Enhancing product recovery value in closed-loop supply chains with RFID.

Direct resale items and products that require some degree of disassembly (repair, refurbish, re-manufacture and cannibalize) will have varying levels of return volatility and product complexity. The higher the return volatility and product complexity, the greater the difficulty of implementing RFID in these value recovery options. But the impact of RFID to enhance these options could possibly be significant due to the potential of RFID to aid in product identification, product disposition, and disassembly. In addition, value recovery options that require disassembly have the potential to yield valuable information on product usage, which can be used for new product development or product improvement. We postulate that RFID deployment for direct resale items and products requiring some degree of disassembly will yield significant long-term benefits, and these benefits will increase as return volatility and product complexity increase. In addition, we postulate that these benefits will be greater for products that have a high marginal value of time.

CONCLUSION

In this article we have discussed the importance of "closed-loop supply chain management" and the benefits of implementing RFID systems in it. As RFID system cost decreases and standards become clearer it is predicted that RFID tags will gain widespread acceptance in all types of supply chains. Suppliers and manufacturers should look at the mandates from retailers and government agencies as a business opportunity to improve the visibility, security and efficiency of their own business processes and to take control of their supply chain.

Rohm and Milne state "business strategy involving the Internet must be developed in concert with existing business practices, structures, and channel relationships" (2003: 480). Because RFID is an Internet-based technology the biggest benefits of RFID implementation will come from solutions across the entire supply chain. But it is difficult to implement because of the disputes regarding sharing the cost and benefits between manufacturers, logistics providers, distributors and retailers. The proliferation of tag use also raises serious concerns regarding privacy issues. Moreover, successful RFID implementation will require a change in culture, process, and technology within and across organizations.

One of the major problems associated with the literature on RFID is the lack of empirical examples of RFID in the closed-loop supply chain. Currently, the only examples we have been able to identify that describe a closed-loop application and provide performance metrics have been for reusable assets. This lack of empirical examples is a limitation of this article.

Due to the infancy of both RFID and closed-loop supply chains, research is needed to identify best practices and applications that integrate RFID and closed-loop supply chains. Research is particularly needed for value recovery options that require disassembly due to the greater long-term benefits these options have for organizations.

For practitioners, the implications of this article are that initial RFID projects should focus on internal closed-loop supply chains for reusable assets. Reusable assets have a high level of controllability and low levels of product complexity and return volatility. For other value recovery options, the focus should be on items with low levels of product complexity and return volatility, and a high marginal value of time. The organizational learning from these early projects can then be expanded to products with increasing complexity and return volatility. Those firms deploying closed-loop supply chains will assume a leadership role in sustainable operations, which can then be leveraged for competitive advantage.

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John K. Visich

Assistant Professor of Management

Bryant University

Suhong Li

Assistant Professor of Computer Information Systems

Bryant University

Basheer M. Khumawala