A Study on Exploring the Variables Influenced by Utilization of “Radio Frequency Identification (RFID)” Technology in Iran

[a] Department of Management， Azad University of Tehran-South Branch， Tehran， Iran.

[b] Silverstar Network SDN. BHD.，Kualalumpour， Malasiya.

* Corresponding author.

Received 17 September 2013； accepted 10 November 2013.

Abstract

The purpose of this paper is to introduce one of the leading new technologies， “Radio-frequency identification（RFID）”， and investigate the effects of applying this technology on target environment in Iran.

The variables， affected by application of RFID technology in various environments， were extracted through the review of literature then a research was carried out in this field， and the obtained variables were localized by consulting with the experts in this area. A questionnaire was developed through using these variables and distributed among a sample of RFID technology providers and users after testing its the reliability and validity. Finally， the statistical tests on the obtained results from the research led to the discovery of components.

The findings of this paper would be discovered components， which are affected by application of RFID technology， are as follows：Tracking quality， decision-making improvement， error control， warehouse management， cost leadership， level of assurance， inventory data， speed of provided service， data monitoring and order management.

Considering the prevalent use of RFID technology in various industries around the world， the need for this technology and its benefits becomes obvious to everyone. This paper has created a proper vision of RFID for readers through collecting a wide range of RFID technology benefits as well as discovering the major components associated with application of this technology.

Key words： RFID technology； Tracking； Inventory management； Decision making

Hamideh Afrashteh， Sara Yazdi Ramezani Mojarad， Saeed Yazdi Ramezani Mojarad （2013）. A Study on Exploring the Variables Influenced by Utilization of “Radio-Frequency Identification（RFID）” Technology in Iran. International Business and Management， 7（2）， 36-51. Available from： http：//www.cscanada. net/index.php/ibm/article/view/j.ibm.1923842820130702.1110 DOI： http：//dx.doi.org/10.3968/j.ibm.1923842820130702.1110

BRIEF INTRODUCTION OF RFID

It can be said that the most common method of identifying objects with RFID is storing a serial number that identifies a product. Other information can be saved on a microchip that is attached to an antenna. They together form the RFID tag. The antenna enables the chip to transmit the identification information to a reader. The reader converts the radio waves obtained from the RFID tag into a form that can be passed on to computers that can make use of it. When an interrogator reads a RFID tag the unique identification code of the tag can be used as a reference to a local network or Internet database which contains the information related to the individual product or references（E. IlieZudor， 2005）.

RFID technology with the expedient IT infrastructure is appropriate for both main distributors and manufacturers， as well as other logistics operations dealing with complex， global supply chains in which products and product shipments must be traced and identified in a non-contact， wireless method using a computer network （Paul G. Ranky， 2006）.

It is remarkable that although RFID has played an important role in supply chain as a leverage for unprecedented ease and accuracy of goods tracking to drive down costs and improve product availability for over a decade. But the technology has not achieved optimal results yet. It is particularly relevant within the retail environment where RFID tag costs make it impractical to take the technology beyond pallet level， undermining the vision of individual product tracking from manufacture to store shelves. However， the technology has gained significant traction in other areas， most notably passports–with countries such as the USA including RFID tags in new passports as well as in transport payment systems. Indeed， the technology has also been accepted by libraries， museums and colleges to track valuable assets.The result of this diversification of RFID application is a significant reduction in unit cost over the last few years （Karen Conneely， 2009）.

1. LITERATURE

The RFID technology is changing our life and production dramatically. Its usage in manufacturing systems will profit building of real time factory. In this field， George Q. Huang presented an approach to the shop-floor performance improvement by using RFID technology for the collection and synchronization of the real-time field data from manufacturing workshops. He emphasized upon how to deploy RFID technology for managing workin progress （WIP） inventories and also for tracing the products， tools and components as well as walking worker in factories （Huibin Sun， 2009）.

The above-mentioned are just a small part of RFID benefits. Indeed researches demonstrate that applying RFID technology can provide a wide variety of advantages for its applicants which are studied in the present paper. It is undeniable that there are some common profits mentioned in different articles and some that are quite frequent， for example， improving inventory management.

Yahia Zare （2009） considering supply chain system has listed 15 benefits of RFID that are as follows： Reduced shrinkage， Reduced material handling， increased data accuracy， Faster exception management， Improved information sharing， Production tracking， Quality control， Supply and production continuity， Material handling， Space utilization， Asset management， Reduced stock-outs， Customer service， After sales service and Lower inventory（Yahia Zare Mehrjerdi， 2009）.

In another essay， this researcher proceeded a number of variables for RFID adoption by using multiple case studies in 5 firms from industries with supply chain management system intact which are： Wall mart， library at the City University of Hong Kong， Sushi restaurant， Healthcare Industry and Intel. The variables of highly concerned from this subject are： RFID technology， quality， efficiency， productivity， responsiveness， better management， On-Time decision making， On-Time data collection， inventory control， security level， and accuracy in decision making.

Other variables in his research are as follows： Effectiveness， data accuracy， Labor costs reduction Shortshelf-life， Better service， Human errors， Revenue， Out of stocks， Tracking/products/production， Product safety， Lead time， Spoilage reduction ， Short-shelf-life Delivery time， Asset management， Reduced shrinkage， Space utilization， Material handling and Information sharing.

It is notable that Wal-Mart has had a saving of about$800，000，000 in the year 2008 with applying RFID technology in efficiently tracking products （Yahia Zare Mehrjerdi， 2011）.

Manufacturers can use RFID solutions to reduce operating costs through decreasing the labor costs， claims， and returns. It leads to an increase in the operating income. They can also reduce the working capital by reducing inventory， lowering write-offs from the returned goods， and unmarketable items.（Yahia Zare Mehrjerdi， 2008）

Main benefits of RFID can be categorized as follows： Improving the accuracy and speed of tracking pallets， cartons， and containers； reducing stock levels and operating costs； improving the management of inventory； improving efficiency in the reports of the work in process and improving inventory visibility to feed just in time （JIT） systems.

RFID technology has a supporting role in automating processes and improving operations management in many commercial applications， like supply chain management， logistics， and transportation. In fact it can empower the decision-making team by providing On Time information. This advanced technology is more useful to the management for one or more of the following facts： better supply chain and inventory management， reducing counterfeiting and fraud controlling， tracking work-in progress， reducing administrative errors， reducing rework， better management of warrantee claims， capable of working in suitable and harsh environments， better supply chain efficiency and cost saving and profit enhancement（Yahia Zare Mehrjerdi， 2011）.

In another research， the author has identified a list of benefits that RFID has brought with itself to various industries. Some benefits of RFID are： Automation， Integrity， Velocity， Insight and Capability. The following is a brief description of these benefits：

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 security and tracking capabilities reducing errors， shrinkage， and counterfeiting while improving customer satisfaction information is valuable if it is correct.

Velocity – Reducing work-flow issues by minimizing thetime spent 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.

As Paul G. Ranky （2006） expressed some reasons why RFID technology is being pilot tested in hundreds of US manufacturing， assembly and distribution companies and global distribution networks； some of them the are presented as below：

Close to real-time inventory control becomes reality， meaning less waste， tighter supply-chain integration and higher level of leanness throughout the supply-chain.

Part numbers can be cross referenced to minimize inventory.

Work in progress inventory can be significantly reduced， since parts and their locations can be automatically traced using a wireless computer operated network.

Identifying parts for statistical process control datacollection， and then testing correct correlation within the batch， or product family.

Automated part tracking throughout the cell， the factory and the global supply chain becomes reality .

The opportunity to implement a completely new inventory management strategy， based on real-time transactions and accurate stock control.

An RFID project can fundamentally change customer relationship management， because transactions become real-time accurate.

In a study conducted by Daniel Hellstrom on the RFID， the effect of inventory accuracy during assembly has been studied and finally， an analytical model for identifying the impact on the RFID technologies of inventory accuracy is proposed. The literature states that the average error for RFID systems， is much less when the system has not been implemented （Daniel Hellstrom et al.， 2010.）

In order to bring about automation of existing plant site safety processes， it is suggested that technologies such as mobile computing and RFID tags may be employed for automatic data collection. Given recent advances in plant security such as the CESAR initiative （which employs RFID as a machine identifying mechanism）， the technical infrastructure to satisfy this aspiration may be partly in place already. ZainabRiaz et al. （2011） presented an architecture for the development of a prototype system （Sight Safety） that could integrate these technologies with management tools like MIS， to provide a comprehensive and proactive HS management solution on construction projects.

Karen Conneely （2009） in his article intended to show the benefits of using RFID technology to improve asset management in organizations. The majority of companies have very little grasp of how inaccurate the asset register can be， believing stored data could only be a maximum of 5 percent inaccurate. RFID tags allow those responsible for managing fixed assets far greater visibility into the true condition and value of those assets. For example， workers of heavy machinery， such as mechanics and drivers， can gain instant insight to all the machinery parts’maintenance history as well as information on unique identifiers including part numbers， serial numbers and manufacturers’ codes. By adopting RFID， scanning can be undertaken by line managers on a regular basis in a matter of minutes， without impacting the organization’s core operations in any way. The tight integration with the full asset history and general ledger ensures unprecedented accuracy and audit ability of the entire asset register.

By placing RFID tags on the assets and readers at key entry and in exit points and various other locations， movable assets will be automatically tracked and located in real time. RFID tags are rugged， compact and inconspicuous. Even while dormant， they integrate seamlessly into business processes making it easy for utilizing the technology in yard management， tracking reusable transport items， and other high-value asset tracking applications.

zdenEngin et al. （2011） have surveyed using RFID for pharmaceutical inventory management through system optimization and shrinkage control. In the literature， the benefits of RFID in over barcode technology has been implied as follows： No need to Line of Sight because of applying wireless technology， high data storage capacity， accurate real-time visibility， optimizing the inventory policy， shrinkage prevention， reduced cost resulting from elimination of inaccuracy， decreased human error， real time tracking， automatic inventory counting and reordering， high durability， security， e-pedigree and product recalls， automatic counting and reordering， inventory records and then real-time visibility.

Moreover， RFID technology can eliminate laborintensive inventory processes and therefore solve barcode technology operational problems. In addition， the inventory manager can benefit from RFID by automatic counting and continuous review and by tracking shrinkage actively. It has been analytically shown that without shrinkage， the switch to a continuous review achieves savings in all the three inventory cost categories： inventory holding， backorder， and ordering costs. So the long-run average cost of inventory is constantly lower than under periodic review（？zdenEngin？ak？c？ et al.， 2011）.

A study of RFID in hospitality by BasarOztaysi et al. has mentioned the advantages of RFID such as Service innovation， Service quality， time saving， cashless payment， keyless room entrance， online tracking，service customization and customer loyalty by designing preference-capturing systems and integrating them with the customer relationship management systems （Bas-ar O¨ztaysi et al.， 2009）.

Sanghyun Kim et al. have perused RFID users’ behaviors considering supply chain technology then detected these benefits of RFID in this regard： Cost Savings， reducing error rates in managing organization’s data， providing information for decision-making in a timely manner， accurate information in decision making， an efficient way for a better managing product information and improving company image.（Sanghyun Kim et al.， 2011）

James JungbaeRoh et al. （2009） have classified the benefits of RFID adoption in 3 categories as follows： Cost savings， Supply chain visibility ； and new process/product creation.

The first category “Cost Saving” includes： Counterfeiting reduction， Shrink reduction， Labor cost reduction and Inventory cost reduction. “Supply chain visibility” is the second class and it consists of ’Bullwhip effects’ reduction， Uncertainty of product availability reduction， Reductions in out-of-stock， delivery and safety stock， inventory obsolescence material handling costs reduction， Rich information change among suppliers， Inventory monitoring and Efficiency measurement.

“New process/product creation”， the third category has contained： New process creation， Quality control， Communication of the componentparts to a reader. （James JungbaeRoh et al.， 2009）

2. METHODOLOGY

This research is carried out on the basis of a surveydescriptive method and through the questionnaire tools.

At the first stage of the study， the key variables and concepts were extracted by the view of books about the process of identification based on the radio waves and tracking systems. The list of the extracted variables from the literature review is given in Table 1.

Extracted key concepts were studied through the literature review， interviews and consultations with the experts， and the repeated and similar cases of composition were removed. As a result， a list of initial variables consisting of 87 key concepts， which could be raised in the questioners， was designed. Listed variables were reviewed and modified at several stages by the researchers and a list of final variables for the key concepts was prepared in order to be provided for the experts.

Afterwards， the list of key concepts variables was provided face to face or via E-mail for 10 experts（10 professionals and top managers in the field of RIFD technology） in order to assess the validity of the questionnaire content. In an attached letter， they were asked to express their opinions about whether the questions of the questionnaire examine and measure what should be questioned and examined or not. Based on the corrective feedback and suggestions by the mentioned group， 40 questions of the initial questions of the questionnaire were determined during several reliable stages and appropriate changes were made in the initial questions. Consequently， a set of 40 key concepts was put on the agenda.

At the next stage， a 40-question questionnaire was designed and developed by using these 40 variables. The research theoretical foundations and library studies were applied in order to develop the questions of the questionnaire. This questionnaire was designed with the items of completely disagree to completely agree and based on five-point Likert scale and then distributed among the research units after determining its validity and reliability.

Statistical population of this study includes the users in the centers， where this technology is used， as well as the personnel of companies which apply this system in Iran.

At this stage， 120 questionnaires of the total 200 designed ones were answered. Therefore， the response rate to the questionnaire was 60%.

Previous researches （Hemminger， 2007） indicate that the response rate in the online questionnaires was equal to 3 to 62%， and some of the researchers， like Gunter（2003）， argue that the response rate in the traditional printed questionnaires is usually lower than the online questionnaires. Given these points， it seems that the response rate of 60% in this study is an acceptable rate.

After distributing and collecting the questionnaires and investigating the responses， the questionnaire data was analyzed through the SPSS Software， version 19.

At the next stage of this research， the internal consistency of the questionnaire was investigated through Cronbach’s alpha method. Alpha value equal to 0.918 showed that only about 10% of the variance of total scores in the questionnaire is obtained from the questionnaire error， thus the scale has a high reliability.

One of the main hypotheses of line regression classical model refers to when the error terms have equal variances. Among various methods of determining the inequality of variances， Bartlett’s sphericity index was used in this research in order to investigate the significance of data in the correlation matrix and the amount of Chi-square equal to 2189.182 at the significance level （P<0.001） shows the existence of detectable relationships among the variables in the factor analysis. The results of this test are presented in the following Table 2.

Exploratory factor analysis through principal components analysis with orthogonal varimax rotation was used in order to determine the variables which explained the lower factor loadings and had low correlation. The validity of the questionnaire structure was assessed by factor analysis and Table 3 represents the factor matrix and Table 4 and Table5 represent the variance matrix and rotation matrix， respectively. First and before implementing the factor analysis， the proportion of data was investigated for doing the factor analysis. Then again， the exploratory factor analysis of principal components analysis was done with the varimax rotation. After implementing the factor analysis， a 12-factor structure was considered as shown in Table 5.

Results of factor analysis showed that the questionnaire has appropriate structure validity.

Finally， the factors of the questionnaire were named as follows through consultation with experts participating in the study： Tracking quality， Decision making improvement， Improving Error Control， Inventory management， Cost leadership， Guarantee level， Inventory data， Speed of service， Data monitoring and Ordering Management.

The Factor Analysis and Cronbach’s Alpha for each factor are as the following：

2.1 Tracking Quality

2.2 Decision Making Improvement

2.3 Improving Error Control

2.4 Inventory Management

2.5 Cost Leadership

2.6 Guarantee Level

2.7 Inventory Data

2.8 Speed of Service

2.9 Data Monitoring

2.10 Ordering Management

CONCLUSION

RFID technology is a new generation of information technologies which are applied in the field of tracking and controlling the objects and even creatures through using the radio waves and making the wireless communications. Despite the resistance and confrontation in the adoption of this technology， the domain of proven benefits for the RFID technology is widespread and in a short time leads to its development in various industries ranging from the security and military industries to the factories， institutions， shops and retail stores， restaurants， libraries and hotels.

According to Table 1， the main advantages of RFID technology in previous research is to save the costs especially reducing the labor costs， and easy and accurate tracking of products. Furthermore， the issues such as improved inventory management， asset management， space utilization， increased data accuracy， timely decisionmaking， modernization and updating， reduced forging and fraud control， reduced human error， increased safety， improved efficiency in reports on performance-related components， use of materials， quality control， decreased volume loss （shrinkage） are discussed more than other advantages in the researchers’ literature.

In this paper， a comprehensive questionnaire was developed and distributed after reviewing the literature and extracting the variables as well as their localization by experts of this technology. Investigating the results of questionnaires and doing the statistical tests led to the discovery of ten components.

Investigation of components， discovered from the benefits of using RFID technology in this paper shows that the tracking quality component， which is extracted from the variables of “Improving The Accuracy Tracking Pallets， Cartons， And Containers， Improving The Speed Of Tracking Pallets， Cartons， And Containers， Tracking velocity and Production tracking”is amongst the major advantages of applying this technology in Iran. Accurate， quick and easy tracking of objects and individuals with the lowest error rate is one of the main reasons of using this technology in the industries and organizations of Iran.

The second component， which is called the Decisionmaking improvement， includes the variables of Accuracy In Decision Making， On-Time decision-making， reduced rework and automation and refers to the use of RFID that leads to the automated affairs and facilitates the “On-Time decision-making” while reducing the rework and errors by providing the On-Time and without-delay required information.This component also increases the accuracy of decision-making.

The component “error control improvement”refers to this fact that using the RFID tags will lead to Reducing Counterfeiting and Fraud Controlling as well as the Reducing Administrative Errors and improving Inventory Management.

“Inventory Management” refers to a discovered component which is associated with the variables of Reduce Stocks level， improved inventory management， Faster Exception Management， lower inventory. This component refers more to the application of RFID in the field of warehousing. By setting the RFID tags on the goods and properties in the warehouses， the quick and easy access to the inventory then Inventory management will be improved.

In this study， the “Cost Leadership” is another obtained component which includes the variables such as “Controlling Inventory Cost， Profit Enhancement， Reducing Operating Costs， Cost Saving and Labor Cost Reduction”. Reducing the operating and inventory costs by using RFID and totally by saving the costs will generally increase the profitability of companies which utilize this technology.

The component “guarantee level” includes variables such as increased level of security， better management of product information， and management of parts guarantee and indicates that RFID plays the role in increasing the accuracy of decision making by providing the accurate data， and thus provides more reliable decisions for the set. Setting the RFID tags on sold components and products simplifies the identification and provision of the services for the customers of these products. Impacts of applying this technology on the increased security level seems also clear due to monitoring and tracking the objects and properties.

The next component is “Inventory data” and contains the concepts of “Real-Time Inventory Control， Increased Data Accuracy， On-Time Data Collection”. As mentioned， one of the greatest applications of RFID Technology is in the field of warehousing and inventory control. By applying the RFID， we will become fully informed about the inventory information at any time and thus will control it.

Variables such as “Improved Company Image， Time Saving， Lead Time Improvement， Better Management Of After Sales Service And Warranty “ are the constituent variables of component “speed of service” and focus more on the benefits of RFID in the field of customer relationship.

The component “Data Monitoring” is related to the data and information provided by applying the RFID and consequently the increased efficiency and contains the variables of Information Sharing， Improving Efficiency In Work In Process（WIP） Reporting and Comprehensive data.

The 10th component entitled as “Order Management”includes the variables of Spoilage reduction， Improving Inventory Visibility to Feed Just In Time （JIT） Systems and Inventory monitoring， and it is still associated with applying the RFID in the field of warehousing.

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