Saurabh Tege, Mr. Devendra S.

Verma / International Journal of Engineering Research and

Applications (IJERA) ISSN: 2248-9622 www.ijera.com
Vol. 2, Issue 3, May-Jun 2012, pp.3038-3044
Implementation of RFID in Retail Outlet
Saurabh Tege1
M.E., Industrial Engineering and Management
Mr. Devendra S. Verma2
Asst. Prof. Mechanical Engineering
Institute of Engineering &Technology, Devi Ahilya University, Indore (M.P.)

Abstract:
The adoption of radio frequency identification Unlike Internet and wireless technologies, RFIDs
(RFID) will create a revolutionary change in the started off with humble beginnings and have taken
management of a supply chain, particularly in the retail much longer periods for implementing them
sector. The aim of this paper is to study the commercially. Radio-frequency identification (RFID)
benefits/applications of RFID on retailers and in turn, can provide cost effective solutions to improve
to formulate the cost benefit analysis model which organizational efficiency. In the context of supply
helps in adopting this technology. The findings show chain management (SCM), the technology has been
that RFID could be implemented in the retailing in the considered as „the next revolution‟ since it allows the
logistics and inventory management etc. Improved tracking of each object or product in real time in the
operational efficiency and effectiveness, and increased supply chain (SC).
sales and profits, are the major perceived benefits,
while implementation cost, compatibility with current
systems, top management attitude, and staff acceptance
are the key challenges. The results give retailers a
better understanding of the potential benefits and
challenges of adopting RFID. The retailers will,
therefore, be able to make more informed decisions in
operational planning and resource allocation.
Moreover, the results may inspire more retailers to use
this technology. By integrating the views of the
potential users, the RFID-based business value-added Fig1: RFID Process [3]
framework and qualitative models supposed by
different researchers agenda for further investigation of Previous research on justifying RFID investment
the use of RFID in commercial sectors and contributes decisions predominantly focused on cost benefit
to the understanding of technology transfer in a less analysis or using discounted cash flow technique but
technologically advanced retailing industry. after some criticism wu proposed a better way to deal
with RFID uncertainty, risk and reflect the actual value
Keywords: Radio Frequency Identification (RFID), of the investment process real option for RFID project
Cost Benefit Analysis, Inventory management, investment evaluation for pharmaceutical supply chain.
Operational efficiency  Wu and yue consider for pharmaceutical supply chain
and we consider for retail supply chain that what
Introduction: benefits are achieving after implementation of RFID
RFID is a rapidly evolving Technology for automatic .We consider in this processes such as receiving,
identification data capture of products. RFID is in inspection and handling of inventory at backroom and
today‟s perspective changing the way of companies in also shrinkage cost yearly. Generally many larger retail
supply chain system which track, trace and manage outlets considering their shrinkage cost by default more
assets easily. This will have major impact upon the than 0.7.In this model point of sale data with
whole supply chain. Radio Frequency Identification consideration of human error with barcoding so these
(RFID) is a term used to explicate technologies that use possibilities are discusses here as:
radio waves for “identifying and tracking objects
automatically”. This RFID system can store signals  When range of products for scanning is more than the
below the detectable light with frequencies called products are to be scanned by the clerk than there are
“bands” by intonation of electromagnetic waves. chances of mistakes i.e. by getting one product of
3038 | P a g e
 Saurabh Tege, Mr. Devendra S. Verma / International Journal of Engineering Research and
Applications (IJERA) ISSN: 2248-9622 www.ijera.com
Vol. 2, Issue 3, May-Jun 2012, pp.3038-3044
biscuit he got multiple products so on the data sheet the manufacturers of America (gma) presents research on
particular segment or product to be sale out but rfid implementations in the consumer products industry
actually it will not happened. [3]. A report prepared by a. T. Kearney and k. Salmon,
associates for gma, discusses how implementation of
epcs can benefit each partner in the supply chain.
 Many time scanning due to rushes at the pick time than However, as implementations and ex- tended processes
clerks due to their regular practices doing fast scanning are examined, gma has also found that the benefits of
and due to which some products are misplaced or some rfid may be more substantial in some product
products scanning is not taken place i.e. not counting categories and supply chain partners than others
properly in the bill so that is come in loss. [2].Mit center have demonstrated rfid applications that
result in substantial gain in efficiency and effectiveness
 There are mismatching of the products are held at point of logistic processes[10], but have also identified
of sale which also considered as loss. The initial value situations. Where the technology needs to advance to
of the underlying assets is the present value of provide more than marginal benefits. Clarke and kipp
investment projects. In order to determine initial value discuss the technical details of how tag readers obtain
of the underlying asset. on the basis of wu and yue data from the RFID tags [2].RFID transactions based
paper on pharmaceutical supply chain we offer a cost on service levels restaurants industries have been
benefit analysis on retail sector analyzes RFID cost and discussed [4].however ,no research has been reported
benefit quantitatively, and offer corresponding on the cost benefit models for RFID implementations.
formulas .finally propose the present value of the In section III, we discuss RFID transactions generated
project i.e. RFID installation is feasible or not. at different locations which are accomplished in retail
outlet and the starting point is from receives goods
based on the order, while the end point is customer
II. Literature Review purchase that product at point of sale so the business
RFID application in retail industry is processes of before and after RFID application can be
increasing now a days .most of the RFID application shown in As shown in fig.1 we can compare the
mainly concentrated in supply chain. But the current differences before and after RFID application scenario,
scenario shows that the retail sector in order to which is shown in table1.Many time decision makers
strengthen retail supply chain efficiency and safety has can not decided the company policies on time in the
urged retail supply chain to apply RFID. On the basis competitive environment because daily updated selling
of wu‟s model we apply same quantitative model based data send to the corporate office from which companies
on RFID by considering many factors which are related most profitable decisions takes place that is beneficial
to the retail industry. RFID technology including the from companies point of view.
design of tags and frequency/distance ranges in which
the readers operate have been described in many
articles [2]. Applications of rfid tags for many
industries including retailing, healthcare, and IBM and
a. T. Kearney‟s report prepared for grocery
2.6scan barcode on the shelf
2.7 confirm
“AS- IS” 2.8generate the outlet report on ERP
1. Receive goods 3. Inventory checking
1.1 Truck entered through the designated entry 3.1check the inventory manually
1.2 The forklift is ready to pick
1.3 Discharge goods from trucks
1.4 forklifts fully loaded to outlet
1.5scan barcode on pallet “TO –BE”
1.6forklifts fully loaded to area to be transported 1. Receive goods
1.7discharges the pallets 1.1Accept ASN in ERP
2. Put away 1.2Trucks enters through the designated entry and scan
2.1 note the cargo in the area to be transported 1.3Ready to pick
2.2 forklift to the area to be transported 1.4Read tag information with portal RFID reader
2.3 read the storage list and select the pallet 1.5check the efficiency and accuracy of the reader
2.4 scan barcode on the pallet, and specified to the shelf 1.6Dicharge
2.5 complete outlet on specified shelf 2. Put away

3039 | P a g e
 Saurabh Tege, Mr. Devendra S. Verma / International Journal of Engineering Research and
Applications (IJERA) ISSN: 2248-9622 www.ijera.com
Vol. 2, Issue 3, May-Jun 2012, pp.3038-3044
2.1Generate storage list byERP
2.2Discharge goods
2.3confirm accepts goods in ERP
2.4complete outlet on specified shelf
2.5check information by scanning tag on shelf
2.6Generate outlet report in ERP
3. Inventory checking
3.1check the inventory with portal RFID reader and do
with ERP

Table 1. Process of Receiving, put-away and inventory checking at “retailer-Distribution Center”

Sector Process “As is” “To be”

Retailer Receive goods Unload cargo from the truck Automatically check ASN
information

Put away/backroom Firstly place goods to the area to Automatically scan the shelf
stocking be transported to check the goods whether
on the correct shelf

Forklift transport the goods

Confirm whether the goods on

the right shelf manually

Inventory checking Manually RFID automatically scans

storage in the tag

similar with supplier similar with supplier

Table 2: Differences of processes between As-is and

To-be

III. COST BENEFIT ANALYSIS OF RFID order, while the end point is the retailer receives the
A. Modeling goods on the shelves. So business processes of before
For RFID in retail sector ensures its high and after RFID application can be shown in table1.
efficiency and security through talking the advantages
of high data accuracy, fast transmission, an As shown in table1, we can compare the difference
anticounterfieting and so on. We take the RFID before and after RFID application scenario, which has
application in retail sector, only considering the process shown in table2:
to the retail outlet from the supplier.
Suppose a retail sector is composed of a supplier, a B. Qualitative Analysis on cost and benefit
distributor centre and a retailer and the goods Firstly, we analyze RFID cost i.e. the constituents of
information is accurate and then all logistics receives RFID are given as:
the goods, no reverse logistics. The paper is based on  Hardware: RFID hardware cost mainly
business processes, the starting point is the supplier includes: RFDI infrastructure (tags, readers,
business processes picks and sends goods based on
3040 | P a g e
 Saurabh Tege, Mr. Devendra S. Verma / International Journal of Engineering Research and
Applications (IJERA) ISSN: 2248-9622 www.ijera.com
Vol. 2, Issue 3, May-Jun 2012, pp.3038-3044
antennas) and other RFID device infrastructure
for supporting.
 Software: RFDI software cost mainly includes: Ct= Quantity of pallet tagged per year
middleware software upgrade and integration Qp= cost of tag in Rs.
with other software such as ERP, WMS and so 2. Reader cost (Tcr): For outlets ,2 fixed readers are
on. needed to control the goods in and out the outlet
 Service: RFID service cost mainly includes: and portal reader is needed to scanning, picking,
RFID infrastructure and the corresponding inventory checking. Suppose the cost of portal
software installation, staff training, system reader as Cpr, the quantity as Qpr ; the cost of
maintenance and business process fixed reader as Csr, the quantity as Qsr. So. [2]
reengineering costs after RFID application. Tcr=Cpr*Qpr+Csr* Qsr ---(2) [5]
Secondly, we analyze RFID benefit: Where,
Cpr= cost of portal reader
 Process: RFID can solve warehouse handling
Qpr=quantity of portal readers
processing and tracking problems, ensure that the
Csr=cost of fixed readers
information is accurate and reliable and reduce the
Qs=quantity of portal readers
misplacement, theft damage and losses caused by
shipping errors. RFID reader can read the
3. Antenna cost: There are 2 antennas in every reader.
information automatically to check the mistake.
Suppose the cost of the antenna as CA, and the quantity
While portable data terminals and radio
in every reader as C. So: [2]
communications are able to grasp the real time
Tca=Ca*C*(Qpr+Qsr) -------(3) [5]
tracking in transit goods with GPS.
Where,
 Resources: RFID can tag every player in the supply
Ca= cost of anteena
chain to carry out unified management. While the
Qpr=quantity of portal readers
production efficiency can be collected in the terms
Qsr=quantity of fixed reader
of materials. Equipment and other assets of the final
C= antennas quantity in every reader
product are marked by RFID to strengthen
materials monitoring and reduce the loss and 4. If infrastructure cost (Tc) ----(4) [5]
damage, while combining with the EPC, the 5. Other cost: There are costs including software
information can be shared by supply chain cost (Cs),training cost (Ct),RFID installation cost(Ci),
members to improve efficiency. system maintenance cost(Cst) for yearly. [2] -- (5)[5] ------(5)
An overall RFID benefit in retail supply chain includes TC=Tct+Tcr+Tca+Tci+Cs+Ct+Ci+Cst ------(6)
the following aspects: There are inventory checking is very important task
 The cost reduction: labour reduction, inventory Which are checked by outlets in a particular time
costs, operating time reduction, process automation, period but this process is too much time Consuming
efficiency improvement and so on. which can takes place 2-3 months so due to knowing
 New values RFID create: increase revenue, all the expected terms so the outlets saving cost of
improve customer satisfaction, prevent out of stock, inventory checking incorporated RFID reduces time
reduce loss, and prevent counterfeiting and so on. for inventory checking.
 Decision analysis, perfect forecasting, accurate  Picking
information delivers to floor clerk, real time DSCP=TS*RQD*RQDP*ASL/ (T*TL) ----(c) [5] --(3)
visibility, information and so on.  Storage out
DSCO=TS*DQT*DQTP*ASL/ (T*TL) ---(d) [5]
IV. MODEL OF COST BENEFIT  Asset management ----(6) [5]
ANALYSIS: Modification : Enterprise asset management is the
business processes and enabling information systems
Development of model for cost benefit analysis of a that support management of an organization's assets,
Retail Outlet: both physical (such as buildings, equipment,
A. Quantitative Analysis on Cost Infrastructure etc.)Asset management including in
this a cost of stationary paper work etc., cost of
1. Tag cost (Tct): At the retailer distribution centre inventory and other things, and cost of labour.
tag the pallet received from supplier, the quantity So the benefit in asset management is including.
of pallet tagged Qp per year, and the cost of tag So the total benefit of DC is shown as follow:
Ct. [1] so: BD= (DSCI+ DSCIC+ DSCP+ DSCO)*YD+BAD
Tct =Ct*Qp -----(1) [5] Since the benefits of a retail outlet are as follows
Where, which are different from pharmaceutical supply
Chain as:
3041 | P a g e
 Saurabh Tege, Mr. Devendra S. Verma / International Journal of Engineering Research and
Applications (IJERA) ISSN: 2248-9622 www.ijera.com
Vol. 2, Issue 3, May-Jun 2012, pp.3038-3044
We examine the formula for receiving quantity h=human error in respect of bar coding [ 8]
from the truck with due respect of time. So There are much time consuming at point of sale in
receiving quantity is given as, peak hours so there are chances of errors made by
Modification I: The Quantitative formula is the clerk so how tackle this problem is incorporated
incorporated which sets necessary position viewing in above formula by enabling RFID.
from the side of retail outlets. Modification V: There are considering all extra
A. Receiving Quantity in respect of time: [4] Costs which coming in the category of shrinkage
Receiving time= TA+TU+TC Cost which are shown as :
Where,
TA=time to accept the truck D. Shrinkage cost (SC): [6]
TU=time to unload the truck
TC=time to control SC =Aty+Aied+Astopl+Adamage+Adiscontinuous item
TC =time to identify the pallet+ time to check the
information matched on standard operating SC =Aty+Aied+Aunsalable -----(5)
procedure+time in counting+ time to control case* where,
no. of cases check*no. of cases per pallet load+time Aty=amount of theft per year
for terms of trade. Aied=amount of items per year reaching the expiry
TR=Receiving time*lc/ (T*TS)-----(1) date
Where, Aunsalable=amount of unsalable products
lc=labour cost per hour There are considering whole shrinkage cost in which
T=total time duration in hrs including theft cost ,shoplifting cost ,unsalable
TS=seconds in per hour products costs etc so with the help of RFID the
There are receiving section has very important which shrinkage cost will be reduced.
required particular whole day so retailers gets
benefits by RFID ,they can save their time as well as Cost Benefit Analysis of Retail Outlet is given by:
Customers point of view. So from equation (1) to equation (6 ), final equation
Modification III :There are need of less time taking of total benefit comes as:
Place in backroom so the given formula incorporated T= (A+B+C)*365+D+E+F ,i.e.
the given formula as: T=( TR+ IC+ BS)*365 + SC+ POSti+ AM---(7)

B. Backroom stocking (BS): VI. Illustration :

BS=IH* TSRFID* lc/ (T*TS) --------(3) We have tried to implement the above quantitative
Where, model in retail outlet X from which necessary
IH=total inventory handling per day information/data are collected and takes benefits
TSRFID= saving time due to RFID from the particular retail outlet. Now we take an
lc= labour cost per hour analysis of retail outlet X i.e. for the tag cost from
There are much time taken place in backroom in equation (1), the quantity of pallet tags is to be
inventory handling so due to RFID exact location 500000 per year and the cost of tag is $0.05 i.e.
and time saving taken place which shown above. given as: [Assuming 1$=Rs 50/-]
Modification IV:There are cost saving made at point Tct =Ct*Qp
of sale point which shown in the given formula as: =500000*2.5= Rs.1250000/-
and the retail outlet 2 fixed readers are needed to
C. Point of sale data: [4] control the goods in and out the outlet and 50
The total POS load rate at the central location is the readers are fixed inside the retail outlet needed to
sum of POS reading load and reordering load. So the scanning,picking,inventory checking .one reader
total POS load rate at the central location. cost is to be $15000 so by putting values in
POSti=(FijPOS*TjPOS+Rj*tj)*h ------(4) equation (2) we get, 15000*50+15000*2= $780000
where, and from equation (3) we have , two antennas are
Fij=frequency of tag reads of item j in location i attached in particular reader whose cost is to be
Tj=processing time required for reading of item j estimated $2500 so values from equation (3) is
at point of sale given as:
Rj=reorder placement rate at the central location 2500*2*(50+2)= $ 260000
for item j On the basis of wu‟s research paper infrastructure
Tj=processing time for reordering from central cost is takes place as Tc $ 120000 and other costs
location for item j including software cost (Cs),training cost (Ct),RFID
Rj=demand rate of item j/order quantity installation cost(Ci),system maintenance cost(Cst)

3042 | P a g e
 Saurabh Tege, Mr. Devendra S. Verma / International Journal of Engineering Research and
Applications (IJERA) ISSN: 2248-9622 www.ijera.com
Vol. 2, Issue 3, May-Jun 2012, pp.3038-3044
about 300000 dollar totally. = Rs.34, 93, 72,976.2>0,
So, the investment cost of RFID project in the first therefore, investment is to be feasible.
year (TC)is about after putting the values in So the value of RFID project is so important.
equation (6) we have,
TC=Tct+Tcr+Tca+Tci+Cs+Ct+Ci+Cst VII. Conclusion:
25000+780000+260000+120000+300000 RFID gives the very good sign in retail industry,
= $1485000 /- (Rs.7,42,50,000/-) due to which many benefits can be achieved by the
So the cost of RFID installation and other including Retailers.
comes as Rs.74250000/-. The contribution of the paper is shown as follows :
take an analysis of retail outlet X i.e. where time to ( 1)The paper constructs the scenario and compares
accept the truck loading is up to 1800 sec. and time the differences before and after RFID application,
in unloading is up to 5400 sec. and time for (2) Based on the scenario the paper carries out cost
Controlling the whole processed to be 800800 sec. benefit analysis qualitatively and quantitatively.
So receiving time is given as:
TR=808000*18.2/ (3600*9) =Rs 453.87/- VIII. References:
In inventory checking there are 30000 items are in 1. R. Clarke, R. , and T. Kipp, “Matching radio
whole sales stock checking made only one time in a frequency tags to readers,”Smart Packaging
month labour charges are to 18.2 per hour and time J., no. 12,
saving due to RFID is up to 200 sec. then we have, 2. T. Kearney, IBM, Washington, DC, “Grocery
IC=30000*200*1*18.2/ (9*3600*30) =Rs 112.34/- manufacturers of America (GMA)” 2005.
In backroom stocking daily inventory handling is to [Online]. Available:http://www.gmabrands.
be700 then saving cost in backroom stocking is given com/publications/docs/2005/Balance Perspective
as: BS=700*200*18.2/ (9*3600) =Rs 78.64/- .pdf.
If there are 1200 products scanned in 3600 3. www.iot-online.com/RFID/xinwen/2011/0830111
sec. means in one hour duration, reordering time is 34. html,
to be 500 sec. and At point of sale assuming saving as 4. Thorsten Staake, Frédéric Thiesse “Extending the
in percentage of human error is up to 0.0000001 than EPC Network – The Potential of RFID in Anti-
saving cost at point of sale is given as: Counterfeiting”, Report No. 27 20.10.2004.
POSti=1296500*0.0000001*10*18.2*9 5. Dianmin Yue, Xiaodan Wu,Mengyuan Hao,
212.36*30=6371.00*12=Rs. 76452.012/- Junbo Bai “A Cost-Benefit Analysis for Applying
There are shrinkage can be taken as 3% of total sales RFID to Pharmaceutical Supply Chain”.
per year there are Rs 206341339.2/- total sales than 6. Giovanni Miragliotta,Alessandro Perego,Angela
saving value of shrinkage is given as: Tumino Politecnico di Milano” An Activity-
SC=Rs.6190240.2/- Based model to assess the costs and the benefits
and the benefit of asset management value is stemming from an RFID application in the Fast
considered as Rs.18,53,00,000/-a cost of stationary Moving Consumer Goods supply chain”.
paper work etc .is to be Rs 500000/-and cost of Jayavel Sounderpandian, Rajendra V. Boppana,
inventory and other things is to be Rs.180000000 /- Senior Member, IEEE, Suresh Chalasani, ,
and cost of labour is to be Rs.4800000/- yearly so SeniorMember, IEEE, and Asad M. Madni,
cost including asset management is given as: Fellow,“Models for Cost-Benefit Analysis of
AM =Rs 18, 53, 00,000. /- RFIDImplementations in Retail Stores”.
Cost benefit analysis at retail outlet is given as: 7. Rodney Schmidt CAP Companion Meeting at
18,53,00,000+6190240.176+ 76452.012+235370.25 USCAP 2010 Quality and Patient Safety in
=Rs.19,18,02,062.4/- Anatomic Pathology: Practical Solution
Than benefit at outlet in the first year is Barcoding for Specimen Identity .
Rs. 19,18,02,062.4/-.Assuming outlet operates in 8. Indan Retail Industry:challenges, opportunities,
good condition, expected benefit of the second year and outlook-insight at retail.net/issues.asp.htm
is grown by 65%.so the benefit of the second year is 9. Christian Tellkamp “A Dissertion The impact of
19,18,02,062.4 *165% =316473403/- Auto-ID.technology on process performance –
Assuming the enterprise invest RFID and discount RFID in the FMCG supply chain”.
rate K=12% after risk adjusted .assuming the cash
flow in the next two year is given by:
PV=19, 18, 02,062.4 / (1+12%) +316473403/
(1+12%) 2=Rs.423622976.2 /-
If taken NPV as the investment evaluation method,
NPV=423622976.2-74250000

3043 | P a g e
Saurabh Tege, Mr. Devendra S. Verma / International Journal of Engineering Research and Applications
(IJERA) ISSN: 2248-9622 www.ijera.com
Vol. 2, Issue 3, May-Jun 2012, pp.3038-3044

3044 | P a g e