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Integration of RFID and ERP Challenges and possibilities. Humberto Moran Research Fellow Judge Institute of Management University of Cambridge June 2004 h.moran@jims.cam.ac.uk. © Humberto Moran. What is RFID? – an invention. RFID is an old invention that became less expensive

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integration of rfid and erp challenges and possibilities

Integration of RFID and ERPChallenges and possibilities

Humberto Moran

Research Fellow

Judge Institute of Management

University of Cambridge June 2004

h.moran@jims.cam.ac.uk

© Humberto Moran

what is rfid an invention
What is RFID? – an invention

RFID is an old invention that became less expensive

  • The reader ‘queries’ the chip with a radio wave
  • The chip replies with its identification (EPC) and other optional data
what is rfid an innovation
What is RFID? – an innovation

Intelligent interoperable products

High

Transformation of society (lifestyle)

Technology as perception

Technology as embedded system

Way of increasing product quality

Way of developing new products

Reshape the consumer experience

Mass customization enabler

Supply chain productivity tool

Building block of a modern supply network

Restructuring of the supply chain

Technology as production network

Depth of the impact

Physical extension of the Internet

Information processing tool

Generation of new business models

Data gathering device

Productivity tool

Extension of information systems

Support of business processes

Barcode substitute

Manufacturing tool

Tool for automation

Support of operational processes

Labor substitution tool

Productivity tool

Low

High/ Active

Low/ Passive

Degree of coupling with environment

rfid from a erp perspective
RFID from a ERP perspective
  • A set of inter-organisational standards
    • Identify physical objects
    • Trace information on products
  • A powerful tool for automation
  • Provides computers with new senses, new data (and new possibilities…)
  • A Revolution in the SW area ??
integration of rfid erp there is a gap between both worlds
Integration of RFID/ERP: there is a gap between both worlds

Information world

Business meaning

Business intelligence

Sales and marketing

ERP and related

?

Financial

Logistics and distribution

Information about physical objects

Low-level interface

Inventory

Manufacturing

Readers

Physical meaning

Physical world

why is it important to integrate both worlds
Why is it important to integrate both worlds?
  • Both worlds complement each other creating important complementarities
  • To allow/ease the adoption of RFID applications
  • To provide RFID-generated data with useful meaning
  • To provide ERP systems with accurate, timely and reliable information about physical objects
  • To make the best possible usage of the new information from a business point of view
what are the challenges posed by this integration
What are the challenges posed by this integration?
  • RFID-Generated data are dispersed, fragmented, duplicated, inaccurate and lack business meaning
  • Interpretation is context- and information-dependent
  • Interpretation requires sharing inter-organisational information
  • RFID-Generated data might generate business transactions targeting different systems/modules
  • Duplicity of Information and functionality of RFID-enhanced systems and that of existing ERPs
  • Amount of new data is stunning
1 rfid data are dispersed fragmented duplicated inaccurate and lack business meaning
(1) RFID data are dispersed, fragmented, duplicated, inaccurate and lack business meaning
  • Readers can detect the same objects many times, with random gaps
  • Some tags can be missed
  • Reading order is random
  • Logically related and unrelated objects are read all together
  • The data consist on identification numbers (EPC) and other optional data, which lack business meaning
2 interpretation is context and knowledge dependent
(2) Interpretation is context- and knowledge-dependent
  • Business meaning depends on:
    • Location of the object
    • Whether the object is static or moving
    • Direction/speed of movement
    • Detection intervals
    • Aggregation information (e.g. compound products, batches, tools etc.)
    • Business transactions (e.g. ASN, warehouse transfers, sales etc.)
    • Previous status of the object (e.g. location etc.)
illustration characteristics of the data and its interpretation
Illustration - characteristics of the data and its interpretation

Data comes fragmented and dispersed

Some transactions are duplicated

EPC

EPC

EPC

EPC

EPC

EPC

?

EPC

Reader 1

o o o o

EPC

EPC

?

EPC

EPC

EPC

EPC

EPC

Reader 2

There is a need for location and aggregation information

o

o

o

Low-level interface

The information about the employee and/or equipment is in the HR and Fixed Assets modules respectively

The information about the products is in the inventory module

Readers

Some tags might not be read

Products are often handled in groups

implications characteristics of the data and its interpretation
Implications - characteristics of the data and its interpretation
  • The integration layer must combine data from many different sources – some degree of centralisation is required
  • Hence, there is a need for interoperability
  • A GIS must be incorporated or linked to the interface
  • These data requires sorting - a grammar-like processor is required
  • Since data may be incomplete or contradictory, the integrator may incorporate “fuzzy” logic or artificial intelligence
3 interpretation requires sharing inter organisational information
(3) Interpretation requires sharing inter-organisational information
  • Most of the value of RFID comes from inter-organisational applications
    • Information about products
    • Communicating/tracing shipments
    • Vendor managed inventory (VMI)
    • Anti-counterfeit, anti-smuggling etc.
  • However, these exchanges cannot be easily done at ERP level
    • Heterogeneity of vendors and versions
    • Limited funcionality
rfid enhanced and non rfid enhanced systems must coexist

INTERNET

INTERNET

RFID-enhanced and non-RFID-enhanced systems must coexist

Information world

Company C

Company A

Company B

Non-RFID-enhanced ERP

RFID-enhanced ERP

RFID-enhanced ERP

Integrator

Integrator

Integrator

Interface

Interface

Interface

Readers

Readers

Readers

Physical world

implications sharing of information
Implications – sharing of information
  • There is a need for inter-organisational interoperability at the integration level
  • As ERPs cannot be replaced overnight, the integration layer must perform the exchange of inter-organisational information
  • In the future, traditional e-commerce transactions must be expanded to include information about physical objects
4 rfid generated business transactions may target many different systems modules
(4) RFID-Generated business transactions may target many different systems/modules
  • RFID is very versatile and allows for many business applications, hereby affecting many IS and ERP modules
  • RFID infrastructure can be shared among applications
  • A single physical transaction may generate multiple business transactions – even inter-organisational ones
slide16

RFID transactions target many different systems/modules

  • Sales and mktng:
  • online product information
  • product returns
  • self checkout
  • SC design:
  • mass customisation
  • Financial:
  • payment conciliation
  • item-level costing
  • Item-level taxing
  • Stock recount
  • Material management:
  • supplier upstream tracking

Business Intelligence

  • Automation:
  • mass customisation
  • Order entry:
  • build to order
  • Inventory:
  • shrinkage control
  • stock failures
  • product recalls
  • perishables mgmt
  • Shipment:
  • loses
  • damaged products
  • anti-counterfeit
  • Control:
  • tracking
  • locating
  • sensing
  • Security:
  • theft prevention

Physical world – RFID-transactions

Manufacturing systems

ERP systems

SCM systems

Other systems

implications multiplicity of targets
Implications – multiplicity of targets
  • RFID devices cannot be directly integrated into existing ERPs
  • The integration RFID/ERP must be multipoint and generate consistent transactions
  • The inter-organisational layer must convey not only information about products, but also about business transactions
  • There is a need for interoperability between ERPs from different vendors (again!)
5 duplicity of information and functionality of rfid enhanced systems and that of existing erps
(5) Duplicity of Information and functionality of RFID-enhanced systems and that of existing ERPs
  • Most existing ERP already include information on physical entities
    • Product description at SKU level
    • Product location and stock levels
    • Inter-organisational transactions
  • Functionality also overlaps
    • Use of barcodes
    • Human-fed transactions
rfid generated information statically relate to many existing erp entities
RFID-generated information statically relate to many existing ERP entities

Present

Non-RFID-enhanced information systems

Future

RFID-enhanced information systems

Database

Database

Existing ERP entities

Existing ERP entities

RFID entities

RFID entities

implications data and functionality overlap
Implications – data and functionality overlap
  • Need for a separate storage for the new physical information
  • Need for logical links with existing ERP entities
  • Need for combined functionality
  • Need for bidirectional transactions to keep both worlds “synchronised”
6 the new amount of data is stunning
(6) The new amount of data is stunning
  • Tracking mass-produced goods such as cans of soda will generate millions of transactions every second
  • Most of these transactions are redundant; others have meaning only to specific modules, whole ERP or other IS; whilst others should be shared beyond the organisation
  • Transactions will come not only from relevant objects, but also from many other tagged objects scanned by chance
reach of data transactions
Reach of data/transactions

Company A

Company B

Physical world

implications amount of data
Implications – amount of data
  • This requires many filtering and interpretation layers: RFID-Generated data and their related business transactions should be transmitted to the lowest meaningful possible level only
  • The integration should be flexible to adapt to different configurations
    • All data
    • Exceptions only
    • Expectations (cache)
    • Different levels of trust among SC partners
  • The integration layer should then allow not only for data transmission, but also for mobile business logic
  • This requires the creation of a new entity: the “Physical Business Language” (PBL), providing business knowledge with physical cognition and scope
holistic integration layer
Holistic integration layer

Information world

Business meaning

Integration

layer

BI + AID functionality

INTERNET

Sales and marketing

Information Systems

Financial

Logistics and distribution

Logistics and Ds + AID functionality

Low-level interface

Inventory

X

Manufacturing + AID functionality

Readers

Physical meaning

Physical world

slide25
Standard-based

Multidirectional

Flexible and interoperable

Independent from ERP

Allow anticipation of events

Centralised decisions

INTERNET

Inter-organisational transactions

INTERNET

Inter-organisational transactions

RFID/ERP Integration layer – characteristics and general architecture

  • Intelligent
  • Comprehensive
  • Automatic, reliable, transparent

Mobile business logic

  • Programmable and configurable
  • Distributed processing

ERP Modules

Bespoke Systems

Business world

Transaction interpreter / generator and entity linker

Low-level interface with readers

Database with information about physical objects

Physical world

slide26

BIS Transactions

Generator

ERP Modules

Bespoke Systems

Remote database with information about physical objects

INTERNET

Inter-organisational transactions

INTERNET

Inter-organisational transactions

Industrial Control

Configurable business data / events interface

Alarms

Expectation engine

Expectation engine

Expected events

Location / routing interface

GIS

Transaction interpreter and entity linker

Physical data / status

Aggregation / Location engine

Database with information about physical objects

Low-level interface with readers

RFID/ERP Holistic Integration LayerDetailed Architecture

Business world

Physical world

summary advantages of a holistic model
Summary – advantages of a holistic model
  • Clearly separates layer functions and relationships
  • Enhances interoperability at many different levels
  • Allows for incremental implementations
  • Makes possible reusing existing infrastructure
  • Maximises strategic value from expansion possibilities
  • Accounts for both dynamic and static integration
  • Has clear-cut interfaces and functions per layer
  • Completely strips out business logic from the lower levels
  • Provides business value by complementing the RFID infrastructure
  • Maximises scalability
conclusions
Conclusions
  • The RFID revolution is incomplete and cannot take place without the evolution of existing business software, particularly the middleware
  • The integration of RFID and ERP is unique in nature and different from other integration approaches
  • Integrating RFID and ERP requires an independent and autonomous integration layer with very specific characteristics
  • ERP systems need to undergo a major transformation to make the most of RFID
integration of rfid and erp challenges and possibilities1
Integration of RFID and ERPChallenges and possibilities

Questions?

Humberto Moran

Research Fellow

Judge Institute of Management

University of Cambridge June 2004

h.moran@jims.cam.ac.uk