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How deeply a company wants to communicate with its suppliers and even with its customers is at the heart of the debate over increased transparency in supply chain management and is clearly impacted by the innovation of radio frequency identification tags (RFID). The means of data sharing should correspond with the amount of data shared. In some cases where there is not a good match, there will be problems.

At present, most distribution software which electronically determines when inventories are low and automatically trigger orders to the manufacturer, is based on bar code reading, which may take place at the warehouse level, or even at individual stores as products are passed across the scanner for ringing up prices. Bar codes are an effective mechanism for this process, but they also have limitations. For example, they are limited by line-of-sight. The scanner cant read a bar code that is turned away from it. In addition, if the bar code is obscured because it has been ripped, smudged, or otherwise damaged, it becomes impossible to read.

One of the proposals to boost efficiency is to replace bar codes with RFID, a tag that works via low frequency radio signals delivered from a microchip with a coiled antenna. The tag can be embedded inside packaging material or in some cases within the product itself. The radio signal is triggered by a reader that only has to be within low level radio frequency range, not within line-of-sight. The reader transmits relevant information back to a computer which uses it to store product information or track shipments.. RFID is not a new technology. It has been around for the last 60+ years, buhas been too expensive to use until recently.

The beauty, and the difficulty, with using RFID tags in product distribution, is that they are capable of containing and transmitting a great deal more information than a simple bar code. Because the tag contains a microchip, it has substantial information storage capabilities. Some microchips that are currently manufactured, for example, are able to give each individual product, i.e., hairbrush, can of orange juice, or bag of potato chips, a separate and unique serial number.

While more information supplies greater flexibility in handling, inventorying, and processing products, it also makes them more susceptible to competition and even counterfeiting. In some parts of the world, businesses have used their link in the electronic supply chain to copy and steal from their clients.

Of course, that is a worst-case scenario. However, even in legitimate business, companies can acquire significant advantages from knowing not only what products their competitors have, and how many. It has been suggested that RFID provides a virtual window into the cost structures and innovation processes of a companys supplier, which could allow a business a strong edge if it decided to compete with its suppliers and begin producing a particular product in-house. Suppliers could be motivated to minimize, distort, or conceal RFID tag elements, in order to safeguard their products.

Managers who invest in supply chain infrastructures are generally seeking increased efficiency, decreased costs, and maximum return on investment. However, the very level of transparency that best promotes these attributes, may also undermine the business in some very fundamental ways.

In order to keep the supply chain functioning efficiently, but without providing unfair negotiating advantage to either side, software will have to contain tools for limiting the amount of information available, even while promoting the efficiency of information sharing.

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