**2. RFID technology and sustainability**

#### **2.1 Fundamental of RFID technology**

**RFID** is an automatic identification (Auto-ID) technology developed by Auto-ID Center at Massachusetts Institute of Technology, relying on storing and remotely retrieving data using devices called RFID tags and readers (Auto-ID Center, 2002; Doyle, 2004; EPC, 2004; Finkenzeller, 2000; Shepard, 2005). With RFID technology, physical asset will have embedded intelligence that allows them to communicate with each other and with the tracking points (Auto-ID Center, 2002; IBM, 2003; VeriSign, 2004). Leading companies and business networks adopt management best practice enabled with new technologies and strategies such as lean thinking, eco-design, life-cycle assessment and close-loop production, which offer merchants improved resources management and greener value chains (UN, 2003). Information and

understanding customer needs, lean thinking has gained the wide acceptance in nonmanufacturing (Heizer and Render, 2007; Russell and Taylor, 2009). Successful cases of adopting lean thinking in services have been applied in some instances to insurance (Swank, 2003), healthcare (Miller, 2005), government (Gupta, 2004), library (So and Liu, 2007), and

To adopt lean services effectively in operations, firms need to made changes on three aspects: (i) *standardization of tasks and procedures* which can be achieved by, for example, documenting the process flow, training, automating tasks, etc., such that people can be freed to spend more time being creative on value-added work, (ii) *consolidating common processes* to eliminate non-value-added cost and duplicative efforts that customers are not willing to pay for, and (iii) *eliminating loop-backs or delay* which will result in improving productivity levels (Swank, 2003; George and Wilson, 2004; Hanna, 2007). The fast-paced characteristics and changing customer expectations of the markets lead apparel retail to the characteristics of short lifecycle and high impulse purchase which are sensitive to inventory shrinkage and product flow delay in the supply chains. Also, the perception of customers on retail services would affect their purchase decision. Realizing lean thinking in apparel retail operations with RFID technology creates a leaner operating environment which offers not only userfriendly shopping experience to customers but also more agile and responsive store operations to retailers with less wasteful sales and operations process. Adopting lean services in apparel retailing may equally beneficial to this industry with potential of creating

The purpose of this research is to provide management and practitioners with insights on implementing and adopting lean services in contemporary retail environment enabled with RFID, a communication technology that add value to the customer chain in apparel retailing through providing smart and agile service operation. This paper presents supportive literature on the principles and the process of value creating activities based on lean thinking (Womack and Jones, 2003) and CCOR model (SCC, 2010a) aimed at improving profitability. A case study is presented to demonstrate how the convergence of these two management approaches can be applied to an apparel retailer based on a novel RFIDenabled smart apparel system aimed at improving its service operations that lead to increased customer conversion. Lastly, the implications of adopting this new initiative in creating leaner and smarter retail operations are discussed with the purpose to ensure the

**RFID** is an automatic identification (Auto-ID) technology developed by Auto-ID Center at Massachusetts Institute of Technology, relying on storing and remotely retrieving data using devices called RFID tags and readers (Auto-ID Center, 2002; Doyle, 2004; EPC, 2004; Finkenzeller, 2000; Shepard, 2005). With RFID technology, physical asset will have embedded intelligence that allows them to communicate with each other and with the tracking points (Auto-ID Center, 2002; IBM, 2003; VeriSign, 2004). Leading companies and business networks adopt management best practice enabled with new technologies and strategies such as lean thinking, eco-design, life-cycle assessment and close-loop production, which offer merchants improved resources management and greener value chains (UN, 2003). Information and

retailing (Heizer and Render, 2007; Russell and Taylor, 2009; So and Sun, 2010).

both user- and eco-friendly retail environment.

**2. RFID technology and sustainability** 

**2.1 Fundamental of RFID technology** 

delivery of maximum value as a strategic tool for apparel retailers.

communication technologies (ICT), e.g. RFID technology, add great values to retail sales and operations processes through enabling consumers to find information and alternative products and services more easily online leading to a greener and less wasteful consumption practice by helping them to make sustainable choices (UN, 2011).

A RFID system essentially consists of three main components: RFID tag, RFID reader, and backend information system with middleware sitting between reader and backend system for carrying out data capturing, screening and routing (Glover and Bhatt, 2006). An RFID tag is a small object that can be attached to or incorporated into physical asset such as book, clothing, or person. When an RFID tag passes through the electromagnetic zone, it detects the reader's activation signal. The reader decodes the data encoded in the tag's integrated circuit (silicon chip) and the data is passed to the host computer for further processing (Finkenzeller, 2000; Hawrylak *et al.*, 2008; Shepard, 2005). RFID tags generally fall into two categories: passive, and active. Passive tags receive the most publicity and are currently being used by large retailers such as Wal-Mart and Metro to track inventory, and by the U.S. Department of Defense to track supplies (Hawrylak *et al.*, 2008). Unlike active tags, passive tags do not contain onboard power source and derive the power for operation from RFID interrogation signal in the course of communication (Finkenzeller, 2000; Hawrylak *et al.*, 2008; Shepard, 2005).

Passive RFID tags communicate using one of two methods: near-field and far-field (Hawrylak *et al.*, 2008). Far-field RFID tags support longer communication range than nearfield tags, but they are comparatively more sensitive to tag orientation. The type of tags required for a RFID system would depend on their business applications, site conditions and system design requirements. In case of supply chain and retail applications, far-field RFID systems are used extensively. According to Hawrylak *et al.* (2008), the sensitivity of the system to RFID tag orientation is critical in many applications. The communication method used by far-field RFID system easily causes false detection and hence the design of middleware and upper layer application software becomes critical in order to effectively screen unwanted RFID signals emitted by nearby irrelevant product items.

#### **2.2 RFID in enabling sustainable retail operations**

Tracking the movements of product items in operations can be determined by three variables in a three-dimensional space, in which the first two are related to the "time" and "space" of item movement, while the third dimension concerns item identification by using RFID tags that carry Electronic Product Codes (EPCs) (Sarma, 2008). On this ground, RFID reader works with middleware to provide backend information systems with an "inventory snapshot" in its field of view which may cover a small corner of warehouse, distribution centre (DC) or backroom of retail store that essentially provides a series of item management function for improving the efficiency of supply chains including: (1) finding, (2) tracking, (3) tracing, (4) item count, and (5) time-intersections. Through querying of this corpus of data gathering from operations, two key metrics, i.e. *shrinkage* (caused by theft, damage, loss, and etc.) and *lead times* that concern operations visibility are evaluated (Hardgrave and Miller, 2008). In particular for apparel retailing, the "lost sales" causing by (1) misplacement, (2) damage, (3) theft, (4) shipping error, and (5) counterfeit of items can be reduced with the use of RFID which ultimately lead to increased product availability and total cost saving (Ustundag and Tanyas, 2009).

RFID, an Emerging Wireless Technology for Sustainable Customer Centric Operations 141

An innovative system design and new configuration are needed for coping with changes. By re-designing services with RFID and CCOR model, clothing items carried by customers can be

Service design is considered as part of operations management that concerns the production of goods and services. Shostack (1982, 1984) is one of the earliest contributors in designing services that are process driven and customer focus with the methodology named service blueprinting. Shostack (1982) identified three important concepts in service design: (i) *process charts* for illustrating the operations processes flow, (ii) *PERT charts* for visualizing the project yields, and (iii) *systems/software programs* for supporting the service operations. Shostack (1984) further introduced the process of designing a blueprint which includes the steps of: (i) *identifying processes*, through mapping the processes that constitute the service, (ii) *isolating fail point*, by identifying the vulnerabilities of the service delivery system on the process chart, (iii) *establishing time frame*, as standard execution time which is below the maximum delay time tolerable by the customers, and (iv) *analyzing profitability*, based on the service execution time which is considered as cost component of service that should be minimized. However, the leakage of sales prospects, i.e. customer conversion is not included as a measurement of service profitability and the metric should be used in

Developed by Supply-Chain Council's (SCC), CCOR model expands the application range of the supply chain operations reference (SCOR) model, which is also a methodology, diagnostic and benchmarking tool developed by SCC for standardizing the process of supply chain management, from improving supply chain processes to enhancing service operations of a firm at its customer touch points (Saegusa, 2010). CCOR model provides a standard framework of high-level customer chain definitions that enables firms to benchmark their processes with other firms that use the same approach, and then identify and implement the changes needed to improve their customer chain which aims at cutting cost and time for subsequent improvement programmes (SCC, 2010a). The process reference framework adopts a standardized approach to speeding up the improvement programmes (Magnusson, 2010; SCC, 2010a) which includes three major steps: (i) *reengineering business processes* by capturing the 'As-is' business activity structure and deriving the future 'To-be' state, (ii) *benchmarking* by quantify the operational performance of similar companies and establish internal targets based on the 'best in class' results which involve defining metrics for making comparison, and (iii) *best practice analysis* by adopting suitable management

practices and software or technological solutions that result in superior performance.

CCOR model defines the value-creating processes in the sales operations of a firm as the collection of business activities along the customer chain in which both the pre-sales and post-sales activities in the sales execution processes are designed to convert customer needs into sales orders (Magnusson, 2010). According to SCC (2010a, 2010b), the sales execution processes are triggered by planned or actual events including customer visits, responding to customer inquiries, creation of customer solutions, processing of claims and support calls,

automatically detected with mix-and-match recommendations provided in real-time.

**3. Re-designing services with CCOR model** 

designing customer focused retail services.

which are organized into four major process groups:

Back in June 2003, Wal-Mart, a US retailer, strictly required its top 100 suppliers to implement RFID technology by tagging the pallets and cases in the supplies for operation improvement through sending real-time inventory data from individual store to suppliers (Hardgrave and Miller, 2008; Roberti, 2004). Wal-Mart and its suppliers use the real-time data to improve replenishment with out-of-stocks reduced by 16% by tracking cases of goods with RFID tags carrying EPCs, where this data enables suppliers to measure the execution of promotions and boost sales which benefit to both parties (Roberti, 2005; 2007). The Wal-Mart case demonstrates an RFID implementation that only predominately affects only a small portion of the supply chain (from retailer distribution centre to store backroom) and makes use only limited RFID system capability (e.g. finding and counting items at pallet level and case level only). Given this limited scope of exposure and application, determining the payback and ultimately creating business value are challenging.

In supporting the lean thinking initiative, three mini-cases are presented to illustrate how the application of RFID technology combined with the EPCs benefits apparel retail management:


As seen from these examples, many RFID-based apparel retail systems is mainly used to improve accuracy or efficiency of business logistics in relation to inventory management or checking out of product items but however do not address all the concerns on sales-floor management, e.g. improving shopping experience or item availability. RFID technology is traditionally offered to the retail segment for improving business logistics. Some apparel retailers use RFID technology in product authentication or article surveillance. Apparel retail is a season-driven and time-sensitive industry. In today's fast-paced society, customers with more sophisticated buying needs and increased choices but have less time to devote to shopping. Apparel retailers have to face the challenge of adapting quickly and efficiently to keep up with fashion and buying trends to meet customer demand, in view of the shelf-life of most product items are just around 20-40 days before their first markdown (Wasserman, 2006). An innovative system design and new configuration are needed for coping with changes. By re-designing services with RFID and CCOR model, clothing items carried by customers can be automatically detected with mix-and-match recommendations provided in real-time.
