcode reading the goods must be taken out
of their cartons and read one at a time with a reader in close proximity. Moreover each
RFID tag item has a unique ID allowing differentiation between identical products.
The company also aims at using the RFID technology as anti-counterfeiting system.
For explaining the company counterfeiting problem we have to underline that the
driving force of the company business is mainly due to the creative of the most famous
architect in the world that take inspiration from art, history, nature and the traditions of
the Italian style for developing handmade products. The company sells these products
directly to furniture stores in Italian market while it uses international distributors for
foreign markets. Moreover the company uses several providers that are geographically
close to it, for carrying out many production phases. In the last years some not kosher
providers tried to copy furniture company products selling them directly to furniture
stores at a lower price. Poor product quality, deterioration of the brand, and concern for
consumer safety pose a very real threat. Counterfeiting can affect a company’s revenue
and do incalculable long term damage when a substituted product is associated with a
brand causing product failure. In this context the company decided to use RFID-tags
not only for tracing production activities but also for verifying the product authenticity
among supply chain stakeholders.
Business Process Re-Engineering (BPR) methods can be used for analysing and
mapping new procedures for production control and anti-counterfeiting activities. The
central element of the Business Process Re-Engineering is the analysis of the actual
situation (the “AS IS” model) and its critical aspects and the future situation (the
“TO BE” model), through process mapping. The main purpose of process mapping
is to highlight which activities must be deleted or inserted and which resources and
constraints must be taken into consideration in the TO BE model. The code used to
M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry 101

model the processes following the IDEF0 standard is AIO-WIN, version 7.2, which
models the activities and attributes them to the relative costs. The activities related
to different management options have been analysed and compared in terms of costs
and savings.
The remaining sections of the paper are organised as follows. In section 2, the
literature is reviewed. In section 3, the BPR approach proposed in this work is given.
Sections 4 and 4.1 describe the case study and the BPR project. Section 5 is divided
into three parts: sections 5.1 and 5.2 show the BPR project of sewing and inventory
processes, while a cost analysis is performed in section 5.3. Lastly, the concluding
section reports the main findings of the study.

2. Literature review

There is a wide range of literature regarding the implementation of RFID tech-


nology, and this technology has often been linked to the decisions of companies to
redesign and rethink processes from the standpoint of radical change compelled by
the need to improve performance (Bertolini et al., 2011). Consequently, reports of
‘pilot’ projects by many different companies have been on the increase. However,
the development of an RFID project is a complex task, requiring the involvement of
many different parties with a variety of skill sets (Bevilacqua et al., 2011, 2012).
Regarding RFID technology as a tool for anti-counterfeiting we can highlight that
the costs associated with counterfeit parts just in the automotive and aerospace sec-
tors are estimated to be in the hundreds of millions (http://www.businessweek.com/).
Cheung & Choi (2011) defined RFID as a potential tool for combating product coun-
terfeiting, which undermines the global economy to an enormous extent. In their paper,
the authors proposed an RFID-based track-and-trace system for anti-counterfeiting,
and they discussed a number of implementation issues, including tagging, the selec-
tion of tags, and tag programming. The study of these issues was conducted on
an RFID-based packaging line for bottled products, but the findings were gener-
ally applicable to the implementation of anti-counterfeiting systems for other types
of products. Wong et al. (2006) showed in their work how RFID could be used in
the apparel industry as an effective method for identifying counterfeited products.
Their paper presented a new approach, using lightweight cryptography and a sim-
ple authentication method, based on hash functions for RFID Class 1 passive tags.
The Tags were embedded inside apparel products, such as garments or high-value
apparel accessories. To determine whether a product was counterfeit, tag authen-
tication on that apparel product could be performed, advising whether the apparel
product was genuine or counterfeit. The proposed method was compared with other
basic approaches, and it was found that the proposed method was effective, and its
operation was reliable.
The approach proposed in this work is different from those already proposed in liter-
ature. Considering the company context, highlighted in introduction section, the new
anti-counterfeiting procedure considers using company selling agents as inspectors of
102 M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry

product authenticity. In particular, the selling agents will be equipped with an RFID
interrogator in order to control company products that are presented in provider’s
warehouse and in furniture stores. Using symmetric cryptography technology, the
inspectors must know the same secret as the one embedded into the product.
Regarding production control, RFID technologies offer several contributions to
supply chain management through their advanced properties, such as unique identifi-
cation of products, ease of communication and real-time information (Bevilacqua et
al., 2013). Some authors (Zhong et al., 2013) presented RFID-enabled real-time man-
ufacturing execution systems (RT-MES). RFID devices were deployed systematically
on the shop floor to track and trace manufacturing objects and to collect real-time pro-
duction data. Disturbances are identified and controlled within the RT-MES. Planning
and scheduling decisions are more practically and precisely undertaken and executed.
Online facilities are provided to visualise and manage the real-time dynamics of shop-
floor WIP (work-in-progress) items. A case study was reported of a company that
manufactures large-scale and heavy-duty machinery. RFID can ameliorate the trace-
ability of products and improve visibility throughout the entire supply chain, and it
can also make operational processes such as tracking, shipping, checkout and count-
ing processes more reliable and rapid, resulting in advanced inventory flow and more
accurate information (Sarac et al., 2010; Tajima, 2007). Some authors (Tzeng et al.,
2008) have presented an in-depth analysis in an attempt to understand the business
value components that an organisation could derive from adopting radio frequency
identification (RFID). The authors illustrated these concepts, drawing on the experi-
ence of five early adopters from the Taiwan healthcare industry, demonstrating how
to use RFID to undertake more effective and efficient business processes. Compa-
nies can achieve better supply chain planning and management by integrating and
storing more accurate data, obtained through RFID technologies, in their information
technology systems (Whitaker et al., 2007). Bottani & Rizzi (2008) indicated that
reengineering models increased the possible benefits gained through RFID for all
processes performed in distribution centres and retailers. Chen et al. (2013) applied
lean production and radio frequency identification (RFID) technologies to improve
the efficiency and effectiveness of supply chain management. In this study, a three-tier
spare parts supply chain with inefficient transportation, storage and retrieval opera-
tions was investigated. Value Stream Mapping (VSM) was used to draw current state
mapping and future state mapping (with lean production and RFID) with materials,
information, and time flow. Preliminary experiments showed that the total operation
time could be reduced by 81% from the current stage to future stage, with the inte-
gration of RFID and lean production. Bottani (2009) evaluated the impact of RFID
and EPC Network on traceability management within a supply chain, introducing a
detailed mathematical model to assess the economic impact of radio frequency iden-
tification technology and EPC Network. The model computed the savings resulting
from RFID implementation based on the gap between the costs of product recalling
performed without and with the support of RFID-based traceability systems. Those
situations were respectively referred to as ‘AS IS’ and ‘TO BE’ scenarios. Both of
M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry 103

the scenarios were validated by a panel of experts, operating as manufacturers and


distributors of food products, to ensure good correspondence with real traceability
management procedures. A numerical example was proposed to show the model’s
application as well as to provide insight into the economic impact of RFID and
EPC Network implementation on traceability management. The furniture company
analysed in this work aims at controlling all production phases, in addition to the
traceability of semi-finished products and/or some raw materials, even in the contrac-
tor’s warehouse. The use of RFID technology is considered as a “condicio sine qua
non” for the management of production, in addition to both the present and future
software used in the company, to accelerate the observation of processes, improve
performance and update the situation in real time.

3. BPR Methodology

In this work IDEF0 technique has been used as BPR method for modelling the
new procedures and for assessing activities costs. IDEF0 is a modelling language
with graphical and text capabilities that provides a standard model for the decisions,
functions and activities of a company, process or system. It is based on the Structured
Analysis and Design Technique (SADT), developed in 1972 by Douglas T. Ross and
SofTech, Inc. (Marca & McGowan, 1988). IDEF0 is now an IEEE Standard (KBSI,
1998). IDEF0 consists of a hierarchy of diagrams, text and glossary. The diagram
in Fig. 1 represents the main component of the IDEF0 model. It presents the system
functions as boxes and data or object interfaces as arrows. The attachment points
between the arrows and boxes indicate the interface type (input, control, output or
mechanism). The generation of many levels of detail through the model diagram
structure is one of the most important features of IDEF0 as a modelling technique
(Bevilacqua et al., 2005). In each diagram, activities, processes and transformations
are represented by boxes that describe their function. Data and objects related to
the functions are represented by arrows. The IDEF0 model starts by representing the
entire system as a single box (the highest level), which is labelled A0. The A0 box can
be divided into more detailed diagrams until the system is described in the necessary
detail. The top level of the model presents the most general system objectives, followed
by a series of hierarchical diagrams to provide more detail about the system being
modelled.
As shown in Fig. 1, the role of an arrow is determined by its relationship to a
function box.

– Inputs that are transformed or consumed by the function to produce outputs are
represented by arrows entering the left side of the box.
– Controls that specify the conditions required for the function to produce the
correct output are represented by arrows entering the box on the top.
– Outputs that are the data or objects produced by the function are represented by
arrows leaving a box on the right side.
104 M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry

Fig. 1. IDEF0 representation of a function and related data and objects.

– Mechanisms that are the necessary means for executing a function (i.e., human
or material resources) are represented by arrows connected to the bottom of the
box.
IDEF0 models are created by a bottom-up analysis process but offer top-down
representation and interpretation. The A0 diagram can be divided into sub-functions
represented in a child diagram, and each sub-function can be again divided into
lower-level child diagrams. The decomposition structure is shown in Fig. 2.
The hierarchical structure allows for the representation of any portion in detail,
while also providing an overall view of the system. The IDEF0 structured analysis
method is one of the favoured tools used by industry to understand complex man-
ufacturing situations (Baines & Colquhoun, 1990). IDEF0 can help companies to
implement Business Process Reengineering programmes (Maull & Childe, 1994)
and has been applied in many different sectors. For example, IDEF0 was used to
describe and analyse the business processes of a bank to determine critical processes
and improve them (Climent et al., 2009). In the agricultural sector, the IDEF0 lan-
guage was used to understand and formalise the sugar beet production activity on a
French farm (Papajorgji, 2009). In the healthcare sector, IDEF0 was used to identify
vulnerabilities to human error in surgical processes (Kenneth et al., 2010). Therefore,
a functional model is a representation of the function, activities or processes in the
system under consideration. The aim of the AS IS analysis is the identification of
disconnections in the existent processes that prevent the obtaining of the requested
performance and results. This aim requires the documentation and description of the
processes, using methodologies that can represent the relationships among their dif-
ferent activities. An important aspect of AS IS analysis is the determination of the
time, costs and resources associated with each activity. The results of AS IS analysis
are the definition of the following:
• The functional relationships that correlate the activities of the selected process
and that define their input, output, constraints and resources;
M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry 105

Fig. 2. Decomposition structure.

• The phase sequences within each activity;


• The performance and cost measurement;
• A list of disconnections that represent obstacles to achieving the desired results
and objectives, constituting the base of the TO BE phase.

IDEF0 was designed to model the decisions, actions, and activities of a specific
organisation or system, described by a hierarchic series of diagrams. The code used in
this work to model the processes following the IDEF0 standard is AI∅ WIN, version
7.2, which models the activities and attributes relative costs to them using Activity-
Based Costing (ABC) method. ABC is a management instrument that allows for the
determination of the real costs associated with the production of goods or services. It
is articulated in the following operation phases:

• Definition of the activities necessaries for obtaining the output;


• Attribution of the costs of the resources through the Resource Cost Driver, which
expresses the amount of resources employed; and
106 M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry

• Identification of the objects generating costs and use of the Activity Cost Driver
to measure the frequency and intensity of the demands placed on activities by
the intermediate and final cost objectives.

4. Case study

This work was conducted in a medium-size Italian company (approximately 300


employees) involved in the fashion industry and that is a leader in the furniture sector.
This company handles 145,000 finished products per year and 13,000 semi-finished
products per month. As previously mentioned “Production control” and “Counterfeit-
ing” processes have been pinpointed as high-priority by the company. The company
arranged a panel of expert for developing the BPR project of these two processes.
The study of relations between the activities and the interviews with personnel has
pointed out some problems during the modeling phase of the as-is procedures of
these two processes. The people involved in company are aware of their role, but
they do not have a thorough understanding of the process as a whole, with a conse-
quent weakness in communications between the parties, which makes it impossible
to organize improvement plans. Moreover, auditing practices are only undertaken at
the tail end of the process and the entire procedure is carried through in a sub-optimal
manner. To overcome these obstacles a panel of experts was formed encouraging
communicational exchanges and meetings where the operators could contribute their
knowledge and information about the process. The panel was made of 8 participants,
encompassing 2 academicians, whose research studies are mainly focused on oper-
ation management, 3 consultants that will provide RFID systems and 3 managerial
operators involved in the processes analyzed. These panel developed the AS IS and
TO BE models of “Production control” and “Counterfeiting” processes and carried
out an economical analysis using ABC techniques.

4.1. BPR project

The general process of production of an armchair can be divided in seven sub-


processes that were modelled in the AI∅.WIN environment. The processes identified
were the following: Cutting; Sewing; Semi-finished products being received by
providers; “crudo” preparation; Facing; Shipping semi-finished and finished products;
Inventory.
During the cutting phase “dimes” are made. “Dimes” are leather parts cut for a
specific product. The customer order (called UDC) is detailed on a printed sheet that
has a barcode and an order number. In this production phase a UHF tag can be applied
on a transparent plastic bag that contains the customer order sheet. This plastic bag,
linked to the “dimes”, allows the company to connect the order number with the
corresponding “dimes” (“baptized” activity). During the sewing phase all leather
parts of “dimes” are sewed. The sending/receiving process, of particular furniture
parts, from external providers, will be carried out using the order sheet previously
M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry 107

identified by an association with barcode and UHF RFID tags affixed to the plastic
bag. In this phase, it is necessary to implement a RFID gate that automatically detects
the passage of furniture parts from and to external providers, identifying the unique
code of the tag placed on the transparent plastic bag. In the “crudo” preparation
phase the armchair wooden structure is made. In this case, the idea was to insert a
second UHF tag in each “crudo” which would be managed for the various internal
processes, including combination with the leather, and then would be retained as an
anti-counterfeiting product. In the Facing step the armchair wooden structure (crudo)
are faced with leather parts (dimes). In this phase the “crudo” tag is connected with
“dimes” tag using a UHF RFID reader which carries out the reading of the two
identifiers. At this stage we can remove and re-use the plastic bag for other orders
and all information related to product and customer are contained in “crudo” tag. The
shipping process is currently implemented by terminal keyboard. The use of RFID
will require equipping every loading bay with a UHF RFID Long Range gate for
automatically identifying the passage of products. The idea is to cover the entire area
of production and warehouse via Wi-Fi access point generation in order to be able to
use a handheld RFID reader connected directly to the computer system.
The “crudo” tag can offer to the company two advantages:

1) When attached to the final product, such tags have the potential to prevent
product counterfeiting, because at various points in a supply chain—from the
manufacturer to a logistics company and on to customs, then to distributor sites
and, ultimately, at retail sites—the tags can be read to ensure goods are authentic
(Fig. 3). Company sales agents will be provided with a RFID interrogator for
controlling products in retail stores. Using symmetric cryptography, the verifier
must know the same secret as the one embedded into the product.
2) The second advantage is related to reverse logistic activities. Some customers
may receive ruined products or they want to repair (after ten/fifteen years) a
worn product. In these cases, the company is often in trouble because they do
not remember or have lost the information about the material codes or external
providers used in that customer order. The company uses a standard bill of mate-
rial (BOM) personalized for every customer. The leather type often varies from
client to client, as well as suppliers. In this context the “crudo” tag can provide
an important contribution having stored all information of the customized BOM
(colour type, leather type, batch number, production phases and date, . . . ) as
well as the provider’s information.

5. BPR procedure

For each production phases the AS IS and TO BE models were developed, but
in this article, for showing the BPR procedure, only two of the seven processes that
were analysed are reported: sewing and inventory. In these two processes, the RFID
introduction provides more important benefits in terms of time and cost-saving. We
108 M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry

Fig. 3. Counterfeiting approach using RFID.

have to take into consideration that the company analysed is listed in Italian Stock
Exchange therefore the Inventory process is very frequent activity.

5.1. BPR of Sewing process

The following models (Figs. 4 and 5) represent the AS IS sewing model and its
breakdown, using the AIO WIN code.
In the AS IS processes the sewing department:

• Administrative staff presses the “sewing schedule” with the “barcode” of iden-
tification to be delivered to the warehouseman;
• The warehouseman receives the sewing schedule on which to check out the arti-
cles to be taken from the “warehouse cut,” with its identification code, location,
quantity and destination;
M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry 109

Fig. 4. AS IS model of the sewing process.

• The warehouseman picks up the dime of leather by reading the bar code on the
vignette and subsequently corresponds the item with the identification code on
the order;
• The accounting inventory reads the barcode of the order with a barcode reader
and updates the output of the “sewing” on the company computer program;
• After checking in the order and the conformity of the “cut” derived, the operator
starts the sewing operation and then manually completes the job of cutting and
registering the box and the code identifying the processing of the seam being
sewn;
• The storage process of “sewing” is performed at the entrance of the warehouse
by the accounting man equipped with a barcode gun, and this man performs the
following:

1) reads the label identifying the job;


2) notifies the warehouse location to provide the leather sewing;
3) updates the warehouse management computer program; and
4) manages the storage of leather.

In the TO BE sewing process a UHF tag is used for the order management (UDC).
With this solution, both the sewing and the material will be tagged in order to have
full automatic control of the whole process, from procurement of raw materials to
110 M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry

Fig. 5. AS IS model of the inventory process.

shipment. From the sewing department to the packaging department, we replaced


the document containing the barcode currently in use for monitoring/managing the
progress of production. In the new project to be managed, the individual phases,
as well as tracking of hours worked, RFID technology would facilitate the survey
processes. The control of the amount to be taken, the location and the destination
was performed via the mobile terminal, which allowed for automatic updating of the
“cut” and “sewn” materials into the warehouse.
The model below (Fig. 6) is a breakdown in the activities of the sewing process
TO BE.
The TO BE sewing process would include the following operations:

• The warehouseman on the mobile terminal RF receives the “sewing sched-


ule”, indicating the leather to be removed from the “cut” warehouse with their
identification codes, locations, quantities and destinations;
• The warehouseman leaves the “cut” warehouse through the RFID gate, so there
is an automatic update of the cut in the stock management software;
• The accounting of inventory controls, which updates the warehouse management
system, is correctly performed;
M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry 111

Fig. 6. Sewing TO BE model breakdown.

• The operator of the sewing department starts the process of sewing by reading
the barcode on the order: in this way, he or she communicates to the computer
system that the sewing operation is to begin and then updates the information
about the progress of the production; and
• For the process of storing the “sewing” in the warehouse, the product is made to
pass though the RFID gate, so the system can detect the code and automatically
update the data warehouse in the company database.

Some benefits are achieved through the introduction of an RFID system. Specifi-
cally regarding the sewing process, the withdrawal of the “cut” in TO BE management
is more rapid owing to the tags, which allow for automatic detection and which allow
the warehouseman to consult directly the RF on the terminal in the real location of the
products in the warehouse. The substantial differences between the two management
systems are primarily found in the updating of the accounting of materials (“cut” and
“sewing”) in stock. We move from a manual process of barcode reading to a simple
transit of the fork lift (with UDC) through RFID gate, located at the warehouse door,
and an automatic update of company management software (AS400).
112 M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry

Fig. 7. Sewing AS IS model breakdown.

Fig. 8. Inventory AS IS model breakdown.

5.2. BPR of Inventory process


Figures 7 and 8 show the AS IS models obtained for this process, starting with
model A0, which represents the process in question and subsequently defines the
activities in the subsequent breakdown.
The AS IS inventory process consists of the following steps.
• Administrative staff prepares a list of materials to control and deliver to ware-
house workers, who will perform the control.
M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry 113

Fig. 9. Inventory TO BE model breakdown.

• The warehouseman physically controls the pieces that are on the shelf and records
their values in a specific column of the list. When this control operation is
finished, the warehouseman returns the list to the office;
• The administrative staff takes the updated list and checks the correspondence
between the quantity of materials marked on the list and the computer program’s
recording of inventory management. If the quantity does not match, possible
causes of non-correspondence are sought.
Regarding the inventory, in “AS IS” situation, a list is printed for the control of the
articles, and the correspondence is then verified with the merchandise present in the
warehouse. With the introduction of RFID, the tags will replace the labels applied
to the FPs (Finished Products) to allow for surveying the inventory, as well as the
output of the warehouse. The data relating to the items in stock are loaded into a
management program, and there is also an exact plan of the warehouse, allowing
workers to locate quickly where the items are placed. The resulting TO BE model is
shown below (Fig. 9).
In the inventory process, the following operations are undertaken in the TO BE
model:
• The administrative staff creates and prints a floor plan of the warehouse so the
warehousemen can follow a set route;
• During his route in the warehouse, the warehouseman interrogates the TAG with
the Portable Reader and updates the data, recording them on the Reader;
114 M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry

• After the read operation, the data stored on the Reader are downloaded to the
management programme of the warehouse;
• The correspondence between the data downloaded from the Reader and the
quantity recorded on management is verified;
• If the data do not match, research is undertaken into the causes of the mismatch
between the data.
In TO BE process the physical inventory control activities of the pieces on the
shelf, with the registration of their numbers on the list, is replaced by the use of the
portable TAG reader, which records information. In many aspects, RFID and barcodes
are similar: both technologies use tags and readers, and both are based on computer
systems to match the ID on the label to a database record containing the data on the
related item or class of items. Nevertheless, from a practical perspective, there are
two key features that distinguish the RFID system:
1) it is a wireless technology, this means that the warehouse worker has not to
read every single barcode attached to the goods in the shelf but he only needs
a portable TAG reader.
2) It has an increased amount of recorded data in the tags. This aspect is important
for developing particular queries required by investors and for reverse logistic
activities.

5.3. Cost analysis

The implementation of RFID requires changes in existing business processes. The


successful implementation of any innovation requires understanding of its benefits
and costs (Bunduchin et al., 2011). Obviously, the use of the RFID method involves
both benefits and costs. To analyse the cost of warehouse management the technique
used is Activity-Based Costing. For the evaluation of costs, the past 3 years were
taken into account. To evaluate the costs related to the management of the process,
the staff was divided into two specific functions:
• “Administrative” staff, for a total of six people; and
• “Warehouse” staff, for a total of six people.
The hourly cost for the warehouse staff was 24 D , while for the administrative staff,
it was 25.8 D . The employees worked in single daily shifts of eight hours, for a total
of 2016 hours/year, which corresponds to approximately 252 days per year.
The cost of warehouse management had the following values:
• D 68,705.00 per year for the warehouse staff; and
• D 73,858.00 per year for the administrative staff.
Tables 1 and 2 show the degree of absorption of resources by the two functions,
according to the processes they performed. Last columns of these tables reports the
M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry 115

Table 1
Analysis of resource consumption and costs of the processes performed by warehouse staf in the AS IS
model

Process Time (minutes) % Cost


1 Picking items from the warehouse 96 20 D 13,741
2 Warehouse storage 96 20 D 13,741
3 Control reception-shipping 216 45 D 30,917
4 Inventory 38.4 8 D 5,496.50
5 Other activities 33.6 7 D 4,809.50

Table 2
Analysis of resource consumption and costs of the processes performed by administrative staff in the AS
IS model

Process Time (minutes) % Cost


1 Picking items from the warehouse 75 15.6 D 11,521.9
2 Warehouse storage 80 16.6 D 12,260.4
3 Control reception-shipping 205 42.7 D 31,537.3
4 Searching documentation and production of identification labels 70 14.5 D 10,709.4
5 Inventory 30.2 6.3 D 4,653.1
6 Other activities 19.8 4.3 D 3,175.9

costs associated with these processes for staff (multiplying the individual percentages
of the various activities by the estimated value for the staff cost).
It is evident that the higher costs concern the phases of shipping/receiving and
storage/withdrawal, during which the administrative staff is involved in the control
and manual update of the management system of the company.
The evaluation of the costs that the introduction of RFID technology generates was
undertaken with reference to the comparison between the AS IS and TO BE activities.
The cost saving is based on time saving. In particular, IDEF0 models allowed us to
assess all AS IS activities, their durations and resources consumption. Then we eval-
uated what activities can be removed in the TO BE model and what activities must be
added. The panel of expert assessed the duration of new activities. We considered only
activities that changed between the two management systems. We can estimate that
the new technology would result in a halving of the time needed to control, yielding a
quantifiable savings of approximately D 15,000. The system update is automatic, and
the administrative staff that remains as a control function that still requires less time
than it takes to manage AS IS. We can quantify the savings as approximately 20,000
D . Regarding “control of the pieces on the shelf” as inventory, “TO BE” management
is replaced by the activity of “interrogation of TAG in stock”, resulting in savings
in terms of resources consumed. This is because querying a TAG affixed to all of
the articles took a few hours (reading of TAG by the portable reader portable in 1/10
second), while control of the pieces on the shelves involved the full-time commitment
116 M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry

Table 3
Analysis of cost management in the TO BE model

Cost Savings
Query TAG in stock D 5,496.50
Reading TAG in shipping/receiving through the RFID gate D 20,000.00
Reading TAG inbound/outbound warehouse using the RFID gate D 15,000.00
Downloading data stored in the mobile terminal for the inventory D 4,328.00
Cost for RFID Tags D 14,400.00
Total D 14,400.00 D 44,824.5
SAVINGS D 30,424.5

of the warehouse for approximately a month, resulting in savings of approximately


D 5,000.
In Table 3, we propose the synthesis of all of the costs and savings that the TO BE
scenarios incur, compared to the current “AS IS” solution.
The “savings” obtained is the difference between the savings and the costs that
this technology introduces annually and is equal to D 30,424.50. We also performed
a preliminary analysis of what the investment that the company would have to make
to adopt such a system, accounting for both the variable costs (dependent on the
number of tags adopted) and fixed costs (regarding the software and training of staff).
We analysed, in particular, the cost of implementing this new operational system.
Implementation costs are associated with acquiring and implementing an innovation,
and they include direct and indirect costs (Irani et al., 1997). Direct costs are readily
attributable to the acquisition and operation of technologies, notably equipment costs,
while indirect costs include organisational and human-related costs (Ryan & Harrison,
2000). In our cost estimate, we considered the implementation costs to be the cost of
RFID tags (greater in comparison to traditional barcodes) and the costs associated with
the acquisition, installation, configuration, integration and running of the associated
IT infrastructure (such as RFID software applications and related databases).
This prediction was made by considering that the system, at full capacity, involved
the use of:

• Approximately 80,000 tags per year (the first year 160,000);


• 6 RFID readers; and
• 5 Wi-Fi terminals.
• We estimated, based on the experience of the warehouse manager, that the overall
cost for programming, printing tags and preparing transparent plastic bags with
the tag would be approximately 10,000 D .
• Furthermore, it should also be considered in the initial installation, testing and
training of staff that this cost was considered to be equal to D 9,100.

Table 4 describes all of the cost items that the company might expect. As we can
see, the start-up costs that have been evaluated were on the order of approximately
111,000 D .
M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry 117

Table 4
Cost estimate for the implementation of the RFID system

Unit cost (D ) Quantity (units) Total cost (D )


RFID Gate D 4,980.00 06 D 29,880.00
RFID Reader D 600.00 06 D 3.600.00
Tag UHF D 0.18 160,000 D 28,800.00
Software D 7,300.00. 01 D 7,300.00
Wi-Fi Terminals D 2,700.00 05 D 13,500.00
Printer Label RFID D 2,130.00 01 D 2,130.00
Initial Installation, Testing and Training of staff D 700.00 13 D 9,100.00
Access Point D 700.00 10 D 7,000.00
Programming, Printing Tags and Preparation of D 10,000.00
Transparent Plastic Bags with the Tag
TOTAL D 111,310.00

6. Conclusion

In this research, an analysis was performed to evaluate the convenience of intro-


ducing a new management system based on RFID technology, in particular for the
production of armchairs by a furniture company.
In the first phase of the work, the actual “AS IS” situation was described in terms
of processes, activities and sub-activities.
In the second phase, analysis of the “TO BE” situation after the implementation
of the RFID system was performed, and a comparison was made between the two
options to assess the differences.
The processes were modelled using the AIØ WIN software and following the
IDEFØ standard; lastly, a cost analysis was undertaken. The cost analysis showed
that RFID technology could lead to savings of 30,000 D per year. In contrast, the start-
up costs for the implementation of the new technology appeared to be rather high,
assessed at approximately D 110,000, and their recovery would take approximately 4
years. That the annual costs of the new technology are 14,400 D for the purchase of
80,000 RFID tags) should also be considered, to reintegrate the tags affixed on finished
products. However, we can consider this cost (dependent on the volume of purchases
of TAGs) as eventually decreasing due to the development of this technology and the
consequent massive use that it will reach.
We have also seen that among the most immediate advantages of the new technology
is the reduction of inspection and control time. According to Lee et al. (2010), RFID
technology improves the efficiency in this field in various ways: for example, the level
of accuracy in the counting of products eliminates the need for subsequent recounts
and speeds up the process. In addition, RFID shortens the time for inspection and
control of items along the supply chain, thereby reducing labour costs. The benefits
of RFID in this area have also been described using the notion of “the uninterrupted
supply chain “(TUSC) (Gaulker & Seifert, 2009). This concept expresses the idea
118 M. Bevilacqua et al. / Implementation of a RFID system in a furniture industry

that too large a percentage of the lead time of the products through the supply chain
is spent waiting for the identification or the conclusion of a manual process, such
as a count of the products. This delay causes an interruption of the flow of goods
because of the breakpoints that RFID technology is able to remove almost completely,
allowing the products to flow along the supply chain in a more rapid and less expensive
manner. The impact of a reduction in the time necessary for good management is
particularly useful in warehouse operations, in which 50–80% of the costs are incurred
due to the human labour associated with good management and updating of the
company information system. Thus, the benefits produced by the RFID system are
the following: accuracy (reducing errors); efficiency (reduction of time “lost”); speed
(speed of execution); simplification (reduction of scripts and data entry); timeliness
(information acquisition in real time); and documentation (more information).
In addition to being a useful tool for product traceability and anti-counterfeiting,
the RFID system can help to improve the whole management process. The prod-
uct authentication solution provides a certain level of security against the threat of
counterfeits; the level of security also has a deterrent, or discouraging, effect on the
counterfeiter because it makes the business less profitable for him.

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