The Impact of RFID Technology on Moving from SCM to ISCM ( IT Based Project)

The impact of RFID technology on moving from SCM to ISCM ( IT based project)

Author: NIOOSHA NASSEH

Supervisor: Dr. Ove Bayard

Master of Science Thesis, 20th June 2017 KTH Industrial Engineering and Management Production Engineering SE-100 44 STOCKHOLM

Sammanfattning I detta examensarbete demonstreras hur RFID- tekniken (Radio Frequency Identification) kan användas för att göra en försörjningskedja (Supply Chain) ”intelligent” med hjälp av snabba informationsflöden. Bakgrund, relevant teori, definitioner samt fördelar och nackdelar med RFID och Supply Chain Management (SCM) presenteras i kapitel 1-5. Här betonas och framhålls behovet av en övergång från SCM till Intelligent Supply Chain Management (ISCM). Därefter redovisas resultatet från en fallstudie med olika testscenarier vilken genomförts på försörjningskedjor inom bilindustrin, Renaults biltillverkning. Det finns tre huvudflöden inom försörjningskedjor; material, pengar och data/information. I detta arbete studeras smidigheten i informationsflödet (ur ett informationstekniskt perspektiv) med avseende på utbytet av data. I fallstudien som genomfördes på Renaults biltillverkning kunde man dra slutsatsen att då man använde RFID och implementerade SCM minskade spillet med 38,8 % vilket motsvarar 1470 miljarder Rials (Den Iranska Valutan). Det är uppenbart att genom att använda lösningar baserade på RFID-teknik och applicera dessa på spillet inom en organisation kan man vinna mycket. Denna studie har två målgrupper. Grupp 1; Personer med akademisk bakgrund/ universitetsstudiebakgrund vilka kan använda informationen i sin forskning för att utöka/fördjupa kunskapen inom området. Grupp 2; Personer med direkt industrianknytning via ett företag eller indirekt som konsult. Dessa personer kommer att kunna dra nytta av de koncept som har presenteras i detta arbete.

Abstract

The impacts of Radio-Frequency Identification (RFID) on making the Supply Chain Intelligent, based on accelerating information flow are demonstrated in this thesis.

History, relevant theory, definitions, advantages and disadvantages of RFID and Supply Chain Management (SCM) are explained in chapters1-5, emphasizing the urge of transition from SCM to Intelligent Supply Chain Management (ISCM), followed by the test scenarios case study implemented for the supply chain of Renault car manufacturing Company.

There are 3 main flows in supply chain including material, money and data. The information flow smoothening (from information technology point of view) in the data flow is investigated in this research.

In the case study conducted in Renault car manufacturing company, it is concluded that using RFID and implementing SCM reduces the waste up to 38.8%, this is equal to 1470 billion Rials (Iranian currency) equals to 63million Dollars. It is evident that executing solutions based on RFID to a known organizational wastes promises standing in an adequate development way.

Two groups are targeted in this study: Group1; include people with academic/university studies background that could use the provided information in this thesis in their research and extend the borders of knowledge in this field. Group 2; covers people who are involved in different industries directly (industry owners) or indirectly (industrial consultants). This group will be able to localize the discussed concepts in this thesis in their industry.

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FOREWORD

Acknowledgement:

The writing and completion of this dissertation have been one of the most significant academic challenges I have ever had. I owe my deepest gratitude to the following people whom without the guidance, support, and patience of them, this thesis would have never been completed.

My thanks and appreciation to KTH, School of Industrial Engineering and Management and Dr. Ove Bayard who has not only undertaken to act as my supervisor but also encouraged me in this study and, over a number of years in different levels as a real helpful colleague and friend during all my study period at KTH University. My colleagues, teachers, friends and staff who shared their experiences with me are appreciated. I must acknowledge as well my colleagues at RENAULT Car Manufacturing Co. for their helps and comments throughout the time it took me to complete this research and write the dissertation. My friends and corridor mates at Lappis and Kungshamra Dormitory, who made my days, gave me my required energy for starting every new week and during my exam nights, in Stockholm, My family for their continuous support, love and best wishes, THANK YOU ALL! Cordial thanks to my supportive, patient fiancé Kian whom faithful support and encouragement allowed me to finish this journey which is so appreciated.

Nioosha Nasseh

Royal Institute of Technology (KTH),

Stockholm, June 2013

TABLE OF CONTENTS

SAMMANFATTNING (SWEDISH) ………………………………………….i

ABSTRACT iii

FOREWORD iv

TABLE OF CONTENTS vi

1 Introduction 1

1.1 Background 1

1.2 Purpose 1

2 Supply Chain Management 3

2.1 Definition of supply chain management 3

2.2 SCM drivers 3

2.3 Components of supply chain management 3

2.4 Types of supply chain 4

3 Supply Chains Waste Zones 7

3.1 Intra-organization waste zones 7

3.2 Lean supply chain, agile and lean agile 8

3.3 Push-pull strategy 10

3.4 Bullwhip effects of supply chain 11

3.5 Waste zones of supply chain 12

4 Supply Chain Management and Information Technology 15

4.1 Information technology sections 15

4.2 Movement from a supply chain to electronic supply chain 16

4.2.1 Intelligent supply chain 16

4.2.2 Commercial drivers in a deployment of intelligent supply chain.16

4.2.3 Supply chain transparency 18

4.2.4 Executive problems of intelligent supply chain 18

5 Supply Chain Management and Identification via Radio Waves 20

5.1 Overview of radio waves 20

5.2 Automatic identification 21

5.3 RFID 21

5.4 RFID strategies 26

5.5 RFID benefits 27

5.6 RFID hazards 28

5.7 RFID application in the automotive industry 30

5.8 Strategic sections of automotive industry affected by RFID 31

6 Case Study: Supply Chain of the Renault Company in IRAN 34

6.1 Problem definition 34

6.2 Identify current system of Renault supply chain in Iran 34

6.3 Identify the Renault supply chain wastes in Iran 39

6.4 Identify solutions 52

6.5 Design phase 56

6.6 Execution phase 56

7 Conclusions 59

8 Future Work 61

9 References 63

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1 INTRODUCTION

This chapter describes the background, the purpose, the limitations and the method(s) used in the presented project.

1.1 Background Globalization is the phenomenon that similar organizations in terms of production and services are closer to each other and the destiny of each one is depended on a professional behavior, so this means close competition to create and maintain new markets (Campbell and Verbeke 1994; Arnett 2002; Jenkins 2004; Scheve and Slaughter 2004).

One of the important factors in intelligent design of Supply chain is using automatic identification system that is developed by new technologies. Nowadays, because of developing information technology, new technologies such as radio frequency identification (RFID) provide creating smart integrated systems of information-driven supply chain (Weis, Sarma et al. 2004; Roberts 2006; Domdouzis, Kumar et al. 2007).

1.2 Purpose In this research ,the opportunity to learn more the development process of supply chain and recognition of supply chain waste has been created and strategies based on RFID to eliminate waste and development of Chain have been introduced.

The author of this thesis have hopes of that this research and other similar types, could promote further studies and progress in the field of new intelligent design methods in accordance with the daily needs.

2 SUPPLY CHAIN MANAGEMENT

This chapter presents the definition of supply chain management, types of supply chains management and the most important flows in the supply chain.

2.1. Definition of supply chain management From the view of the organizational, supply chain management is the framework of production- industry(Mentzer, DeWitt et al. 2001). Dr. Longley from the Pennsylvania state University and University of Tennessee is offering the following definition for the supply chain: “A network of resources provides customer satisfaction”

Perhaps the concept of supply chain management can be associated with crisis management concept in business environment(Tan 2001).

By the definition of the Council of Supply Chain Management Professionals (CSCMP), supply chain can be defined as follows:

"Planning and management of all activities involved in changing provisions and resources and all of logistic management activities”. 2.2. SCM Drivers - Innovation: Being a leader in product and process including materials technology, and equipment of producing software (Kim, Cavusgil et al. 2006).

- Product development: is defined as the process of designing, creating and marketing new products or services to benefit customers and is essential for the product future and its related services. .(Lambert, D. M. et al 2000)

- Globalization: Having a global sales network and global resources including commercial ports to support the production and distribution of raw materials.(Lambert, D. M. et al 2000)

- Flexibility: Have the ability to rapidly respond to environmental changes and also having a short cycle time for product(Petersen, Handfield et al. 2005). 2.3. Components of supply chain management In this section, five fundamental components of supply chain management are briefly shown (Mentzer, DeWitt et al. 2001; Tan 2001; Petersen, Handfield et al. 2005).

 Plan: this section is a strategic section of Supply chain management. Companies need a strategy for managing all resources to meet their customer requirements for products and

3 company services. By developing this important part of supply chain management, this is certainly having a measurable plan.

 Resources: companies should choose suppliers of their goods and services. Supply chain management to enhance potential in selecting the best suppliers and after that, continuous improvement conditions of the selected supplier should offer collection of prices, deliveries, payments and suppliers connection with companies in the form of measurable process and then supply chain managers could proceed to inventory management of goods and their services included receiving and sending production relocation and payments of the supplier.

 Construction: This step is the production stage, Supply chain management plan necessary activities for production, Experiment, Packaging and preparation for delivery.

 Delivery: This part is known as the logistic in supply chain management is a part that companies make the necessary arrangements for on time delivery of goods and services based on customer orders.

 Return: This section can be used as a problem part of supply chain for many companies. Supply chain designers should have flexible and responsive network for receiving product defects and customer service to create and support customers who have received the goods and services. 2. 4. Types of supply chain  Responsive supply chain: Some of production groups such as fashion or technology are involved in creator of many innovations. These innovations could reveal production demand being unpredictable and the nature requirement of supply chain to respond quickly(Gunasekaran, Lai et al. 2008).

In these circumstances, the supply chain must be capable of moving data between its members quickly. This information is not only about new products for responding to customer but also it will include which customers like to see future products .Therefore, we conclude that where there is a high level of innovation in industries, a rapid response is also required . In these conditions, certain types of supply chain to the name of responsive supply chain for satisfying multiple needs of the market is required. Members of this supply chain will be selected based on their speed, flexibility and capacity in receiving information of market. For example, a responsive supply chain which is called Innovative Supply Chains is also widely used in fashion industry(Christopher 2000).

 Efficient supply chain: In some industries, standard products with the long lifetime and no change have predictable demand, this supply chain is very common .Some lower margins is one 4 of the specifications of such products. For these types of products, supply chain will be selected based on the efficiency of operations to reduce costs and reduce inventory in the system (Gunasekaran, Lai et al. 2008). Grocery industry is one of the industries that are arranged by Functional Supply Chains (Fernie 1995).

Current supply chain management is divided into 3 main flows (Lee, Padmanabhan et al. 1997; Lambert and Cooper 2000):

1. The product flow covers all goods flow from a supplier to a customer which has also considered returning.

2. The information flow which involves transmitting orders and updating delivery status.

3. The finances flow includes the credit department and the payment schedule.

Figure 1 shows the three main flows in a supply chain management.

(1)

(2)

(3)

Figure 1. The most important flows in supply chain including; (1) Material flow (2) Financial flow and (3) Information flow.

3 SUPPLY CHAINS WASTE ZONES

This chapter presents different waste zones of supply chain and then focuses on Lean supply chain, Agile and Lean Agile in supply chain and continues with clarifying the areas of Bullwhip effects of supply chain and push-pull strategy.

3.1. Intra-organization waste zones The waste reduction idea was presented for the first time with lean production in 1990 (Holweg 2007). Lean production based on waste reduction is focused on appropriate use of resources .These types of production systems can be used in environments where there is a predictable demand and without any independently to other variables.

Usually waste zone in a productive organization are divided into 4 sections that each of these sections have their own waste (Thomas and Griffin 1996; Holweg 2007).

 The Design zone: This area includes operations which have created due to the other improper operations that are also inappropriate operations.

 The Information flow zone: some of information flows are inadequate and inefficient that would cause such waste.

 The physical flow zone: These types of waste are created due to delays and pauses occurred in a production. These delays and pauses can be because of inadequate equipment design , Improper transportation of materials , inefficiency of machines , Inappropriateness of the current production system or inadequate program of maintenance repair .

 Brink zone: the excess costs associated with additional transportation and consumption program of energy resources causes this type of waste.

Figure 2. Organizational outsourcing wastes.

The classified zones shown in figure 2 are being adopted from Sozaki `s research that was conducted in 1987. He described a system in which the highest value of production has been created by the lowest equipment, sections, and working time of workers. It is a system without waste indeed.

3.2. Lean supply chain, Agile and Lean Agile  Lean: in lean production is designed based on waste reduction in a company and a lot of research has been done in order to deploy this system in supply chain management (Holweg 2007). Lean manufacturing is built based on four principles such as minimizing the waste, complete initial quality, Flexible production lines and continuous improvement.

Table 1. Comparing characteristics of lean production and mass production

Mass production Lean Production safety stock Minimum loss Minimum inventory ontime delivery acceptable quality Quality Initiative Quality Taylorism Work teams Involvement of workers Maximum Performance Flexible manufacturing systems

 Agile: agility is a business ability which includes organization structures, information systems of Logistic procedures. Agile manufacturing was presented after lean manufacturing.

There are many definitions for this type of system and here are just 2 definitions referred to:

1. Organizational level of production strategic. In order to produce new products to meet rapid market changing.

2. Organization's ability to succeed in a competitive environment by consistently unpredictable changes

 Agility vs. Mass production: In a mass production, company begins to produce a standard and ideal product in large sizes and in large quantities. Yearly, mass production is reviewed in order to increase its ability in variety of product and this is while in agile manufacturing, products are more customized.

Table 2. Agile vs. mass production characteristics

Mass production Agile manufacturing standardized products Custom products Enduring market expectations short-lived market expects Production based on forecasts Product based on request Low information contents High information content fixed sell Continuous communication Pricing based on production costs Pricing based on customer value

 Agile vs. Lean Production : Lean concept is justified only in certain circumstances .In specific conditions ,when there is a foreseeable demand and needs are for variety in low production and production rate is high, lean production system is defined (Ben Naylor, Naim et al. 1999) . In fact, many conditions in Toyota Company cause developing Lean philosophy. The problem occurs when we are trying to implement lean philosophy in a condition when a demand is not very predictable and need for high variety and to follow the total mass production of goods in Stock keeping unit (SKU) is low.

Table 3. Agile vs. Lean production characteristics

Lean production Agile manufacturing Typical products Commodities Fashion goods Marketplace demand Predictable Volatile Product variety Low High Product life cycle Long Short Costumer service Cost Availablity Profit margins Low High Dominant costs Physical costs Marketability costs Information enrichment High desirable Obligatory Purchasing policy Buy goods Assign capacity Forecasting mechanism Algorithmic Consulative

 Agile lean: Agile Lean is a combination of pure philosophy and agile thinking in a way of the overall strategy of supply chain in which there is a common point and where the needs have been meet. Perhaps it causes question why this new model is called Agile Lean. First, because in Agile Lean supply chain, lean materials flow are depended to agile materials flow. Second, for they have a successful agile process.

3. 3. Push-Pull strategy

When making use and implementing this strategy, push system is applied on upstream and pull system is applied on downstream supply chain. However, this means production and distribution decisions in the supply chain process should be taken by the help of long-term predict (Olhager and Östlund 1990; Cook, Khan et al. 2006). Group technology is a good example in this field.

If push-pull strategy is applied on a supply chain, early stages are based on push strategy and final stages of it are based on pull strategy.

Companies that are in early stages of supply chain, begin to produce pieces and raw materials. Planning for receiving these raw materials and pieces for producing the final product are very accurate but they produce less according to markets needs and this isn`t a violate closer relation of final product with customer order. The interaction result of these two parts on the other is to maintain adequate part of inventory as an ensuring saving. Although the inventory of ensuring saving is output of push strategy but it can be simultaneously used as input by ordering (Olhager and Östlund 1990).

Figure 3. Schematic illustration of the pull and push solution.

3.4. Bullwhip effects of supply chain

Bullwhip effects of supply chain indicate variables of business activity in a supply chain are sensitive to changes and other sections feel more unusual motivation by a motion at a part of Chain Supply causes by fluctuations (Lee, Padmanabhan et al. 1997). This means that for example difference between orders and sales cause to increase inventory and increased wastes in an upstream of supply chain.

Research pointed to the fact that the movement of information throughout the supply chain if it is done incomplete or information transmitted incorrectly can cause keeping secret of production decisions from the upstream sections of supply chain. The result is that information flow and sharing of information are the principles that take part in waste reduce and increase coordination out of organization in push-pull strategy of storage inventory. Excess inventory, predictions of production weakness, insufficient or excess capacity, and poor customer service due to goods deficiency or delayed orders, planning for indecisive production, the high cost of corrective actions are signs of bullwhip effects.

Figure 4. The whip effect.

We can use one or all of solutions to reach bullwhip effects to its lowest value and business efficiency to reach to its highest values are as follows :

 Minimize the cycle time in receiving real information of demand.  Establish a monitoring system to have a real demand of production which is close to reality.  Understand the different parts of production demand in any of supply chain  Quantitative and qualitative increase co ordinations and cooperation in demand information sharing.  Minimize or eliminate information rows leading to the delay in information flow.  To remove the excess inventory that led to the accumulation of demand in the supply chain.  Remove non-tangible benefits for customers.  Offer products with a constant good price in order to minimize purchasing fluctuations and avoid premium discounts declaration as a gift.  Identify and eliminate reasons of reduction or cancellation of customer orders.

3. 5. Waste zone of supply chain A supply chain includes all activities inside and bottom of supply chain section. Based on what was said, supply chain waste range includes 2 Inter-organizational and Intra-organizational waste zone .Common things between 2 regions are the information region and sections where the information are followed there.

Waste of supply chain:

Table 4. Supply chain waste

Inter-organizational region Intra-organizational region Added works caused by lack of coordination Added works due to unnecessary designing Added works caused by un-efficient information Added works due to insufficient production sharing methods Added works caused by insufficient allocation of Added works created by improper locating pull-push system the facilities Added works caused by improper Added works caused by incorrect saving movement of materials Added works caused by improper Added works caused by logistic fluctuations information flow Added works caused by insufficient capacity of Added works caused by extra works the network Added works caused by improper distribution

Two main works in the supply chain to reduce the waste are as follows:

1. Making transparency that leads to reduction or prevention of an ambiguity. 2. Increasing learning rate which automatically improves the waste reduction more effectively.

4 SUPPLY CHAIN MANAGEMENT AND INFORMATION TECHNOLOGY

In this chapter, it is shown how supply chain will be upgraded to electronic supply chain and supply chain intelligence (SCI) and discussed the relation between supply chain management and information technology. Finally, the role of new technologies such as RFID is surveyed in advanced supply chain.

4.1. Information technology sections - Information systems: Today, different developed countries are in competition for applying information technology on economic, social and cultural processes. Information technology is to collect, organize, store and publish information, including text, image or number using computer tools and telecommunications(Gunasekaran and Ngai 2004).

 Organization system:

In each organization, a set of activities is designed and defined that is known as an organization system. This organization system has three sections:

 Operation systems: All physical activities for doing services are executed tangible in an organization.

 Management systems: Collection of activities occurs to plan, organize and organizational unit controls.

Based on the above definitions for systems, if we consider organizations from the bottom to up in three levels of operation management, middle management and senior management, operation systems in a level of operations management, management systems at the level of senior management and information systems at all levels of the current organization have been located more.

4.2. Movement from a supply chain to electronic supply chain The framework of information technology development in supply chain is shown in figure 5.

Figure 5. The framework of information technology development in supply chain

4.2.1 Intelligent Supply Chain: Technologies of early decision support systems are converted to intelligence business tools which cause to store information into new methods. one of the key features of intelligent business is using Online analytical processing (OLAP ) (Vogt 2011).This technology allows users to predict, track, analyze customer communications and to discover hidden information sections

A specialized application of business intelligence in intelligent supply chain has been seen. In fact, intelligent supply chain provides collecting correct information based on business intelligence in an entire supply chain and it`s a key factor in integrating of a supply chain management.

4.2.2 Commercial drivers in a deployment of intelligent supply chain:

Four main factors are a commercial incentive in the intelligent supply chain:

The globalization of markets and suppliers

Customer request The feasibility of based on cost and Intelligent Supply Chain using new technologies value

Complexity and uncertainty of business

Figure 6. Business Inciters of Intelligent Supply Chain.

1. Globalization: Moving towards globalization in the market and suppliers is a key factor in the use of intelligent supply chain.

At a beginning, supply chains faced with constraints such as geography conditions and communication delays. Nowadays in the 21century, these are not challenges any more. Information and communications technology provide rapid communication and coordination between different parts of the supply chain in the world.

2. Customer demand: Customer demand proceeds increasingly to customize products and services. Business cannot survive in offering services with low diversity of products in a competitive market.

3. Complexity of business : Globalization of supply chains have created many business opportunities but they have also brought problems .Business in an uncertain and less predictable environment has been forced to companies .

4. New technologies: One of the key factors in the deployment of intelligent supply chain systems is the possibility of employing new technologies of communication and information. By helping of these new technologies which there weren`t in the past, it provides possibility of having clear information and obtaining conditions throughout supply chain.

To reduce cycle time and increase power of responding to customer is a goal of intelligent supply chain obtained from reducing costs of communications and better analysis of supply chain. These goals are achieved by increasing insight of supply chain, Communication and better analysis of supply chain efficiency(Arnett 2002).

4.2.3 Supply chain transparency: Intelligent supply chain allows us to have a complete vision of all orders, posts, conditions, inventories, and Production output and consumption rates during the supply chain.

4.2.4 Executive problems of intelligent supply chain: Executing intelligent supply chain according to the process complexity has problems such as information integration and business systems throughout the supply chain(Vogt 2011).

See the figure 7.

Figure 7. An intelligent supply chain configuration.

 Information integration: Information integration is one of important problems in this area .The lack of coordination of information in systems with the same goal and dissimilar databases cause that we fail to reach a common language. Indeed, supply chains are made up parts that have their own separate business, and this makes the intelligent supply chain projects to become complex(Gunasekaran and Ngai 2004).

 Increasing number of information: Due to the large mass of existing information in the supply chain are often scattered .Increasing amount of information needed to integrate and storage is one of the problems.

 Security : Intelligent supply chain requires partners ( various sections ) to easy access to information throughout the supply chain and this accessibility creates unclear security conditions of why some information without no feeling of how they are valuable and high sensitivity and they shouldn`t share without policy(Gunasekaran and Ngai 2004).

5 SUPPLY CHAIN MANAGEMENT AND IDENTIFICATION VIA RADIO WAVES

In this chapter, applications and effects of the radio waves technology in the production and supply chain are discussed from different aspects. 5.1. Overview radio waves Today in an era of technology development, usage of radio waves and frequency spectrum are growing increasingly. The most important advantage of this technology is to reduce communications mass and interface devices such as wires cables and therefore they cause decreasing of costs so that wireless relations are replaced(Roberts 2006; Domdouzis, Kumar et al. 2007).

We look generally to some of the initial concept related to this subject.

We all have heard phrases such as UHF, VHF, AM, FM, The environment around us is full of radio waves and they publish in all directions .Basically, a radio wave is an electromagnetic wave that is usually spread by antenna. Radio waves have different frequencies and they have been divided according to standards. In America's FCC National Committee Communications has a responsibility of management and making decision in the case of frequencies spectrum and issuing license or standards determination (Figure 8).

Figure 8. Diagram of the electromagnetic spectrum.

Some of the usage of these waves with a mention of frequency range is as followed:

 Radio 535 kHz : AM Up to 1.7 MHz  Shortwave radios: 509 MHz Up to 26.1 MHz  Urban-band radios: 26.96 MHz Up to 27.41 MHz  Radio 88 MHz: FM to 108 MHz 20

And some minor divisions are:

 Alarm systems, parking remote door about 40 MHz  Conventional wireless Phone: About 40 MHz to 50 MHz  Control model aircraft: About 72 MHz  Remote control toy car: About 75 MHz 5.2. Automatic identification Automatic identification is identifying everything that is done by machines not human. In these systems, received signals from analyzed objects and desired object are obtained from desired object.

Indeed, in these systems:

 Information reliability is more than manually system.

 Information gathering speed in compare with manual mode is more.

Some common types of automatic identification include barcodes, magnetic stripes, radio waves and voice recognition (Sarma, Brock et al. 2001; Domdouzis, Kumar et al. 2007). 5.3. RFID Identify by radio waves is actually identifying physical items by radio waves(Domdouzis, Kumar et al. 2007). Information with appropriate equipment such as a tag and special identification will be transferred, then this information is read by a reader and finally information gathers in a database with special methods. RFID The mechanism of RFID is similar to barcode but in RFID, reading process is done by radio waves. Maximum information can be transmitted by the barcode is 30 byte and this is while the number is 125 KB or 1 MB.

Frequency limitations of RFID as the assigned frequencies depend on to each country. Mini- frequency signals makes it possible to cover more distance with better influence power in doing and problem of these frequencies is their low capacity in carrying information.

The above story is vice versa at high frequencies.

Overall, we can divide RFID systems into 2 following section:

1. Open system

In the system, tag that is used in a product can be almost used permanently and this means that there are cases where the workflow is used.

To illustrate, library is a typical example in this matter (Every system where goods will be reviewed of quantity). These tags have a longer lifetime and they have the ability to work in difficult conditions.

2. Closed system

In this system, goods returning are not the aim and the tag will be destroyed at a time. In these sample systems we can point to post packages, clothes, food and etc. In this system, tags price will be played major roles.

 RFID History:

Because RFID technology has been used recently more than before and users attention in different parts of this technology is increased daily ,most people think this is a new technology but RFID history returns to the great discovery of Faraday in 1864 on which he showed that light and radio waves are a form of electromagnetic energy . Some sources believe RFID technology was introduced among the experts in 1920 and it will be expanded in 1960. Another technology similar to RFID was IFF. IFF was born in England in 1939 and it became quickly to an important tool in detecting enemy aircraft in World War II. In 1946 León Theremin invented a device for espionage of the government. This device had an ability to transmit radio waves and frequencies of the different objects to specific location. Although this machine was made for espionage and not for tags identification, but almost all believe this was the first machine used of RFID technology (Roberts 2006; Domdouzis, Kumar et al. 2007).

Although this car was made for espionage, and no identification tags, but almost all believe that this was the first machine of RFID technology be used.

Then an American researcher named Harry Stockman published an article called relationship via reflected power in 1948 and he predicted different objects and even human can be detected by radio waves, and this matter requires more research(Stockman 1948).

It introduced the first economic program for investors in 1969. A researcher named Mario Cardullo discovered RFID system in which radio waves are transfer independently and RFID had a memory .This researcher is known as a father of RFIID technology through this discovery that is much like the RFID system(Shepard 2005).

The first experience of using RFID technology in tax payment section of New York airport was did in 1971.

After that, many researchers have done many researches in different fields of RFID and each of them causes to expand the scope of this technology.

Figure 9 shows a summary of the formation and promotion of the RFID process.

Figure 9. Summary of the formation and promotion of the RFID process.  RFID system component: Generally, RFID tag is composed of a microchip, an antenna strip and a printed surface(Shepard 2005) (See Figure 5.4). Microchip is connected to the antenna and the antenna is connected to the printed surface. This microchip has the ability of storing information up to 2 KB in itself. This information can be a type of a piece post date, production date, destination, sale date. We need a scanner or special reader to receive this information of the label. Common reader includes one or two antenna for sending or receiving antenna from a tag.

Figure 10. A typical RFID tag. 23

 Tags: Tags are attached to goods like a label. Portability information for tags are from 16 bit to 1000 bit. More information capacity has a direct relationship with a tag price.

Tags are classified into following categories:

1. Passive: passive RFID has not an internal power source. Momentarily, electrical current in antenna is produced adequate power via radio frequency to work and react. Passive tags produce signal by restoring wave carrier that is issued by a reader. So Antenna should design in a way that it can absorb power from a received signal and also it can move up recursive signal.

Passive tags we call them read-only or zero class includes information such as serial number that has been written by a manufacturer or distributor of tags and they are cheap. Coverage of these tags reaches to 3/3 meter.

2. Semi-Passive: Semi-passive tags are similar to active tags in a case of having a power supply within itself. However an existing battery of them just provides power of microchip but it doesn`t publish signal. The reflection process of radio waves to the reader is an existing power in active tags.

Semi-passive circuits have three major advantages:

 Higher sensitivity toward Semi- Passive tags

 More Battery life toward active tags

 They can do active operations (such as heat control) with reliance to storing power in themselves, even though when a reader is not available.

3. Active: Unlike passive tags, active tags have a power supply (battery) which it broadcast signal on a power circuit toward a reader.

Active tags are more reliable than passive tags (and have less errors) because they have an ability of communication between waves and a reader.

Table5. Comparison between different types of tags

Tags and features Passive tag Active tag Semi passive tag Internal power source No Yes Yes Signal by backscattering the carrier Yes No Yes wave from the reader Response Weaker Stronger Stronger Size Small Big Medium Cost Less expensive More expensive Less Potential shell life Longer Shorter Longer 10 centimeters to few Hundreds of Hundreds of Range meters meters meters Sensors No Yes No

 Readers: Typically, this equipment has a direct relationship with the computer system and act as barcode scanners. In fact, the reader task is a constant communication between tags and information systems. Compared with barcode scanners, RFID readers have an ability of reading information without direct contact and without physical contact.

The biggest advantage of these readers is their ability in reading about 200 tags at a same time.

 Constant Readers: This type of equipment is fixed installed in buildings, inputs and outputs.

 Portable Readers: This type of readers is portable and can be moved manually. One of its usages is in stock. These readers are in a form of a gun and they are much lighter and cheaper than constant readers. The main usage of these readers is in places where an operator is moveable and items are constant (such as storage operations).

 Antenna: Antennas connected to readers and they are divided based on the communicated distance and their level of efficiency, sizes and different structures. Actually, a connection factor between reader and tag in tracking system is RFID.

This equipment has a role of transmitter and receiver of waves in the system and they should be in an appropriate place.

Number of antennas and their placement is mathematically having a direct relation to the amount of space covered by RFID system.

The station includes an antenna and a reader. Stations can read and update the tag information. Antennas are classified according to their existing frequencies.

Below, some RFID frequency bands are shown:

 Low frequency (LF) 25

Frequencies between 120 KHz to 134 KHz

 High frequency (HF): Frequency 13/56 Megahertz

 Ultra-high frequencies (UHF): Frequencies between 300 MHz to 1 GHz

Most RFID users use tags with LF or HF frequency and not UHF.

 Electronic product code (EPC): EPC systems have the task of transferring information from readers to the firmware called SAVANT (SAVANT will be explained more). Codes are based on GS1 (global standard). GS1 is an organization that it has been responsible for preparation and standardization of barcode systems. Each tag has its own code and you cannot find 2 tags with the same code in the world. (All tag producers must register their tags under the supervision of international organizations)

Figure 11. The RFID system configuration.

5. 4. RFID strategies RFID strategies are not limited to offering solutions for short-term problems. Generally, the initial deployment of any new technology can be faced with limitations and it is a reason of not continued use of the technology.

In summary, the basic factors in the strategic deployment of RFID are as follows(Shepard 2005):

 To identify different impacts of RFID technology  To trust to the basic concepts and then to attract the support of senior managers of organization.  To expand another strategies of politics taken from of this technology, preparation of a high level program for commercial explanation

 To ensure protecting effective workers in this field.

In table 6, dedicated region frequencies for RFID are shown.

Table 6. Region frequencies for RFID

Country or region Legal frequency (MHz) Europe 862-870 USA and Canada 902-928 Korea 908.5-914 Japan 862-928 China 915 Meddle east 862-870 Singapore 862-870 Taiwan 915 New Zealand 862-928 Australia 915 Northern Africa 862-870 Southern Africa 915 Southern America 915 Mexico 915

5. 5. RFID Benefits Some of the benefits of RFID are as follows:

 To store more information than other systems

 To increase rate of productivity

 To increase accuracy in processes

 High speed

 Great flexibility

 To reduce wastes

 Ability to modify tags information

 Ability to read tags between different objects

 Ability to update system

 Ability to identify separately of each goods

 To Track on time via satellites and GS1

 Ability of reusability

 To reduce error rate

 Ability to prepare any reports

 Ability to automate warehousing

 Identification in various conditions such as motion, static, dust, fog, moisture, rainy, sunny and etc. The following table shows a comparison between RFID and barcode from the point of overall advantages and disadvantages (Andrechak, Lou et al. 2011)

Table 7. Comparison between RFID and barcode

RFID Barcode Technology Radio frequency (RF) Optical (Laser) Not required-items can be oriented Required-scanner must physically see each Line of site in any direction, in read range tag to scan Read rang High, tens to hundreds of feet Low, inches to a few feet High, multiple (100+) tags per Read rate Low, tags can only be read 1 at a time pass Capabilities Read, write, Modify and trigger Read-only Easily damaged or removed, also Some frequencies don’t work with Interference unreadable if torn, dirty or placed in hard to certain metals or liquids reach areas Security High Low, easy to duplicate Human Low, fixed scanner no manual High, must manually scan each tag labour intervention High, uo to 50$ per tag, averaging Cost Low, up to a few cents per tag 0.10$ to 5.0$/tag

5. 6. RFID Hazards The high cost / Interference (Interference are usually done by the following 2 methods: readers interference and tags interference) / Safety (Most RFID tags are still active after leaving the shop or company. Thus, their information can be read by miscellaneous reader and this means increasing the risk of information stealing) / Standards (Several companies are active in the field of RFID equipment construction but these companies do not use a unique global standard in their product), efficiency ( usually RFID equipment specially tags ,whenever they are next to fluids, metals and other specific conditions, they have less efficient ), vulnerability ( being vulnerable of RFID equipment By electricity, weather conditions like snow and rain ), social problems ( community refuses to use a device for personal information and social restrictions in the RFID applications required extensive training for a mass of community audience)(Karygicmnis, Phillips et al. 2006) .

Some of the RFID applications in supply chain are mentioned in table 8.

Table 8. RFID applications in supply chain

Product/service Company Chip IBM, Hitachi, Philips, AMI, TagSys, RFSaw, Charterate Printer Zebra, Printronix, Alien Tech, Intemec, Toshiba Tag Alien Tech, Philips, Flint Ink, Tyco, TI, Siemens, Power Paper Antenna Flint Ink, Avery Dennison, Moore, EMS, Omron Reader Alien tech, Matrics, Intemec, Symbol, TI, iPico, Hitachi Firmware IBM, Accenture, OATsystems, Microsoft, SAP, Oracle, Genesta Consulting IBM, Accenture, KPMG, Dloitte, Capaemini

 Assets management: Generally, RFID closed systems have a greater acceptance. In large industries, there are multiple cases of using active tags to identify pallets, containers and the other moveable assets of full units. For example, one of the cases of this zone is tracking and management of full containers (containers, pallets, boxes) which has the following advantages:  Reducing the confusion in full containers mobility and to increase access speed of them for reusing  On time identification of pallets or full containers in rail way transportation industry of entire network  To relocate containers quickly at the end of consignment  To increase resources performance  To track parts inside full containers  To design optimum route relocations  To reduce average responsive time  To organize information flow and exchanges operations of pallets with suppliers and manufactures  To record and maintain exchanges records of pallets with institutions that signed the agreement of company  To control pallets exchanges of company and trust pallets of a company to suppliers in order to maintain and protect property and asset of a company  To control pallets exchanges of suppliers with a company to guarantee the rights and property of suppliers and manufactures  To integrate and facilitate in how to inform pallets flow between company and suppliers

 Track goods: Many studies have been done to reduce production costs. Research shows that 2 to 8 percent of these costs can be reduced via using RFID and the ability to accurately track goods and materials inventories.

Using RFID tag under the assembly in production process and the final products of producers allow to acquire accurate information from in process goods and the other needed production. Industrial control and material relocation systems can be integrated to RFID readers for identifying the material relocation.

 Inventory control: In retail industry, effective management of inventory depends on identifying of integrations and information analysis from various sources such as distribution centers and warehouses.

In full systems, when the total inventory in the full or distribution centers is less than a certain level, RFID system is issued an order automatically. Also, products with the RFID tag allow full keeper to order inventory and identify a place of desired product in a certain time.

 Returns management: Companies in order to track their goods after delivery to the customer, they need to have information such as customer-specific information, post times, Product information (production time, Expiration date, Operator name, resources information).  Guarantee and support management: sold product requires different operations such as maintenance in which some part of repairing should be done during the guarantee period, which included costs for company and the other section will have done in a period of after guarantee, has not any cost but it needs technical information of product.

To cover the requirements of two sections, we can register production information such as production time, period consumption date, guarantee, supplier and specific technical information on RFID tags and when needed, we call them back.

Car manufacturing supply chain could be represented in 7 categories as shown in Figure 12.

Figure 12. Schematic illustration of a car manufacturing supply chain. 5.7. RFID application in the automotive industry: Automotive Industries are always faced with new problems. Since the beginning of the auto industry although the supply chain and production processes have a remarkable progress but there are still problems that must be studied. Automotive Industries continue following new methods in their supply

30 chain and production processes and cost will reduce more during that time. Thus, this industry needs to invest in RFID industry. RFID can cover information space in supply chain of this industry.

Automotive supply chain can be shown in 7 sections as following: 5.8. Strategic sections of automotive industry affected by RFID  Focus on customer

In order to improve relations with customers, identify customer needs are important priorities. In fact, customer tastes like ring change or tire or automate turning can be effective in customizing products.

Specific information can be stored on the client machine by RFID. By this information, automotive producers and sellers that have the ability to offer better suggestions for maintenance, repairing, services. For example, with RFID technology, a technical service center can immediately notice the last time that oil change or tire changes, or overall any piece may have been replaced(Cao, Folan et al. 2009).

 Chain demand

One of the problems of automotive producers is their excess inventory that will cost a lot. With an adequate supply chain, parts can be moved quickly and they are only needed when there are available and not considered as excess inventory.

This type of supply chain requires an efficient and reliable program, inventory management, production and distribution processes. For these cases, accurate inventory information is required. RFID can automatically monitor the input and output of full or any other location of supply chain to help the automotive industry. Of course, RFID can prevent interfere of parts in each other in production and distribution processes to help organize automated posts.

 Outsourcing

Although outsourcing processes enables automotive manufacturer to reduce their concerns about the great operation that should have been done, but do not forget the increased risk of unrelated or bad communication in the outsourcing process can cause loss and many delays of a supply chain.

RFID technology allows parties to have control and clarification processes because processes will be automatically traced. So they reduce outsourcing risks.

 Mass production

Today, productions of automotive manufacturer go to increase the diversity according to customer's order besides mass production and this means have a problem in the efficient production line with different parts and different products. The problem here is that in a production line, a large number of custom automobile is produced in which massive amounts of various parts may be interfere to each other in full and RFID can easily solve this problem.

6 CASE STUDY: SUPPLY CHAIN OF THE RENAULT COMPANY IN IRAN

This chapter represents a case study performed on the supply chain of the Renault Company in Iran. Problems, solutions and results of this study are discussed in this chapter.

6.1. Problem definition

 Title: Intelligent design of Renault supply chain by RFID in Iran

 Domain: Production of L90 in Iran Khodro and Pars Khodro

 Goals: To identify and reduce the main loss of Renault supply chain by solutions based on RFID technology

 Study phase 6.2. Identify current system of Renault supply chain in Iran  Supply chain units: As we described in chapter 5, the supply chain in the automotive industry can be separated into the following sections and in this chapter, Renault position in each section will be explained briefly according to the present situation in Iran

 Suppliers: Generally, Renault's suppliers in Iran are divided into 2 general sections: domestic and foreign suppliers. Of course, It is mentioned that the global supply network of Renault regulates provisions ( Qualitative and quantitative ) to evaluate companies willing to join this network that it gives the opportunity to each supplier who are eligible to send part to each of Renault factories around the world .

So, internal and external separation is not of the Renault, but only to survey more accurate and better of suppliers and their role in creating existing losses.

 LSP: During Renault supply chain in Iran, LSP is assigned to Renault Pars Co that we explained about its formation before.

In later sections we will talked in detail about Pars Renault supply system.

 Automotive manufacturers: From the Beginning of the L90 production project, its agreement was about producing vehicle in Iran Khodro (IK) and Pars Khodro (PK) Companies (The Saipa Group).

Figure 13. Manufacturing process.

 Distributer: The task of produced vehicle distribution to agents and stores in Iran is by Iran Khodro and Pars Khodro (each of them related to their products) and Pars Renault Company has a responsibility of sending vehicle and produced parts inside to outside of Iran. (Export)

 Customer: In fact, customers are consumers inside and outside of the country

 Recycling: According to agreements during the L90 production process, the task of recycling reversible parts and waste parts are under the supervision of Pars Renault Co. contractors.

Of course, returned part to the consumption cycle is depending on official license of Renault.

 Information flow system: In this section, we study current system of flow information during supply chain of Renault products in Iran.

 Logistic information systems: According to what we said, Pars Renault has a task of supplying parts for automotive manufacturers (Iran Khodro and Pars Khodro) .So, by considering this point that all the suppliers work directly with Pars Renault in this field, they passed the Renault manufacturers assessment levels and are connected to global networks of Renault suppliers. The current information flow systems throughout the supply chain are also the Renault Global System.

Here it is necessary to describe the Renault ordering system in Iran:

In calculations related to orders, the physical distance of supplier with an automotive manufacturer and specific problems of supplier due to past experiences is considered in choosing demand during consumption or Lead-Time of a supply, and this has a direct influence on inventory level of ensuring storage of a supplier for automotive manufacturer and also

35 maintenance costs or quality problems caused by failure to fulfill the production plan or inappropriate policy of lead time.

After selecting appropriate LT time for every supplier, every Sunday orders to suppliers are announced through EDI .These two orders are as follows:

1. Certain orders can be 1 week or 2 weeks based on LT of each supplier,

2. To predict future orders: suppliers in addition of notifying its certain orders ,but also he will receive predict of the next 6 month orders that can be a basis of domestic orders of supplier with low-level suppliers.

The physical flow system of goods

- A system of receiving and sending goods: In this section, it is necessary to describe the physical system to receive and send goods to the automotive manufacturer, be noted, identification of the current system helps in implementing technology based on RFID technology.

After delivery request (DR) through EDI to the supplier, at a same time when the supplier prepares goods for sending to an automotive manufacturer and the truck is of carrying goods is ready to move, DN is printed by the EDI and delivered to their representatives .By this simultaneous operation, physic and information of good are sent to the automotive manufacturer. We call Dispatch Advice to the submitted information in a sending time that is visible by Pars Renault.

Figure 14. Shipping and Receiving Systems.

Receiving process can be divided into the following steps:

 To receive Dispatch Advice (Ready to send)

 received confirmation by automotive full (updated sealed DN and sending inventory to Renault)

 See the updated inventory process by Pars Renault (including new incoming of a supplier and goods movement from a full to a production line)

 Comparing the information received by the automotive manufacturer and sending supplier by Renault Pars and analyze differences

 Correcting inconsistencies in a general information system by Pars Renault via the help of complementary documents

To be more familiar with packaging systems of Renault product in Iran, we continue this subject in 2 general sections: packaging physic and information about internal and external parts.

Packaging physic

Internal parts : packaging is in 2 types of standard and special. When a part could be packaged and sent without any damages and require no protective coatings and separated, we can use standard pallets that a group of parts can use them. The size of pallets depends on the size and number of particular group of parts.

Figure 15. Different structures of the standard pallets.

But when dispatch goods from the view of thickness, production physical complexities, environmental sensitivities (humidity, dust, and etc) requires a special coating in the packaging and these coatings are dedicated to the goods, so, a used pallet is called special pallet. For

37 example we can mention petrol tank, axles, engines, windows, bumper, large body parts such as roof, door.

Figure 16. A specific metallic pallet structure. Calculate the number of pallets according to the production rate is very important. In fact, this calculation should consider the trust storage of inventory in a supplier and automotive manufacturer, the number of pallets in circulation between these two and a percentage for probable damage to the pallet leads to sectional or complete exit of the cycle, or damage to parts inside pallet which causes no evacuation and stop pallet on time.

In this thesis, we will see the number of optimal pallets of manufacturer is effective in reducing structural cost of RFID technology installation.

External parts: Packaging foreign goods is due to unreturned of pallet, its disposable and also long distance of carrier, is as a cartoon or wooden. It is mentioned that the quality of packaging, especially sensitive parts is very important because sometimes lead time in customs for prolonged clearance process or lead in automotive manufacturer full as excess inventory is causing the loss of goods. Reasons of the external parts excess inventory can be pointed to the followings:

Information related to packaging is transferred via pallet identification cart now about packing pallet identification card that is installed on a pallet body gets transferred

This information which is as a bar code and exported by EDI and a supplier should print and install it before dispatching goods, includes the Part number, traceability number, unloading point, the number of quantity and etc.

Figure 17. A packaging Information data sheet. Some of the key problems in using this system are as follows:

 The lack of a barcode scanner in supply companies and automotive manufacturer to read information automatically

 Lack of a firmware to transfer information to an internal information system of companies to a general system of Renault information

 Lack of integrated information system to identify traceability codes

 Vulnerable of printed paper in its position on a pallet

We will see more of how installation of RFID hardware and software infrastructure will respond to these needs. 6.3. Identify the Renault supply chain wastes in Iran In this section, after identifying Renault supply chain in Iran and by considering contents have been told in chapter 3,we are going to explain main core of Renault supply chain wastes in Iran.

Before you start searching about wastes, you must first consider a question that since 2004 until now, during Renault activity in Iran, what are great losses supply chains includes all suppliers, Pars Renault, automotive manufacturer and customers faced with.

In other words, first, we introduce problems and then we find the root in a framework of difference waste area explained before, then we provide solutions by categorizing roots in the facing problems format of supply chain main flows means goods flow, information flow and financial flow. Of course it is natural according to the subject of this research which is certainly designing intelligent supply chain by the help of RFID, Our focus is on providing solutions 39 based on this technology and it is the best solution for specific problems. Therefore some of problems need further study in the frame of other solutions.

We review problems with the below classification:

 Problems of automotive manufacturer’s production:

- Technical problems of production:

Include reasons of unachieved production due to technical errors of production line.

- Political problems of production:

Include all types of management decisions (short and long term), which directly generate limitation for production.

- Inter-organizational supply chain problems of automotive manufacturer:

Include all problems happened during dispatching part from a full of raw materials to production line and to dispatch final product to a full product.

 Supply problems:

- Inappropriate forecast of production rate:

This part includes all calculation lead to unrealistic preparation of production plan.

- Financial problems:

Include reasons that led to disconnect or low speed financial flow throughout the supply chain.

- Problems of main supplier production:

This part includes all kinds of problems causes supply chain wastes of a supplier.

-Supplier production problems of Levels 2 and 3:

All kinds of problems lead to supply chain wastes of a supplier in a higher level are included in this part.

 Facts and figures:

In this level, we survey some production index and financial impact in 2008 and after that by identifying waste areas we provide solutions.

- Deviation scale of the automotive manufacturer production:

Pars khodro(PK):

Table 9. PK production and production plan of 2008

Real product Month product plan planning deviation lost sell average(10000x) Jan 1893 5565 66% 42081120 Feb 2321 3700 37% 15803340 Mar 1483 1750 15% 3059820 Apr 2019 4030 50% 23046060 May 1721 4120 58% 27492540 Jun 1830 3585 49% 20112300 Jul 2382 5125 54% 31434780 Aug 1607 1665 3% 664680 Sep 2174 3420 36% 14279160 Oct 3112 4140 25% 11780880 Nov 2612 3850 32% 14187480 Dec 2762 3330 17% 6509280

6000

5000

4000

3000 Serie2 Serie3 2000

1000

0 jan feb mar apr maj jun jul aug sep okt nov dec

Figure 18. Comparison between PK production and production plan.

Figure 19. PK production deviation.

Figure 20. PK Lost sell.

IranKhodro(IK):

Table 10. IK production and production plan of 2008

Real product planning lost sell average Month product plan deviation(%) (10000x) Jan 2331 5340 56 34483140 Feb 2288 4125 45 21052020 Mar 1517 1750 13 2670180 Apr 2250 3745 40 17132700 May 2086 4050 48 22507440 Jun 2472 3285 25 9316980 Jul 2646 5400 51 31560840 Aug 1996 3150 37 13224840 Sep 3099 3420 9 3678660 Oct 4052 4140 2 1008480 Nov 2608 4050 36 16525320 Dec 2676 3102 14 4881960

Figure 21. Comparison between IK production and production plan.

Figure 22. IK Lost sell.

Figure 231. IK production Deviation.

PK and PK:

Table 11. Manufacturers Total production and production plan of 2008

Real product planning lost sell average Month product plan deviation(%) (10000x) Jan 4224 10905 61 76564260 Feb 4609 7825 41 36855360 Mar 3000 3500 14 5730000 Apr 4269 7775 45 40178760 May 3807 8170 53 49999980 Jun 4302 6870 37 29429280 Jul 5028 10525 52 62995620 Aug 3603 4815 25 13889520 Sep 5273 6840 23 17957820 Oct 7164 8280 13 12789360 Nov 5220 7900 34 30712800 Dec 5438 6432 15 11391240

Figure 24. Comparison between Manufacturers production and production plan.

Figure 25. Manufacturers production Deviation.

Figure 26. Car manufacturing lost sell.

After the calculation of real production and sales in 2008, benefit and liability scale of partners in the supply chain is given in the table 12.

Table 12. Benefit and liability scale of partners

1000IRR*costs IK PK IK+PK Year benefit 78012596 67345339 145357935 Renault share 240828462 207898152 448726614 Debt of C. assembler to RP 100000000 50000000 150000000 Debt of RP to supplier 10000000 10000000 20000000 Debt to main Renault in France 90000000 40000000 130000000

By considering above information, the role of LSP (Renault Co.) became bold in modulating the effects of severe financial volatility on suppliers are shown in figure 27.

Figure 27. Moderating effects of financial volatility

After the awareness of the deviation scale from the lost production and sales of automotive manufacturer that is a considerable amount (total about 145 million Dollars), we begin to separate loss product based on registered information of unachieved reasons .The following table by separating the automotive manufacturer shows mentioned reasons:

Table 13. Reasons for non-fulfillment IK production

Number of lost Affect in lost Problems Sub-problems products(car) (%) Production technical 1400 9 problems Production policy 400 3 Car assemblers production problems problems Internal supp;y chain 736 5 problems Production rate wrong 5000 32 expectation Financial problems 5000 32 Supply problems Main supplier production 2000 13 problems Suppliers 2,3 production 1000 6 problems

Table 14. Reasons for non-fulfillment PK production

Number of lost Affect in lost Problems Sub-problems products(car) (%) Production technical 914 5 problems Production policy 500 3 Car assemblers production problems problems Internal supp;y chain 1100 6 problems Production rate wrong 7200 39 expectation Financial problems 3600 20 Supply problems Main supplier production 3100 17 problems Suppliers 2,3 production 1950 11 problems

IK and PK:

Table 15. Reasons for non-fulfillment IK and PK production

Number of Problems Sub-problems lost Affect in lost (%) products(car) Production technical problems 2314 7 Car assemblers production Production policy problems 900 3 problems Internal supp;y chain problems 1836 5 Production rate wrong expectation 12200 36 Financial problems 8600 25 Supply problems Main supplier production 5100 15 problems Suppliers 2,3 production problems 2950 9

Table 16. Reasons for non-fulfillment PK production

Number Affect RFD effects in Production Sub- Waste effec of Problems in Waste zone RFD solutions waste waste problems reduction(%) production lost(%) reduction(%) rate(IRR) waste(car) Production technical 7 Design 20 1 463 5303688 problems Production Sterategic policy 3 0 0 0 0 decisions problems Car Physical assemblers Internal and production Canban lines supp;y information problems 5 feeding,tracking,pull-push 80 0 1463 16832448 chain flow,pull- policy problems push wrong allocation Lack of proper Information forecasting flow and 36 LT reduction 50 9 6100 69906000 of systematic Production changes rate Financial Lack of 25 Fast moving fmcg 0 50 0 0 problems coordination Physical Supply Main and problems supplier information 15 5100 15 production flow,pull- problems push wrong allocation Physical Suppliers and Canban lines 2,3 information 9 feed,track,LFO,FIFO,pull- 60 5 1770 20284200 production flow,pull- push policy,outstanding problems push wrong allocation Total 38 12862 147393936

All IK and PK:

Table 17. Reasons for non-fulfillment IK and PK production

Number of lost Affect in Problems Sub-problems Waste zone products(car) lost(%) Production technical 2314 7 Design problems Production policy 900 3 Sterategic decisions Car assemblers problems production Physical information Internal supp;y problems 1836 5 flow, pull-push wrong chain problems allocation Production rate Information flow and wrong 12200 36 systematic changes expectation Financial 8600 25 Lack of coordination problems Supply problems Main supplier Physical information production 5100 15 flow, pull-push wrong problems allocation Suppliers 2,3 Physical information production 2950 9 flow, pull-push wrong problems allocation After identifying main factors of unachieved production, we act to sort these factors in the form of known wastes area in which they were studied last chapter.

The following table indicates this level by a separation of automotive manufacturer.

Table 18. IK waste zones

Number of lost Affect in Problems Sub-problems Waste zone products(car) lost(%) Production technical 1400 9 Design problems Production policy 400 3 Sterategic decisions Car assemblers problems production Physical information Internal supp;y problems 736 5 flow, pull-push wrong chain problems allocation Production rate Information flow and 5000 32 wrong expectation systematic changes Financial problems 5000 32 Lack of coordination Main supplier Physical information Supply problems production 2000 13 flow, pull-push wrong problems allocation Suppliers 2,3 Physical information production 1000 3 flow, pull-push wrong problems allocation

Table 19. PK waste zones

Number of lost Affect in Problems Sub-problems Waste zone products(car) lost(%) Production technical 914 5 Design problems Production policy 500 3 Sterategic decisions Car assemblers problems production Physical information Internal supp;y problems 1100 6 flow, pull-push wrong chain problems allocation Production rate Information flow and wrong 7200 39 systematic changes expectation Financial 3600 20 Lack of coordination problems Supply problems Main supplier Physical information production 3100 17 flow, pull-push wrong problems allocation Suppliers 2,3 Physical information production 1950 11 flow, pull-push wrong problems allocation

All car assemblers:

Table 20. Car assemblers waste zones

As previously noted, this research is just focusing on designing the intelligence of supply chain via RFID, regardless of offering complementary solutions.

Renault Annual Performance Review conducted in 2008 for Renalut-IRAN revealed that using the RFID and implementing SCM reduced the waste up to 38.8%; this is equal to 1470 billion Rials (Iranian currency) equals to 63million Dollars(Renault-IRAN Annual Performance Review , May 2008)

All car assemblers:

Table 21. RFID Solutions

Affect in Problems Sub-problems Waste zone RFID solutions lost(%) Production technical 7 Design problems Production Sterategic policy 3 decisions Car assemblers problems production Physical Canban lines problems Internal supp;y information flow, feeding,tracking 5 chain problems pull-push wrong LIFO,FIFO, pull-push allocation policy Production rate Information flow wrong 36 and systematic LT reduction expectation changes Financial Lack of 25 Fast moving fmcg problems coordination Physical Supply Main supplier Feeding,tracking, information flow, problems production 15 LIFO,FIFO, pull-push pull-push wrong problems policy, outstanding allocation Physical Canban lines Suppliers 2,3 information flow, feeding,tracking production 9 pull-push wrong LIFO,FIFO, pull-push problems allocation policy,outdstanding

6.4. Identify solutions: Here we explain some important solutions:

 Reduction of bullwhip effects: We talked a lot about the formation of this effect, its symptoms and ways to deal with it in last chapters. Now, we have studied according to the information about production conditions of 2008 production rate fluctuations, as the actual 52 sample of l90 suppliers named Press Iran Khodro. Below charts show the bullwhip effects of supply chain due to the production rate fluctuations:

Table 22. Orders and real usage rate

Month Real product Production plan M.sheet supplier order(Kg) M.sheet order(Kg) Jan 1839 5565 359862 145019 Feb 2321 3700 Mar 1438 1750 210092 130180 Apr 2019 4030 May 1721 4120 467697 292173 Jun 1830 3585 Jul 2382 5125 Aug 1607 1665 Sep 2174 3420 Oct 3112 4140 Nov 2612 3850 Dec 2762 3330

Table 23. Request and order comparison

Order number Car assembler order Supplier order M.sheet usage(Kg) 1 299885 359862 145019 2 175077 210092 130180 3 389748 467697 292173

Figure 28. Order and usage comparison

Figure 29. Supplier, Car assembler order and M-sheet usage The graphs above show the necessity of reducing this effect.

Now, by the help of RFID technology which generates the transparency movement of goods in supply chain ,we can have a control of order fluctuations .These factors include accurate

54 information of goods inventory, goods consume dare, how to reduce lead tines, how to reduce orders costs and carrier costs.

 LT Reduction: The complexity of systems doesn`t allow us to track transportations and times control. RFID Systems by generating transparency in the movement of goods across the supply chain allows managers to make accurately and quick decisions about their inventory control. This technology is a part or all the time and it eliminates effort needed to count the goods during loading .This is a major cause of LT reduction.  Improving lines liquid system and new methods (canban and synchron): Lines liquid system is a part of inter-organizational supply chain actually composed of the full parts, production line and full products. Here is a question of how we can produce products according to production plan in a minimum time and minimum reserved goods without stop via the help of RFID technology solutions.

One of these solutions is improving sorting rate and separating based on produced product. RFID technology facilitates can do it by generating automatic control of inventory for every part in their original containers along the production line and automatic sending new orders via general information system..

To improve controlling of FIFO – LIFO policy

Many items such as batteries, paper, materials and petroleum derivatives, are highly dependent on their production time. Sometimes it is observed after generating bullwhip effects, full excess inventory that included ordering and maintenance costs become waste by the time and it includes doubled costs.

Planning of ordering perishable goods requires accurate information of goods such as production date and expiry date. RFID facilitates adequate system deployment of FIFO / LIFO by transparency in this section.

 Tracking and tracing: RFID technology by generating transparency makes it easy to trace parts. In many cases, pallets includes pieces, has been delivered to automotive manufacturer , but due to errors such as human or system errors ,documents have been altered for financial use. In these cases, RFID makes it possible to track pallet by document number. In some cases, dispatched part to an automotive manufacturer has a quality problem and it needs information to produce this part such as format number, production date and ... to identify the objection source and fix the root problem, RFID technology can easily do this tracing. There are many other examples to offer this section.

 Outsourcing: As noted in previous sections, some of the production and supply problems can be minimized with appropriate outsourcing process. When because of financial problems or distance problems of supplier’s production or maintenance problem and order specific items (perishable and ...) you make the possibility of supplying some goods to other companies. In fact, you minimize time wastage and unforeseen costs. RFID technology will prevent future wastes by creating transparency of your needed information in a contractor`s company. 6.5. Design phase

In this level, the general outline of the RFID technology deployment in supply chain should be drawn.

In the pilot model that is the small sample performance, product full, production line, dispatch and receive, automotive manufacturer and finally raw full of automotive manufacturer of a supplier are included in the deployment plan.

In this project:

 All products is coding by EPC standard.  Renault Information system is a relational module for each equipped and application zone.  Supplier production stations is equipped with constant ceiling readers  Line operators, supplier full and raw of stock of automotive manufacturer are equipped with a gun reader.  All pallets are equipped with passive tags includes useful information of a production.

6.6. Execution Phase In this section, after knowing tools and solutions based on RFID technology, we begin executing implementation project to separate four below levels:

1. To form technical committee: like other technologies, when RFID technology is reached to execution level, it needs to form expert team with a combination of follow members:

 Process Engineering (BS of automobile industry)

 Software Engineer (expert in the information relocation)

 Design, services and execution experts

 Hardware Engineer (networks and servers experts)

 Standards Experts

2. Pilot definition in initial execution: In this level for the actual costs, requirements infrastructure, guarantee and results after execution in a smaller range, we should execute project. For this project, we pilot body parts Supplier Company named Saipa Press.

Equipment required for initial execution with a range of product lines and product full and to dispatch and receiving SAIPA PRESS goods, Iran Khodro and Pars Khodro primary full are as follows:

 Passive tags to the number of pallets (6 thousand)  Gun reader to the number of 6 machines:

(2 machines for operator of the production line and full of Saipa Press production, 4 machines for operators of automotive manufacture`s full production)

- ceiling tag reader to 6 number (production line stations)

- fixed gate tag reader to 7 number (input and output of full product, dispatch output of Saipa Press goods to the number of 1 machine , goods full input devices and for each of automotive manufacture`s initial full input is 1 machine )

- Integrated general system of information

- Consultation and EPC standard deployment for coding goods in Saipa Press

It should be mentioned that the automotive manufacturer`s production lines are not equipped with this technology in this level, so in a current situation, the possibility of having accurate information of Saipa Press production status, Saipa Press production inventory, dispatch status of Saipa Press, daily input of Saipa Press to automotive manufacturer, status of full and empty pallets and parts inventory status of Saipa Press in automotive manufacturer and finally tracking and tracing of problem parts will be provided.

3. Income and expenses Review:

The table describes equipment costs of the pilot based on items:

Table 24. Cost of equipment

Equipments Numbers Unit price(IRR) Total price(IRR) Passive tag 6000 200 1200000 Gun reader 6 50000000 300000000 Little ceiling fixed reader 6 30000000 180000000 Fixed gate readers 7 1.5E+08 1.05E+09 Integrated information system 1 50000000 50000000 EPC 1 50000000 50000000

IK:

Table 25. Cost Reduction

Number Affect RFD effects Production Sub- Waste effec of Problems in Waste zone RFD solutions in waste waste problems reduction(%) production lost(%) reduction(%) rate(IRR) waste(car) Production technical 7 Design 20 1 463 5303688 problems Production Sterategic policy 3 0 0 0 0 decisions problems Car Physical assemblers Internal and production Canban lines supply information problems 5 feeding,tracking,pull-push 80 0 1463 16832448 chain flow,pull- policy problems push wrong allocation Lack of proper Information forecasting flow and 36 LT reduction 50 9 6100 69906000 of systematic Production changes rate Financial Lack of 25 Fast moving fmcg 0 50 0 0 problems coordination Physical Supply Main and problems supplier information 15 60 38 3060 35067600 production flow,pull- problems push wrong allocation Physical Suppliers and Canban lines 2,3 information 9 feed,track,LFO,FIFO,pull- 60 5 1770 20284200 production flow,pull- push policy,outstanding problems push wrong allocation Total 38 12862 147393936

7 CONCLUSIONS

In this study the impact of Radio-Frequency Identification (RFID) and Supply Chain Management (SCM) on Renault car manufacturing company are investigated. The RFID definition, strategies benefits, hazards and applications are explained. Among three main flows in the supply chain including material, money and data, in this research the data flow from Information Technology (IT) point of view is studied. Different supply chain waste zones are investigated and correlation between the IT and SCM are explained.

Supply chain management Drivers and Intra-organization waste zones are reviewed. Movement from a supply chain to electronic supply chain and the framework of information technology development in supply chain are investigated in different chapters of this thesis.

In the case study conducted in Renault car manufacturing company, it is concluded that using RFID and implementing SCM reduces the waste up to 38.8%, this is equal to 1470 billion Rials (Iranian currency) equals to 63million Dollars. It is evident that executing solutions based on RFID to known organizational wastes promises standing in an adequate development way.

In future, by the research about using advanced materials based on NANO technology in making RFID equipment, we can achieve a more reliable and cheaper of them. Also, this way will continue by specialized working in various industries to identify waste zones and offer solutions related to disbursement.

8 FUTURE WORKS

Works that could be done in the future are: - Identify new problems of SCM in the field of information and finding solutions based on technologies such as RFID. - Find out more advanced technologies such as cheaper and more useful versions of RFID or use of new technologies such as nanotechnology. - Help to implement these concepts in various industries individually

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