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. i ii 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. iii 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 iv v 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 vi 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 vii 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. 1 2 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