Efficient inventory management with the accurate reorder points is significant for the companies that use a just-in-time (JIT) approach. Pride & Ferrell (2012) say that according to this approach, the suppliers arrive only when they are needed. According to Pride & Ferrell (2012), when using JIT, the companies maintain low inventory levels and purchase products and materials in small quantities whenever they need them. Thus, RFIDs play an important role in the implementation of just-in-time inventory. There is no safety stock in just-in-time inventory, and the suppliers are expected to provide consistently high quality products (Pride & Ferrell, 2012). Just-in-time inventory management requires a high level of coordination between the producers and suppliers, but it eliminates waste and reduces inventory costs significantly.
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The RFID tags are becoming popular for all types of merchandise. Using them, businesses can save time and money. The RFID tags reduce time needed for a physical inventory by a factor of 10. “Radio frequency identification (RFID) uses tiny transponders in tags that can be attached to merchandise or other objects and read wirelessly using a RFID reader” (Pride & Ferrell, 2012). Baldauf & Stair (2010) point out that RFID is used widely in the market places in that they are embedded in the products for identification and tracking purposes in just-in-time inventory. In the major stores like Wal-Mart and Super Target Stores, RFIDs are used for tracking merchandise and they are attached to the products or crates pallets. Thus, inventory can be tracked from the manufacturer to the retail store checkout counter (Baldauf & Stair, 2010).
The RFID tags consist of a transponder that is as small as a grain of sand and has an antenna embedded on a paper tag. Baldauf & Stair (2010) say that the readers may take the forms of the hand held devices, or devices mounted in the doorways of loading docks or in the conveyor belt systems. The RFID systems are connected to the central databases, where the inventory information is stored. Baldauf & Stair (2010) further mention that as a RFID tagged item moves from manufacturing to the warehouse to retail vendor to the checkout counter, the database record is updated providing up to the minute information. With this technology, the companies gain control over their inventory getting the products to locations, where they are needed just-in-time.
Through the use of RFID, just-in-time has been implemented in order to reduce the out of stock (OOS) situations experienced by many retailers. Krafft & Mantrala (2006) point out that the RFID tags send electronic signals, which can be recognized by the specialized systems. This implies that when the RFID tags are available for each individual product, the inventory level of each product per store can be observed constantly through out the day. Just-in-time inventory has enabled the retailers to have information of their inventory at both store and warehouse levels (Krafft & Mantrala, 2006). In order to reduce the out of stock (OOS) situation, the use the RFID tags makes the information available in the real time. Suppliers, on the other hand, say that the RFID tags enable them to use the real time information in order to keep their inventories at a sufficient level of supply orders from the retailer on a just-in-time basis.
In addition, RFID can be used to store the globally unique product identifiers, which can also provide item level rather than class level identification granularity. Roussos (2008) noted that the RFID tags can also provide the means for automatic capture and processing of this information. In addition, they do not require a line of sight, and that since they can be embedded inside a product, they are less likely to be damaged. This concept has led to the growth of just-in-time inventory. RFID is also seen as a good candidate to replace bar codes, although this requires that the additional cost do not exceed the potential gains from its implementation.
In just-in-time inventory, RFIDs are used to reduce inventory levels. Roussos (2008) says that “highly accurate data allows all partners in a supply chain from the manufacturer to the retailer to maintain lower inventories and plan deliveries and shipments in a just-in-time manner” (p. 26). Lack of RFIDs entails that it is not possible to predict the stock patterns accurately. As a result, all partners need to maintain the excess stock as a buffer against the sudden surges. The role of RFIDs in just-in-time inventory reduces the out of stock situations. Roussos (2008) says that despite the increased inventory levels, it is still common that supply chains run out of stock and, as a result, cannot respond to the consumer needs. The use of RFID in just-in-time inventory reduces the order and lead times. According to Roussos (2008), RFID increases the visibility of information held in the systems of the supply chain partners, making it possible to implement the aggressive ordering strategies driven by the vendor rather than the client, which can significantly reduce the lead times for orders.
The use of RFIDs in just-in-time inventory reduces shrinkage. This implies that by marking the individual items using RFIDs, it is much easier to identify when and where the items have been lost. As a result, it is possible to reduce not only an internal theft but also shrinkage due to the products expiring (Roussos, 2008). The utilization of RFIDs in just-in-time inventory increases on-shelf availability. Roussos (2008) says that effective replenishment processes developed on the facilities outlined above would result in the higher product availability at the retail outlet shelves. Subsequently, RFID increases the consumer service levels. In just-in-time inventory, the detailed information about individual items can support the higher service levels both at the point of sale and after the sales services. A special safety is gained through a more effective management of the product recalls. Roussos (2008) further explains that when all product items are RFID tagged, it is also possible to provide the fully automated quick checkouts that minimize waiting times at exit.
Choi & Cheng (2011) found out the value inventory visibility in a manufacturer’s reverse channel. RFID technology might enable the substantial benefits, if the product return flow is highly volatile, if the duration of the reverse channel process is long, and if a significant portion of the returned products needs to be reworked. Choi & Cheng (2011) further notice that the RFID technology is essential in eliminating inaccuracies and reducing the supply chain cost and stock outs. The RFID technology promises to reduce the major problems associated with traditional inventory maintenance methods. Just-in-time inventory research shows that RFIDs improves inventory transparency reducing the uncertainty associated with the inaccurate inventory records.
According to Bidgoli (2010), RFID continues to lower the cost of tracking high value items, but there is still an untapped and lucrative market of the cheap every day consumer goods. Without the use of RFIDs, the implementation of just-in-time inventory presents a major challenge, because tracking and managing the flow of goods through these supply chains is a complex and expensive enterprise (Bidgoli, 2010).
In conclusion, the use of RFID in just-in-time inventory can streamline the supply chain processes and save billions of dollars. The savings may be ultimately passed on to the consumers. Individual items may be tracked and traced from the manufacturers, through transport, wholesale and retail into the hand of the consumer at a point of sale. In just-in-time inventory, the use of RFIDs enables tracking of the products as they are recycled, refurbished or disposed of. It is important to note that the organizations with large supply chains are the driving force behind the RFID adoption in just-in-time inventory. This implies that their inventory efficiency is tied with the use of the RFIDs tags, a concept, which cuts costs across the board.
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