RFID IN ASSOCIATION WITH ERP SYSTEMS WITHIN THE MANUFACTURING INDUSTRY TO IMPROVE DATA TRANSFER RELIABILITY

International Journal of Automated Identification Technology, 3(2), July-December 2011, pp. 81-88 RFID IN ASSOCIATION WITH ERP SYSTEMS WITHIN THE MANUFACTURING INDUSTRY TO IMPROVE DATA TRANSFER RELIABILITY Farhad Nabhani 1, Sara Zarei 2 and Simon Hodgson 3 1,2,3 School of Science and Technology, University of Teesside, Middlesbrough, TS1 3BA, UK 1 E-mail: f.nabhani@tees.ac.uk Abstract: Radio Frequency Identification (RFID) is an AIDC technology that is used to identify people or objects carrying encoded microchips through the use of radio waves. Automatic Identification and Data Collection (AIDC) Systems have been widely used to allow information to pass easily and accurately between different stages of the supply chain. AIDC technologies can be categorised as Biometrics or Data Carrier technologies; Biometrics include fingerprint recognition, facial recognition and voice recognition technologies whereas Data Carrier consists of optical, magnetic or electronic storage. AIDC systems utilising Data Carrier technologies have been successfully implemented within many large multinational organisations but research into the implementation of AIDC systems within SMEs is far more limited. In the manufacturing industry, the tracking of a product and its status through the processes of a company, from the moment it arrives until the time of despatch, can significantly reduce the lead time, increase the efficiency and visibility, increase the accuracy of production plans and also improve the efficiency of an ERP system. As the constant demand for total visibility and fast and accurate information flow increases, the inefficiencies of traditional systems are becoming more apparent. An investigation was conducted at a Teesside manufacturing SME to identify the areas in which the implementation of an RFID system would benefit the company through improved efficiency and visibility of the processes and also the accuracy and reliability of real-time data transfer. This study aims to establish the link between the success of RFID systems with and without a suitable data management system such as Enterprise Resource Planning (ERP) and also assess the level of investment required for such a system, and the return on investment it could provide. 1. INTRODUCTION The case study will be conducted at a Small to Medium Enterprise (SME) located in Middlesbrough, in the North East of England that specializes in the manufacture and refurbishment of feedscrews and barrels for the plastic, rubber and food industries. The company manufactures parts as required through a specific customer order, known as job shop manufacturing, which provides a high level of customer support and interaction. In the manufacturing industry, the tracking of a product and its status through the processes of a company, from arrival until despatch, can significantly reduce the lead time, increase the efficiency and visibility, increase the accuracy of production plans and also improve the efficiency of an ERP system. [1] This study and research aims to establish the importance of a fully integrated IT infrastructure for the success of an RFID system within a company. The paper aims to educate SME s on RFID and its role in the manufacturing environment, alongside its feasibility and application. The paper also aims to analyse the level of infrastructure required for the SME and the costs that could be involved throughout the entire goal of implementing a fully functioning RFID system that can reach its maximum potential in terms of efficiency, flexibility and accuracy. 2. ENTERPRISE RESOURCE PLANNING SYSTEMS The main aim of Enterprise Resource Planning (ERP) systems is to achieve an improved performance of all of the processes within a business by integrating the management of different functions within the business as one rather than separate entities. Enterprise Resource Planning (ERP) Systems are concerned with all of the functions within an enterprise and rely heavily on the technology

82 International Journal of Automated Identification Technology available. The ERP system functions around one core database applied within the organisation from which all members may feed information. All elements within the organisation must be coordinated if the system is to be successful and the information must be updated regularly so as the system contains the current status of each application. [2] [3]. Figure 1 shows an example of each of the different areas of an organisation that are considered within the ERP system. Figure 1: Links Between Departments Through an ERP System [adapted from 4] Due to the enhancement of the visibility of all processes and materials within a company because of the integration of all information, ERP is seen as a powerful system that can significantly improve the performance of a company in many areas. The enhanced performance of the company may also be due to the level of discipline that is required when implementing an ERP system. However, this level of discipline and rigidity may sometimes cause problems within the company as it is difficult to achieve and is not always appropriate for all aspects of business. ERP still provides many benefits to a company; the visibility levels within the company are increased due to a fully integrated system, all areas of the business are made more efficient due to the discipline of forced changes, continuous improvement is to be achieved due to the increased level of control of the operations, levels of communication with customers and suppliers are increased which leads to more accurate information and time scales and the entire supply chain may be integrated using the system. [5] [6]. The implementation of a successful ERP system within a company is, however, difficult to achieve. An ERP system is often extremely expensive to install as many of the existing systems within a company are older and so do not communicate well with the new systems. Due to this fact, many companies that implement an ERP system often need to replace many of the systems used simultaneously and often at a great cost. [7] [8]. The organisational aspects of a company also pose a major problem in the implementation of a successful ERP system. The interaction between the members of an organisation, the structure of an organisation and the processes within the organisation are of utmost importance when implementing an ERP system. The majority of failures that occur in the implementation of an ERP system are due to organisational problems within the company. The appropriate technology may be applied and a fully integrated system installed within the company that can be accessed by all members; but, the level of communication can still be poor due to a defective organisational structure or the culture and management style of the company may be inappropriate. [9] [10]. 3. RADIO FREQUENCY IDENTIFICATION Radio Frequency Identification (RFID) is an AIDC technology that is used to identify people or objects carrying encoded microchips through the use of radio waves. RFID technologies were initially developed by the British military in the 1940s in order to be able to distinguish their own aircraft from the enemy aircraft. This was performed by equipping the aircraft with devices to send out coded signals in order to identify them as their own. [1], [11] - [12]. All RFID systems are generally made up of a tag/transponder, an antenna and a reader, the link between these parts can be seen in Fig. 2. Figure 2: Operating Principles of a Passive RFID System [1] The transponder is activated when the reader creates a magnetic field and emits an interrogation

RFID in Association with ERP System within the Manufacturing Industry to Improve Data Transfer Reliability 83 signal in order to encode and decode data onto the tag. The transponder for the technology consists of an antenna, radio receiver contained in a silicon ship and a power supply. The power source contained provides the power for the tag and other elements of the system and is also used to distinguish the difference between RFID tagging systems. Active RFID tags are distinguished by the presence of an internal power supply that is used to activate the tag through the use of a battery or other dedicated power supply. Passive RFID tags are distinguished by the absence of an internal power supply and they are activated through the incoming radio frequency signals sent by the reader. Passive tags are much smaller than active tags due to the fact that they do not have an internal power supply but they have a much more limited operating distance of up to a meter due to the dependence on the radio frequency signals for activation. Active tags may be read at far longer distances and may read the data at a much greater speed. [11] [14]. RFID tags are available in a number of different frequencies that can also distinguish them from one another; low frequency (LF), high frequency (HF), ultra-high frequency (UHF) and super-high frequency (SHF). The low frequency tags usually operate between 120 khz and 140 khz and the high frequency tags usually operate at 13.6 MHz, both of which are generally passive RFID tags. They are activated by a nearby device and are therefore effectively used for the transfer of relatively small amounts of data at reasonably short distances and low speeds. There are no issues relating to the collision of data signals for LF tags as they do not support the simultaneous reading of tags but they are able to penetrate a number of materials including water, woods and organic tissues. [12], [14]. The LF RFID tag technologies are commonly found in EAS systems in the retail industries whereas HF passive tags have found a much larger range of applications globally due to the few restrictions of the technology at this frequency. Ultra high frequency tags usually operate between 860 MHz and 960 MHz as passive tags and at less than 450 MHz as active tags. Passive UHF tags can encode large quantities of data and have a much longer read range of up to ten meters; despite this, they are fairly ineffective in environments with metal and water present which is a disadvantage in some industries. Super high frequency tags operate at extremely high frequencies of 2.45 GHz and may be in the form of active or passive tags. The tags used over the range of frequencies are made in a large variety of shapes and sizes which each have advantages and disadvantages for individual applications. Some typical types of RFID tags are card tags, key tags, glass tags, button tags and paper or plastic labels. [12] - [15] The maximum working range of an RFID system is achieved in an environment without electric noise from machines and without any metal in the near area; this is known as the clean environment. Any metal placed in the area of the system will influence its performance as the magnetic flux created will penetrate the metal and cause what are known as Eddy Currents through the metal which will work against that of the reader. This will significantly weaken the magnetic field emitted by the reader and vastly reduce the achievable reading range of the system. To avoid the effects of metal objects in the vicinity of the system, a shield may be placed between the metal and the system. This technique usually uses a ferrite material as a shield between the metal and the system in order to eliminate the interference with the signal. [13] - [15] 4. RFID AND IT INTEGRATION Once data has been read from the RFID tag, it must be utilised to provide reliable and useful information to a company. Only when the data gained from a Radio Frequency Identification (RFID) system can be integrated into the decision making processes of a company, will the full benefits be achieved. The processes and efficiencies of the business will therefore only be able to improve once the RFID system has been incorporated into central enterprise IT systems to allow the data to pass between. In order to achieve this merger of the systems, RFID middleware is used to connect the RFID hardware with the existing enterprise IT system. The middleware is ultimately the piece of software that is responsible for the usability and the level of quality of the information that is passed between the RFID system and the enterprise IT system and manages all aspects of data flow, including enterprise resource planning applications, within a company. [16] [17]. There are four main function of RFID middleware; the first is the extraction, combination and filtration of data from the number of RFID

84 International Journal of Automated Identification Technology readers across the organisation. The second is to direct the data collected to the appropriate enterprise IT system in order to facilitate the integration; thirdly is process management, in which certain business rules can be used to trigger some events. Lastly, middleware is used to monitor and manage the multiple RFID readers across the organisation. Currently, many middleware products are being developed based on EPCglobal standards which divide the components into three categories according to their function; these are core processing, reader interfaces and enterprise application adapters. [16] [18]. The relationship between these components and the functions they provide can be seen in Fig. 3. Figure 3: Links between RFID System, Middleware and Enterprise (adapted from [16]) The section of RFID middleware that work between core processing and the enterprise IT systems is enterprise application adapters. They are responsible for transferring the data from RFID systems to and from the enterprise applications within the system. The data that flows between core processing and each of the specific applications of the enterprise IT system is converted using the enterprise application adapters in order to reduce the amount of traffic on the enterprise IT system. Future middleware applications will have to provide an increased number of capabilities in order for companies to gain the full potential benefits of their RFID systems. 5. ANALYSIS OF IT INFRASTRUCTURE The current processes present at a Teesside manufacturing SME were initially assessed in order to identify the areas in which the implementation of an RFID system would benefit the company through improved efficiency and visibility of the processes and also the accuracy and reliability of real-time data transfer.(ref). Once this was established, the IT infrastructure present at the SME was analysed so as to understand the current systems utilised and the areas in which changes may need to be made to better facilitate the data of the RFID system. The SME was found to be utilising systems that were very basic and all were run independently of one another. These systems were run using mainly manual techniques or by using basic electronic software such as MS office. Much of the information was hand written; such as job cards, orders and costing, and was also filed away and retrieved manually. The job scheduling was manually compiled using MS Excel and only updated once a week by a member of management. The SME had a database containing all jobs that had been ordered, manufactured and invoiced for the past 25 years. This database was heavily relied upon to check when jobs were manufactured and invoiced, their invoice number to pull this from file and also the job number to pull the job card from file. The database is MS-DOS based and has not been updated in the company since 1986; the system is very rigid and the data contained is almost impossible to extract. As each system and method of data storage was running independently of one another, there were often holes in the documentation process or overlaps of information that differed from one another. This method often provided mistakes in the information that was gathered as it was incorrect or not up to date and thus caused delays or rework for members of staff. The implementation of an ERP system was therefore recommended so as all aspects of the managing and decision making processes were contained in the same system with up to date information being fed to each aspect once one had been modified. The SME first must have a reliable data management with increased visibility, communication and control in order for an RFID system to make the most impact on the company and provide the highest level of benefits.

RFID in Association with ERP System within the Manufacturing Industry to Improve Data Transfer Reliability 85 Figure 4: Screen Capture of Enquiry form of ERP Package A suitable enterprise IT System was identified for use at the SME and a small scale ERP system was chosen. This system can be tailored to suit the needs of the company and the system can be configured for each individual, creating a flexible package that is still comprehensive enough to merge all aspects of information and current systems into one complete system. The ERP package chosen also has a developed section of software that may be built in and used to integrate with the RFID system; the function is entitled shop floor data collection. The software can be designed specifically for the SME so as the link with RFID provides them with the most reliable and real time data to incorporate into their management system. 6. COST BENEFIT ANALYSIS Initially, the current manufacturing processes at the SME and the flow of materials and information across the shop floor for each part produced were analysed through a process mapping investigation previously conducted by the author [19]. The improvements in the process efficiency and transportation times in particular can be identified through the use of process activity mapping and flow across the shop in order to add value to the operations and also savings in the reduction of safety stock levels and manual part counting can also be identified. The total annual saving that were calculated previously by the author [19] for the company across each of these areas through the implementation of an RFID system and the improvements in the shop floor layout are outlined in Table 1.

86 International Journal of Automated Identification Technology Table 1 Annual Savings Savings Amount ( ) Inventory Savings 6,500 Manual Tracking Savings 2,080 Process Efficiency Savings 58,625 Total Annual Savings 67,205 One of the main barriers to the successful implementation of an RFID system, especially within an SME, is cost. Due to the fact that the current level of research into the successful implementation of RFID within SMEs is limited and the level of education in SMEs with regards to RIFD is inadequate; there are many perceptions that the cost of implementation is far greater than the benefits. [20], [21]. The investment necessary for the implementation of an RFID system is highly dependant on the requirements of a company and the hardware chosen. The implementation costs for the SME were initially established as summarised in Table 2. Table 2 Implementation Costs for RFID System Requirements Associated Costs Investment Required ( ) Tags - 2.00 Each 580 required for new sales 1,160 (per year) X 2 = 1,160 Extra Labour Required for Tagging 30 minutes allowance for each tag 2,900 (per year) application Time taken for each tag (0.5hrs) hourly labour ( 10) no of tags (580) = 2,900 Hand held Readers 2000 per pair 6 required = 12,000 12,000 (one purchase) RFID Software and installation costs 25000 max 25,000 (one purchase) Training 10 days at 450/day 4,500 (one purchase) Annual Fees Estimated licence and maintenance 4,000 (per year) fees = 4,000 Total Initial investment required 49,560 The SME must also invest in an Enterprise IT System to allow the data taken from the RFID system to be incorporated into the management and decision making processes at the company. The costs associated with the implementation and maintenance of this system must also be taken into account when trying to determine the true value of an RFID system for the company as they are an additional cost in order to reap the full benefits expected of the system. The business case and cost benefit analysis for the complete system will therefore need to include the investment required to implement the ERP system and also develop and implement the bespoke middleware that is necessary to allow the link between information gathered from the RFID system and the management of all other aspects of the company processes. Table 3 Implementation Costs for Enterprise IT System and Middleware System Requirements Associated costs Investment Required ( ) Enterprise IT Software ERP System = 14,000 14,000 (one purchase) Training 10 days at 400/day 4,000 (one purchase) RFID Middleware Bespoke software from ERP Vendor for 2,900 (one purchase) integration with RFID = 2,900 Annual Fees Licence and maintenance fees = 3,500 3,500 (per year) Total Initial investment required 24,400

RFID in Association with ERP System within the Manufacturing Industry to Improve Data Transfer Reliability 87 The initial investment required for the implementation of a suitable RFID system has been calculated as 49,560 with an additional cost of 8,060 per year to tag each new product manufactured and maintain the system. The investment required for the implementation of an enterprise IT system and also the middleware required to link with the RFID system has been calculated as 24,400 per year with yearly costs thereon being 3,500 for licence and maintenance costs. The ROI of the RFID and ERP systems could therefore be calculated by dividing the investment required to implement the system by the cost benefits of the system and then multiplying by 12 months. ROI = [system implementation costs ( ) / cost benefits of system ( )] 12 = [(49,560 + 24,400) / 67,205] 12 = 13.21 The ROI for the implementation of an RFID system linked with the ERP Enterprise System within this company was found to be 13.21 which will produce a payback period of just over 13 months. 7. DISCUSSION The major barriers for the successful implementation of an RFID system within a company are found to be; the lack of basic IT infrastructure, the reluctance to invest in new technologies due to lack of education and knowledge in the subject area and cultural resistance to change. A major issue for the implementation of an RFID system within an SME is the requirement of a computerised infrastructure as a prerequisite as this is associated with high costs and vast amounts of training. [7] [9] Only when the data gained from a Radio Frequency Identification (RFID) system can be integrated into the decision making processes of a company, will the full benefits be achieved. A company could implement an RFID system without integrating it with an adequate enterprise IT system; but the data gathered from the RFID tags would not be utilised to its full potential, nor would the expected benefits of the RFID system be reached. The processes and efficiencies of the business will only be able to improve to their capability once the RFID system has been incorporated into central enterprise IT systems to allow the data to pass between. This will allow a company to gain full visibility, flexibility and accuracy of all of their processes through the integration and transfer of real-time data. The cost benefit analysis for the SME through the implementation of an RFID system and the modification of the shop floor plan was found to provide a saving of 67,205 annually with a payback period of around 13 months. Significant cost savings are found through the implementation of an RFID system based on the reduction of safety stock, the elimination of manual job tracking and the reduction of the manual input and written data throughout the process. Many more benefits will also be gained through the implementation of both the RFID and the ERP system that are hard to quantify as a cost benefit. The ease of data transfer, use of comprehensive data management systems and ease of use of one linked system will themselves provide much welcome benefits to employees at the SME. However, the disruption that may be caused when implementing new IT systems and the transfer of all existing data can be time consuming and often frustrating for employees. Lack of training and a cultural resistance to change are well known barriers to the successful implementation of IT systems in particular and these problem areas should be specifically targeted throughout the implementation process to keep disruption and resistance to a minimum. ACKNOWLEDGEMENTS We would like to thank all employees of the SME for their time and contribution throughout the course of this research and we would also like to offer sincere gratitude to the Knowledge House, Teesside University for providing the support and funding to carry out this research. REFERENCES [1] Furness A., 2000. Machine-Readable Data Carriers - A Brief Introduction to Automatic Identification and Data Capture. Assembly Automation. 20(1), 28-34. [2] Harrison D.K., and Petty D.J., 2002. Systems for Planning and Control in Manufacturing. Oxford: Newnes. [3] Wallace T.F., 2001. ERP: Making it Happen: The Implementer s Guide to Success with Enterprise Resource Planning. New York; Chichester: Wiley. [4] Dowlatshahi S., 2005. Strategic Success Factors in ERP Design and Implementation. International Journal of Production Research. 43(1). [5] Eckes G., 2003. Six Sigma for Everyone. Hoboken, NJ. : Wiley.

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