Antecedents and Consequences of RFID Adoption in Logistics Systems: An Integrated Model

www.ijape.org International Journal of Automation and Power Engineering (IJAPE) Volume 2 Issue 4, May 2013

Antecedents and Consequences of RFID Adoption in Logistics Systems: An Integrated Model Hongxia Peng*1, 2, Xianhao Xu1, Yuchuan Zhang2 1. School of Management, Huazhong University of Science and Technology, Wuhan, China; 2. School of Business, Hubei University, Wuhan, China phx@hubu.edu.cn

1

Abstract

operation efficiency improvement, increase in sales revenue, decrease in the bullwhip effect and integration of the supply chain. However, as the costs may overweigh the profits for RFID adoption, or other factors impede the adoption decision, most firms are reluctant to embrace RFID(Kim et al. 2010) and RFID penetration rate in the logistics systems is still moderate. To examine the antecedents and consequences of RFID adoption in the logistics systems, the paper reviews the previous literature and constructs an integrated model with a systematic view.

RFID is such a promising technology of the Internet of Things that many business firms and public sectors plan to adopt or have adopted RFID in their logistic systems. The paper reviews the literature and constructs an integrated model to investigate the antecedents and consequences of RFID adoption in logistics systems. The antecedents of RFID adoption include technological, organizational and environmental factors, and the consequences comprise positive performance and negative concerns. The study provides a comprehensive understanding of RFID adoption both for the RFID researchers and the potential RFID adopters.

Literature Review

Keywords

RFID adoption has aroused public concern since 2003 when Walmart and United States Department of Defense announced respectively a mandate for its suppliers. According to the bibliometric analyses by Ngai et al(Ngai et al. 2008). and Liao et al. (Liao et al.

2011), RFID research gradually tends the focus from the technological issues at the beginning to practical application in organizations in the latest decade. Zhu et al.(Zhu et al. 2012) provides an overview of the current state of RFID applications in the logistics activities of different industries such as consumer packaged goods retailing, smart shelf operations, apparel retailing, food and restaurant industry, health care industry, logistics industry and libraries. For both the theoretical and practical purpose, the influential factors, i.e., antecedents of RFID adoption, and RFID impacts, i.e., consequences of RFID adoption are well examined especially with empirical methods in the recent 5 years.

RFID Adoption; Antecedents; Consequences

Introduction Logistics is the third profit source of firms.

Competitive advantages of modern firms mostly originate from logistics and supply chain management, where information technology plays an important role in the operations management. With the concept of the Internet of Things, RFID has drawn much attention from the logistics professions. RFID (Radio Frequency Identification) is a non‐contact, automatic identification technology. A RFID system is composed of an electronic tag or transponder where information is stored, a reader who can read or write information in the tag, and an application software system which can process information from the reader. RFID is also called e‐tags. In 2011, 2.88 billion tags are estimated to be sold and the value of the global RFID market would be $5.84 billion(Harrop et al. 2012). By implementing RFID in the logistics systems, objects can be identified and traced automatically during the manufacturing, warehousing, shipping and retailing processes, which would result in labor saving, inventory cost reduction,

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Antecedents of RFID Adoption in the Logistics Systems As an innovative information technology, RFID adoption research extends the theories of information

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framework became the most popular model of RFID adoption. The TAM model (Technology Acceptance Model)(Venkatesh et al. 2000), Technology Push and Need Pull concept (TP/NP), Innovation Diffusion Theory (IDT) and interorganizational information systems view (IOS) are also introduced to RFID adoption research. In these theoretical bases, conceptual models and hypotheses are proposed, and antecedents of RFID adoption in the logistics systems are verified by empirical data. The proved antecedents are listed in Table 1.

system adoption and innovation diffusion using empirical methods such as regression analysis and structural equation modeling. The Technology‐ Organization‐Environment (TOE) framework, which was put forward by Tornatzky and Fleischer(Tornatzky et al. 1990) and verified in open systems(Chau et al. 1997), EDI(Kuan et al. 2001), e‐ business(Zhu et al. 2006) and the Internet adoption(Xu et al. 2004), was first introduced by Brown and Russell(Brown et al. 2007) to RFID adoption in their exploratory investigation based on the interviews with 6 retailers in South Africa. Since then, the TOE

TABLE 1. ANTECEDENTS OF RFID ADOPTION

Study

Theory

Antecedents*

(Chang et al. 2008)

TOE

Complexity, cost, mutual standard, integration of supply chain strategy, pressure of transaction partners, degree of competition in the marketplace, supplier’s industry environment

(Schmitt 2009)

TOE

Compatibility, costs, top management support, presence of a champion, external pressure

et

al.

(Lin et al. 2009)

TOE

(Wen et al. 2009)

TOE

(Jang 2010)

TOE

(Wang et al. 2010)

TOE

(Park et al. 2011)

TOE

(Fazel et al. 2011)

TOE

(Thiesse 2011)

TOE

et

al.

(Wu et al. 2011)

TOE

(Chong et al. 2012)

TOE

(Chao et al. 2009) (Cheng et al. 2011) (Lee et al. 2007)

TAM TAM TP/NP

(Shih et al. 2008)

TP/NP

(Tsai et al. 2010)

IDT

(Tsai et al. 2012)

IOS

(Bendoly 2007)

et

al.

‐

Explicitness of technology, accumulation of technology, encouragement for innovation, quality of human resource, governmental support, environmental uncertainty Technology factors, organizational factors, environment factors, product factors Perceived benifits, standardization, top management support, IT knowledge capability, environmental uncertainty, competitive pressure, inter‐organizational cooperation Complexity, compatibility, firm size, competitive pressure, trading partner power, information intensity Technology competence, technology compatibility, top management support, RFID related cost, competitive pressure, government support Perceived benifit, complexity, compatibility, financial capability, management support, IT experiences, organization size, technical know‐how, inter‐organizational readiness, competitive pressure, external support, change agents, certainty Costs, top management support, supply chain benefits, supply chain forces Technology complexity, technology maturity, top management support, trading partner power, trading partner readiness complexity, cost, security, top management support, technological knowledge, organzition size, competitive pressure, expectation of market trends Security, subjective norms, perceived ease of use, perceived usefulness Subjective norms, perceived ease of use, perceived usefulness Technology push, need pull, presence of champions, organizational readiness Operation efficiency, manufacturing efficiency, supply chain efficiency, organization context, investment cost, market environment, technology characteristic Relative advantages, complexity, supply chain integration, organizational readiness social support, power structure, organizational readiness, procedural flexibility, top management support Cross‐functional knowledge, procedural flexibility, effective information‐processing standards

(Kim et al. 2010)

‐

(White et al. 2008) (Leimeister et al.

2009) (Keating et al.

2010) (Kros et al. 2011) (Reyes et al. 2012)

‐

Ubiquity, performance gaps, perceived benefits, cost savings, financial resources, technological knowledge Customer mandate

‐

Perceived potentials of RFID, RFID experience, company size, cultural differences

‐

Cost

‐ ‐

Satisfaction with technologies, technology optimism, technology innovativeness, hostage position Internal drivers, cost, lack of understanding, technical issues

(Matta et al. 2012)

‐

Top management support, external pressure, organziational size

* Only the supported antecedents are retained.

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Consequences of RFID Adoption in the Logistics Systems

Table 1 shows that on one hand, besides the different expressions of the same constructs, researchers get different results using the same TOE framework. For example, accumulation of technology(Lin et al. 2009) is the same construct with IT knowledge capacity(Jang 2010) and IT experience(Fazel et al. 2011). Technology complexity, compatibility, organization size, IT capacity and environmental uncertainty was both proved and disproved by more than two studies. On the other hand, different theory bases come to similar antecedents. For example, perceived benefit(Jang 2010) (Fazel et al. 2011) is similar to relative advantage(Tsai et al. 2010), perceived usefulness(Chao et al. 2009) (Cheng et al. 2011) and perceived potentials(Leimeister et al. 2009). By merging the similar constructs, the antecedents of RFID adoption can be integrated into the TOE framework as three dimensions, namely, technological context mainly including complexity, compatibility, perceived benefit, cost and technology maturity, organizational context mainly including organization size, top management support, IT competence, performance gap and financial resources, and environmental context mainly including government support, supply chain pressure, competition pressure, supply chain integration, environmental uncertainty and RFID supplier’s support.

Literature pertaining to the consequences of RFID adoption has two streams. One focuses on the quantitative evaluation of economic impact of RFID in a particular firm or supply chain with the methods of case study, analytic modeling and simulation.

Consequences of RFID adoption are measured by both direct financial indicators such as return on investment(ROI) (de Souza et al. 2011; Doerr et al.

2006; Ferrer et al. 2011) and net present value(NPV) (Ustundag et al. 2010), and indirect financial indicators such as the improvement in cycle time, lead time(Bendavid et al. 2009; Fosso Wamba et al. 2008), inventory turnover and inventory level(Wang et al.

2011). Visich et al.(Visich et al. 2009) reviews the existing quantitative empirical evidence of RFID on supply chain performance and classifies the RFID consequences into automational effects on operational processes (indicated by labor cost, shipping efficiency, receiving efficiency, inventory control, inventory cost, throughput), informational effects on managerial processes (indicated by container utilization, responsiveness and waste reduction), and transformational effects on process redesign.

TABLE 2. CONSEQUENCES OF RFID ADOPTION Consequences Study Mediators (Tsai et al. 2012) (Kros et al. 2011) (Reyes et al. 2012)

(Chang 2011) (Park et al. 2011) (Lim et al. 2009)

‐ ‐ Benefits: patient care, productivity, security and safety, asset management, communication Inventory ratio, sales efficiency ‐ Managerial risk, process fit, data fit, system fit

(Lin et al. 2009) ‐ (Zelbst et al. 2010) (Zelbst et al. 2011) (Zelbst et al. 2012) (Hazen et al. 2012)

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Supply chain information sharing Organizational agility, operational performance Efficiency outcomes, effectiveness outcomes, supply chain performance Buyer‐supplier relationship as a moderator

Dependent variables Operational performance: relative advantage, operational gains, competitiveness, tracking capabilities Logistics performance: fill rate, cycle time consistency, cycle time length , on‐time delivery, ability to customize service Performance: cost performance, quality performance, financial performance Financial performance: profit change Organizational performance: learning & growth, internal process, customer, finance Business performance: reduced inventory, reduced cycle time, improved resource utilization, improved process quality, improved service Financial performance: profit, revenue growth, cost per order, return on assets; Non‐financial performance: order fill rates, order cycle time, delivery time, customer requirements met, number of faults, flexibility Supply chain performance: zero‐defect products, value‐added services, order accuracy, responsiveness, flexibility, cost control, inventory control Logistic performance: customer satisfaction, delivery dependability, responsiveness, delivery flexibility, order fill capacity Organizational performance: average return on investment, average profit, profit growth, average return on sales Efficiency, effectiveness, resiliency

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The other stream of literature focuses on the causal relationship between RFID adoption and supply chain performance with survey‐based description statistics, multiple regression analysis and structural equation modeling, where non‐financial outcomes are also stressed. Compared to the quantitative evaluation of RFID performance in particular organization, empirical research based on statistical data from large sample of organizations adopted RFID reveals the universal and comprehensive consequences of RFID adoption, as well as how RFID adoption exerts the influence on the supply chain is shown. The studies are listed in Table 2.

1997), employee fears and customers’ private concerns(Bunduchi et al. 2011), are still yet to be examined by empirical researchers.

The performance consequeces in the post‐adoption stage are actual outcomes of RFID adoption. They are different constructs from the expected performance of RFID, which is expressed as perceived benefits, supply chain integration or relative advantages in the pre‐ adoption stage. As shown in Table 2, empirical literature on the consequeces of RFID adoption is more fresh than the antecedents research, due to the short history of RFID applications. With the data collected from the top managers by their experience and the comparision with other firms in the same industry, both financial and non‐financial performance of the organiztion and the supply chain are investigated.

Though the findings provide a comprehensive understanding toward the RFID performance, some positive or negative consequences of RFID adoption, e.g., increase of customer order(Ustundag et al. 2010), competitive advantage(Cannon et al. 2008; Powell et al.

In the integrated model shown in Fig. 1, antecedents are at the left side of the RFID adoption, and consequences are at the right side. The arrows indicate the causal or formative relationship between the variables. The antecedents includes technological, organizational and environmental factors following the TOE framework. Most factors in Table 1 are summarized in the left side of our model. Moreover, the TOE framenwork is modified to indicate the relationships within the TOE dimensions. For example, technology maturity integates technology standard and security. Technology complexity and maturity are the determinants of perceived cost, whereas technology compatibility and maturity are the determinants of perceived benefit (or relative advanteges of RFID technology). From the technological dimension, perceived cost and perceived benefit are direct antecedents of RFID adoption. From

Complexity

The Integrated Model The previous literature usually separates the antecedents and consequences of RFID adoption in different models, and pays less attention to the internal relationship among the antecedents or consequences themselves. We propose an integrated conceptual model for a comprehensive understanding of RFID adoption in logistics systems, as shown in Fig. 1.

Operational performance Perceived cost

Compatibility Perceived benefit

Maturity Financial resources

Automation

Performance gap

RFID Adoption

IT competence Top mgt support

Information sharing

-efficiency -accurancy -logistics capability -supply chain integration

Financial performance - cost savings - return on investment - profit

Organization readiness

Firm size SC pressure Government support

Competitive advantege External pressure Employee fears External support

Competition pressure

Customers private concerns

RFID supplier’s support

FIG. 1 THE INTEGRATED MODEL OF RFID ADOPTION

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the organizational dimesion, organizational readiness is influenced by financial resouces, IT competence and top management support, and firm size has a moderating effect on financial resouces and IT competence. At the right side of the integrated model, nagetive consequences of RFID adoption including employee fears and customers private concerns are involved. As to the positive consequences, operational performance is measured by the subdimensions of efficiency, accurancy, logistics capability and supply chain integration, is mediated by automation and information sharing, and has a positive effect on both financial performance and competitive advanteges.

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Conclusions

benefits and costs associated with process innovation:

The paper puts forward an integrated model for antecedents and consequences of RFID adoption based on literature survey. The contributions of the integrated model are threefold. Firstly, the antecedents and consequences are put in the same model to show the reasons and outcomes of RFID adoption in the fims that have already adopted RFID in their logistics systems. It provides more powerful explanations for the reasons and outcomes of actual RFID adoption than the RFID adoption intention models where RFID perceptions and expected performance of the non‐ adopters are also measured. Secondly, our model propose the reasonable relationships within the antecedents and consequences. It makes clear not only “what” but also “how” variables are related to RFID adoption. Last but not the least, negative outcomes of RFID adoption are also proposed in the model. It can be concludes that the integrated model helps a comprehensive understanding of RFID adoption in logistics systems for both practitioners and researchers.

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ACKNOWLEDGMENT

Chau, P.Y.K., and Tam, K.Y. ʺFactors affecting the adoption

The work was partially supported by grants from the National Natural Science Foundation of China (71131004 & 71201050), the Humanities and Social Sciences Foundation of the Ministry of Education (12YJC630149) and the Hubei Provincial Department of Education (2011jytq011).

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