A framework for Six‐Sigma driven RFID‐enabled supply chain systems

QUALITY PAPER

A framework for Six-Sigmadriven RFID-enabledsupply chain systems

Yahia Zare MehrjerdiDepartment of Industrial Engineering, Yazd University, Yazd, Iran

Abstract

Purpose – This paper aims to propose a new framework for selecting strategies from the pools of RFIDstrategies, Six-Sigma strategies and supply chain strategies. To gain a better understanding of theproposed model, three case studies are investigated and all related strategies are presented and discussed.

Design/methodology/approach – This article proposes a new framework for Six-Sigma drivenRFID-enabled supply chain systems. Theory building is comprised of four parts where each part isdiscussed clearly in the content of the article. However, it is through such tools that management canidentify new systems for matching the needs of his/her organization with all of the right strategies.

Findings – In a journey to business excellence, an organization is successful if specific goals for criticalprocesses of the organization are identified. The quality management programs implemented canmodernize and simplify activities towards the ultimate goal of the business. To do so, this author’sdiscussions on Six-Sigma strategies, supply chain strategies, and radio frequency identification areconverted into a framework that can be used for developing an appropriate model for organizationalstrategy selection. There are some cases in the literature that can support such a model building andframework identification. Three of such cases are presented for the readers’ familiarity with the subject.

Practical implications – The use of these three methodologies can bring significant changes to anorganization. This can be done by taking into consideration the key strategies of supply chainmanagement, Six-Sigma, and RFID playing a big role in the success of the organization.

Originality/value – For each methodology considered, strategies are examined and a frameworkbased upon such methodologies is proposed. Cases supporting the proposed framework are reviewedfrom the literature for clarification purposes.

Keywords RFID, Supply chain, Six Sigma, Strategies, Framework, Supply chain management

Paper type Research paper

1. IntroductionA wide range of applications in supply chains, such as warehouse operation (Chow et al.,2003; Ngai et al., 2007), material handling (Glidden et al., 2004), and inventory monitoring(Strassner and Chang, 2003) is created by a new technology known as radio frequencyidentification (RFID). It can be clearly claim that, in the area of supply chain, many of thewell known problems as such as bullwhip effect can be resolved if information can beprovided on time for making timely decisions. In this regard, Huanga et al. (2007) hasdiscussed about the information sharing in supply chain and elaborated on two dimensionsof timeliness and neighborhood. Lefebvre et al. analyze how supply chain processes can beredesigned when using RFID and examine the impacts of RFID in terms of improvementsthrough process integration, automation, cancellation, and the emergence of new “smartprocesses”. Using multiple case summaries, Angeles (2005) illustrated some of the potentialbenefits that can be derived from the RFID technology adoption in a supply chain context.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0265-671X.htm

IJQRM30,2

142

Received 14 March 2010Revised 29 November 20104 April 2011Accepted 11 September 2011

International Journal of Quality &Reliability ManagementVol. 30 No. 2, 2013pp. 142-160q Emerald Group Publishing Limited0265-671XDOI 10.1108/02656711311293562

Lee and Ozer (2007) have studied the value of RFID in a supply chain. Dutta et al.have scrutinized RFID on the basis of:

. generic architecture of RFID implementations and the drivers of value;

. measurement issues associated with quantification of value; and

. incentives for achieving diffusion when multiple independent organizationsdeploy the technology and coordinate the resulting information flows.

Gaukler et al. have studied item-level RFID in the retail supply chain. Fleisch andTellkamp and Karkkainen (2003) have discussed the RFID technology potentialregarding the increasing of efficiency of supply chain of short shelf life products.

A paper entitled “RFID research: an academic literature review (1995-2005) and futureresearch directions” is published by Ngai et al. (2008b). This article reviews 85 academicjournal papers on RFID that were published in the period 1995-2005. These studies areorganized into four main categories of: technological issues, application areas, policy andsecurity issues, and other issues. Table I shows the trend of academic publications onRFID while Table II shows the distribution of articles by the topics mentioned.

In a paper entitled “Evaluating the business value of RFID: evidence from five casestudies,” and authored by Tzeng et al. (2008) an in-depth analysis of the business valuecomponents that an organization can gain from the adoption of RFID is discussed. Theyhave proposed a framework for determining the business value of RFID technology andemphasizing the delivery of value through the refinement of business processes andexpansion of the business model.

Wamba et al. (2006) have provided insights on RFID technology and the EPCnetwork by investigating their impact on mobile B2B-eCommerce. Based on empirical datagathered from the interrelated firms in a supply chain, several scenarios that integrate

Year of publications Number of academic articles

1995-1998 01999 72000 02001 32002 32003 92004 222005 41

Source: Adapted from Ngai et al. (2008b)

Table I.Distribution ofarticle per year

Topics Number of articles

Technology 31Policy and security 11Applications 28Others 15

Source: Adapted from Ngai et al. (2008b)

Table II.Distribution of

articles by topics

RFID-enabledsupply chain

systems

143

RFID and EPC networks are tested and evaluated. In the paper entitled “Development of anRFID-based Sushi management system: the case of a conveyor-belt Sushi restaurant,”Ngai et al. (2008a) describe the design and development of an RFID-based sushimanagement system in a conveyor-belt sushi restaurant to enhance operational efficiency.

Authors such as Tan et al. (1999, 2002) and Kanji and Wong (1999) have investigated theimpacts of aligning supply chain and quality management strategies and activities withmanufacturing goals and business performance. On the other hand, the effect of operationalquality initiatives and supply base management on firm performance is studied by Tan et al.(1998). Ulusoy, Yeung et al. (2003, 2005) and Yeung (2008) have studied quality-based supplychain strategies. In a survey of Turkish firms, Ulusoy commented that firms are aware thata quality strategy is the most fundamental requirement for sustaining their existence in themarket. Lastly, the strategy of supply chain integration and communication as it relates tocustomer responsiveness or positive performance has been investigated by Narasimhan andJayaram (1998), Tan et al. (2002), Olhager and Selldin (2004), Rosenzweig et al. (2003) andMangiameli and Roethlein (2001). Figure 1 shows the impacts of management structures,human resource focus, quality tools and others on the quality.

Theory building in this paper is comprised of five parts. First, RFID and its potentialas are discussed in the literature are reviewed and related applications areas of that areidentified. Using a research conducted by Tajima (2007) four propositions regarding howRFID may create a competitive advantage and achieving a sustainable one are reviewed.Second, supply chain is briefly reviewed and its strategies are highlighted. Third,Six-Sigma is reviewed as a tool for enhancing the level of the quality in supply chain.Fourth, a framework that can incorporate the strategies of RFID, supply chain, andSix-Sigma together is introduced. Fifth, to gain a better understanding of the proposedmodel three case studies from the literature are reviewed. This can demonstrate the stateof the current literature on the proposed model.

The plan of this paper is as follows: Section 2 describes research methodology.Section 3 discusses the relevant concepts from the literature. The proposed frameworkfor RFID-based Six-Sigma driven supply chain is the topic of Section 4. In Section 5, threecase studies are studied and their findings with regard to the proposed framework areevaluated. Managerial implications and future works are discussed in Section 6. Thearticle conclusion is given in Section 7.

Figure 1.Quality management andthe business influentialfactors

Source: Adapted from the work of Robinson and Malhotra (2005)

IJQRM30,2

144

2. Research methodologyThis research attempts to study the main strategies related to RFID, supply chainmanagement (SCM), and Six-Sigma for presenting a framework that can be used fororganizational strategy identification and selection. In general, the number of researchesconducted on the theoretical framework in this regard is limited. This is the first attemptto combine the strategies of RFID, SCM and Six-Sigma for such framework development.Tzeng et al. (2008) write that “case studies are a valuable tool for examining acontemporary phenomenon, especially one that is not clearly understood, asking how andwhy questions, and capturing the context”. With this note in mind, this author considersusing case studies as for the proposed framework analysis. The study process in thisarticle is comprised of four steps:

(1) Related concepts from the literature are examined.

(2) A framework for RFID-based Six-Sigma driven supply chain is proposed.

(3) Three cases are provided for better understanding of the situation.

(4) Future research propositions are presented.

To make the reading of materials easy the list of abbreviations used in this article aregiven below:

RFID ¼ radio frequency identification

SCM ¼ supply chain management

RF ¼ radio frequency

DMAIC ¼ Define, measure, analyze, improve, and control

DMADV ¼ Define, measure, analyze, design and verify

DPMO ¼ Defects per million observations

DFSS ¼ Design for Six-Sigma

QFD ¼ Quality function deployment

UHF ¼ Ultra high frequency

FMEA ¼ Failure mode and effect analysis

FLC ¼ Fuzzy linguistic computing

SST ¼ Smart and security trade lane

3. Relevant concepts from the literatureThe preliminary step in this research is to examine three existing streams of research togain an understanding of the sources of the value creation and key strategies forframework model development. Each of these research areas is discussed with sufficientdetails below.

3.1 RFID and its strategiesRFID is a term used for technologies utilizing radio waves for identifying individualitems automatically. The most common way is storing a serial number identifying


systems

145

a product and related information on a microchip attached to an antenna. RFID is usedvery similar to bar codes. It is designed to track items in the supply chain withoutrequiring a line of sight. To read a bar code its lines had to stay in sight of the scanner toidentify product correctly. RFID is not a new phenomenon. It has been around fordecades. It was used initially for proximity access control. Thereafter, it was evolved to beused in supply chain tracking, toll barrier control, and even protecting automobiles(Potter, 2005). An RFID tag has a higher data capacity than a bar code, and depending onthe type of chips, RFID tags can store more than identification information, and theinformation can be rewritten by users (Sheffi, 2004). There are four types of tags inindustry that are known as:

(1) passive tags;

(2) active tags;

(3) semi-passive tags; and

(4) semi-active tags.

Passive tags get their energy from a remote RFID reader. An active tag uses a batteryfor both the chip and the transmission of data on the antenna. Semi-passive tags use asmall onboard battery to power the chip. Semi-active tags use the battery for poweringthe antenna but the chip relies on the radio frequency (RF) energy from the reader (Potter,2005). The life of active tags are limited while of passive tags are unlimited. Active tagsare heavier than the passive tags and more costly as well. By combining RFID use withother technologies, such as global positioning system (GPS), RFID could somedayenable wireless, real-time tracking of any individual items anywhere in the world toprovide complete visibility in the supply chain.

The world biggest retailer, Wal-Mart, expects to receive about four billion cartons inyear 2004 and five billion in 2005 (Nogee, 2004). Management at Wal-Mart believes thatRFID system can help them to do the following:

. reducing labor costs;

. reducing inventory costs;

. reducing human errors;

. increasing revenues by limiting the shortages; and

. increasing the overall efficiency and productivity of the their supply chain.

Once these factors are available to users it can be seen that why stockhandling, traceability and warranty also improves. Please notice that the fourthproperty of RFID tag gives it more power to be considered as a read or read/write deviceonly. Regarding this technology it is most important to be able to do the followingsimultaneously:

. reducing the cost of each chip to under $0.10;

. producing in large quantities;

. having customers with big demands;

. keeping high the level of quality and reliability; and

. being ecologically concerned about the materials used in the product.

IJQRM30,2

146

The main detractors for this technology can be listed as:. costs may overweight the benefits;. return on investment may not be possible in about 12 months;. customer finds difficulty to understand how RFID works; and. difficulty in implementing RFID.

RFID readers usually cost around $1,000-$2,000 and RFID tags costs are as discussedbelow. The tag cost can be broken down into following components: chip cost,inlay/substance with antenna cost, assembly cost, and licensing cost. Chips cost is about$0.25-$0.35 while inlay cost ranges from $0.02 to $0.10 and assembly from 0.02 to 0.04.In comparison with the price of one chip being estimated to reach $0.05 in year 2004 it isstill very high (Chao et al., 2007).

RFID systems work at a number of different frequencies including 125 KHz,13.56 MHz, 2.45 GHz and 5.8 GHz and for UHF 860-950 MHz. Low frequency tags workalong 120 KHz-140 KHz frequencies while high frequency tags work along the 13.56 MHzradio frequencies. UHF tags work along the 850-900 MHz. Low frequency tags are lessexpensive and use less power compare to other kinds of tags. High and ultra high tagshave better ranges and transfer data faster. These two types of tags use more power andare more expensive.

An insight into the strategic value of RFID by building a theory on how RFID usedin SCM may create and sustain a competitive advantage (Tajima, 2007). Tajima (2007)has developed four propositions based on a theory of organizational learning and thetheory of first-mover advantages as are listed below:

P1. The use of RFID for exploitation improves the firm’s competitive advantagethrough increased supply chain efficiencies (Figure 2).

P2. The use of RFID for exploration improves the firm’s competitive advantagethrough increased innovation capability (Figure 2).

P3. The long-term use of RFID for exploitation improves the firm’s short-termcompetitive advantage through “learning to adjust” (Figure 3).

P4. The long-term use of RFID for exploration improves the firm’s long-termcompetitive advantage through “learning to transform” (Figure 3).

Figure 2.A proposed model of RFID

and competitiveadvantage

P1P1

P2

P2

Exploitation Supply ChainEfficiencies

CompetitiveAdvantage

ExplorationInnovationCapability

Source: Adapted from the work of Tajima (2007)


systems

147

3.2 Supply chain and its strategiesSCM is a link between planning and control of the supply process and corporatecompetitiveness. SCM is an effort to win economic advantage by expert deployment ofsupply chain resources. In simplest terms, an integrated supply chain is a connectedseries of organizations, resources and activities involved in the creation and delivery ofvalue in the form of finished products and services to end customers. Management of asupply chain involves the integration of all decisions that affect the design and flow ofpurchased items/materials/services into and through a corporate entity to finishedproducts. In the application of SCM, internal and external materials decisions becomepart of a focused sourcing strategy aimed at winning customers and increasingcompetitiveness.

A research conducted by AMR, a research based consulting firm in MassachusettsUSA (http://wareseeker.com/the-amr-research-rfid/), indicates that early adopters ofRFID can cut supply chain costs by about 3-5 percent. The same study points out thatthese users of RFID can reduce costs by about 2-7 percent. Generally speaking, RFIDcan have a huge impact on the entire supply chain processes. Hence, it is important forthe big supply chain players to learn about this technology and to take its effectivenessinto consideration. Companies considered to be the best in the class for their supplychain performance must be able to operate their network efficiently at 4-7 percent ofrevenue less than the average company in their industry. Main strategies used withSCM are:

. competitive strategy;

. product development strategy;

. marketing and sale strategy;

. supply chain strategy;

. strategic fit;

. global freight management strategy;

. customer focus strategy; and

. strategic sourcing.

To ensure optimum performance, companies must work to reduce costs, accelerateoperations, and improve quality both in their own processes and in their partnerorganizations. By gaining cross-company visibility and control, companies can identify

Figure 3.A proposed model of RFIDand sustainablecompetitive advantage

P3 P3

P4 P4

Exploitation Learning toadjust

ExplorationLearning totransform

Short termCompetitiveAdvantage

Long termCompetitiveAdvantage

Source: Adapted from the work of Tajima (2007)

IJQRM30,2

148

and pursue opportunities for supply chain improvements. The global supply chainforum identified eight key processes that drive supply chain efficiencies:

(1) customer relationship management;

(2) customer service management;

(3) demand management;

(4) order fulfillment;

(5) manufacturing flow management;

(6) supplier relationship management;

(7) product development and commercialization; and

(8) returns management.

Tajima (2007) have examined a compiled list of 39 benefits across the supply chain thatwas prepared by Li and Visich (2006) and identified a list of 15 distinct types ofbenefits by minimizing overlap and excluding secondary benefits from that. The listsof 15 benefits are incorporated in the Figure 6 for model building.

3.3 Six-Sigma and its strategiesSix-Sigma program is credited to Dr Mike Harry, a statistician who is the main founderof Six-Sigma Academy in Scottsdale, Arizona. Motorola, a huge US Company, is anearly corporate adopter of the Six-Sigma program in the world. Other US firms such asgeneral electric, Texas Instruments and allied signal are also the big beneficiaries ofthis technology. A way of reading and speaking the language of Six-Sigma is throughdetermining the number of defects per millions opportunities. We say the Six-Sigmaquality level is equal to 3.4 defects per million opportunities and can be shown as 3.4DPMO. An “opportunity” is defined as any chance for nonconformance or not meetingthe required specifications.

In mathematical terms, Six-Sigma defines a transfer function, y ¼ f(x1, x2, . . . ,xn),between the quality metrics of a product or process and the inputs that define andcontrol the product or process. Six-Sigma focuses on two things:

(1) understand which inputs (x’s) have the greatest effect on the output metrics(y’s); and

(2) control those inputs so that the outputs remain within a specified upper and/orlower specification limit.

Most people have this understanding that Six-Sigma is used in the manufacturingfor reducing defects. The reality is that Six-Sigma can be used in both manufacturingand businesses to reduce process defects and variability. For instance, we can usethat to:

. improve on time delivery;

. reduce cycle time for hiring and training new employees;

. improve logistics;

. improve sales forecasting ability; and

. improve quality of customer service.


systems

149

Depending on the focus for improvement, Six-Sigma has two branches, as listed below:

(1) DMAIC. For existing products and processes, the DMAIC methodology applies.There are five steps to be considered for this case. The steps are DMAIC.

(2) DMADV. For new products and processes, the DMADV methodology applies.This case has five steps as well DMADV.

The first three steps of define, measure and analyze in both cases are the same. ForDMAIC, the last two steps focus on improving and controlling existing product or processinputs. For DMADV, the final two steps focus on designing and verifying the futureproduct or process inputs. In a study conducted by Aboelmaged (2010) using 417 articlesfor data classification and analysis purposes, he has shown that DMAIC and DFSSmethodologies together are made up 87 of those articles. That is DAMIC with 54 articlesand DFSS with 33 articles. However, TQM and continuous improvement contributed48 articles and the human structure of Six-Sigma made up 37 of those articles as well.

Although, Six-Sigma tool has a specific role and is often narrow in focus, Six-Sigmatechnique has a wider application and requires specific skills, creativity and training(Antony et al., 2005, 2007). Examples of Six-Sigma tools include pareto analysis, root causeanalysis, histograms, customer requirements measurement, cross-functionalmanagement, knowledge discovery (Pepper and Spedding, 2010), QFD (Tanik, 2010;Zare Mehrjerdi, 2010), and FMEA (Segismundo and Miguel, 2008). The Six-Sigma cyclefor DMAIC is shown in Figure 4 along with sufficient descriptions on each step of theprocess (Lee and Whang, 2005). More details on the DMAIC phases and Six-Sigmaconcepts are given by Zare Mehrjerdi (2011).

Six-Sigma is a data driven approach uses define, measure, analyze, improve andcontrol and utilizes DFSS (Tennant, 2002). According to Mader (2002):

DFSS is a methodology that utilizes tools, training and measurements to enable theorganization to design products and processes that meet customer expectation and can beproduced at Six-Sigma quality levels.

Figure 4.The Six-Sigma cycle

Define

Measure

Improve

Source: Adapted from Lee and Whang (2005)

Analyze

Control

Issues, stakeholders,measurement identification

Tracking, Visibility,Accessability

What is out of control,What if scenarios

Diagnoses

Resolution excecution,Communication, Restoration

to in-control

Root cost analysis systemupdate structural correction

IJQRM30,2

150

DFSS has two main goals of:

(1) Minimizing defect rates for reaching to the Six-Sigma level.

(2) Maximizing positive impact during the developed stage of the products.

Six-Sigma takes an organization to an improved level of sigma capability through therigorous application of statistical tools and techniques (Tennant, 2002). Antony et al. (2005)have pointed to this fact that Six-Sigma is a strategy that drives the cultural change toimprove the profitability level of the company by increasing the benefits from the savingsgenerated when defects are detected at a very early stage. Some of the main strategies ofSix-Sigma along with tools and techniques are summarized in Table III.

4. A propsoed framework for RFID-based Six-Sigma driven supply chainThe impact of aligning supply chain and quality management strategies and activitieswith manufacturing goals and business performance are studies by Tan et al. (1999,2002) and Kanji and Wong (1999). Other researches looked beyond a firm own bordersand discussed the importance of bonding goals and strategies of upstream anddownstream channel members. Ulusoy, Yeung et al. (2003, 2005) and Yeung (2008) haveconducted research on quality-based supply chain strategies. In a survey of Turkishfirms, Ulusoy commented that firms are aware that a quality strategy is the mostfundamental requirement for sustaining their existence in the market.

To employ Six-Sigma for an RFID-based supply chain system management need to useFigure 5 as a guide for the Six-Sigma justification. Once it is determined that Six-Sigmais an appropriate tool for organizational quality management then management mayemploy Figure 6 to pick the right strategies for developing a suitable RFID-enabled SCMsystem and Six-Sigma driven.

It is management responsibility to determine a suitable integration of RFID-basedSCM strategies and Six-Sigma business strategies and the principles that fits his/herbusiness nature best. Figure 6 provides the list of strategies available to the managementfor integration purposes. Knowing that RFID technology is a new technology there isa limited number of conceptual and theoretical works available in the literature on that.As indicated by Eisenhardt, case studies are appropriate in the early stages of researchwhen little is known about the phenomenon of interest. The initial theory buildingrequires the “rich description, the richness that comes from anecdote” associated withcase study methodology (Mintzberg, 1979).

Six-Sigma business strategies and principles Six-Sigma tools and techniques

Project management Statistical process controlData base decision making Process Capability analysisKnowledge discovery Measurement system analysisProcess control planning Design of experimentsData collection tools and techniques Robust designVariability reduction QFDDMAIC process FMEAMaster, Black and Green, and Yellow Belt Regression analysisChange management tools Analysis of mean and variances

Hypothesis testing, process mapping

Table III.Six-Sigma business

strategies and principlesand tools and techniques


systems

151

A process to add RFID technology and utilizing one or more Six-Sigma tools as a part ofthe supply chain’s value determination, and managing its performance, Figure 7 needs tobe taken into consideration. In the first step, the enterprise should identify the typeof supply chain that is under study in organization. Once all appropriate strategies forsupply chain system are determined and a need for having RFID technology as a part

Figure 5.A method for Six-Sigmajustification to be used inan organization

General Six SigmaUnderstanding of concepts

Six SigmaJustification

Techniques and toolsfor evaluation and

Justifying Six SigmaProjects

Evaluation of theImplementation of Six

Sigma

Evaluation CriteriaEmphasised for Justifying

Six Sigma Projects

Figure 6.Incorporating RFID basedSCM strategies andSix-Sigma

Management

SCM: Key Strategies

1. Competitive strategy 1. Reduced Shrinkage 1. Project Management2. Data base decision making3. Knowledge Discovery4. Process Control Planning5. Data collection tools andtechniques

6. Variablity reduction7. DMAIC process

9. Change management tools

8. Master. Black and Green andYellow belt

2. Reduced Material handling3. Increased data accuracy4. Improved informationsharing

5. Faster exception manage6. Production tracking7. Quality control

9. Material handling10. Space utilization11. Asset management12. Reduced stockouts13. Customer service14. Aftersales service15. Lower inventory

Management should match bothgroups of strategies and the RFIDbenefits with regrad to the type of theindustry that is in and the mainstrategies and objectives of the SCMorganization develop an appropriatelist of strategies for its new efficientand smart enterprise.

8. Supply and prod. Continuty

2. Product Development Strategy3. Marketing and Sale Strategy4. Supply Chain Strategy5. Strategic Fit6. Global Freight ManagementStrategy7. Customer focus Strategy8. Strategic Sourcing

Six Sigma: Key StrategiesRFID: Key Benefits for SCM

IJQRM30,2

152

of system is substantiated then a simulation model can be built for testing the systemwith and without the RFID technology. Thereafter, the results obtained from thecomputer program/simulation system can be tested using one or more Six-Sigma tools. Itis clearly then that management can decide to add RFID into the system or not.Mathematical and simulation models may also assess the impacts of RFID on supplychain dynamics. In this regard, Fleisch and Tellkamp have shown the potential benefitsof RFID in a retail supply chain for reducing inventory inaccuracies while at the sametime also reducing supply chain costs and out-of-stock levels. Gaukler has investigated onthe improvement of inventory replenishment decisions considering “informationvisibility” as a key dimension to an RFID-enabled supply chain.

Furthermore, using the concept proposed by Figure 7 an ideal RFID-based supplychain system can be designed to have the ultimate system outputs as managers andengineers do require. This is because at the presence of Six-Sigma concept navigationthe true level of sigma can be determined and then the improved sigma level after somechanges are made to the system can be determined. On the other hand, management canpropose a sigma level and then make all necessary adjustments to the system toapproach that using stock and flow and system dynamics concepts. Such computersimulation models helps us to study the dynamic behavior of the system as one or moreinside or outside factors changes or the rate-of-change of variables vary. Such modelbuildings are possible when parameters are deterministic, random, or fuzzy.

Figure 7.A process to add RFID and

Six-Sigma to a supplychain system

Enterprise diagnoses andsupply chain determination

Identify the right strategies forthe supply chain

Consider addingRFID technology

Modifygenerate reportson RFID-basedSCM six-sigmadriven system

Statistical process controlRegression AnalysisDesign of experimentsAnalysis of mean, variance,hypothesis testing, and processmapping

Pilot the proposed solutions

Test results using six-sigma

Full scale RFID implementation

Develop a computer simulation modelto test the system with and withoutthe RFID technololgy addition


systems

153

5. Case studiesThis section is devoted to the review of RFID-based supply chain cases presented in theliterature using Six-Sigma to manage the quality of products or system. The cases are:

. Six-Sigma and SCM (Yeh et al., 2007).

. Supply chain security (Lee and Whang, 2005).

. Service level management of non-stationary supply chain using direct neuralnetwork controller (Yoo et al., 2009).

5.1 Case 1Yeh et al. (2007) have conducted a research on the evaluation of the performance of SCMby using the Six-Sigma DMAIC process and a 2-tuple FLC model. In this model,researchers have modified the original 2-tuple model proposed by Herra and Martinez(2000) by utilizing a geometric operator and some translation functions. The modifiedmodel can make the linguistic representations of information and their computationsthat are confined to the 2-tuple setting domains and then ensure the consistent propertyof aggregation algorithm (Yeh et al., 2007).

Due to the facts that a number of researches had come to this conclusion that amulti-criteria performance evaluation model may be useful for the supply chain systemresearchers have selected several research techniques and methods for conducting thisstudy. First of all, the criteria framework with five criteria and 36 sub-criteria isconstructed by the Delphi method for evaluating the performance of SCM (Yeh et al.,2007). Second, the modified 2-tuple FLC model is used. Third, the Six-Sigma DMAICprocess is cited to organize and systematize the evaluation processes (Figure 8).

The list of criterions and sub-criterions used by the author for supply chainperformance evaluation is provided by authors in a tableau format (Yeh et al., 2007).The main criterions are considered to be:

. customer satisfaction improvement;

. business process and information integration;

Figure 8.The modified 2-tuple PLCmodel based on Six-SigmaDMAIC process forevaluating theperformance of SCM

Source: Adapted from the work of Yeh et al. (2007)

Define Problem DefinitionLiterature Review

and datacollection

Expert Interview

Model for evaluatingthe performance of

SCM

Criteria selection andweightings

identification

Case verification andoutcome analysis

ImprovementProposal

ExpertQuestionnair

2 tuple FLC algorithmMeasure

Analyze

Improve

Control

IJQRM30,2

154

. organization innovation capability;

. enterprise profit increasing; and

. human resources management.

5.2 Case 2The threat of terrorist attacks has introduced a new dimension into the problem ofsecurity forcing managements to look for the assurance of the supply chain security.This has happened right after September 11, 2001 accident in the US land. From one side,the public is concerned with the problem of being the weapons of mass destruction asa part of the shipments through the supply chain. From the other side, the private sectoris concerned with the costs of assuring security, and the potential disruptions associatedwith real or potential terrorist acts (Lee and Whang, 2005). To accomplish this goal,governments and industry have all gotten united by proposing proposals for creatinghigh level of security for supply chain in order to bring more confidence with that.In this case, one of the most effective strategies may be to apply the lessons of successfulquality improvement programs. The central theme of the quality movement – thathigher quality can be attained at lower cost by proper management and operationaldesign – is also applicable in supply chain security (Lee and Whang, 2005).

Lee and Whang (2005) have used some data from a high tech manufacturerparticipating in the initial SST pilots. It shows that how using the right approaches andtechnologies that higher supply chain security at lower costs can be achieved. In thisexample, they had considered a trade lane from Malaysia – Singapore to Seattle for the useof a hypothetical example for the presentation purposes. It is important to know that byusing the right management approach, new technology such as RFID, and re-engineeredoperational processes, one can obtain higher supply chain security at lower cost.

Researchers have discussed in their articles that the SST is based on solution providerssuch as Savi Technology, QUALCOMM, Sandler Travis Trade Advisory Services, andParsons Brinckerhoff (Lee and Whang, 2005). The SST process starts with theidentification of personnel, cargo, and transportation information about the container andits contents at the point of origin. This is followed by providing real-time supply chainsecurity and management information to partners involved in the end-to-end shipment,through integrating data from active-RFID (radio-frequency identification) tags andintrusion – detection sensors attached to the containers.

Without SST, i.e. in the current process, the safety stock is given by Silver et al.:

So ¼ kffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffim 2VarðTÞ þ s 2EðT þ RÞ

p:

With SST, we have advanced information about the lead time statistics, and so couldadjust the safety stock based on the knowledge of whether inspection is needed or not.The resulting expected safety stock is:

S1 ¼ k

�p0

ffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffim 2½uVarðxÞ þ VarðyÞ� þ s 2½EðxÞ þ Eð yÞ þ R� þ ð1 2 p0Þ

ffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffim 2uVarðxÞ þ s 2½EðxÞ þ R�

pq �:

One of the values of SST is to have the potential of giving advanced lead timeinformation to the manufacturer.

The inventory cost and service level tradeoff curves under the conventionalprocess and under smart and secure trade lane (SST) can be seen from the work of


systems

155

Lee and Whang (2005). With SST, the manufacturer could improve its service level from95 to 98 percent with the same inventory costs, which could result in potential increasesin profits due to less stock outs. Alternatively, SST can enable the manufacturer to reduceits inventory costs to achieve the same level of service. In other words, supply chainsecurity can be achieved with lower costs.

5.3 Case 3RFID technology will drive SCM toward the closed loop based control that monitors theevents of interest such as the sudden changes of critical performance measures andreacts to the events in a timely fashion (Yoo et al., 2009). Researchers have studied aclosed loop supply chain control based on a direct neural network controller. Theinteresting point about this model is that it is capable of maintaining the target by usingthe actual ones measured online not like a simulation based optimization model thatrequires forecasted demands. Researchers have performed some simulation basedexperiments for testing the performance of the controller against two kinds of unstablecustomer demand curves. Yoo et al. (2009) have proposed the direct neural networkcontroller that detects the significant change of customer demand indirectly by thechange of customer service level that is measurable online through the RFID technology,and generates appropriate decisions for maintaining the target service level by adjustingthe network weights. As authors have indicated in their publication:

[. . .] the results of main experiment was convincing that the direct neural network controlleris an adaptive and efficient policy generator of the RFID-enabled supply chain that hasnon-stationary customer demand patterns.

In this research, authors have set objectives as: maintaining the time average of theactual service levels of the wholesalers as close as possible to the target, by controllingthe decision variables in response to the changes in the external customer demands facedat the wholesalers. The target service level is defined by the supply chain manager. Theactual service level (SLt) at period t is the average of the service levels of the wholesalersand is defined as follows:

SLt ¼ 1 21

N

XN

i¼1

Lost SalestiCustomer Ordert

i

!

Yoo et al. (2009) have proposed a direct neural network controller for the closed loopbased SCM. In this regard, the configuration of the direct neural network controller canbe seen from the work of Yoo et al. (2009). The back propagation algorithm of Haykin(1998) is applied for the online neural network training. The training data are thedifferences between the target service level and actual ones which are periodicallyobtained during the supply chain operation.

The simulation was implemented using the ARENA 7.0 software. This simulationmodel consists of three suppliers, one manufacturer and three wholesalers. In thesimulation, the major external variable is the customer demand faced at the wholesalers.The other external variable is the supply rate.

6. Managerial implications and future worksRFID technology is another supporting tool for automating processes and improvingoperations management. The fact is that it can bring more power to the decision

IJQRM30,2

156

making team by providing on time information. This sophisticated technology is moreuseful 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.

. Cost saving and profit enhancement.

There are some areas that are in needs of more research:. Modeling a simulation-optimization computer program allowing users to test the

development of an RFID-based supply chain as a part of organization.. A Six-Sigma driven RFID-based supply chain can be designed and developed to

test the model proposed in this article.. An RFID-based supply chain can be designed using system thinking concepts,

DMAIC processes, and then solving that using dynamic simulationmethodology.

. More theory based empirical research is needed to enhance the construction ofSix-Sigma theory (Aboelmaged, 2010).

7. ConclusionRFID is a technology with full benefits not being emerged to all industries yet. It willbring a good opportunity for improving supply chain efficiency and hence to enhancethe profitability level of the organization. In this article, author has reviewed key pointsabout the basics of RFID, and presented an insight into the value that it can bring intothe organization. To understand the importance of supply chain, main strategies areidentified first. Then, fundamental concepts on Six-Sigma and key strategies of that arediscussed and some of the related tools are identified. A number of applications of RFIDin supply chain along with three large cases on RFID implementation in supply chain arediscussed. A new framework based upon the concepts of RFID, supply chain andSix-Sigma is presented and three appropriate cases from literature are reviewed. Thefirst reviewed case study demonstrates the use of Six-Sigma in the supply chain using2-tuple FLC model. In the second case study, the objectives are set as maintaining thetime average of the actual service levels of the wholesalers as close as possible to thetarget, by controlling the decision variables in response to the changes in the externalcustomer demands faced at the wholesalers. The target service level is defined by thesupply chain manager. The actual service level at period t is defined as the average of theservice levels of the wholesalers. In the third case, researchers have studied a closed loopsupply chain control based on a direct neural network controller. Author has employedARENA computer software to solve the problem which is comprised of three suppliers,one manufacturer, and three wholesalers.


systems

157

With this research a sophisticated Six-Sigma driven RFID-enabled supply chainsystem can be designed to have the ultimate system outputs as managers and engineersdo require. The development process of such systems is possible using the conceptof system dynamics. Since this is the first attempt to combine RFID, Six-Sigma, andsupply chain strategies into one framework it makes a significant contribution to theliterature of SCM.

References

Aboelmaged, M.G. (2010), “Six Sigma quality: a structured review and implications for futureresearch”, International Journal of Quality &Reliability Management, Vol. 27 No. 3,pp. 269-318.

Angeles, R. (2005), “RFID technology: supply-chain applications and implementations issues”,Information Systems Management, Vol. 22 No. 1, pp. 51-65.

Antony, J., Antony, F. and Kumar, M. (2007), “Six Sigma in service organizations: benefits,challenges and difficulties, common myths, empirical observations and success factors”,International Journal of Quality & Reliability Management, Vol. 24 No. 3, pp. 294-311.

Antony, J., Kumar, M. and Madu, C. (2005), “Six Sigma in small and medium-sized UKmanufacturing enterprises: some empirical observations”, International Journal of Quality& Reliability Management, Vol. 22 No. 8, pp. 860-74.

Chao, C-C., Yang, J.M. and Jen, W. (2007), “Determining technology trends and forecasts of RFIDby a historical review and bibliometric analysis from 1991 to 2005”, Tchnovation, Vol. 27No. 5, pp. 268-79.

Chow, H.K.H., Choy, K.L. and Lee, W.B. (2003), “A dynamic logistics process knowledge-basedsystem – an RFID multi-agent approach”, Knowledge Based Systems, Vol. 20, pp. 357-72.

Glidden, R., Bockorick, C., Cooper, S., Diorio, C., Dressler, D. and Gutnik, V. (2004), “Design ofultra-cost UHF RFID tags for supply chain applications”, IEEE CommunicationsMagazine, Vol. 42 No. 8, pp. 140-51.

Haykin, S. (1998), Neural Networks: A Comprehensive Foundation, Prentice-Hall, Upper SaddleRiver, NJ.

Herra, F. and Martinez, L. (2000), “An approach for combining linguistic and numericalinformation based on two-tuple fuzzy linguistic representation model in decision making”,International Journal of Uncertainty, Fuzziness Knowlege-Based systems, Vol. 8, pp. 539-62.

Huanga, G.Q., Zhanga, Y.F. and Jiang, P.Y. (2007), “RFID-based wireless manufacturing forwalking-worker assembly islands with fixed-position layouts”, Robotics& Computer-Integrated Manufacturing, Vol. 23, pp. 469-77.

Kanji, G.K. and Wong, A. (1999), “Business excellence model for supply chain management”,Total Quality Management, Vol. 10, pp. 1147-68.

Karkkainen, M. (2003), “Increasing efficiency in the supply chain for short life goods using RFIDtagging”, International Journal of Retail & Distribution Management, Vol. 31 No. 10,pp. 529-36.

Lee, H.L. and Ozer, O. (2007), “Unlocking the value of RFID”, Production and OperationsManagement, Vol. 16 No. 1, pp. 40-64.

Lee, H.L. and Whang, S. (2005), “Higher supply chain security with lower cost: lessons from totalquality management”, International Journal of Production Economics, Vol. 96, pp. 289-300.

Li, S. and Visich, J.K. (2006), “Radio frequency identification: supply chain impact andimplementation challenges”, International Journal of Integrated Supply ChainManagement, Vol. 2 No. 4, pp. 407-24.

IJQRM30,2

158

Mader, D.M. (2002), “Design for Six Sigma”, Quality Progress, July, pp. 82-6.

Mangiameli, P. and Roethlein, C.J. (2001), “An examination of quality performance at differentlevels in a connected supply chain: a preliminary case study”, Integrated ManufacturingSystems, Vol. 12, pp. 126-33.

Mintzberg, H. (1979), “An emerging strategy of ‘direct’ research”, Administrative ScienceQuarterly, Vol. 24, pp. 582-9.

Narasimhan, R. and Jayaram, J. (1998), “Causal linkages in supply chain management:an exploratory study of North American manufacturing firms”, Decision Sciences, Vol. 29,pp. 579-605.

Ngai, E.W.T., Suk, F.F.C. and Lo, S.Y.Y. (2008a), “Development of an RFID based Sushimanagement system: the case of a conveyor belt sushi restaurant”, International Journal ofProduction Control, Vol. 112 No. 2, pp. 630-45.

Ngai, E.W.T., Cheng, T.C.E., Au, S. and Lai, K.H. (2007), “Mobile commerce integrated with RFIDtechnology in a container depot”, Decision Support Systems, Vol. 43, pp. 62-76.

Ngai, E.W.T., Moon, K.K.L., Riggins, F.J. and Candace, Y.Y.I. (2008b), “RFID research:an academic literature review (1995-2005) and future research directions”, InternationalJournal of Production Control, Vol. 112 No. 2, pp. 510-20.

Nogee, A. (2004), RFID Tags and Chip: Changing the World for Less than the Price of a Cup ofCoffee, Stat/MDR, Santa Clara, CA.

Olhager, J. and Selldin, E. (2004), “Supply chain management survey of Swedish manufacturingfirms”, International Journal of Production Economics, Vol. 89 No. 3, pp. 353-61.

Pepper, M.P.J. and Spedding, T.A. (2010), “The evolution of lean Six Sigma”, InternationalJournal of Quality & Reliability Management, Vol. 27 No. 2, pp. 138-55.

Potter, B. (2005), “RFID: misunderstood or untrustworthy?”, Network Security, April, pp. 17-18.

Robinson, C.J. and Malhotra, M.K. (2005), “Defining the concept of supply chain qualitymanagement and its relevance to academic and industrial practice”, International Journalof production Economics, Vol. 95, pp. 315-37.

Rosenzweig, E.D., Roth, A.V. and Dean, J.W. Jr (2003), “The influence of an integration strategyon competitive capabilities and business performance: an exploratory study of consumerproducts manufacturers”, Journal of Operations Management, Vol. 21, pp. 437-56.

Segismundo, A. and Miguel, P.A.C. (2008), “Failure mode and effects analysis (FMEA) in thecontext of risk management in new product development, a case study in an automotivecompany”, International Journal of Quality & Reliability Management, Vol. 25 No. 9,pp. 899-912.

Sheffi, Y. (2004), “RFID and innovation cycle”, International Journal of Logistics Management,Vol. 15 No. 1, pp. 1-10.

Strassner, B. and Chang, K. (2003), “Integrated antenna system for wireless RFID tag inmonitoring oil drill pipe”, Proceedings of the International Symposium on Antennas andPropagation Society, Vol. 1, pp. 208-11.

Tajima, M. (2007), “Strategic value of RFID in supply chain management”, Journal of Purchasing& Supply Management, Vol. 13, pp. 261-73.

Tan, K.C., Kannan, V.R. and Handfield, R.B. (1998), “Supply chain management supplierperformance and firm performance”, International Journal of Purchasing & MaterialsManagement, Vol. 34 No. 3, pp. 2-9.

Tan, K.C., Lyman, S.B. and Wisner, J.D. (2002), “Supply chain management a strategicperspective”, International Journal of Operations & Production Management, Vol. 22 No. 6,pp. 614-31.


systems

159

Tan, K.C., Kannan, V.R., Handfield, R.B. and Ghosh, S. (1999), “Supply chain management:an Empirical study of its impact on performance”, International Journal of Operations& Production Management, Vol. 19, pp. 1034-52.

Tanik, M. (2010), “Improving ‘order handling’ process by using QFD and FMEA methodologies:a case study”, International Journal of Quality & Reliability Management, Vol. 27 No. 4,pp. 404-23.

Tennant, G. (2002), Design for Six-Sigma, Gower Publishing Ltd, Aldershot.

Tzeng, S.-F., Chen, W.-H. and Pai, F.-Y. (2008), “Evaluating the business value of RFID: evidencefrom five case studies”, International Journal of Production Economics, Vol. 112, pp. 601-13.

Wamba, S.F., Bendavid, Y., Lefebvre, L.A. and Lefebvre, E. (2006), “RFID technology and theEPC network as enablers of mobile business: a case study in a retail supply chain”,International Journal of Networking and Virtual Organizations, Vol. 3, pp. 450-62.

Yeh, D.Y., Cheng, C.-S. and Chi, M.-L. (2007), “A modified two-tuple FLC model for evaluating theperformance of SCM: by the six-sigma DMAIC process”, Applied Soft Computing, Vol. 7,pp. 1027-34.

Yeung, A.C.L. (2008), “Strategic supply management, quality initiatives, and organizationalperformance”, Journal of Operations Management, Vol. 26 No. 4, pp. 490-502.

Yeung, A.C.L., Chan, L.Y. and Lee, T.S. (2003), “An empirical taxonomy for quality managementsystems: a study of the Hong Kong electronics industry”, Journal of OperationsManagement, Vol. 21 No. 1, pp. 45-62.

Yeung, A.C.L., Cheng, T.C.E. and Lai, K.H. (2005), “An empirical model for managing quality in theelectronics industry”, Production and Operations Management, Vol. 14 No. 2, pp. 189-204.

Yoo, J.S., Hong, S.R. and Kim, C.O. (2009), “Service level management of non-stationary supplychain using direct neural network controller”, Expert Systems with Applications, Vol. 36No. 2, pp. 3574-86 ( part 2).

Zare Mehrjerdi, Y. (2010), “Quality function deployment and its extensions”, InternationalJournal of Quality & Reliability Management, Vol. 27 No. 6, pp. 616-40.

Zare Mehrjerdi, Y. (2011), “Six-Sigma: methodology, tools and its future”, Assembly Automation,Vol. 31 No. 1, pp. 79-88.

Further reading

Anonymous (2004), “Another link in the chain”, Card Technology Today, Vol. 16 No. 4, pp. 11-12.

Behara, R.S., Fontenot, G.F. and Gresham, A. (1995), “Customer satisfaction measurement andanalysis using Six Sigma”, International Journal of Quality & Reliability Management,Vol. 12 No. 3, pp. 9-18.

Fleisch, E. and Strassner, M. (2003), The Promise of Auto-ID in the Automotive Industry, Auto-IDCenter, Massachusetts Institute of Technology, Cambridge, MA.

Ulusoy, V., Grosso, O.D., Dell’Ova, F. and Prior, C. (2007), “Emerging RFID technologyroadmap”, EU RFID Forum-2007.

Yin, R.K. (2003), Case Study Research: Design and Methods, 3rd ed., Sage, Thousand Oaks, CA.

Corresponding authorYahia Zare Mehrjerdi can be contacted at: [email protected]

IJQRM30,2

160

To purchase reprints of this article please e-mail: [email protected] visit our web site for further details: www.emeraldinsight.com/reprints

Documents

A framework for Six‐Sigma driven RFID‐enabled supply chain systems