Inventory Management System With Rfid Information Technology Essay

The inventory management or inventory control refers to an attempt to balance inventory needs and requirements with the need to minimize costs resulting from obtaining and holding the inventory (Inman, 2006). The most important objective of inventory control is to determine and maintain an optimum level of asset in the inventory. Wise control of inventory is often a critical factor in the success of businesses in which inventories are significant. The goal of inventory control is to be sure that optimum levels of inventories are available, that there are minimal stock outs, for example running out of stock, and that inventory is maintained in a safe place and is always readily accessible to the proper workers. Conventional inventory system requires manual intervention, which is labor intensive, time consuming, and error-prone.

Nowadays, restaurants can be found everywhere. Food industry becomes one of the fastest growths in industries today. It is known to provide food services and drinking places that sell foods and beverages, although the size of the establishment and the range of foods, beverages, and services offered are vary. But, how they ensure the availability of their stocks in order to fulfill the customer’s orders? Most items in their inventory can be categorized as perishable items which mean decrease in value or usability of product over time due to the inherent characteristics of product, whereas obsolescence refers to loss in value of items. (Chande, Hemachandra, Rangaraj and Dhekane, n.d., p. 2). Examples of such perishable items are fresh items, canned products, dairy items, meats, and frozen items.

The inventory management helps the restaurant to decide in advance on how to fully utilize these items. If a restaurant is getting supplies of minimum order quantities, it may not be much of a problem to store and use them before the expiry date. Compare to a large amount of order quantities, which need to be wary so that the storeroom space is not overcrowded and all the items are optimal utilized.

This research involves developing a system prototype focused on managing the inventories which applies the technology of RFID. The primary focus is to help and manage the inventories for efficient stocks controlling. This system will be implemented in a storeroom of a restaurant to replace the warehouse to show the concept of tagging, tracking and checking of inventories inside the storage. The target users who are going to implement this system are those who have big restaurant and carry out the day-to-day operations of their stock inventory. Besides, the inventory management system embedded with a computer equipped with customized database and outfitted with an RFID reader to monitor inventories.

This inventory management system which includes RFID reader will facilitate the tracking of objects, instead of traditional bar-code scanning technology to keep track of the items in the storeroom. Primarily RFID is used for inventory tracking, to track items using Electronic Product Code (EPC) that is unique identifier stored within a RFID tag which contains a string of numbers and letters, consisting of a header and three sets of data partitions. The first partition of EPC identifies the manufacturer. The second identifies the product type (stock keeping unit) and the third is the serial number unique to the item (Association for Automatic Identification and Mobility, n.d.).

This system becomes aware of its contents and it is capable of establishing direct contact between the user (person who responsible to count stocks) and the items. It will remind user if they are out of stocks of items in their storage or when stocks levels go below some set limits. Besides, it alerts user if there are stocks inside the inventory had passed their expiry date. As an inventory control tool, RFID can help the restaurant to wirelessly capture data concerned with the movement and status of items inside the storeroom.

1.2 Problem Statement

There are several issues aroused regarding to keep track of the stocks in conventional inventory management. Some of the issues are:

In a large storeroom of a big restaurant, sorting or picking activity is more time consuming and subjected to errors.

The stock clerks may miss to take record of what items need to be ordered and lead to the situation where items are out of stocks (OOS), or they are in stock but cannot be found.

Unpredictable customers present on a particular day which means more menu orders that can play a role in reducing items availability. However, other causes of OOS are more dependent on process compliance and information-sharing infrastructure between the retailer and the person who responsible to make an items order (IBM Canada Ltd., 2007, p.18).

Situation called shrinkage may happen where a portion of inventory may become unavailable to the owner of the restaurant due to loss, damage theft or spoilage. This may lead to waste of cost.

Space is usually a critical factor in keeping inventory. It is important to have enough space to place the stocks and keep the storeroom from overcrowded (The Decision Maker’s Direct, 2004, p.1).

1.3 Objectives of the Research

The objectives of the research are:

To review the technology using RFID towards better inventory management.

To identify the requirements criteria of the inventory management system.

1.4 Significance of Research

Effective management of an inventory management calls for getting the right items at the right time to the right place and in the right condition. Therefore, this research constructed an inventory system which intends to help the owner of the restaurant or the store clerk routine in organizing their inventory become simpler and systematic. The RFID will enable to keep accurate account of each item in the inventory so that the serialized date are better inventory control, reduced loss, and improved customer satisfaction. RFID enable automatic tracking in inventory (Holloway, 2006) which helps the restaurant for better safety and quality control of their items. Tracking system helps restaurant to isolate the source and extent of safety or quality control problems. It also means to avoid serving the customer with unsafe or poor-quality items, which in turn reduces the potential for bad public relations and accountability. The better and more precise the tracking system, the faster the stock clerk can identify and resolve food safety or quality problems.

1.5 Scope

The scope of this research will be focusing on the following items:

Managing and identifying the inventory of the stocks or items inside the inventory by using the concept of RFID which is tagging, tracking and checking.

Features included in this system are adding new stocks, edit stocks, delete stocks, find stocks, stocks notification, generate report of stocks as well as viewing, printing and export the stock report.

Developing a prototype with a windows-based form and builds using the Visual Basic.Net (VB.Net) scripting language. The external RFID device is used where the RFID tagging will make the checking of items quicker, more accurate and provide a database of information about each item. The database used in this system is Microsoft Access.

The main users of this system will be the person who is responsible to keep track the inventory status of stocks inside the storeroom such as stock clerk or order filler which they are responsible to count, prepare and maintain the stock records necessary to keep items for inventory running smoothly.

The level of identification for RFID tagging using in this system is pallet-level tagging. This level of identification is important because it depends on the constraints, for example the researcher decided not to apply the item-level tagging, because in case of the raw stock that is going to be processed or where the physical shape of the stock is going to be changed, item level tagging is not relevant.

2. Literature Review

Perishable goods present some of the biggest challenges for inventory management due to a high number of goods variants, strict traceability requirements, short lifetime of the goods, temperature control in the inventory is needed, and the large volume of goods handled. At the same time, new technology allows new ways of controlling the inventories. Technology such as RFID will enable an efficient administration of both the quantity and the age of the inventory in the system. RFID based data capture system can help to solve the problems associated with the inventory control of stocks. This technology is an emerging trend in this field and is mainly used for product identification, collection and communication of relevant data. This research considers an RFID-based methodology for inventory control of goods. The technology also helps in updating the inventory status in real time without product movement, scanning or human involvement.

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2.1 Inventory Control

Inventory control refers to Chande, Hemachandra, Rangaraj and Dhekane (2005, p. 448) which monitoring the availability of material, assigning it to demands that have arrived and placing orders for replenishment of the product. All these activities may not happen continuously, or even in all time period. Inventory control is employed in the context of “pull-based” or replenishment-based systems where the trigger for placing an order is the current inventory status which in turn is related to the demand for items in recent periods. Inventory is a major investment in most of the companies. It strongly influences the internal flexibility of the organization, for example, by allowing production levels to change easily and by providing good delivery performance to the customers.

Inventory costs include working capital and storage space costs as well as costs to do with obsolescence, deterioration and loss. In recent years, attention in the industry has concentrated on customer demand-driven systems. In retailing, inventory management attempts to provide high demands and high profits to the company as well as good services and fresh items to customers at low cost. Inventory models are commonly used to determine when and how much to order while optimizing the overall organizational goal, for example, maximizing the net profit (Chande et al., 2005).

According to Deis (2006), benefits of inventory management can be reached by the use of “information technology and the construction of integrated inventory information systems”. Concerning the use of information systems (IS) to integrate business processes across the inventory, various studies have shown that an internal integration should precede the external integration with suppliers and customers (Narasimhan & Kim, 2001).

2.2 Overview of RFID Technology

RFID uses radio signals to exchange data between a tag (also known as a transponder) and a read/write device (commonly called a reader or interrogator). Tags consist of a wireless chip and antenna that are housed in a label or other protective casing and attached to the item that is to be identified. The tag may be active, which means it has a battery to power its own transmission, or passive, which transmits using power received from the reader in the form of electromagnetic waves (Jones, Wyld, and Totten, 2005); Mennecke and Townsend, 2005, p. 4).

According to RedPrairie Corporation (2003), the active tags have longer read ranges making them appropriate for asset management and real-time location systems (RTLS). Passive tags have a shorter read range and are smaller and less expensive than active tags making them the tag of choice for most supply chain applications. The most common tag types used in warehouse and distribution center (DC) operations are passive adhesive “smart labels” applied to cases and pallets. A typical smart label has an RFID tag encoded within the label material, which is printed with text and bar code to support legacy operations. Chips and antenna can also be encased in more rugged tags to provide permanent asset and location identification or withstand exposure to high temperatures, industrial solvents, impact, and other conditions that make bar code or other forms of data collection impossible.

LXE Inc. (n.d) said that readers have antennas for sending and receiving signals, a processor for decoding tag information, and may have additional software for more advanced data processing. Antennas may be separate from the processor and connected by cable for additional placement and configuration flexibility.

There are many types of RFID readers. The most common include mobile readers integrated into handheld computers or mounted on vehicles, and fixed position units, which are typically mounted at dock doors and conveyor lines.

2.2.1 Reading Characteristics

RFID’s suitability for use in industrial environments is just one of the attributes that set it apart from bar code and other automatic identification and data collection (AIDC) technologies (Bushnell, n.d.). One of the most significant is that no direct line of site is required between the tag and reader to exchange data. This enables tags to be read if they are not perfectly aligned with the reader, and even to be read through packaging material. Readers can also identify multiple tags simultaneously. Companies can take advantage of these attributes to reduce labor requirements with automatically triggered reads and unattended, high speed reading processes. RFID tags offer secure, rewritable memory, which can be used to improve visibility, security and provide other advantages as stated by IBM Canada Ltd. (2007, p. 12). Most RFID tags are read/write, and many have memory that can be partitioned so that some portions can’t be changed (such as a serial number) while other portions can be updated, with transaction histories, storage records, pedigree information or other variable data. According to Scassa Chiasson, Deturbide and Uteck (2005), Electronic Product Code (EPC) of RFID technology provides a standardized, unique serial number for each RFID tag. Many new inventory processes are emerging to take advantage of unique, standardized and secure serialization that EPC provides.

2.2.2 Frequencies and the EPC System

Frequency is one of the biggest variables affecting RFID range and performance. According to Holloway (2006), nearly all RFID systems used for warehouse, distribution center and supply chain applications operate on one of three major frequency families: 13.56 MHz high frequency, common for short range (up to about 1 meter) reading; 860- 960 MHz UHF, which includes the well-known EPC global Gen 2 standard and provides range of up to 20 feet; and 2.45 GHz microwave transmission, which is used in active tags that provide long range reading (Mennecke and Townsend, 2005, p. 6), commonly used for identifying cargo containers.

Between the three, Ultra High Frequency (UHF) technology is by far the most common and best suited for the majority of manufacturing and logistics needs. High frequency (13.56 MHz) technology is widely used in other applications and is a viable option for short-range applications. It is often promoted for item level tagging, such as for product authentication and retail shelf management (Association for Automatic Identification and Mobility. n.d.). UHF technology offers the range, speed, security and cost-effective equipment that many material handling, warehouse and manufacturing applications require. The EPC Gen 2 UHF standard was created specifically to support supply chain applications. EPC Gen 2 operates in the 860-960 MHz range, so it can be used throughout the world and poses no interference risk to IEEE 802.11- standard wireless networks (although interference is possible from older, 900 MHz wireless LANs).

2.2.3 Applications

RFID can be used for many common warehouse and DC inventory management operations, including receiving, put away, picking and shipping procedures (Frazelle, 2002). RFID has high return on investment potential when applications take advantage of its reading characteristic to overcome previous limitations or to enable new business processes. Indeed, items can be monitored and identified at process points where other forms of data collection are impractical because of environmental or cost limitations. Factor in the ability to encode unique, secure serial numbers on tags, and it begins to become clear how RFID can lead to new levels of visibility in inventory and supply chain operations. It reduced inventory levels, storage, managing, and logistics expenses from the improved visibility.

2.4 Sample of Case Studies using RFID in Inventory Management

Next subtopic will discuss more about sample of case studies for inventory management with RFID deployment.

2.4.1 R. MOROZ LTD. /ACTION TRAILER SALES – ASSET TRACKING/

INVENTORY TRACKING

Business Challenge

Action Trailer Sales, a utility trailer dealership with multiple locations in Canada, wanted to automate its trailer inventory system. In order to take an inventory of the 600 to 800 trailers at its main storage yard, employees walked through the 25-acre lot writing down trailer ID numbers and locations, then manually entered them into a Microsoft® Excel® spreadsheet. The process was prone to errors and consumed several hours each day.

Solution

Action Trailer Sales holds more than 1,000 trailers on four lots at its Mississauga, Ontario location. The company’s manual inventory system, used for daily checks at the largest trailer yard, took too much time and was often inaccurate. If an employee wrote down or entered the wrong trailer number during this process, it made it difficult to locate trailers when they were needed. The company considered a bar code solution, but the harsh conditions of the open trailer yard would have rendered the labels unreadable. R. Moroz Ltd. designed an automated system using its own software, 433 MHz Active RFID tags from Wavetrend, and mobile RFID readers. Trailer tags are encoded using a Wavetrend tag programming device and a standard PC. For rental units, these tags are affixed to the front of the trailer with a special weatherproof plastic housing. Trailers meant for sale have their tags attached using a removable plastic holder that hangs on the front of the trailer, away from the metal surface.

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To take a complete inventory, staff can now simply drive through the yard and read the RFID tags using a mobile computer from Psion Teklogix to read and record the trailer numbers. Data from the mobile computers is uploaded and integrated with Action Trailer’s inventory system using software from R. Moroz.

Results

Eliminated data entry errors.

Increased inventory accuracy.

Saved two to three hours per day in labor.

Inventory process did not need to be overhauled in order to use RFID.

2.4.2 INTERACTIVE LOT TECHNOLOGIES / HAVERTOWN

MITSUBISHI LOT TRACKING SYSTEM

Business Challenges

Havertown Mitsubishi, a new car dealer in Havertown, Pennsylvania, was faced with three primary business challenges. The dealership has two locations – its main facility, which includes its showroom and primary lot, and an overflow lot. With an extensive inventory dispersed over the two lots, Havertown Mitsubishi required an effective vehicle tracking system to inform in real-time the presence and location of all cars in stock. Like many car dealerships, Havertown Mitsubishi was finding that locating a specific car for a test drive by a prospective buyer was taking a significant amount of time. It was not an unusual occurrence for the whereabouts of a vehicle to be unknown for days, resurfacing only after monthly floor plan inventory audits. These extended delays in locating vehicles stalled test drive experiences and caused customer excitement to wane, and resulted in lost sales. In addition, with the monthly floor plan inventory audit, the dealership was often paying for vehicles which were audited by its financial institution as sold when the vehicles were on the premises but were not located during the audit. Management also wanted the ability to identify cars that were most popular with customers and frequently test driven, and ones that were simply sitting on the lot generating little customer interest.

Solution

To provide the accurate, real-time vehicle tracking capabilities, Interactive Lot implemented Wavetrend’s active RFID-based system for inventory monitoring with Interactive Lot’s Web-based software. Wavetrend’s active RFID readers were installed at Havertown Mitsubishi’s main facility and its off-site storage lot located three miles away. The reader networks are terminated at Serial/Ethernet modems to feed collected data over the Internet to the company’s servers.

Every vehicle entering into inventory is fitted with a Wavetrend active RFID tag encrypted with its unique identifying data. The tags remain attached to the vehicle for the duration of its stay in inventory. Once a car is sold and exits the inventory, its tag is removed for reuse. Interactive Lot developed and customized a software application for Havertown Mitsubishi to transmit the serial data over the Internet, process it, and transfer it to the database. The system administrators can then interact with the data via the application specific graphical user interface.

Havertown Mitsubishi can produce numerous management reports that detail the movement and usage of all vehicles, and associate all actions to the staff members initiating them. The system is fully integrated with the car dealership’s software to manage the entire operation, and receives real-time updates on all current and incoming inventories. The real-time vehicle tracking system has given Havertown Mitsubishi a valuable management tool to provide visibility and information on all events related to the dealership’s largest investment – its inventory.

Results

Decreased time to locate vehicles, leading to increased sales and customer satisfaction.

Real-time inventory visibility, resulting in improved lot management, inventory rotation, availability and reduced floor plan inventory audit charges.

Enhanced security by instant notification of unauthorized exit and other selectable notifications such as tamper, missing asset tag, and low tag battery alerts, as well as custom notifications.

Reporting and historical data on number and length of test drives, enabling the monitoring of customer vehicle preferences and staff performance.

2.4.3 FREIGHTLINER CONTROLS INVENTORY “CHOKE POINTS”

WITH MOTOROLA RFID

Business Challenge: Automate Inventory Tracking To Improve Accuracy and Efficiency

Like many modern manufacturers, Freightliner faces constant pressure to improve the efficiency and accuracy of its resource handling in order to better control manufacturing costs. The Freightliner management team, headed by Plant Automation Project Manager Louis Fleischer, was looking for a way to streamline the tracking of parts movement from inventory to the factory floor in the Portland plant.

Solution: Automate Parts Tracking In And Out Of the Warehouse

Once the study had defined Freightliner’s process requirements, the business case for an RFID solution was easily established and solution development began. Compsee and System Concepts recommended an automated RFID solution utilizing:

Motorola advanced RFID hardware solutions incorporating the XR400 series of RFID readers and the AN series of industrial antennas at each portal.

Metal mount RFID tags attached to the tugs. The tags were encoded with the EPC Standards’ Global Returnable Asset Identifier (GRAI) format that is intended for assignment to individual objects and is the corporate standard for tote/tug identification.

A paper RFID 4″ x 6″ smart label attached to each tote (one on the side and one on the front) to provide as much tag exposure as possible to the scanning portals. The GRAI format was also used for these tags.

System Concepts’ TraxWare® Software Suite. These modular software products were specifically developed for use in RFID applications in Manufacturing and Industrial Control, Asset Tracking and EPC/DoD Compliance opportunities. The software readily integrates with Motorola’s RFID hardware.

Freightliner supplied printers and System Concepts software connected to the SQL database for receipt transactions.

The Benefits

Labor costs associated with inventory control are down significantly

Reduce the inventory pick errors and miss-ships

Production lines receive timely and correct parts.

3. Research Methodology

The methodology that has been used in this study consists of four phases and will have its own activities and deliverables which being followed carefully to ensure this research achieved all the required scopes and objectives. The four phases are:

Problem Identification and Planning

The current problems are studied properly because it provides the context for this research study and typically generates questions which the research expect to answer. After clearly understand the problem statement, the goals and objectives of this research study are established.

Requirement Gathering

A combination of primary sources and secondary sources are provided for this research. Primary sources of information are from informal interview. Information from the Internet and computing magazines, contribute as a secondary sources.

Requirement Analysis

The requirements which is RFID specifications and its characteristics that being used together with the inventory management are documented in Software Requirement Specification (SRS) that covered Use Case Diagram, Class Diagram and Sequences Diagram, constructed using Rational Rose tool. These requirements will be used later as a reference during the rest of the project development and thus, need critical thinking of precise, brief and fixed of requirements analysis.

Prototype Development

The system prototype is built according to the stated requirement specifications. It is crucial to make sure that the system is compatible with the platform and hardware including the RFID device which is used to detect the unique serial number items and store it in the database. Therefore, during the development, this inventory system is ensured to cope with the RFID device specification. Development of this system prototype involved the uses of Visual Basic.Net scripting language and Microsoft Access as the database. At the end of this phase, the second objective which is to verify and validate the requirements of inventory management by demonstrating the prototype of the inventory system is achieved and the system completely delivered.

Currently, the progress of this research is at requirement analysis level where the functional requirements of the inventory management are identified.

4. Analysis and Findings

The presentation of findings is concise and sufficient details as it followed the research methodology that has been constructed properly and the data has been collected carefully. Data gathering process was covered on inventory management system as well as the technologies applications of RFID in relations to performance and data integrity. As a result of online magazine, journals, articles, reference mining, library searches, talking and interview to expert, the researcher came out with findings which contain information on range of variations.

4.1 Issues in Inventory Management

Interview session had been done with the person who has experience in handling inventory management and familiar with the written procedures regarding purchasing, receiving, inspection, and handling stocks. The interview session was conducted with Operation Manager of Shakey’s Pizza, Mr. Ahmad Tajul Ruslee Termizi (refer appendix – sample interview questions). From the interview, the synopsis of common problems in managing inventories being identified as shown in Table 1.

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Table 1. Issues and Common Problems in Inventory Management of

Shakey’s Pizza Sdn. Bhd.

Issues

Identified Problems Dealing with Stock

Identified Problems Dealing with Stock Record Keeping

The way of

storing/ recording

information

Human errors/ processing errors in counting stocks

Stock being recorded in paper forms

Use separate forms for each stock

Waste resources

The way to retrieve information

Count the stock by physically moving into stockroom

Sorting/ picking stock is subjecting to errors and time consuming

Take out document in cupboard, filing cabinet, and files

Find and check one by one of each stock to update the record

Waste times

Categorizing information

Each stock has its own category and need to be properly labeling

May miss to place them into different area condition

Checking each stock compared against a list of stocks in forms

Mark one by one

Waste efforts

Space of storage

More stocks, more space area to place the stocks

Stockroom becomes overcrowded

All paper forms are kept in separated labeling files

More paper forms, more files, more space area to place them

Waste resources and cost

The way of inventory monitoring

Portion of stocks become shrink because:

Stocks get spoiled before being used

Theft

Damage

Need to remember and check expiry date in paper form for each stock

Do not realize if stocks are being stolen.

4.2 Functional Requirements of the System

Based on the Table 2, the activity, entities, attributes and processes for the system are identified. These details are roughly identified from the interview. It provides an image of the system requirements that need to be fulfilled. The Stock entity stores all the needed information about stocks and this entity directly connected with the Vendor entity. The Vendor only contains information about Company Name and Id. The researcher did not mention lots about Vendor because this entity is merely additional information to stocks and it is not the mainly focus in this system while Admin entity stores the records on user authentication which include username and password. The application of these entities, attributes, and operations is discussed further in this chapter.

Table 2. Functional Requirements

Activity

Requirements

Entity

Attribute

Process

A) Manage Stock Records

1. Adding new record of stocks

2. Updating stock records

3. Delete stock records

4. Find current stocks in

inventory

5. View stock information

6. Print stock information

Stock

Stock Code

Stock Name

Stock Type

Stock Description

Vendor Name

Expiry Date

Quantity

Unit Price

Total Price

Get Stock

Check Stock

Set Stock

Add Stock

Update Stock

Delete Stock

Find Stock

View Stock

Print Stock

B) Vendor Information

1. View Vendor’s Company Name

Vendor

Vendor Id

Vendor Company

Stock Code

Get Vendor

View Vendor

C) System User

1. Authenticate user

2. Create new user

3. Change user password

Admin

Username

Password

Get Password

Verify Login

Add user

Change Password

Logout

5. Conclusion

The aim of this paper is to give overview of requirements in inventory management with the RFID deployment. The problems in organizing stocks in conventional inventory management were identified before providing the solution. In the conventional inventory system, it is still using the manual way of inventory records – numbers of paper forms are being used, files need to be labeling to differentiate each paper stock forms and when these records getting increase, the filing cabinet use for storing them need to be added. Therefore, understanding with the true facts of the current situation had been developed in order to place this subject research in context.

A set of procedures that consist of several phases is implemented to show the workflow during this research. It started with problem identification and planning phase, then requirement gathering, requirement analysis, and lastly is prototype phase. Each of these phases plays an important role that is well designed to produce a good research.

This paper discussed about two objectives that have been achieved throughout the research project. The first objective achieved is to review the technology using RFID towards better inventory management. Secondly, the requirements criteria of the inventory management system were identified. This research intends to continue demonstrating a prototype of Inventory Management System based on the functional requirements of inventory.

Finally, this paper hopes to be beneficial and contributes to the practitioner as well as the researcher in implementing RFID in inventory management. Therefore, for future research, further study in implementation process and empirical study in selected Malaysia food industry to justify the implementation inventory management using RFID in Malaysian context.

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