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Www.eltrun.gr ΟΙΚΟΝΟΜΙΚΟ ΠΑΝΕΠΙΣΤΗΜΙΟ ΑΘΗΝΩΝ ΤΜΗΜΑ ΔΙΟΙΚΗΤΙΚΗΣ ΕΠΙΣΤΗΜΗΣ ΚΑΙ ΤΕΧΝΟΛΟΓΙΑΣ Evaluating the impact of RFID on warehouse process performance.

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Presentation on theme: "Www.eltrun.gr ΟΙΚΟΝΟΜΙΚΟ ΠΑΝΕΠΙΣΤΗΜΙΟ ΑΘΗΝΩΝ ΤΜΗΜΑ ΔΙΟΙΚΗΤΙΚΗΣ ΕΠΙΣΤΗΜΗΣ ΚΑΙ ΤΕΧΝΟΛΟΓΙΑΣ Evaluating the impact of RFID on warehouse process performance."— Presentation transcript:

1 ΟΙΚΟΝΟΜΙΚΟ ΠΑΝΕΠΙΣΤΗΜΙΟ ΑΘΗΝΩΝ ΤΜΗΜΑ ΔΙΟΙΚΗΤΙΚΗΣ ΕΠΙΣΤΗΜΗΣ ΚΑΙ ΤΕΧΝΟΛΟΓΙΑΣ Evaluating the impact of RFID on warehouse process performance 29/03/2011 RFID IN EUROPE - ACADEMIC WORKSHOP Angeliki Karagiannaki ELTRUN, Dept. of Management Science and Technology ATHENS UNIVERSITY OF ECONOMICS AND BUSINESS

2 RFID technology in supply chain processes • Process-driven value – Physical flow process integration- process redesign – Object-connected ICT: the information is physically linked to the products (CASAGRAS, 2009) RFID reader RFID tags chip antenn a 2 RFID technology Integration with Processes Process performance General research scope: PROCESS-DRIVEN VALUE OF RFID What is the impact of RFID and its subsequent changes in processes on process performance?

3 Research Approach Form Research Objective Refined Research Questions MOTIVATION- PROBLEM DEFINITION Approach: Literature Review CONFIRMATORY Phase Approach: Experimental Simulation HYPOTHESES TESTING Simulation model on process-driven value of RFID Factors affecting the impact of RFID RFID Assessment between the as-is vs. to-be processes EXPLORATORY Phase Approach: Case Study HYPOTHESES GENERATING RFID-enabled process redesign: a reference framework 3PL warehouse Manufacturing Facility Retail Distribution Center 3

4 Case 1: a 3PL Warehouse • Background – 03/ /2007 – 3PL company that deals with paper trading – a manual warehouse system with “some” computer control – the warehouse consists of a number of parallel aisles with paper rolls stored alongsides and are piled one on top of the other • Outcomes – Simulation model of receiving, storage, picking and shipping processes – Evaluation of the impact of RFID due to automation in terms of Time savings & Labor utilisation 4 Measurement AS-IS model RFID- enabled model Comparison Result % utilisation of scanning labor9.60%2.48%Reduced 74% % utilisation of storing/picking labor19%17.17%Reduced 9.6% % utilisation of unloading/loading labor3.19%2.48%Reduced 22.5% Average time waiting for storing Reduced 4.22% Average time waiting for scanning Reduced 71.4% Average time waiting for loading Reduced 5.58%

5 Case 2: Manufacturing Facility • Background – 01/ /2008 – a leading food company in Greece (more than 30% of market share) and one of the largest in Europe- the Frozen Foods Division – a project partly funded by the General Secretariat for Research & Technology, Ministry of Development of the Hellenic Republic 5 • Outcomes – Requirements’ analysis, development and pilot implementation of a RFID-enabled traceability system within the central warehouse – Cost-benefit assessment of the proposed RFID system

6 Case 3: a Retail Distribution Center • Background – 07/ /2010 – a retail distribution center of one of the biggest supermarket chains in Greece. – a typical retail distribution center that stores a wide variety of products until needed by the retail location • Data Collection – On-site observations in the research sites regarding the current production flow, process operations, processing times, resources and facility layout – Semi-structured interviews in the three research sites with managers and operational personnel – Official records retrieved from enterprise system 6 • Outcomes – A more generic simulation model of receiving, storage, picking and shipping processes – Test various RFID implementations

7 Factors affecting RFID implementation 7 FactorDescription RFID Tagging Level represents what objects are being passed through the RFID enabled processes RFID Tagging Process Responsibility represents who has the responsibility to attach the RFID tags to the objects

8 NEW Process (RFID LABELING) Process C (Picking) Process D (Shipping) Process B (Put-away) Process A (Receiving) …is not supported by RFID… RFID IMPLEMENTATION 1 Alternative RFID implementations 8 Process D (Shipping) Process A (Receiving) Process B (Put-away) Process C (Picking) …is not supported by RFID… RFID IMPLEMENTATION 2

9 Numerous Alternative RFID Implementations • Numerous possible ways that the processes can be shaped – Different implementation  different value of RFID – no clear cut answer as to which RFID implementation is the best • Discrete Event Simulation as a decision support tool – design differently configured to-be implementations and – decide on a specific one based on a credible evaluation of the alternatives 9

10 Experimental Design In-house By all the suppliers By the large suppliers By the large suppliers & In-house PalletsExperiment 1Experiment 3Experiment 5Experiment 7 CasesExperiment 2Experiment 4Experiment 6 Experiment 8 Tagging Level Tagging Responsibility 10

11 A Retail DC simulation model (SIMUL8 software) 11

12 Simulation Study Steps 12 • Process modelling • Level of detail • On-site Observation • Retrieving data from official records • Model validation

13 Model validation • Independent T test using SPSS software • Test the null hypothesis that the distribution of the outputs is the same across categories of simulated and real data • Outputs – no. of orders per day, no. of pallets receiving for each supplier • Validation with the managers 13

14 Output Analysis • Run (8 to-be & 1 as-is) Simulation Experiments in the Simul8 Software – For each experiment, the simulation runs with 30 replications to eliminate the effects of random variants with: • Warm-Up Period (20 days=4 weeks) – Time-series method – Welch method • Run-length (70 days=14 weeks) – Robinson (1995) graphical method • Using the outputs of the experiments, run a two-factor multivariate analysis of variance (MANOVA) in the SPSS software – Independent variables • tagging level • tagging responsibility – Dependent variables • labor utilization – receiving, storage, picking, shipping, overall • time savings – average queuing time for unloading, scanning, checking-in, storing, checking-out picking time and overall 14

15 Hypothesis H1 Testing RFID effect on Labor Utilisation Hypothesis H1: “The integration of RFID in warehouse processes has a positive effect on process performance in terms of labor utilisation. This effect varies depending on tagging level and who has the tagging responsibility.” 15

16 Hypothesis H2 Testing RFID effect on Time Savings Hypothesis H2: “The integration of RFID in warehouse processes has a positive effect on process performance in terms of time savings. This effect varies depending on tagging level and who has the tagging responsibility.” 16

17 Tagging Level*Tagging Responsibility Labor Utilization 17 Experiment1 Experiment2 Experiment3 As-is Experiment4 Experiment 5 Experiment6 Experiment7 Experiment8

18 Conclusions • RFID deployment within warehouse processes pays off the investment – numerous RFID implementations – each RFID implementation has different value • Understand the linkages between RFID assessment and simulation for: – evaluating RFID implementations in terms of process- driven savings (labor hours, processing times, etc.) 18

19 Publications (1) Journals • Chryssochoidis, G., A. Karagiannaki, K. Pramatari, O. Kehagia (2009). A cost-benefit evaluation framework of an electronic-based traceability system, British Food Journal, 111(6) • Karagiannaki, A. Papakyriakopoulos, D. and Bardaki, C. A framework for identifying RFID-enabled warehouse settings, Submitted to Industrial Management and Data Systems (IMDS) – to be published 30- Jun-2011, vol:111, iss:5 • Karagiannaki, A., I. Mourtos and K. Pramatari. Measuring the impact of RFID on process performance metrics: a simulation study of the warehouse environment, Submitted to International Journal of Production Economics • Karagiannaki, A., Pramatari, K. and Doukidis, G.J. Decision Support for the Design of RFID implementations: Toward a Simulation Framework, Submitted to Journal of the Operational Research Society (JORS) – 1 st revision • Karagiannaki, A. and Pramatari, K. The interaction effects of RFID tagging level and tagging responsibility on warehouse process performance, Submitted to the special issue: “Interdisciplinary Research in Operations Management”, International Journal of Production Economics Book Chapters • Karagiannaki,A., C. Bardaki and K. Pramatari. “RFID and its role in food supply chain” in the book entitled: “Delivering performance in food supply chains”, Woodhead Publishing (forthcoming) • Karagiannaki,A. and K. Pramatari. “Leveraging RFID-enabled Traceability for the Food Industry: a case study” in the book entitled “Intelligent Agrifood Chains and Networks: Current Status, Future Trends & Real-life Cases” (forthcoming) • Andriana Dimakopoulou, Katerina Pramatari, Angeliki Karagiannaki, George Papadopoulos, Antonis Paraskevopoulos. “Investment evaluation of RFID technology applications: An evolution perspective” in the book entitled "Unique Radio Innovation for the 21st Century: Building Scalable and Global RFID Networks“(forthcoming) 19

20 Publications (2) Conferences • Karagiannaki, A., Pramatari, K. and Doukidis, G.J. (2010). Using simulation to design & evaluate RFID implementations in the supply chain, In the Proceedings of the Operational Research Society Simulation Workshop 2010 (sw10), March, Worcestershire, England • Panousis, K. and A. Karagiannaki (2009). Quantifying RFID-Enabled Traceability for the Food Industry: a Case Study. In the Proceedings of the 4th Mediterranean Conference on Information Systems (MCIS), September 25-27, Athens, Greece • Karagiannaki, A. and M. Kehagia (2009). Modeling the Warehouse Operations to Quantify the Value of RFID. In the Proceedings of the 4th Mediterranean Conference on Information Systems (MCIS), September 25-27, Athens, Greece • Karagiannaki, A. and K. Pramatari (2008). Towards a framework for simulating the impact of RFID on different warehouse settings, In the Proceedings of the 15th International Annual EurOMA Conference, June 15-18, Groningen, the Netherlands • Karagiannaki, A. and K. Pramatari (2008). “The impact of RFID on different levels of packaging for streamlining the warehouse operations”. In the Proceedings of the 1st Panhellenic Packaging Convention of Food & Drinks, March 17-18, Athens, Greece (best-paper award) • Bardaki,C., A. Karagiannaki and K. Pramatari (2008). A Systematic Approach for the Design of RFID Implementations in the Supply Chain. In the Proceedings of the Panhellenic Conference on Informatics (PCI 2008), August 28-30, Samos, Greece • Karagiannaki, A. and K. Pramatari (2008). Leveraging Traceability using RFID technology: a case study. In the Proceedings of the Department of Management Science & Technology (DMST) 5th Conference, May 8, Athens, Greece • Karagiannaki, A., I. Mourtos and K. Pramatari (2007). Simulating and Evaluating the Impact of RFID on Warehousing Operations: a case study. In the Proceedings of the Summer Computer Simulation Conference (SCSC), July 15-18, San Diego, CA • Bardaki, C., A. Karagiannaki, K. Pramatari (2007). A RFID-enabled Supply Chain Traceability System for The Food Industry. In the Proceedings of TRACE 3rd Annual Meeting, April 26-27, Crete, Greece • Karagiannaki, A. and L. Oakshott (2006). Simulation for Facility Layout Redesign. In the Proceedings of the 20th European Conference on Modelling and Simulation (ECMS), May 28-31, Bonn, Sankt Augustin, Germany • Karagiannaki, A., I. Mourtos and K. Pramatari (2006). Evaluating the impact of RFID in supply chain operations by using simulation: A review. In the Proceedings of the Department of Management Science & Technology (DMST) 3rd Conference, May 10, Athens, Greece • Bardaki, C., A. Karagiannaki, K. C. Pramatari, and I. Mourtos (2006). RFID technology: Simulating the impact on supply chain and demand in retail industry. In the Proceedings of the 21st European Conference in Operational Research (EURO XXI 2006), June 2-5, Reykjavik, Iceland 20

21 Thank you for your attention! Questions 21

22 Research Objective & Questions • General Research Objective: – What is the impact of RFID on supply chain processes? • Specific research questions: – RQ1: How are supply chain processes redesigned due to RFID? – RQ2: What is the impact of RFID on supply chain process performance? – RQ3: Which factors influence the impact of RFID on supply chain process performance? 22

23 Integrative Model of IT Business Value Organizational performance Trading Partners’ Resources and Business Processes Country characteristics Industry characteristics IT Business Value Generation Process I. Focal Firm II. Competitive Environment III. Macro Environment Source: Melville et al., 2004, MIS Quarterly Business Processes Business Process Performance IT Resources: Technology (TIR) & Human (HIR) Complementarity Organizational Resources 23

24 Thesis Overview Form Research Objective Refined Research Questions MOTIVATION- PROBLEM DEFINITION Approach: Literature Review CONFIRMATORY Phase Approach: Experimental Simulation HYPOTHESES TESTING Simulation model on process-driven value of RFID Factors affecting the impact of RFID RFID Assessment between the as-is vs. to-be processes EXPLORATORY Phase Approach: Case Study HYPOTHESES GENERATING RFID-enabled process redesign: a reference framework 3PL warehouse Manufacturing Facility Retail Distribution Center 24

25 Three Cases CASE 1: Manufacturing Facility (01/ /2008) CASE 2: 3PL Warehouse (03/ /2007) CASE 3: Retail Distribution Center (07/ /2010) Product Type / Product IDs -Frozen food -Many productIDs -Paper trading -One productID Fast moving consumer goods (FMCG) Mechanisation Level / Computer System -Semi-automated -WMS -manual warehouse system with “some” computer control -no WMS -Semi-Automated -WMS Storage System / Storage Assignment policy -Many shelves with little automation -Class based storage - Garage-like: a number of parallel aisles with products piled one on top of the other -Closest open location storage -Many shelves -Dedicated storage BatchingPick-by-order ZoningNo zoning Synchronised zoning RoutingHeuristicsNo routing policyHeuristics Order accumulationContinuousDiscrete (wave picking)Continuous Distinction based on van den Berg and Zijm, 1999; Rouwenhorst et. al,2000; De Koster et al., 2007; and Gu et al

26 Warehouse Processes ReceivingStorage Order Picking Shipping 26

27 Current Receiving Process Process Mapping & Modeling 27

28 RFID-enabled Receiving Process Process Mapping & Modeling 28

29 Current Storage Process Process Mapping & Modeling 29

30 RFID-enabled Storage Process Process Mapping & Modeling 30

31 Current Picking Process Process Mapping & Modeling 31

32 RFID-enabled Picking Process Process Mapping & Modeling 32

33 Current Shipping Process Process Mapping & Modeling 33

34 RFID-enabled Shipping Process Process Mapping & Modeling 34

35 RFID-enabled process redesign: A reference framework Εffect typeDescriptionReferred to by Dimension A: STRUCTURAL CHARACTERISTICS of a BP Keith et al., 2002; Karkkainen, 2003; ; Alexander et al., 2003, Chappell et al., 2003; Lee et al., 2004; Srivastava, 2004; Lapide, 2004; Pramatari et al., 2005; Fleisch and Tellkamp, 2005; Atali et al., 2005; Angeles, 2005; Jones et al., 2005; Capone, 2005; Chuang and Shaw, 2005; Lefebvre et al., 2005; Hardgrave and Miller, 2006; Gaukler et al., 2006; Loebbecke, 2007; Wang et al., 2008; Wu et al., 2006; Sellitto et al., 2007; Dutta et al., 2007; Tajima, 2007; Curtin et al., 2007; Attaran, 2007; Reyes and Jaska, 2007; Becker et al., 2009; Roh et al., 2009; Ferrer et al., 2010 A1: Task elimination a,d,h the elimination of unnecessary tasks from a business process A2: Task composition a,b,d,e,g,h,i the division of a general task into two or more alternative tasks or the integration of two or more alternative tasks into one general task A3: Task addition the addition of new tasks in a business process Dimension B: WORKFLOW & POLICIES of a BP B1: Task automation a,b,c,f,j the automation of tasks or change in processing time B2: Resequencing a,b,c,j the change in a sequence/routing of tasks in a process B3: Parallelism a,d,h,i whether tasks may be executed in parallel B4: Exception a,b a deviation from a standardized process execution Dimension C: ENTITIES INVOLVED in a BP C1: Integration a,c the integration with the BP of a supplier C2: Split responsibilities a,i avoid assignment of task responsibilities to people from different units C3: Resources elimination a,b,f,i minimize the number of persons involved in a business process C4: Extra resources a if capacity is not sufficient, consider increasing the number of resources a. Reijers & Mansar (2005), b. Hammer & Champy (1993), c. Balasubramanian & Gupta (2005), d. Van der Aalst & Van Hee (2004), e. van der Aalst (2001), f. Gunasekaranan and Nath (1997), g. Seidmann and Sundararajan (1997), h. Buzacott (1996), i. Rupp and Russell (1994), j Davenport (1993) 35

36 Factors affecting RFID- enabled process redesign • Tagging Level – This choice makes case-level tagging versus pallet-level tagging an important decision. – Literature that supports this assertion: Karkkainen, 2003; Hardgrave and Miller, 2006; Loebbecke, 2007; Tajima, 2007; Lee, 2007; Boeck and Wamba, 2008; Roh et al., 2009; Becker et al., 2009 • Tagging Responsibility – One echelon of the supply chain should take the responsibility of introducing the new process of RFID tagging – Literature that supports this assertion: Kim and Sohn, 2009; Boeck and Wamba

37 RFID effect type ReceivingStoragePickingShipping A1: Task elimination Manually scan each unloaded pallet; Apply a new label; Physically check the BOL and the packing slip; Enter data from paper BOL in the ERP;Verify quantity by looking up the PO; Visual count of pallets Scan the bar code on the pallet and at the slot location in the racks; Manually insert barcode in case of, incorrect receipt of damaged or covered barcodes; Manually confirm the product assignment Scan the bar code on the pallet and at the slot location in the racks; Manually insert barcode in case of, incorrect receipt of damaged or covered barcodes;Manually confirm the product picking; Placement in the wrong location, relocate pallet Visual count of the cases picked; Physically check any discrepancies between the actual cases picked and the list of picking A2: Task composition  Integration of: Manually scan each unloaded pallet, Apply a new label, Physically check the BOL and the packing slip, Enter data from paper BOL in the ERP, Verify quantity by looking up the PO, Visual count of pallets into one general task that of RECEIVE BOL  Division of the RECEIVE BOL into two alternatives based on whether the products are tagged or not by the upstream supplier  Integration of: Scan the bar code on the pallet and at the slot location in the racks, Manually insert barcode in case of, incorrect receipt of damaged or covered barcodes, Manually confirm the product assignment  Division of the PUT-AWAY into two alternatives based on whether the products are tagged or not  Division of the REPLENISHMENT into two alternatives based on the tagging level  Integration of: Scan the bar code on the pallet and at the slot location in the racks; Manually confirm the product picking, inventory update during the PALLET COMPOSITION.  Division of the PICKING into two alternatives based on the tagging level  Integration of: Visual count of the cases picked; Physically check any discrepancies between the actual cases picked and the list of picking  Division of the PICKING into two alternatives based on whether the products are tagged or not A3: Task addition  In case the focal firm does the tagging: Tagging process that includes: Break the shipment down to have access to each individual case; Tag cases; Rebuild pallets; Tag pallet; Ship tagged cases &pallets to the storage area  In case the upstream partner does the tagging: Drive the trailer through a RFID portal; automatic scan of the trailer; automatic upload a copy of BOL; automatic link the BOL to the PO; automatic create inventory; automatic initiate unloading Automatic scan of pallets and storage locations by RFID reader; Automatic update information; Automatic inventory count  In case the products are tagged: Drive the trailer through a RFID portal; automatic scan of the trailer; automatic create a BOL; automatic create inventory; automatic initiate loading; Automatic check any discrepancies between the actual cases picked and the list of picking B1: Task automation Automatic check for any discrepancy (between BOL and PO);automatic enter data from BOL; faster repair in case of a failure, incorrect receipt of damaged or covered barcodes; faster cross-docking; automatic count & create inventory automatic scan the pallet and dedicated rack; Automatic confirm the put- away on the dedicated rack in the system; automatic correlation between the pallet stored and the storage location; faster identification of the dedicated storage location Automatic Scan the bar code on the pallet and at the slot location in the racks; Faster composition of a pallet; Faster repair time in case of a divergence automatic scan of the trailer;automatic create a BOL; automatic create inventory; automatic initiate loading; Automatic check any discrepancies between the actual cases picked and the list of picking; faster compliance checks on the shipping dock B2: Re- sequencing Change of routing to attach tags, cross-docking movement, priority to out-of-stock products B3: Parallelism Tasks may be executed in parallel: check the BOL and the packing slip; Enter data from BOL in the ERP; automatic count & create inventory Tasks may be executed in parallel: Inventory count; scan of pallets and storage locations by RFID reader Tasks may be executed in parallel: Inventory count; scan of pallets and storage locations Tasks may be executed in parallel: Visual count of the cases picked; Physically check any discrepancies between the actual cases picked and the list of picking B4: Exception Different process if the received products are tagged or not Different process if the products are tagged or not based also on the tagging level Different process based on the tagging levelDifferent process based on whether the products are tagged or not C1: Integration Tagging Process in case the upstream partner does the taggingNo integration with partners’ business processes C2: Split responsibilities In case the upstream partner does the tagging: avoid assignment of task responsibilities to people from storage process In case the focal firm does the tagging: split storage labor responsibilities to the tagging process C3: Resources elimination In case the upstream partner does the tagging, eliminate resources in: Manually scan each unloaded pallet; Apply a new label; Physically check the BOL and the packing slip; Enter data from paper BOL in the ERP; Verify quantity by looking up the PO; Visual count of pallets In case the focal firm does the tagging eliminate resources in storage process and allocate them in the Tagging process that includes: Break the shipment down to have access to each individual case; Tag cases; Rebuild pallets; Tag pallets; Ship tagged case s& pallets to the storage area No elimination in the resources Elimination of resources in: Visual count of the cases picked; Physically check any discrepancies between the actual cases picked and the list of picking C4: Extra resources In case the focal firm does the tagging extra resources are needed in: Tagging process that includes: Break the shipment down to have access to each individual case; Tag cases; Rebuild pallets; Tag pallets; Ship to storage No need for extra resources Variation in RFID redesigns Warehouse processes 37

38 Conceptual Model (adapted from Melville et al., 2004 MIS Quarterly) Business Processes Business Process Performance RFID Technology Tagging Level Tagging Responsibility 38

39 Research Hypotheses • Hypothesis H1: “The integration of RFID in warehouse processes has a positive effect on process performance in terms of labor utilisation. This effect varies depending on tagging level and who has the tagging responsibility.” • Hypothesis H2: “The integration of RFID in warehouse processes has a positive effect on process performance in terms of time savings. This effect varies depending on tagging level and who has the tagging responsibility.” 39

40 Experimental Design In-house By all the suppliers By the large suppliers By the large suppliers & In-house PalletsRedesign1Redesign3Redesign5Redesign7 CasesRedesign2Redesign4Redesign6Redesign8 Tagging Level Tagging Responsibility Tagging responsibility Tagging Level Pallet Item Case By all the suppliers In- house Solution Space: all possible conditions under which the ‘to-be’ model can be run • Levels of Tagging Level – we choose pallet vs. case-levels as these are the levels of SKUs we encounter in the majority of warehouse processes • Levels of Tagging Responsibility – two extreme cases: the tagging process is deployed in-house or by all the suppliers, – a “common/popular” case: the tagging process is deployed by the large suppliers – a mixed case: the tagging process is deployed by both the suppliers and the focal firm 40

41 RFID Redesign 1 41 ORDER PICKING SHIPPING STORAGE RECEIVING …is not supported by RFID… NEW PROCESS- RFID TAGGING …is not supported by RFID… 41

42 RFID Redesign 2 42 SHIPPING RECEIVING STORAGE ORDER PICKING …is partially supported by RFID… …is not supported by RFID… 42

43 RFID Redesign 3 43 SHIPPING RECEIVING STORAGEORDER PICKING …is partially supported by RFID… …is not supported by RFID… RECEIVING …is not supported by RFID… 43

44 RFID Redesign 4 44 ΠΑΡΑΛΑΒΗ …is not supported by RFID… ORDER PICKING SHIPPING STORAGE NEW PROCESS- RFID TAGGING …is partially supported by RFID… …is not supported by RFID… RECEIVING 44

45 RFID Redesign 5 45 NEW PROCESS- RFID TAGGING ORDER PICKINGSHIPPINGSTORAGE RECEIVING …is not supported by RFID… 45

46 RFID Redesign 6 46 ORDER PICKINGSHIPPINGSTORAGERECEIVING 46

47 RFID Redesign 7 47 RECEIVING …is not supported by RFID… SHIPPINGSTORAGEORDER PICKING …is not supported by RFID… ORDER PICKING SHIPPINGSTORAGE RECEIVING By the large suppliers …is not supported by RFID… 47

48 RFID Redesign 8 48 RECEIVING …is not supported by RFID… RECEIVING By the large suppliers ORDER PICKING SHIPPINGSTORAGE NEW PROCESS- RFID TAGGING 48

49 Simulation Model Specifications Learning from the preliminary work Simulation Model 1 (preliminary case) Simulation Model 2 Simulation mode: Exploratory experiments Simulation mode: confirmatory experiments Bottom-up approachTop-down approach Narrow warehouse caseMore generic warehouse type Difficult to implement too many different experiments Easy to implement many different experiments Depends heavily on the specific cases data Can be supported by simulated data Difficult to reuse and reconfigure the model Model is reusable, reconfigured 49

50 A Retail DC simulation model (SIMUL8 software) 50

51 Model content (1) Products The products are included as work items. Work items are anything processed through the simulation model. The products represent the flow through the warehouse that triggers the processes of receiving and storage. The products have specific IDs based on their type and supplier. The number of suppliers is eleven. The ten of them represent the large suppliers of the warehouse and the eleven one represents all the remainder suppliers. 80% of the products come from the large suppliers. As such, the products arriving from the large suppliers count for the 80% of the products entering the system. Orders The orders are also modelled as work items. They represent the flow through the warehouse that triggers the processes of picking and shipping. Arrivals Work Entry Points-These components control how work items arrive from outside of system. There are two entry points, one for the products’ arrivals of the eleven suppliers and one for the orders’ arrivals. Product Carrier of SKU When the products arrive into the system, the product carrier of SKU is pallets. The products are stored as pallets, decomposing them to cases based on a replenishment rule. The cases are removed from the system, in response to orders’ arrivals. As such, there is an iterative cycle. Labor The labor is included as Resources. Resources represent entities required in the work centres before work items can be processed. They are responsible for unloading, scanning, checking, storage, retrieval and loading of the products. All resources need to be modeled to give full statistics on queues and resource utilisation. Processes Four main processes are modelled that are spotted in any warehouse, namely receiving, storage, picking and shipping. These processes are decomposed to sub-activities and they are included as work centers. Work centers are steps where some action is taken on a work item, some time is taken to perform the task and requires one or more resources. Moreover, efficiency options are provided to simulate downtime that prevents the work centre from working all time. 51

52 Model content (2) ErrorsThey are included as Efficiency option. They represent misreads because of unlabeled products and covered or damaged barcodes resulting in rejected products that must be carried out manually, with the expected delay of the process. Queues-Storage Areas These components act as buffers in between steps in a process or as storage areas for inventory. Need to be modeled to give full statistics on queues and resource utilisation. The main queued include queue for unloading/loading, scanning, checking in/out Work Exit PointThese are a means for work items to leave the simulation model. RoutingsThey control how work items move from one activity or storage to another LabelsThese are individual pieces of information physically attached to the work items, such as the product carrier of SKU, the productID, the supplierID DistributionsThese are the heart of simulation, they are “number generators” used anywhere timing and number values, fixed or variable, are required Visual LogicThis is an internal programming language to handle advanced user requirement 52

53 Model validation • Independent T test using SPSS software • Test the null hypothesis that the distribution of the outputs is the same across categories of simulated and real data • Outputs – no. of orders per day, no. of pallets receiving for each supplier • Validation with the managers 53

54 Modeling the to-be processes on the simulation tool: A Framework Type of changesDescription Structural Characteristics represents changes in the model structure configure the simulation model on an aggregated level and not each process in depth specification of the high-level operations to be supported by the RFID Workflow & Policies represents changes in the processes’ logic how the simulation is going to be operated with regards to the workflow in each process along with the ongoing operating practices Entities represents changes in the entities’ characteristics configure the characteristics of the objects that pass through the processes 54

55 Key Findings (1) The integration of RFID in warehouse processes has a positive effect on process performance in terms of overall Labor Utilisation & Time Savings •Whatever the tagging level, the RFID-enabled processes bring better results in terms of operational savings than the current situation (without RFID) •Whoever has the responsibility of the new tagging process, even if the focal firm decides to suffer the most from the new time & labor consuming tagging process, the RFID-enabled processes bring better results in terms of operational savings than the current situation (without RFID) The degree to which a focal firm can realize the RFID effect on process performance is moderated by two factors: Tagging level & Tagging responsibility •Based on the % improvement from the current system, case-level tagging brings significantly better results compared to pallet-level. Investment-wise it may be better to go for a case-level tagging if they want to reap the benefits. •Although the experiments that differentiate based on the tagging responsibility are statistically different, viewing the % improvement compared to as-is, it is obvious that the popular case of convincing the large suppliers to tag their products does not bring significantly different results compared to the remainder three. Investment-wise it may be better in all cases to incorporate the new process of tagging inhouse. 55

56 Key Findings (2) Decomposing the outputs:  Labor Utilisation  Receiving – Storage – Picking – Shipping  Time Savings  Average queuing time for unloading – Scanning - Checking-in/out –Storing - Picking time •It seems that the tagging level is more important regarding the outbound processes of a warehouse (i.e. picking & shipping) while the tagging responsibility impacts more on the inbound processes (i.e. receiving & storage) • The mixed experiment that incorporates the tagging process by both the focal firm and the large suppliers seem to have significant difference in some of these outputs from the experiment that incorporate the tagging process only by the large suppliers. This indicates that if the large suppliers take the responsibility of tagging the products, it is of value for the focal firm to tag the remainder products, although having a mixed model may have a negative effect in some parts of the warehouse. •Evidence is presented on how RFID impacts on the four processes of a warehouse separately. It seems that if RFID speeds up only the receiving process, it may made the put-away process a bottleneck. If the facility does not have enough room to store the off-loaded material on the receiving dock, then the gains from RFID are reduced or even negated. So it may be better to go for a full implementation if they want to reap the benefits. Interaction effects of tagging level and tagging responsibility • It seems that when the level of tagging is pallet, there are no significant differences on the process performance based on who has the tagging responsibility. • Controversy, when the level of tagging is case, there is an interaction effect with the tagging responsibility. This means that it is of high importance who has the tagging responsibility. 56

57 Discussion of Findings • A snapshot of one part of the warehouse likely to underestimate impact – full implementation to reap the benefits – longer planning horizon – viewing also this as an investment in the relationship with key suppliers • Warehouse processes – It is a narrow view considering only the warehouse processes when depicting and evaluating the impact of RFID on process performance • Tagging level and tagging responsibility – Tagging responsibility represent the sharing of the tagging process or trading partners’ dependence; other studies only see the sharing of cost in terms of financial indicators and not process-driven ones – Consider not only the two factors of tagging level and tagging responsibility when evaluating the impact of RFID; other important aspects such as contextual factors that differentiate one warehouse from another (such as mechanisation level, size) may moderate the impact of RFID on process performance • RFID as a collaborative, supply chain, object-connected ICT – The two factors of tagging level and tagging responsibility represent a new set of factors that can not be regarded as organisation or human ones • Collaborative design between processes and RFID • The framework rules are thought to have a wide applicability across various supply chain processes and not only within the warehouse ones 57

58 Theoretical Implications Regarding the research problem (i.e. process-driven value of RFID), the thesis: •Proposes a reference framework that conceptualizes how the warehouse processes are designed due to RFID •Develops a simulation model that can be used to estimate the impact of RFID technology within a warehouse in terms of process performance metrics (time savings and labor utilization) •Signifies important factors that influence the impact of RFID on process performance Regarding the approach adopted (i.e. simulation), the thesis: •Signifies the linkages between RFID assessment and simulation by proposing a simulation framework of how to model the to-be processes on a simulation tool 58

59 Further Prospects • Use of the reference framework as a basis for depicting the impact of RFID on other supply chain processes • Use of the existing simulation model to perform different experiments. – For example, other important aspects such as contextual factors that differentiate one warehouse from another (such as mechanisation level, size) may moderate the impact of RFID on process performance • Using the simulation outputs as inputs in developing a cost-benefit model • Development of a more sophisticated model to investigate other impacts of RFID • Development of simulation models in order to investigate: – New leading practices/processes: Environmental Sustainability; In-store logistics with home shopping and neighbourhood distribution; Reverse logistics processes; Collaborative Warehousing & Transport; Collaborative City Replenishment; Multi-player information sharing – New Measurements (KPIs): Energy consumption; CO2 emissions (greenhouse gases); Traffic congestion; Water consumption; Security Compliance; Infrastructure simplification 59

60 Preliminary Case Overview • Background – 3PL company that deals with paper trading – a manual warehouse system with “some” computer control – the warehouse consists of a number of parallel aisles with paper rolls stored alongsides and are piled one on top of the other • Objective – Model four distinct operations: • receiving, storage, picking and shipping – Evaluate the impact of RFID due to automation in terms of: • Time savings • Labor utilisation 60

61 Simulation Modeling (1/3) • Process modeling of the four distinct warehouse operations Model coding in SIMUL8 Real world Solutions/ Understanding Computer model Conceptual model Model coding Experimentation Conceptual modeling Implementation Validation Validation techniques 61

62 Simulation Modeling (2/3) Real world Solutions/ Understanding Computer model Conceptual model Model coding Experimentation Conceptual modeling Implementation Validation Validation techniques Model validation “subjectively eyeballing the timepaths” (Kleijnen, 1995) confidence intervals Experimentation Determining Warm-Up Period •Time-series method •Welch method Determining the run-length •Robinson (1995) graphical method CI for the difference in the warehouse inventory output: =( , ) Steady state Initial transient Steady state 62

63 Simulation Modeling (3/3) Measurement AS-IS model RFID- enabled model Comparison Result % utilisation of scanning labor9.60%2.48%Reduced 74% % utilisation of storing/picking labor19%17.17%Reduced 9.6% % utilisation of unloading/loading labor3.19%2.48%Reduced 22.5% Average time waiting for storing Reduced 4.22% Average time waiting for scanning Reduced 71.4% Average time waiting for loading Reduced 5.58% Real world Solutions/ Understanding Computer model Conceptual model Model coding Experimentation Conceptual modeling Implementation Validation Validation techniques RFID performance advantages within the warehousing operations Time savings and reduced labor utilisation due to: •automation •reduced errors •limited labor intervention and •reduced time to check for any discrepancies Theory Confirmation: •Offer empirical evidence in support of the RFID improvements suggested in Lefebvre et al. (2006) 63

64 Structural Characteristics • Map the type of changes in the MODEL STRUCTURE of the base simulation model – Task elimination • Scanning-out • Checking manually the outgoing shipment – Task addition • RFID labeling – Break the shipment down to have access to each individual case – Tag cases – Rebuild pallets – Tag pallets – Ship tagged cartons and pallets to the storage area 64

65 Workflow & Policies • Task automation – Processing time(ProcTime); Change in Distributions (ChgDsb) • Exception – Error reduction (ErrRed); – Efficiency increase (Effic) • Resequencing – Change in Routing (ChgRout) • Resources Elimination – Resource reduction (Res) Map the type of changes in the MODEL LOGIC of the base simulation model ChgDsb ChgRout ProcTime ErrRed Effic 65

66 Entities Changes in individual object characteristics Product Carrier  Pallet or Case RFID Tagging  Tagged or Not Tagged -Pallet -Not tagged -Pallet -Tagged -Pallet -Not tagged -Case -Not tagged -Case -Tagged 66

67 Application of the framework: RFID effects in STRUCTURAL CHARACTERISTICS of BPs ReceivingStoragePickingShipping A1: Task elimination  Manually scan each unloaded pallet  Apply a new label  Physically check the BOL and PO  Enter data from paper BOL in the ERP  Verify quantity by looking up the PO  Visual count of pallets  Scan the bar code on the pallet and at the slot location in the racks  Manually insert barcode in case of, incorrect receipt of damaged or covered barcodes  Manually confirm the product assignment  Scan the bar code on the pallet and at the slot location in the racks  Manually insert barcode in case of, incorrect receipt of damaged or covered barcodes  Manually confirm the product picking  Placement in the wrong location, relocate pallet  Visual count of the cases picked  Physically check any discrepancies between the actual cases picked and the list of picking A2: Task composition  Integration of: Manually scan each unloaded pallet, Apply a new label, Physically check the BOL and the packing slip, Enter data from paper BOL in the ERP, Verify quantity by looking up the PO, Visual count of pallets into one general task of RECEIVE BOL  Division of the RECEIVE BOL into two alternatives based on whether the products are tagged or not by the upstream supplier  Integration of: Scan the bar code on the pallet and at the slot location in the racks, Manually insert barcode in case of, incorrect receipt of damaged or covered barcodes, Manually confirm the product assignment  Division of the PUT-AWAY into two alternatives based on whether the products are tagged or not  Division of the REPLENISHMENT into two alternatives based on the tagging level  Integration of: Scan the bar code on the pallet and at the slot location in the racks, Manually confirm the product picking, inventory update during the PALLET COMPOSITION.  Division of the PICKING into two alternatives based on the tagging level Integration of:  Visual count of the cases picked  Physically check any discrepancies between the actual cases picked and the list of picking  Division of the PICKING into two alternatives based on whether the products are tagged or not A3: Task addition In case the focal firm does the tagging: Tagging process that includes  Break the shipment down to have access to each individual case  Tag cases  Rebuild pallets  Tag pallets  Ship tagged products to the storage In case the upstream partner does the tagging:  Drive the trailer through a RFID portal  automatic scan of the trailer  automatic upload a copy of BOL  automatic link the BOL to the PO,  automatic create inventory-  automatic initiate unloading  Automatic scan of pallets and storage locations by RFID reader  Automatic update information  Automatic inventory count  Automatic scan of pallets and storage locations by RFID reader  Automatic update information  Automatic inventory count In case the products are tagged:  Drive the trailer through a RFID portal  automatic scan of the trailer  automatic create a BOL  automatic create inventory  automatic initiate loading  Automatic check any discrepancies between the actual cases picked and the list of picking 67

68 Application of the framework: RFID effects in WORKFLOW AND POLICIES of BPs ReceivingStoragePickingShipping B1: Task automation  Automatic check for any discrepancy (between BOL and PO)  automatic enter data from BOL  faster repair in case of a failure, incorrect receipt of damaged or covered barcodes  faster cross-docking  automatic count & create inventory  automatic scan the pallet and dedicated rack  Automatic confirm the put-away on the dedicated rack in the system  automatic correlation between the pallet stored and the storage location  faster identification of the dedicated storage location  Automatic Scan the bar code on the pallet and at the slot location in the racks  Faster composition of a pallet  Faster repair time in case of a divergence  automatic scan of the trailer  automatic create a BOL  automatic create inventory  automatic initiate loading  Automatic check any discrepancies between the actual cases picked and the list of picking  faster compliance checks on the shipping dock B2: Re-sequencing Change of routing to attach tags, cross-docking movement, priority to out-of-stock products B3: Parallelism Tasks may be executed in parallel  check the BOL and the packing slip  Enter data from BOL in the ERP  automatic count & create inventory Tasks may be executed in parallel  Inventory count  scan of pallets and storage locations by RFID reader Tasks may be executed in parallel  Inventory count  scan of pallets and storage locations Tasks may be executed in parallel  Visual count of the cases picked  Physically check any discrepancies between the actual cases picked and the list of picking B4: Exception Different process if the received products are tagged or not Different process if the products are tagged or not based also on the tagging level Different process based on the tagging level Different process based on whether the products are tagged or not 68

69 Application of the framework: RFID effects in ENTITIES involved in BPs ReceivingStoragePickingShipping C1: Integration Tagging Process in case the upstream partner does the tagging No integration with partners’ business processes C2: Split responsibilities In case the upstream partner does the tagging: avoid assignment of task responsibilities to people from storage process In case the focal firm does the tagging: split storage labor responsibilities to the tagging process C3: Resources elimination In case the upstream partner does the tagging, eliminate resources in  Manually scan each unloaded pallet  Apply a new label  Physically check the BOL and the packing slip  Enter data from paper BOL in the ERP  Verify quantity by looking up the PO  Visual count of pallets In case the focal firm does the tagging eliminate resources in storage process and allocate them in the Tagging process that includes  Break the shipment down to have access to each individual case  Tag cases  Rebuild pallets  Tag pallets  Ship tagged case s& pallets to the storage area No elimination in the resources Elimination of resources in  Visual count of the cases picked  Physically check any discrepancies between the actual cases picked and the list of picking C4: Extra resources In case the focal firm does the tagging extra resources are needed in: Tagging process that includes  Break the shipment down to each individual case  Tag cases  Rebuild pallets  Tag pallets  Ship tagged products to the storage area No need for extra resources 69

70 A framework for identifying RFID-enabled warehouse settings (submitted to IMDS) 70

71 Hypothesis H1 Testing RFID effect on Labor Utilisation Hypothesis H1: “The integration of RFID in warehouse processes has a positive effect on process performance in terms of labor utilisation. This effect varies depending on tagging level and who has the tagging responsibility.” 71


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