Enhancing ERP System with RFID:

Logistic Process Integration and Exception Handling

Dickson K.W. Chiu1,4, Kai-Pan Mark2,5, Eleanna Kafeza3 and Tat-Pui Wong4

1 Dickson Computer Systems, 7 Victory Avenue, Homantin, Hong Kong

2 Department of Information Systems, City University of Hong Kong, Hong Kong

3 Department of Marketing & Communications, Athens University of Economics & Business, Greece

4 Department of Computing, The Hong Kong Polytechnic University, Hong Kong

5 Department of Information Engineering, Chinese University of Hong Kong, Hong Kong

Abstract

Various contemporary information and communication technologies (ICT) have revolutionized the global computing environment. This impacts most companies, especially traditional stand-alone ERP systems are inadequate to handle the current requirements of logistics applications. In this paper, we study the integration of RFID and mobile technologies with Web-enabled applications to an existing in-house ERP system. This enables management to utilize accurate information for analyzing their business performance and then perform any other further decisions quickly. Benefits include retrieving information more easily, reducing order processing and delivery time, increasing sales performance, enhancing communication with customer, and improving data accuracy for in-house ERP System. In particular, we illustrate how this infrastructure can help the integration of logistic processes and the handling of exceptions in key business processes. We further evaluate our approach with respect to the requirements of key system stakeholders.

Key words: Information integration, process management, mobile technologies

Introduction

The Internet has become a global and common platform for every organization and individual. Organizations have lots of opportunities and benefits when they fully utilize the Internet such as introducing their company, products, services, and supporting on-line transactions and data processing. Traditional ERP systems, therefore, are insufficient to integrate different stakeholders such as customers, suppliers, and other business parties, especially when they are out of the company premises (Li & Peng, 2005). In this case study, one of the authors is an IT Supervisor for the Hong Kong telecommunication service company being studied. We found that typical computer infrastructures of web-enabled systems need to be enhanced to fit the recent logistic business environment and increase the competition power at a timely manner. Otherwise, this leads to lowered productivity, competitiveness, and revenue.

This paper studies the requirements, design, implementation, and advantages of enhancing an in-house ERP system with Web-enabled applications, mobile, and Radio Frequency Identification (RFID) technology. With such integration of disparate business functions and data, we focus on how the key business processes concerning logistics can be improved through effective automation support for exception handling.

Web-enabled system (Dahanayake & Gerhardt, 2003) is a technology that allows staff, partners, and outsiders to connect to the back-end system through the Internet. Using a Web-enabled system, staff can connect to the in-house ERP system through a Web browser and perform any actions similar to using a thick client. Based on this, we further enhance the support of mobile technologies (Chiu, Cheung, Leung, et al., 2010; Chiu, Cheung, Kafeza, & Leung, 2003), i.e., various types of mobile clients, such as mobile phone, PDA, notebooks, to connect to the back-end system. This enables roaming users (e.g., sales and management), who need to work outdoors, to access the in-house ERP system through the Web server anytime and anywhere to support their business need. RFID (Rosenberg & Garfinkel, 2005) is a technology that uses radio waves to automatically identify objects. A microchip is used to store the stock information, and the stock information can be transferred using radio-frequency waves automatically. RFID supports anti-counterfeiting and is being applied to supply chain management with mobile technology. Using RFID, warehouse staff can manage stocks more efficiently(Meng, Chiu, Kafeza, Wenyin, & Li, 2010) .

We share our experience in integrating the above technologies to an existing ERP system to facilitate the exception handling in various logistic processes, which is inadequately studied before. The remainder of this paper is organized as follows. First we introduce the background and related work. Then we highlight an overview of the requirements for the logistic process integration. Next, we describe our system design and implementation, followed by a tabulation of the key exception handling scenarios for the logistic processes. Finally, we discuss the advantages of our approach with respect to different stakeholders before concluding our paper with future work.

Background and Related Work

The company being studied mainly focuses on telecommunication business (such as PABX, Keyline, data communication, and voice systems) in Hong Kong. Owing to its business nature, the delivery process must be smooth in order not to affect other service parties to perform their jobs (e.g., Installation Team, Training Team). According to the existing system infrastructure, some of the systems need to be upgraded or enhanced. Basically, the ERP System had been running for over 8 years with just some new business operational features and some bug fixes. There was no integration to other system or employment of new technologies. Based on the system functionalities and constraints, the existing system could only fulfill basic internal usage but not the external ones. The users often complained that they could not obtain the information from outside. Meanwhile, most of the competitors have developed Web-enabled system and can support mobile devices. To increase the productivity and competitiveness, it is necessary to develop a Web-enabled system that supports mobile devices in addition to desktop devices, as well as enhanced exception feature (Chiu, Cheung, Till, Narupiyakul, & Hung, 2010). To enhance the warehouse operation (e.g., to avoid mis-packing or mis-delivery, improve stock keeping and the update interval for delivery status, etc.), it is necessary to have a system to verify every delivered item. A RFID system can perform this kind of checking effectively (Meng et al., 2010).

Information Technology has a significant impact on every sector. RFID and ERP cause tremendous impact on the transportation and logistics industries (Gunasekaran, Ngai, & McGaughey, 2006). Several research papers on integrating ERP systems with RFID have been published. Attaran (2007) explored RFID’s capabilities in the industries and evaluated the success factors on RFID integration. He further pointed out that RFID is not only a technical issue but in fact it changes the whole business process. Chow et. al. (2007) proposed a model to integrate RFID and web-based applications to optimize information flow in supply chain parties. Cochran et. al. (2007) mentioned that the most threatening incident is the re-use or re-transfer of information to third parties rather than the initial disclosure which implies that the systems need privacy protection mechanisms.

There are many successful cases of building a Web-enabled system for different purposes. CJ-GLS, a Korean-based Third Party Logistic Operator, successfully gains competitive advantages by deploying RFID technology in electronic logistics business (2008). Similar RFID case studies on Shanghai Port are presented by Wang et. al. (2006) as well. Enhancing a Web-enabled system with support for mobile devices, users can communicate with the internal ERP system at anytime and anywhere. The security of RFID is becoming a concern of technologists. A recent report indicates that it would be possible to introduce RFID virus. RFID systems are subject to sniffing, spoofing, tracking and denial of service attack like an ordinary computer system (Sparkes, 2006). At the meantime, security issue will then be introduced because managing secure interactions over the Internet is an important issue. One method of protecting the Web system is to build a Demilitarized Zone (DMZ) (Shimonski, 2003) and place the Web server inside it. Typically, a DMZ is used for connecting servers that need to be accessible from the outside world, such as e-mail server, domain-name servers (DNS), Web servers, other Web services, etc. The Web server must have the ability to encrypt the data transferred in the public network so that the data can be protected against eavesdropping.

For supporting mobile users, a key issue is that they must have a Web server that can be contacted by mobile devices such as mobile phones and PDA. Such devices must have the ability to connect via mobile networks (e.g., GSM) to the Internet (Küpper, 2005). The most common way to connect to the Internet is to subscribe some add-on services from a GSM network provider such as GPRS, WAP, etc. When a mobile device is connected to a service subscriber, the GSM system can then authenticate and validate the user’s identity and then assign the user with an IP address for using GPRS. The mobile device can then use this IP address to access the Web server through the GPRS Internet tunnel. Another import issue for serving the mobile user is that the mobile interface must be light-weight because the mobile devices have limited computing power and screen size. Therefore, there is a need to develop a different Graphical User Interface (GUI) to serve mobile users. For example, Ngai et. al. (2007) presents a practical implementation of such web-enabled mobile logistics management system with RFID support that has successfully improved container port operations.

For technical principles and details on how RFID works, we skip this in this paper as there have been many papers and textbooks discussing such details. For example, Hassan and Chatterjee (Hassan & Chatterjee, 2006) propose and evaluate taxonomy of various RFID systems currently available for the understanding of this technology, the factors for implementation of a successful RFID system, its strengths and weaknesses, as well as scalability options. Viehland and Wong (2007) identify the most important and unsolved issues that will determine the future of RFID, with a review of the RFID business-oriented literature. Rosenberg and Garfinkel (2005) introduce RFID applications as well as their security and privacy issues in their book. Poirier and McCollum (2006) further detail some RFID strategic implementation and basic adoption strategies in their book. RFID implementation in Taiwan has been deployed in diverse areas including security, asset management, access control, logistics, and pharmaceuticals (Chang & Yen, 2008). In particular, the high price of most stock items related to telecommunication in our case study justifies the cost of employing RFID (Meng et al., 2010).

Lefebvre et al. (2005) present a pilot study in the context of warehousing activities in one specific supply chain in the retail industry. Results indicate that RFID appears to be a disruptive technology as it supports a new business model, entails major redesign of existing processes and fosters a higher level of electronic integration among supply chain members. They further attempt to track key performance indicators in order to assess the impacts of RFID technology in a five layer supply chain in the utility sector, with the focus of inter-company connectivity and relationship management (Bendavid, Lefebvre, Lefebvre, & Wamba, 2007).

However, the focus of this paper is an in-depth study on the integration of ERP systems with RFID technology. We have based on some successful cases as an example. One of the successful stories of using RFID is Wal-Mart Stores (Roussos, 2006). Wal-Mart uses RFID tags to the automatic tracking of pallets and cases of goods. The RFID tags contain a chip that is imparted with information and can also be used in the manufacturing process, which helps suppliers to become more efficient. Holmqvist and Stefansson (2006) discuss the feasibility of a mobile RFID solution in the automotive business-to-business of Volvo from the perspectives of operational reliability, usability, and productivity. We also have successful experiences in utilizing RFID technologies for tracking expensive equipments for the telecom industry (Meng et al., 2010). Most studies have been performed in the context of large enterprises but not on small-and-medium enterprises (SME) as we did.

In summary, there have been many successful cases in using all these technologies (Angeles, 2005). Implementation of business rules that handle new exceptions, especially to deal with the extra volume of data generated from the use of RFID, remains an important point of research(Niederman, Mathieu, Morley, & Kwon, 2007). However, there have not been any studies explicitly in integrating all of these technologies for exception handling of logistic process integration.

Requirements Overview

Figure 1. Stakeholders of ERP System with RFID

After interviewing with some of the key users, we arrived at the requirements for a new system using Web-enabled technology, RFID technology for the process and information integration. Different stakeholders can connect to the system through the Internet from different locations and devices. Figure 1 summarized the stakeholders of the system. Their roles and requirements are as follows.

For Internal Staff

Internal General Staff – They are located in the office and perform general business operation tasks in the intra-net, e.g., create quotations, contracts, invoices, service orders, work orders, maintenance agreements, etc. The mobile enhancement and RFID integration can better support their information needs.

Warehouse Staff – They need an efficient system to check in, check out, validate, verify, and locate the stock. Also, they need to provide updated stock status reports to the management. When they check out stock items, they need to use the RFID Reader/Scanner to scan the RFID tag based on the order. After scanning, the items will be flagged as reserved status and are ready for delivery.

Management – They are the decision makers of this project and responsible for budgeting and forecasting. They need to decide and approve who can use the Web-enabled system and what features can be released. They need various up-to-date reports for analysis and actions as well.

IT Staff – They need to handle all the development activities of the project, including the design of the system workflows, functions, logics, and exception handling. Also, they need to evaluate different vendors’ solutions and select the best ones to integrate to the existing ERP system. They also handle all technical activities such as testing, documentations, sys-tem support, further system enhancements, and debugging.

For Mobile Staff

Salespersons – They need to retrieve the information of product items such as item description and price through the Web-enabled system, sometimes outside the office. They also need to create and update quotations and send them to their customers immediately in an electronic form.
External Warehouse Staff – They need to communicate with the ERP system outside the office and warehouse to update the delivery status. When they reach the destination, they need to use RFID readers to scan the RFID tags based on the order. After scanning, the item status will be updated as delivered. They then can use their PDA to update the order delivery status immediately. So, there is no need to wait until the truck is back to the warehouse and then update the order delivery status manually.

Roaming Management Staff (e.g., Financial Officer) – They need to connect to the ERP system when they are out of town in order to access the management reports immediately through the Web-enabled system by themselves.

Roaming General Staff – Some staff working at home can use their PCs to connect to the Web-enabled system. For example, some staff may need to work outside office hours for urgent tasks or separate because of unpredictable events such as sickness, weather, or accidents.

System Design and Implementation

In this section, our system design and implementation issues are discussed. The technical details on RFID process conceptual model, system architecture and integration architecture are being explained, followed by the business process issues on workflow enhancement with RFID and process integration with an example. The last section gives an emphasis on security issue, which is a challenge in system design and must be handled with extra care.

System Overview

There are two user categories based on the different requirements of different stakeholders: the mobile user group and the normal user group. A user is classified as a mobile user or normal user based on the process flow of the Web-enabled system. The mobile users and normal users are presented with different front-end programs of different Graphical User Interfaces (GUIs) that are designed for different devices. The purpose of having different GUIs is that appropriate GUI components enhance the usability of e-Commerce applications (Chiu et al., 2003; Zou, Zhang, & Zhao, 2007).

After presenting users with different GUIs according to device type, users then can select different modules that they have the privilege to access. For example, staff member of different sales teams are granted permission to access their own product module. Another example is that accounting staff can access the account, contract and inventory modules.