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ORIGINAL ARTICLE
Key performance indicators for the evaluation
of RFID-enabled B-to-B e-commerce applications:
the case of a five-layer supply chain
Ygal Bendavid ÆE
´lisabeth Lefebvre Æ
Louis A. Lefebvre ÆSamuel Fosso-Wamba
ÓSpringer-Verlag 2008
Abstract This paper attempts to track key performance indicators in order to
assess the impacts of RFID technology in a five layer supply chain in the utility
sector. Findings point to some performance improvements especially when RFID
enables more integrated and more collaborative B-to-B e-commerce solutions. The
research design involves multiple units and levels of analysis, and relies on diverse
data collection methods and generates a vast amount of data. The concept of a living
laboratory proved to be an insightful approach for exploring issues related to inter-
company connectedness and relationship management.
Keywords e-Commerce Supply chain Performance RFID technology
1 Introduction
Radio-Frequency Identification (RFID) technology has been identified as one of the
ten greatest contributory technologies of the twenty-first century (Chao et al. 2007).
In the context of supply chain management (SCM), the technology has been
considered as ‘‘the next revolution’’ (Srivastava 2004 pp. 1) since it allows the
tracking of each object or product in real time in the supply chain (SC). However,
An earlier version of this paper was published in the proceedings of the 40th Hawaii International
Conference on System Sciences (HICSS-40).
Y. Bendavid (&)E
´. Lefebvre L. A. Lefebvre S. Fosso-Wamba
Department of Technology Management, ePoly Center of Expertise in Electronic Commerce,
E
´cole Polytechnique de Montre
´al, Station Centre-Ville, C.P. 6079, Montreal,
QC H3C 3A7, Canada
e-mail: ygal.bendavid@polymtl.ca
S. Fosso-Wamba
School of Information Systems & Technology (SISAT), University of Wollongong,
Wollongong, Australia
123
Inf Syst E-Bus Manage
DOI 10.1007/s10257-008-0092-2
while RFID seems to offer a unique potential to SCM improvements over existing
automatic identification and data capture (AIDC) technologies, some skepticism
remains in the community of potential adopters since there is no clear indication of
the model to follow when assessing the impacts and benefits of an RFID enabled
SC.In particular, return on investment (ROI) is uncertain if one attempts to assess
both cost reductions and value creation at the individual organization level and at a
collective level (i.e. including all the SC members). This difficulty adds to the
challenge for RFID adoption which requires interorganizational cooperation among
a network of firms to be involved in implementing this technology in a business-to-
business electronic commerce (B-to-B e-commerce) context.
The main premise of this paper is that RFID technology acts as a ‘‘disruptive’’
enabler of collaborative SC and requires more integrated B-to-B e-commerce
strategies. The overall objective is to improve our understanding of the potential
impacts of RFID technology in the context of one specific supply chain (SC). More
specifically, this paper attempts to (1) identify and validate key performance
indicators (KPIs) that are useful to trace the impacts of RFID technology in each
individual organization and in the SC as a whole, (2) assess these impacts and (3)
analyze how RFID implementation strategies evolve into more integrated B-to-B e-
commerce strategies as mutual consensus among SC members gradually arises.
Since these research objectives clearly fall within the realms of exploratory
research, it is reflected in the research design which consists of a longitudinal field
study involving five layers of one SC in the utility sector.
The rest of the paper is organized as follows. First, RFID technology is briefly
presented and, conceptual and contextual issues are then discussed. Second, the
overall research design is outlined, the research sites are described and data
collection methods are exposed. Third, the main results are then presented and
discussed. The paper concludes with implications and future research avenues.
2 Technological, conceptual and contextual issues
2.1 RFID technology
Considered as a wireless AIDC technology, RFID not only refers to the tag
containing a chip, but also to an antenna for sending and receiving data, an
interrogator, also called reader, and its antennas to communicate through radio
frequency with the tag, and finally, a middleware that manages, filters, aggregates
and routes the data captured. All these elements are essential to constitute a ‘‘basic’’
RFID system (Asif and Mandviwalla 2005). This RFID system is generally
integrated with enterprises systems (e.g. WMS: warehouse management system,
enterprise resource planning: ERP) where specific applications are hosted and may
be coupled with other technologies such as global positioning system (GPS). Today,
various electronic business models coexist depending on where product information
is stored: (a) on the tags, (b) on directories in private networks, or (c) on directories
in external databases that are accessible over the internet. The latter model,
proposed by EPCglobal, may represent the dominant design in the context of SCM
Y. Bendavid et al.
123
applications and is known as the EPC (Electronic Product Code) network
(EPCglobal 2004). The main idea behind the EPC network (Thiesse and
Michahelles 2006) is to create an ‘‘Internet of things’’ that consists of a
technological infrastructure, including UHF passive RFID tags for any kind of
physical objects that could eventually be self-managed in real time. By leveraging
RFID technology and the internet, and building on enterprise systems capabilities, it
offers the potential to modify the way in which electronic commerce is conducted.
Furthermore, some integration (web) service providers such as GXS.com have
recently decided to integrate RFID technology with data synchronization capabil-
ities in their service offer, revamping the opportunities provided by ‘‘collaboration
electronic marketplaces’’ (Markus and Christiaanse 2003).
RFID has been the topic of interest in various fields of research (Ngai et al. 2008;
Chao et al. 2007) related to the technology itself (Asif and Mandviwalla 2005),
innovation management and potential trajectories for RFID adoption (Sheffi 2004)
implementation in an inter-organizational context (Curtin et al. 2007), CRM
(customer relationship management) (Smith 2005), PLM (product lifecycle
management) integrating reverse SC activities (Kiritsis et al. 2003), and an
increasing number of papers in SCM. In a recent historical review and bibliometric
analysis, Chao et al. (2007, pp. 5) found that RFID technological innovation had
passed through three eras focusing on (1) ‘‘tag innovation’’ such as better data
communication, (2) applying ‘‘tag to automation, integration services and ubiqui-
tous computing’’ at which point applications such as smart cards became pervasive,
and more recently, (3) ‘‘manufacturing automation, logistical control, and e-
commerce applications.’’ RFID is now being applied to track any kind of goods in a
wide range of supply chains, with lead users in the consumer goods industry.
However, today’s RFID adoption is still limited due to barriers such as (1)
technology current weaknesses (e.g. read rate, data reliability, high rate of new
hardware and software introduction, lack of unified standards for interoperability),
(2) relatively high costs related to hardware, software customization, systems
configuration and integration, and training, (3) security issues (i.e. data access,
privacy and legislation), and (4) lack of expertise (i.e. specialized skills required for
RFID implementation) (5) patent challenges (i.e. EPCglobal’s intellectual property
(IP) policy and concerns about royalty costs) (Asif and Mandviwalla 2005; Wu et al.
2006; Li et al.2006).
2.2 Conceptual issues
2.2.1 Previous work on RFID impact in the SC
Previous work on RFID impacts in the SC can be classified in three main groups:
conceptual papers, simulation papers and field studies.
Among the conceptual papers, (Srivastava 2004) describes some critical trends
and implications of applying RFID to SCM, detailing its benefits as well as the
impediments to implementation. With respect to SC strategy, Gunasekaran and Ngai
(2005) suggest that RFID may facilitate the development of emerging SC
configuration by acting as an enabler of a build-to-order SCM strategy. More
Key performance indicators for the evaluation of RFID-enabled B-to-B e-commerce applications
123
broadly, Pramataris et al. (2005) consider RFID as a technology that enables
‘‘smarter supply and demand chain’’ facilitating collaboration practices such as
CPFR (collaborative planning, forecasting and replenishment).
Many mathematical and simulation models have been used to assess the impact
of RFID on SC performance. For instance, Lee et al. (2004) demonstrate, in
manufacturer-retailer SC environments, the potential benefits of RFID in inventory
reduction and service level improvement. Gaukler (2005) presents a model of the
benefits of ‘‘item level RFID’’ to two SC members. The author also investigates the
improvement of inventory replenishment decision considering some specific aspects
of RFID enabled SC such as the increase in ‘‘information visibility’’. Hou and
Huang (2006) propose six models of cost-benefit analysis for RFID applications in
different logistics activities in the printing industry. By simulating a ‘‘three echelon
SC’’, Fleisch and Tellkamp (2005) examine the relationship between inventory
inaccuracy and performance in a retail SC, and the way RFID may improve
efficiencies by reducing SC costs and out of stock levels.
Among articles with empirical results from field and laboratory studies,
Loebbecke (2005) examines RFID applications in the retail SC based on the early
Metro group pilots in Germany, suggesting that IT innovations (including RFID) in
combination with the new marketing concept of ‘‘future stores’’ have contributed to
a sales increase of about 23% compared to the preceding year while ‘‘reducing out
of stock by 9–14% and store space by about 11%’’. Hardgrave et al. (2005) present a
study commissioned by Wal-Mart where they examine the influence of RFID on
potential improvements such as the reduction of out of stocks. While preliminary
results indicate that RFID reduced out of stocks by 16% during the period of their
study (i.e. a period of 6 months in 24 Wal-Mart stores), the authors suggest that
these impacts should be considered with caution until ‘‘the RFID effect’’ can be
better isolated. By looking at the business process level, Lefebvre et al. (2005)
explore the impacts of RFID in a retail SC, and shows the emergence of ‘‘intelligent
processes’’ and RFID enabled B-to-B e-commerce. Finally, Fosso Wamba et al.
(2007) explore the impact of RFID technology and the EPC Network on mobile
B2B e-commerce. These authors point out some major impacts in terms of (1)
business and operational process reengineering, (2) IT infrastructure requirements,
(3) information sharing/synchronization between SC members, (4) human and
physical resource utilization, and finally, (5) strategy redefinition.
2.2.2 SCM performance and KPIs
As mentioned by (Gunasekaran and Tirtiroglu 2001, pp. 72) ‘‘measures and metrics
are needed to test and reveal the viability of strategies without which a clear
direction for improvement and realization of goals would be highly difficult’’. Yet,
‘‘performance measurement continues to present a challenge to operations managers
as well as researchers’’ (Melnyk et al. 2004, pp. 210). This is certainly true for
evaluating the viability of RFID-enabled SC scenarios. With respect to previous
work on the impact of RFID in SC contexts, multiple KPIs are used, such as ‘‘level
of inventory (reduction), service level (improvement), (out-of) stock level, storage
Y. Bendavid et al.
123
space (minimum), handling costs, process improvement (automation, cancellation),
etc.’’ These studies certainly provide valuable information on the impacts of RFID
in SC, but do not offer an overall framework to evaluate impacts at the SC level.
Some guidelines can, however, be found in the operation and production
management literature with various contributions such as the ones proposed by
Beamon (1999), Bourne et al. (2000), Holmberg (2000), Lapide (2000), Lambert
and Pohlen (2001), Lockamy III and McCormack (2004), Neely et al. (1995,2000),
Stewart (1997), Van Hoek (1998), Gunasekaran and Tirtiroglu (2001), and others. A
recent review made by Lambert et al. (2005 pp. 33) suggests that the literature
‘‘prescribe two approaches to managing inter-company connectedness. One is based
on transactional efficiency and the other is based on relationship management’’
insisting on the fact that these two approaches are not mutually exclusive. These
authors also identified five SCM frameworks that recognize the need to implement
business processes. Among these, they selected and compared the SC Operation
Reference Model (SCOR) and the Global Supply Chain Forum (GSCF) framework
which include business processes that could be used by management to achieve
cross functional integration (i.e. activities across corporate functions) and cross
organizational integration (i.e. connections with customers and suppliers).
Adhering to the SCOR model previously introduced in the academic literature by
Stewart (1997), Gunasekaran and Tirtiroglu (2001) propose a framework for
measuring the performance of SC which includes metrics that are classified into
strategic, tactical and operational. These metrics are also distinguished as financial
and non-financial, so that suitable costing methods based on activities can be applied.
Finally the authors aligned selected metrics to four basic links that constitute the SC,
namely plan, source, make, deliver (and more recently: return). A few studies (for
instance, Lockamy III and McCormack 2004; Gunasekaran et al. 2004) also based
their investigations on the SCOR model. This paper builds on previous work and we
use the SCOR model as the starting point for the validation of KPIs.
2.3 RFID’s potential in the utility sector—contextual issues
Electricity utility companies, by their very nature, deal with a diverse portfolio of
external customers (industrial, commercial, residential) and internal customers.
These internal customers may include the divisions in charge of electricity
generation, network maintenance and operation, electricity distribution, construc-
tion of new plants, etc. Each of these customers require different service levels
(Hanson et al. 2005), which enhances the complexity of demands on the SC.
The utility market is experiencing ‘‘change on a scale not seen since the early
1900’s, (HP 2004 pp. 1). Deregulation is restructuring this traditionally monopo-
listic and publicly owned industry into an increasingly competitive environment,
forcing players to consider mergers and acquisitions, to modify their business
practices, and to dissociate the electricity generation from the transmission and
distribution (Glassberg et al. 2006). Because utilities have limited options to
generate more revenues through higher prices, they are now focusing on reducing
costs by exploring strategies that target SCM efficiency. In the 1990s, most of the
Key performance indicators for the evaluation of RFID-enabled B-to-B e-commerce applications
123
utilities adopted centralized electronic platforms such as ERPs, replacing bundles of
private proprietary systems with updated electronic platforms compatible with B-to-
B e-commerce initiatives such as e-procurement and electronic marketplace
applications. Utilities are now looking toward emerging technologies such as RFID
to drive transaction cost reductions and optimize their operations.
Since 2002, utilities are leveraging on their established electronic platforms and
are now adopting more integrated and collaborative approaches to demand
management. One of the earliest applications of RFID technology in the utility
industry was to secure residential electricity meters in order to prevent electricity theft
(RFID Journal 2005). Applications are now diversified, including active RFID
systems and applications such as tracking and access control of vehicles and
personnel to power plants (RFID Journal 2002). Furthermore, utilities are also
looking toward improving mobile field service and asset management (SAP 2005)as
RFID systems could allow SC members to identify, locate, track and monitor each
and every item (product, tools, poles, vehicles, etc.) and to obtain continuous real-
time information on these items. This could potentially alter their B-to-B e-commerce
strategies with their upstream and downstream business partners in the SC.
3 Methodology
Prater et al. (2005) suggest that the research on RFID usage in SCM should be
considered within a specific business and market context as it is affected by market
forces. Since the implementation of RFID technology is mostly driven by product
specificity, a product value chain perspective (PVC) (Gartner 2002) is adopted.
3.1 Research design
As the main objective of the overall study is to improve our understanding of RFID
impacts in the context of specific SC activities, the research design corresponds to
an exploratory research initiative. A longitudinal field research was conducted in
five distinctive phases (including the preparation phase), over a period of two and
half years (Table 1).
The initial phase (vision and orientation) corresponds to the development of
strategic alliances with technological and industrial partners for selected RFID
applications in one SC. Opportunities are then explored in phase 1 by examining
primary motivation, assessing product value chain and mapping actual intra- and
inter-business processes while the potential of RFID technology is assessed in phase
2. In phase 3, SC scenarios integrating RFID technology, selected in phase 2 are
simulated in order to retain one final choice for the proof of concept (step 11) which
is validated in the university laboratory setting. During the simulation, the products
were passed through the RFID portals, tags were read, and information was
interpreted in the middleware and the corresponding transaction was transferred into
the ERP. Information on inventory was automatically updated in the ERP as the
products were shipped. In-transit visibility was possible through RFID tags, coupled
with wireless devices (PDA equipped with reader) and linked to location-based
Y. Bendavid et al.
123
systems (LBS). Finally, KPIs are identified and validated with SC members and
performance improvements, arising from the implementation of RFID technology,
are assessed (phase 4). To date, following the proof of concept, the pilot project in
the real life environment is still pending, as a major reorganization took place in the
‘‘Materials division’’ of the utility firm which represents a key actor in the adoption
Table 1 Phases undertaken in the field study
Preparation phase: vision and orientation (starting in July 2004 with a RFID conference held at the
research center)
Step a Choice of test bed based on the partners accessibility, openness, readiness, and,
potential RFID applications
Step b Vision statement by or with potential industrial and technological partners (focus
groups)
Step c Identification of generic business applications and commitment from strategic
business partners to the research project
Phase 1: Intra- and inter-firm opportunity seeking (starting in May 2005 within one specific supply chain)
Step 1 Determination of the primary motivation towards the use of RFID (why?)
Step 2 Analysis of the product value chain (PVC) activities specific to a given product
(what?)
Step 3 Identification of the critical activities in the PVC, (which activities to select and why?)
Step 4 Mapping of the network of firms supporting the PVC to understand the relationships
between the firms supporting the product (who and with whom?)
Step 5 Mapping of (‘‘As is’’) intra- and inter-business processes for critical activities (how
within and between organizations?).
Time and motion data capture and analysis
Phase 2: intra- and inter-firm scenario building integrating RFID technology (starting in September 2005
to May 2006)
Step 6 Evaluation of RFID opportunities with respect to the product (level of granularity), to
the firms involved in the SC and to the specific PVC activities
Step 7 Evaluation of RFID potential applications including scenario building and process
optimization (‘‘As could be’’) (how within and between organizations?)
Step 8 Mapping of intra- and inter-organizational processes integrating RFID technology
Step 9 Validating business processes and technological solutions integrating RFID
technology with key respondents. Feasibility analysis and evaluation of the
challenges including ERP and middleware integration, process automation and SC
alignment
Step 10 Simulating several scenarios for final choice of proof of concept
Phase 3: scenario validation and demonstration (held in October 2006)
Step 11 Proof of concept in laboratory simulating physical and technological environments,
and, interfaces between SC players. Feasibility demonstration of RFID technology
and evaluation assessment (ERP and middleware integration and process
automation for all the SC members)
Step 12 Data mining and strategic enterprise management. Defining business rules in the
middleware
Phase 4: performance measures and RFID impact assessment (conducted in parallel of phase 2 and 3)
Step 13 Identification and validation of KPIs at the firm level and at the SC level
Step 14 Assessment of impacts of RFID technology using KPIs
Step 15 Assessment of performance improvements in different RFID enabled SC scenarios
Key performance indicators for the evaluation of RFID-enabled B-to-B e-commerce applications
123
process decision. On the other hand, the project was presented to a strategic
committee for further consultation. While previous work concentrated on phases 1,
2 and 3 (Lefebvre et al. 2005), within the scope of this paper, the discussion will
mainly emphasize the results obtained within phase 4.
3.2 Research sites
The field study encompassed five layers of one SC (bottom part of Fig. 1). The
starting point is the strategic first-tier supplier site (layer 1) where the products,
which are key components of electricity power grids, namely overhead distribution
transformers (poletype), are manufactured, and kept until a monthly purchase order
is received from two distribution centers (layer 2) where products are received and
kept until a transfer order is generated on a weekly basis. They are then shipped to
some of the ninety stores (layer 3) where they constitute an inventory. Once a new
project starts or a power outage occurs, hundreds of individual operators (layer 4)
can access these stores to take away specific products. Finally, one recycling center
(layer 5) constitutes the last layer of the SC, where damaged products are brought to
be repaired or dismantled and recycled. The last four layers of the SC are part of the
same organization which is a public utility company, but are managed indepen-
dently (as profit centers). Strategic products selected for this study are evaluated at
15,000 units per year, but are available in 65 different models and have to be
customized, based on the monthly purchase order, which in turn depends on the
power grid requirements. In fact, while a new project can be planned in advance,
power outages are more random events, depending on weather conditions such as
thunder, storms, extreme heat or cold, etc. Damaged products and replenishment
orders cannot be fully planned and therefore, the products transit through the
‘‘Materials division’’ of the two distribution centers (DCs) owned by the large utility
firm. Yet missing one product could seriously affect the reliability of the power grid.
The product is therefore considered as critical by all members of the five layer SC.
One area of potential application for RFID may be SC activities related to
procurement, since for average utility industry players, sourcing costs are between
12 and 18% of its regulated revenue (Glassberg et al. 2006). Moreover, as all SC
members could benefit from rendering more efficient their processes, individual
specific interests are sometimes conflictual such as the ‘‘level of inventory’’ at the
supplier level, or the ‘‘minimum downtime’’ at the operator level, and thus could
compromise SC collaboration. Again, this suggests the importance to look at the
global performance of the SC without compromising specific interests, when
identifying the KPIs for the evaluation of RFID enabled B-to-B e-commerce
applications.
3.3 Data collection
Researchers involved in the field study played different roles ranging from full
participants (when performing the simulation procedures) to participants as
observers (mapping actual business processes) to complete observers (when
collecting on-site data for the ‘‘time and motion’’ analysis).
Y. Bendavid et al.
123
Plan and
Source
Assemble
and test
Deliver
Plan
Deliver
Vertical KPIs
e.g. days of inventory,
inventory carrying cost
(raw material, work in
progress, finished
goods), security stock;
capacity utilization,
forecast accuracy,
frequency and quality
of delivery
Vertical KPIs
e.g. minimum
downtime,
replacement
time, cost per
operation
hour
Maintenance
and repair
Source and
Install
Deliver
Source
Plan
Source
SUPPLIER LEVEL
DC LEVEL STORE LEVEL OPERATOR
LEVEL
Vertical KPIs
e.g. days of
inventory, inventory
carrying cost
(finished products),
security stock;
purchase order
cycle, deliver order
cycle
Vertical KPIs
e.g. days of
inventory, inventory
carrying cost
(finished products) ,
fixed assets,
product variety
Return
Product
equipped
with
RFID tag
One strategic supplier Two distribution centers Ninety stores Hundreds of operators
RECYCLER
LEVEL
One Recycler
Vertical KPIs
e.g. amount of metal
recovered (kg), amount
of oil recovered (liters),
number of components
reworked, number of
products recycled,
return transportation
costs
Activities 1
st
level KPIs
Horizontal KPIs (Collective performance optimization)
reliability (e.g. quality of deliveries), responsiveness to urgent deliveries, (e.g. order fulfillment lead time); flexibility (e.g. SC
response time); asset management efficiency (e.g. cash-to-cash cycle time)
Recycle
Return
Layers of the Supply Chain
Fig. 1 Main KPIs as validated in the five layer supply chain
Key performance indicators for the evaluation of RFID-enabled B-to-B e-commerce applications
123
Because RFID projects in a SC context can be considered as business process
reengineering projects often integrating new information technologies, they require
the involvment of multi-disciplinary teams that can assess realistically the potential
of the technologies within the different organizational contexts. Therefore, data
collection involved (1) multiple on-site observations in the organizations from the
five layers of the SC (namely, supplier, distribution centers, stores, operators and
recycling center) in order to map the actual SC processes and carry out the ‘‘time
and motion’’ study, (2) semi-structured interviews with managers and operators to
validate data and resolve potential inaccuracies (3) brainstorming and focus group
activities conducted in the university-based research center with functional
managers from the organizations (director of operations, warehouse managers,
project managers) in the five layer of the SC, internal technical people (ERP, IT
Network) and RFID experts from solution providers to identify areas of RFID
opportunities and validation of retained scenarios. Further, six focus groups were
organized in order to reach mutual consensus amongst all the SC members on the
relative importance of the different KPIs. For phases 3 and 4, data was gathered
following a ‘‘Living Lab’’ approach used for example in German and Finnish
laboratories (e.g. Loeh et al. 2005; Eriksson et al. 2007) where we simulated RFID-
enabled SC scenarios, including all supporting information technologies such as the
firm’s middleware, and ultimately its ERP or equivalent systems. In the context of
our paper, the concept of the ‘‘living lab.’’ refers to a methodology where
innovations, such as B-to-B e-commerce innovative applications are designed,
validated, refined and finally implemented through prototypes in collaborative near
real-world environments (i.e. the laboratory). This in turn requires a broader
involvement of users and stakeholders in the design, functioning and potential
impacts of this innovative application. Therefore, the assessment of RFID-enabled
SC scenarios on performance improvements was also simulated in the laboratory.
Observations during the simulation and the focus groups were captured by the
researchers on an electronic notebook (or field journal).
4 Results and discussion
4.1 Validated vertical and horizontal KPIs in the SC
Figure 1displays the value chain for one selected product. All the members from
the five-layer SC are positioned relative to the main activities they conduct (bottom
part of Fig. 1). The six focus groups allowed, through several rounds of iterations, to
identify the most important key first level KPIs that could be used to monitor the
collective performance of the whole SC (horizontal KPIs) and those that are useful
for each individual firm within the SC (referred to as vertical KPIs).
An initial list of KPIs was extracted from the SCOR model and proposed as a
template for discussion. Functional managers from organizations of the last four
layers of the SC were already familiar with the proposed model that was already
used as a reference to assess their respective performance. At the supplier level, no
formal performance model was used, which implied initial familiarization with the
Y. Bendavid et al.
123
SCOR model, and additional rounds of iteration for the identification, the selection
and the validation of pertinent KPIs. Examples of validated KPIs are displayed in
the upper part of Fig. 1.
Horizontal KPIs are considered by the participants as ‘‘high level indicators’’ as
they provide an overall assessment on four major dimensions: reliability,
responsiveness, flexibility and asset management efficiency. For example, the
reliability is measured on the ‘‘quality of the deliveries’’ at all levels of the SC. The
underlying logic would be that one unreliable SC member would affect the whole
SC performance, or the necessity to identify ‘‘the weak link in the chain’’.
Vertical KPIs are of specific interest to one particular member of SC such as
‘‘capacity utilization’’ at the supplier level, ‘‘minimum downtime’’ at the operator
level, or ‘‘number of components reworked’’ at the recycler level. In some cases,
vertical KPIs are useful to several members in different layers of the SC: for
instance, ‘‘days of inventory’’ or ‘‘inventory carrying costs’’ are common to the
supplier, the DCs and the stores, each SC member trying to optimize its own specific
level of performance.
4.2 Vertical KPIs, assessment of impacts and the evolution from vertical
strategies to integrated SC strategies
The following sections present results on RFID technology impacts at the DCs and
the supplier levels (more precisely sections 4.2.1 and 4.2.2) for selected business
processes. Basically, the scenario represents the receiving and put-away of an order
at a DC location and its shipping to the stores (as carried out now and with RFID
automated processes as simulated in the laboratory).
4.2.1 Assessing the impacts of RFID technology at the DCs:
evolving to real time visibility
What are the impacts of RFID on the activities carried out by the DCs? The
bottom part of Fig. 2gives some answers in terms of performance improvements
for the two first level KPIs (‘‘purchase order cycle’’ and for the ‘‘deliver order
cycle’’).
By drilling down to second level KPIs, namely the ‘‘picking and the put away
lead time’’, the ‘‘picking lead time’’ and ‘‘shipping lead time’’, the results from the
time and motion study conducted on site indicate the length of time for conducting
business processes related to the these three second level KPIs for the actual
situation (as observed on site) and for the RFID scenarios (as simulated in the
laboratory). For instance data entry processes and data verification (1.1–1.8) were
converted into fully automated transactions when simulated in the laboratory (actual
time versus with RFID). As these transactions are realized in real time, a time frame
of 1 s was used as a time line to simulate the action. On the other hand, for manual
processes such as 1.1 ‘‘moving from warehouse to forklift to truck’’, time and
motion data were kept as-is. This allows to build a conservative scenario as RFID
technology can also help eliminate unnecessary material movements of the products
such as 2.2 ‘‘put away temporally’’. Total time gain induced by the RFID
Key performance indicators for the evaluation of RFID-enabled B-to-B e-commerce applications
123
source stocked products deliver stocked products
receive verify…transfer … pick load …
…ship
receiving order cycle
picking and put away lead time picking lead time
shipping lead time
picking and shipping order cycle
1st level KPIs
Plan and
Source
Assemble
and test
Deliver
Plan
Deliver
Maintenance
and repair
Source and
Install
Deliver
Source
Plan
Source
SUPPLIER LEVEL DC LEVEL STORE LEVEL OPERATOR
LEVEL
Product
equipped
with
RFID tag RECYCLER
LEVEL
Activities
Return
purchase order cycle deliver cycle
#
Selected business processes
at the DC (sourcing level)
Actual
time
With
RFID
1
1.1 Move from warehouse - to fork lift -t o truck 165 165
1.2 verify quantity and validate with BOL 126 1
1.3 Unload truck in front of staging area 60 60
1.4 Sign BOL and get back to office 180 160
1.5
Write order number on the "way bill"
and archive file
1.6
Enter transaction in the ERP and
print transfer order
1.7
Clip" packing slip", "transfer order" and
"receiving doc". and archive in a file
1.8 Confirm the receiving in the system
663 387
2103 1827Total time for the receiving (for 25p roduct)
Source (receiving of selected products)
1
132
Total time for the receiving ( for 1prod uct)
NB: 1.3 Unload truck (x 60 seconds per unit)
#
Selected business processes
at the DC (deliver level)
Actual
time
With
RFID
2Deliver (Shipping to the stores)
2.1 Picking of products
1
0
6
"
r
ed
ro
re
f
s
na
r
t
"
eh
t
t
n
i
rP1
.
1
.2
2.1.2
Read the "transfer order" and get
on the fork lift 60 20
2.2 Put away temporally162 162
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oz yawa
tup eht ot oG1
.
2.2
0
3
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cudorp eht
k
ciP2
.
2.2
2.2.3 Drive to the temporary staging area 60 60
2.2.4 Unload temporally pallet in staging area 12 12
2.2.5 Move back to office (for data entry) 78 1
127
"
r
e
dr
o
refsn
a
rt" mrifnoC6.2
.2
432 185
1890 1643
Total time at the picking (for 1 product)
Total time at the picking (for 10 product)
NB: 2.2 Put away temporally (x 162 seconds per unit)
#
Selected business processes
at the DC (deliver level)
Actual
time
With
RFID
2.3 Shipping to the Stores
2.3.1 Pick product/pallet and load the truck 60 60
2.3.2 Indicate departure time at the office 120 1
180 61
720 601
Total time for shipping (for 10 product)
NB: 2.3 Pick products (x 60 seconds per unit)
Total time for shipping (for 1product)
Recycle
2nd level KPIs
Performance
Improvements
Fig. 2 Selected vertical KPIs and assessment of RFID impacts
Y. Bendavid et al.
123
technology is 41.63% (from 663 to 387 s) for ‘‘picking and the put away lead time’’,
mainly by automating processes such as 1.2, 1.4, and, 1.5 to 1.8. This impact is,
however, lower when receiving more than one product (13.12%, from 2,103 to
1,827 s). In fact step 1.3 (unload truck) is incremented by 60 s for each additional
product received.
This suggests that for the receiving of multiple different ‘‘single product orders’’,
the impact of RFID is significant, but it is not as significant to ‘‘consolidated product
orders’’ In any case, the time saved by introducing RFID technology such as data
verification or data entry (business process 1.2 and 1.8) can now be dedicated to the
physical reception of products, which should be the core activity. For the picking of
one product that will be delivered to the stores, results in Fig. 2indicate that the
total time saved with RFID technology could reach 57.18% (from 432 to 185 s),
mainly by automating processes such as 2.1.1, 2.2.5 and 2.2.6.Again, for multiple
picking related to different ‘‘single product orders’’, RFID impact is very significant,
but less significant for ‘‘bundled’’ products (13.01%, from 1,890 to 1,643 s).
Similarly, RFID technology reduces significantly the ‘‘shipping lead time’’ for one
single product (66.12%, from 180 to 61 s), but less significantly (16.53%, from 720
to 601 s) for ‘‘bundled’’ products.
Participants examined closely the ‘‘sourcing costs’’ that could not only be
optimized internally but eventually with their supplier. By implementing RFID and
automating the tracking of movements of goods (i.e. in the ERP), the flow of
information could be automatically updated and transferred on a regular basis to the
supplier. If a contractual agreement is prenegotiated, automatic replenishment could
be an option that seems not only feasible but also cost effective. The DCs, when
faced with the potential impacts of RFID, evolve from mainly internally centered
concerns to concerns dealing with real-time visibility across the SC. Real-time
tracking here involves potentially 500,000 products distributed on a power grid of
30,000 km.
4.2.2 Assessing the impacts of RFID technology at the supplier level:
from a closed-loop RFID implementation to an RFID enabled SC
The strategic first-tier supplier retained after three rounds of iterative validations the
following vertical KPIs to optimize its own activities, namely, KPIs related to
planning (‘‘methods and accuracy forecasting’’), to sourcing (concerning mostly
inventory management such as ‘‘days of inventory’’, ‘‘inventory carrying cost’’), to
operations/production (‘‘capacity utilization’’), to finance (in particular, ‘‘net
working capital’’ since it is considered as critical for SMEs with limited financial
resources), to outbound logistics in order to improve delivery to its direct customer
(i.e. the distribution center). While RFID could be implemented internally (in
‘‘closed loop’’), a preliminary study at the supplier location revealed that
implementing RFID in ‘‘closed loop’’ would be beneficial for optimizing some
internal information tracking that now falls under the responsibilities of 14 persons
(Table 2). With RFID, information tracking is much less labour intensive and
represents 0.5% of the product value, or 45 K$ per year (for one main customer,
which accounts approximately to 1/3 of the supplier’s total revenues). For instance,
Key performance indicators for the evaluation of RFID-enabled B-to-B e-commerce applications
123
for each order, (1) in the planning activities, schedulers have to identify the state of
the orders and estimate the quantity of products that need to be delivered, (2) in the
sourcing activities, buyers have to look for raw materials, work in process and
finished products information prior to pass an order, (3) at the testing activities,
quality managers have to identify each product and its associated information.
These are all time consuming information tracking processes. In reality, while some
manual information tracking processes could be automated (e.g. product identifi-
cation at production cells) and human resources participation reduced (e.g. shop
floor product retrieving and counting), these represent modest savings since the
production floor was recently redesigned to rapidly organize and retrieve product
information. Following an analysis of the internal supply chain processes conducted
with the vice president and the director of operations of the company, it was
estimated that costs could be dropped with RFID from 45 to 20 K$ per year
(Table 2), as a result of reducing by more than half the time required for such
tracking activities. No other costs were included in the analysis since the managers
felt that the consequences of inefficient information tracking management such as
penalties for late deliveries and errors in the warehouse management processes were
exceptions.
However, the participants from the supplier’s site indicate that the ‘‘close-loop’’
RFID implementation represents only one partial indication of RFID potential.
When integrating RFID technology in the five layers of the SC, performance
improvements were gained for all members. For instance, by having an increased
‘‘inventory visibility’’ in real time at the DC and eventually at the stores (through
RFID technology coupled with ERP), the supplier could anticipate demand, and
gain efficiency within its production by optimizing its production capacity
(assembly cells used today at 60% of their potential). This new business model
Table 2 Costs for product information tracking activities at the supplier’s site
Main activities Actual human resources
involved
Human resources involved
using RFID
Product information related
to planning
Scheduler (1) Scheduler (1)
Product information related
to sourcing
Buyer (1) Buyer (1)
Product information related
to assembling
Operators (6) Automated data capture
Product information related to testing ‘‘Trouble shooter’’(1)
Quality manager (1)
Automated data capture
Product information related to
warehousing and delivering
Shop floor clerks (2),
finance clerk (1),
administrative clerk (1)
Some level of automated
data capture
Finance clerk (1),
Administrative clerk (1)
Estimated ($) amount for data capture and
tracking of info.
45 K$ per year 20 K$ per year
Y. Bendavid et al.
123
would allow products to move from assembly cells to inbound vehicles to outbound
vehicles without being stored, thus cutting down ‘‘inventory carrying cost’’,
reducing frozen money and improving ‘‘net working capital’’ by shortening the
‘‘cash-to-cash cycle’’.
Furthermore, the supplier could move from an ‘‘Assemble To Stock’’ (ATS)
strategy to an ‘‘Assemble To Order (ATO) strategy, however, this would only be
possible if the SC members were willing to ‘‘collectively adopt’’ RFID technology
and rethink their supply and demand strategy. In fact, the re-negotiation of
established contractual agreements was one of the main preoccupations in the
elaboration of this scenario. As inventory-carrying cost represents an approximate
amount of 10% of the product value, this could lead to substantial savings for the
supplier. Finally, by being able to optimize its assembling activities; the supplier has
also to reconsider the way products are stored (on the trucks) and transported, thus
highlighting the relevance of ‘‘classic’’ indicators such as ‘‘delivery frequency’’ and
the importance of unconsidered indicators such as ‘‘truck and driver availability’’
for continuous delivery, given that any missing delivery implies a penalty. In the
scenario proposed and validated in the laboratory, increasing the frequency of
delivery by one third, would transfer into savings estimated at 254 K$ (mostly by
reducing inventory of finished products: from 360 to 288 K$ and raw material from
756 to 504 K$). However, increasing frequency of delivery implies additional costs
for warehousing activities at the supplier and DC level, the increased costs for
transportation, etc.
4.3 Horizontal KPIs assessment and the evolution towards more integrated
B-to-B e-commerce solutions
All SC members also validated KPIs that are of interest to other SC members, such
as ‘‘Responsiveness to urgent deliveries, order (fulfillment) lead time; cash-to-cash
cycle time, and finally, SC visibility, access and sharing’’ (upper part of Fig. 3).
This group of high level horizontal KPIs points to one major dimension of SC
collaboration (Simatupang and Sridharan 2004). For instance, the strategic supplier
indicated that visibility for the ‘‘picking’’ at the stores level could allow him to
gather precise information on real demand, thus enabling lean assembling. His
concern fits with a more collaborative strategy to respond to a critically urgent
situation. For example, when a power outage occurs, the operators, have now to call
a ‘‘maintenance center’’ for identifying the closest store where products are
available in order to ‘‘minimize the downtime’’ of the electricity network. Because
the ‘‘product availability’’ for strategic products (e.g. transformers) is critical, stores
constitute inventory buffer areas between remote locations and DCs, for shortening
‘‘delivery time’’ and increasing SC ‘‘flexibility’’. Obviously, the current situation is
rather costly. The RFID scenario simulated and validated in the laboratory
demonstrates that operators could directly access inventory into the ERP, from the
field, using a wireless device (i.e. PDA), check product availability and thus reserve
the required product at the closest store. For the picking of the product, they can go
to the stores, gain automatic access with the RFID smart card, and pick up the
Key performance indicators for the evaluation of RFID-enabled B-to-B e-commerce applications
123
Plan and
Source
Assemble
and test
Deliver
Plan
Deliver
Maintenance
and repair
Source
and Install
Deliver
Source
Plan
Source
SUPPLIER LEVEL DC LEVEL STORE LEVEL OPERATOR
LEVEL
RECYCLER
LEVEL
Activities
1st level
KPIs
2nd level
KPIs
Performance
Improvements
storePlan
source delivermake
cash-to-cash cycle time
flexibility
source Deliver
cash-to-cash cycle time
flexibility
source Deliver
cash-to-cash cycle time
flexibility
ship
frequency of delivery
inventory level
assembling lead time
make store
Plan ship
frequency of delivery
inventory level
store
Plan ship
frequency of delivery
inventory level
pick Install
inventory level
Product availability
source
flexibility
cash-to-cash cycle time
information flow with RFID: end-to-end visibility in the SC and automatic replenishment
Automatic access control (smart card)
Product order from the field (PDA + LAN)
Automatic detection of product picked (RFID)
Automatic inventory adjustment (RFID +
LAN + ERP+ WMS)
Automatic inventory adjustment (RFID + LAN + ERP)
Automatic replenishment (RFID + LAN+ ERP + WMS)
Automatic payment (RFID+ ERP)
Automatic inventory adjustment (RFID + LAN
+ ERP+ WMS)
Automatic production planning (RFID + WMS)
Optimization of lean assembly
actual
information flow
actual
information flow
Up to 90 « self service stores » with a potential of hundreds thousands dollars per year saved in human resources
From “weekly information updates” to real time inventory updates
From 6 weeks order fulfillment lead time (from the supplier to the stores) to less than 10 days
From millions of dollars of inventory on the SC, to hundreds thousands dollars
From “batch deliveries” to frequent deliveries optimized with RFID-enabled warehousing activities at all the SC levels
Recycle
Return
Horizontal KPIs (Collective performance optimization)
reliability (e.g. quality of deliveries), responsiveness to urgent deliveries, (e.g. order fulfillment lead time); flexibility (e.g. SC
response time); asset management efficiency (e.g. cash-to-cash cycle time)
Product
equipped
with RFID tag
Fig. 3 Selected horizontal KPIs and assessment of RFID impacts
Y. Bendavid et al.
123
products for reparation. With their PDA equipped with a RFID reader, they can read
products and automatically transfer the specific transaction that will be matched
with their employee number (or working order) in the ERP. More importantly,
inventory can be updated in real time through ‘‘transparent processes’’, and
eventually automatically trigger a replenishment procedure in the whole SC (see
Fig. 3). With this RFID scenario, the ‘‘downtime’’ can be minimized at lower ‘‘cost
per repair and maintenance’’. Early attempts to implement VMI solution between
the supplier and the DC could be extended to a broader approach such as CPFR
(Schwarz 2004) to satisfy the demands of the ‘‘end customer’’ (store-operator
levels), while reducing inventory costs at all SC levels.
The RFID scenario generates considerable improvements as outlined in the
bottom part of Fig. 3. For example, by converting remote stores into ‘‘automated
self service stores’’, there is a potential saving of hundreds of thousands of dollars
per year in human resources required for conducting non-value-added activities (i.e.
opening the store, controlling the material movement, filling paper works, etc.).
Also, this could be done without compromising the quality of deliveries and product
availability. On the other hand, this transition from weekly information updates on
inventory to real time inventory updates would free 4 weeks of inventory in the SC
(from 6 weeks order fulfillment lead time (from the supplier to the stores) to less
than 10 days). As indicated by the respondents, this represents an estimated value of
millions of dollars in frozen capital and space management. At all the SC levels,
members would then be able to move from a ‘‘batch deliveries’’ approach to
frequent deliveries optimized with RFID-enabled warehousing activities. Other
concepts such as PLM (product life cycle management) can now be implemented as
the damaged ‘‘tagged products’’ flow in the reverse SC. Products under warranty can
be sent back to the supplier, and others sent to recycling centers, where reworking,
dismantling, oil recuperation, etc., are facilitated by information on the products.
5 Implications and conclusion
Attempting to track KPIs and assess the impacts of RFID technology in a five-layer
SC requires considerable research efforts. The research design (Table 1)is
particularly demanding as it involves multiple units and levels of analysis, and
relies on diverse data collection methods and generates a vast amount of data. The
concept of a living laboratory proved to be an insightful approach for exploring
issues related to inter-company connectedness and relationship management, and,
could represent an interesting avenue for research projects on interorganizational
systems, SCM, and, more specifically RIFD enabled B-to-B e-commerce.
Results from the field study point to several implications. Firstly, while there is an
overall consensus among SC members that they move towards horizontal KPIs, it
became evident that this can only be achieved if SC members are ready to give access
or share information that was previously considered proprietary. During the
simulation sessions in the laboratory, this turned out to be a key preoccupation for
the managers involved in the field study since it delimits the respective responsi-
bilities of the SC members. Secondly, there is an obviously limited capacity to
Key performance indicators for the evaluation of RFID-enabled B-to-B e-commerce applications
123
managing the real time data provided by RFID enabled SC, information overload can
be filtered through higher level KPIs (vertical and horizontal). Furthermore,
middleware configuration becomes also an important issue since it largely
determines the amount, type and frequency of information which will be managed
by the different organizational members of the SC. Thirdly, if selection and
development of performance measurement systems is a challenging task, RFID, by
itself, is certainly not the answer, although it may provide data to feed KPIs at all the
SC levels. Finally, RFID has to be considered as another step towards total SC
visibility, but not the last. As the utility companies will have to manage real-time
monitoring, sensors and intelligent devices could be integrated throughout the power
grid, providing possibilities to anticipate power outage and plan maintenance. As
such RFID seems to be an enabler of more collaborative and integrated B-to-B e-
commerce solutions, as it provides the required data for CPFR and PLM applications.
Acknowledgment The authors gratefully acknowledge financial support from SSHRC and FQRSC.
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