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The impact of RFID on service organizations: a service profit chain perspective Jeffery S. Smith
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Florida State University, Tallahassee, Florida, USA
Lorraine Lee University of North Carolina – Wilmington, Wilmington, North Carolina, USA, and
Mark Gleim Florida State University, Tallahassee, Florida, USA Abstract Purpose – The purpose of this paper is to examine the effect of radio frequency identification (RFID) implementation on service performance. Design/methodology/approach – This study utilizes a case study methodology to explain the impact of RFID on performance. The service profit chain is used as the overarching framework to facilitate the discussion. Qualitative methods in the form of in-depth interviews, observation, and participation are employed for the collection of data. Findings – The results in the paper indicate that RFID implementation has a significant impact on the consumer components (quality, value, satisfaction, and financials) of the service profit chain. The implementation also has an effect on the technical aspects of internal operations (internal quality and productivity) but is limited in how it affects the employee components (satisfaction, capability, and loyalty). Research limitations/implications – The paper denotes the potential impact on performance of RFID implementation through the utilization of a qualitative research approach, which limits the scope of the findings. Also, the focal organizations are non-profits, which can also hinder generalizability. Originality/value – This research is one of the first to empirically examine the way in which RFID implementation can affect operational and financial performance. In doing so, valuable insights are gained as to how RFID can be used to improve existing performance. Additionally, areas are identified that can be investigated to further benefit from the implementation. Keywords Organizational performance, Quality, Financial performance, Supply chain management, Radio frequencies, Identification Paper type Research paper
Introduction Radio frequency identification (RFID) is seeing increased interest of late as many organizations are investigating the possibility of implementing it in some variety. Most notably, the technology has been identified for the potential to increase the visibility of materials in the context of supply chain management (Angeles, 2005). The increase is also evidenced by the growing revenues and subsequent projections associated with the technology. Namely, Gartner Research reported that RFID revenues now exceed $900 million with expectations of increases to $1.2 billion for 2008 and $3.5 billion for 2012. These projections are even more optimistic in the eyes of the European research
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firm IDTechEx who reported that the market could increase to up to $25 billion by 2017. Some potential impacts of RFID adoption have been noted by A.T. Kearney who found that retailers alone could benefit in the form of a 5 percent cash savings due to reduced inventory, an annual benefit of a 7.5 percent reduction in store and warehouse labor expenses, and an approximate reduction in out-of-stock items of $700,000 per $1 billion in sales. These benefits are the primary reasons why Wal-Mart and the Department of Defense are both requiring suppliers to be RFID-capable in order to track shipments at the pallet level (Asif and Mandviwalla, 2005). Implementations are also spanning into the global community as Tesco in England and Metro in Germany are also devoting significant resources to RFID programs. In accordance, the majority of the research on RFID has focused on the impact of implementation as it affects materials management and the associated impact on ¨ zer, 2007). The focus on organizational costs (e.g. Ko¨k and Shang, 2007; Lee and O enhancing efficiency, a back-office orientation, has resulted in many “slap and ship” applications where the organizations involved are seeking to improve material tracking capabilities to have products in the right place at the right time (Gaukler et al., 2007). An area that has seen considerably less research is the impact that RFID implementation can have on front office interactions (i.e. those that focus on customer interactions). Examples of the applications include using the technology in gas pumps and tollbooths to increase the speed of processing customers in the delivery process. Beyond the lack of research on front office applications, no research has been identified that investigates the impact of implementation on performance as it pertains to the revenue side of the profitability equation. This research seeks to fill this void by examining how RFID can impact organizational performance in the front office. Specifically, the purpose of this study is to outline how implementation can impact organizational performance in terms of the interaction between the service provider and the organization’s customers. To facilitate the investigation, the well-known service profit chain (Heskett et al., 1994, 1997) is used as the conceptual framework through which the impact is outlined. Additionally, two empirical case examples are highlighted to demonstrate the validity of the performance impact. Literature review The utilization of new technologies in service organizations has been shown to have a significant effect on both operational and organizational performance. In reviewing the literature on technology utilization, it can be seen that the performance implications are tied to the strategic intent of the implementation. By that, the goal could be to enhance either efficiency or effectiveness (Sandstrom et al., 2008). On the efficiency front, technologies have been used to increase the role of the customer in the form of self-service technologies (Meuter et al., 2000). Additionally, they have been used to reduce the need for transactions at physical locations via web-enabled activities (Zinkhan, 2002) or to find ways to more effectively match the organization’s resources to the needs of customers in the form of revenue management systems (Kimes, 1989). The performance effects that result from an efficiency focus are lower transaction costs, higher employee productivity, and increased encounter consistency (a quality dimension), which can all result in enhanced financial performance. In contrast, an organization can opt to focus on improving effectiveness in the form of using technology to enrich the relationship with its customer base. This focus can take
the form of using technology to track customers’ tastes and habits via customer relationship management systems (Rigby, 2004) or employing it in order to provide a higher degree of customization of the experience (Murthi and Sarkar, 2003). The performance benefit that can result is more customer-centric in that it is hoped customers will perceive a higher value proposition from which financial performance will ensue. As can be seen, the use of technology in the provision of services can have a significant impact on organizational performance. A particularly interesting service sector where technology is being increasingly used is the retail industry. In this case, retailers are trying to simultaneously maximize both efficiency and effectiveness in order to address the heightened competition in this sector. Accordingly, retailers are actively trying to find methods to increase operating efficiency so as to free human capital to more effectively service customers. It is along this line that RFID can offer benefits in the service delivery system whereby certain tasks can be automated, or at least streamlined, which enables the organization to re-shape its offering to better serve customers. The emerging focus is interesting since RFID is by no means a new technology as it has been in existence since the 1940s. A main reason for the increased interest is that component costs (e.g. RFID tags and readers) are decreasing, while the potential business applications are expanding. Research, too, is increasing as to how RFID is being (or can be) used to enhance organizational performance. Most notably, research is being conducted as to how the technology can improve operational efficiencies through more effective materials management processes (e.g. Spekman and Sweeney, 2006; Attaran, 2007). Specifically, it has been posited that RFID utilization can result in reduced labor costs, smaller item inventories, and fewer out-of-stock conditions (Lee and O¨zer, 2007). For example, RFID has been used as a remedy to the problem retailers of the discrepancy between inventory records and the actual amount of a product available for order (Heese, 2007). Other works have also noted the impact in terms of records management (Faber, 2002), security (Kelly and Erickson, 2005), and even in the effective management of perishable goods (Ka¨rkka¨inen, 2003). It has been suggested that the objective of operations management research in the RFID context should be to help industry understand the process and methods by which ¨ zer, 2007). However, much of the recent academic benefits can be realized (Lee and O literature has focused on the benefits of RFID in supply chain management. For example, Dutta et al. (2007) identify three areas of RFID benefits: (1) Labor cost savings. (2) Reduction in inventory shrinkage. (3) Higher visibility of the supply chain. Whitaker et al. (2007) develop and validate a theoretical model for the business value of the technology in supply chains. At a more micro level of analysis, Delen et al. (2007) examine the benefits of RFID at a specific link in the supply chain – the link between a distribution center and a retail store. As can be seen, the majority of studies have focused on operations that typically occur in the back office of an organization (such as inter-organizational transactions) while highlighting the ways in which RFID can reduce costs through increased efficiency. It is our belief that the potential performance impact can also occur in the front-office interactions between a service provider and consumers. Research along this line is less frequent but has begun to appear in some form. For instance, Hsi and Fait (2005) outlined
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how the technology can enhance the museum experience, while Tzeng et al. (2008) denote the manner in which hospitals can improve the service through the utilization of RFID. Additionally, Lee et al. (2008) presented an alternate diffusion model that highlights how implementation can result in altered service offerings aimed at increasing customer-perceived value. It is from these customer-centric studies that this research posits a significant relationship between RFID implementation and enhanced organizational performance in terms of customer-perceived metrics. Theoretical framework To structure our analysis, the service profit chain (SPC from this point forward) is utilized as the overarching framework (Heskett et al., 1994, 1997). In this framework (see Figure 1) internal improvements (i.e. RFID implementation in this study) are posited to positively affect employees resulting in a more productive workforce capable of enhancing the quality of the service offering. This quality/offering improvement is expected to result in an increased value perceived by customers, which, in turn, leads to higher levels of satisfaction, long-term loyalty, and profitability. The SPC is an effective framework to structure the complex inter-relationships between employee perceptions, customer perceptions, and the associated organizational performance. Utilization of the service profit chain as an investigation framework is not uncommon, as it has been used as the method for exploring the performance of retail outlets (Pritchard and Silvestro, 2005), transportation service satisfaction (Anderson et al., 2004), and employee development initiatives (Goldstein, 2003). The SPC is underpinned by a concept that has been titled the “satisfaction mirror� (Schlesinger and Heskett, 1991). In effect, the mirror makes the assumption that employee satisfaction and loyalty translate directly into customer satisfaction and loyalty. Much of the prior research on this premise has supported the concept with results indicating a positive relationship (e.g. Schlesinger and Heskett, 1991; Schneider et al., 1998). It is has even been offered that this concept is the basis for the turnaround strategy employed by Sears (Rucci et al., 1998). However, not all prior research has been as supportive of the association. Namely, Silvestro and Cross (2000) and Silvestro (2002) have found negative associations between employee satisfaction and customer assessments. Research on the link between customer assessments and organizational performance has been much more consistent and conclusive. For instance, the marketing discipline has a long history of investigating the impact of customer
Figure 1. Service profit chain
perceptions on organizational performance. Studies along this line have generally found customer satisfaction and/or the perception of value has a significant impact on loyalty (e.g. Biong, 1993; Oliver, 1999; Macintosh, 2007). Additionally, financial performance has been shown to be impacted by either satisfaction or loyalty (e.g. Anderson et al., 1994; Hooley et al., 2005; Gupta and Zeithaml, 2006). These studies agree with the findings in prior studies that have used the SPC as an overarching framework (Silvestro and Cross, 2000; Silvestro, 2002). The aggregation of these studies present an interesting picture in that the proposed links of the SPC have value in specific contexts. An area that has seen much less emphasis is in how the SPC links can be altered based on changes in components of the service system. This study addresses this gap through the investigation of the impact of the implementation of a specific technology (RFID) on the SPC linkages. Therefore, we hypothesize that the implementation of a RFID system will have significant impacts on employees, the quality of the service offering, customer-perceived value, customer satisfaction, and customer loyalty. Methodology This study utilized a multiple case study methodology due to its applicability as a means for obtaining a richer understanding of the concepts under investigation (Eisenhardt, 1989; Meredith, 1998). It was decided that an in-depth, qualitative analysis would be of benefit due to the emerging nature of the topic under examination. Data was collected through naturalistic, qualitative fieldwork as described by Lincoln and Guba (1985). Emergent design was utilized as the researchers are able to build an understanding of the phenomena in situ. In accordance with emergent design, the researchers first observed and recorded the phenomenon in detail. The data were then examined as the researchers were able specify their understanding of it, and guidelines for further data collection were outlined to test the emerging understanding. This process, called the constant comparative method (Glaser and Strauss, 1967), continues until information provided by informants reaches a point of saturation and redundancy. The choice was also made to include more than one organization so as to extend the scope of the research beyond a single setting. The organizations selected for this research were an urban public library (City Library) and an organization responsible for coordinating an annual 10 km road running race (Road Race). These organizations were chosen because they have already implemented RFID systems and have had ample time since implementation whereby both employees and customers have become familiar with the technology. To accomplish the task set forth in the goal of this study, the researchers conducted multiple interviews across the constituents of each focal organization. Specifically, we interviewed representatives from the management team, general employees, and customers in order to explore the full impact of the technology implementation. Data were collected from 15 employees at the city library, as well as 20 customers. All subjects were interviewed at one of the main branches of City Library. The road race yielded interviews from five employees and volunteers and ten race participants with all interviews taking place at either the race site or at the organization’s headquarters. Each of the interviews was conducted in a conversational manner and lasted between 20 and 150 minutes. Each of the subjects was told that the interaction was part of a study interested in understanding RFID in their specific context and was assured anonymity
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prior to the start of the interview. Field notes were taken by two different researchers in order to capture interactions with informants to ensure that none of the valuable insights provided by the informants was lost. The interviews were conducted over a two-year investigation period (2005-2007) and included coverage of multiple organizations. Triangulation was also utilized to help increase the validity of our findings and to ensure accuracy among the researchers’ observations. We first used triangulations across media, which allowed for a comparison of field notes and statistics provided by the organizations of interest. We were able to assess the subjective statements made by the informants and see how well they aligned with the objective data provided by the organizations. In addition, triangulation across researchers was also utilized. Multiple researchers individually captured interviews and situations through field notes, which allowed for the minimization of discrepancies in recording factual information and greater recall by the researchers. Additionally, when utilizing the constant comparative method, the use of multiple researchers helps to ensure that the findings are complete and convergent. This was also important in analyzing the data as multiple researchers were used to ensure that the aggregated findings were representative of the information gathered. Findings Following the methodology outlined previously, the results from the two case examples are highlighted individually. A general summary of findings is then offered to denote similarities and differences in terms of how RFID implementation has affected the organizational performance of each service provider. Case 1: City library The library utilized in this analysis has implemented an RFID system to automate the checkout and check-in processes. Formerly, the library had to have multiple dedicated employees waiting for patrons to enter the check-out/check-in process in order to complete a transaction. The reactive nature of this process was deemed wasteful since employees were often doing nothing more than waiting for customers to request assistance. Since implementation, city library has re-deployed the workforce formerly responsible for manual book transactions to perform altered duties aimed at proactively servicing library patrons. In this case, the implementation of the technology is seen as a facilitating tool whereby the service delivery system could be redesigned to more effectively meet the needs of a changing customer base. In investigating the effect of RFID implementation on organizational performance, perspectives were garnered from city library managers, employees, and customers (patrons). From the management team’s perspective, the implementation has been viewed as a positive endeavor as it has enabled the organization to alter the delivery system supporting the strategic priority set by the library’s senior management and the board of directors. Senior management and the board have a vision for the future, which involves fundamental changes in the manner patrons interact with the library. An operational aspect of the change is a move to a model of multiple self-checkout stations scattered throughout the facility instead of one monolithic desk area at the entrance/exit. RFID technology provides the foundation for realizing that vision. The effect of RFID on library employees, however, has been more gradual as the technology is incorporated into the work processes of various different positions at
different rates. The customer-service clerks are the employees that experienced the first recognizable benefits of the technology accompanied by a new set of barriers. The RFID-based self-service enabled these employees to perform other tasks instead of waiting for patrons, fitting the mission set forth by the directors. However, issues have arisen whereby employees are sometimes overburdened with work when the technology experiences problems or in instances when patrons are in need of assistance, which effectively defeats the purpose of the re-design. In the discussions with the employees and managers, it was noted that employees, in general, are recognizing slight increases in task capabilities and are surprised at the enhanced productivity. In contrast, the effect on employee satisfaction, and loyalty, have been negligible. This can be traced to the aforementioned aspect that required tasks have been altered which bring a new set of challenges to bear, some of which have been received positively while others have been the source of contention. Beyond the employee aspects, most believe that internal operations have improved stemming from the increase in employee productivity and internal quality. This was specifically noted by one manager who stated that the implementation of an additional RFID station led to the reduction in a serious backlog of book processing. Additionally, it was stated that the placement and tracking of all library materials has improved which results in the ability to service patrons more efficiently and with fewer errors. From the customer perspective, it was universally noted that the RFID system is a positive system alteration, which has resulted in faster transactions and enhanced interactions with library staff. When this is coupled with the fact that the individual branches are now able to increase the ancillary services offered (e.g. community programs, outreach activities), the majority of patrons have stressed that they believe the overall value of the service has been greatly improved. The increased value has also resulted in many patrons noting that they are now more satisfied than before the system was in place. However, very few cited that these changes had any significant impact on their long-term loyalty, which runs contrary to the service profit chain framework. A final aspect that was discussed is the overall impact that the system can have/is having on the library’s financial situation. In this case, patrons agreed that the funding supplied to the organization needs to increase in order to support future initiatives aimed at enhancing the delivered service. In sum, the effect of system implementation on employees has resulted in a gradual acceptance and appreciation of the system, while the components perceived by customers have been mainly positive in nature. The exception noted was that loyalty might not be of consequence in this setting. The effects of the RFID system can be seen in the data provided in Table I, which provides annual statistics for the library from 2004 to 2006. The RFID project at the library began in fall of 2004. By the end of 2006, approximately 80 percent of the library’s collection had been tagged, with RFID-based self-service implemented at seven of the ten branch locations. Several points from Table I are noteworthy with respect to the service profit chain framework and the RFID-based self-checkout. As a non-profit, public organization, the revenue growth and profitability outcome variables are not directly applicable to this case, but a possible proxy for revenue growth and profitability is the receipts section that denotes the overall increase in funding sources has increase by 15 percent since system implementation. This is supported by the increase in total units of service (up by 8 percent) which is a measure of how much “service” the library is producing.
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Table I. Annual library statistics
2004
2005
2006
Percentage change (2004-2006)
Library use Total units of service Visitors to the library system New registered borrowers Total registered borrowers Total patron information requests In-house Phone/mail Holds placed Web site access In-house programming attendance Outreach programming attendance
13,090,508 1,895,893 17,228 236,435 1,544,623 921,814 622,809 135,208 628,558 23,953 4,936
13,884,129 1,896,034 18,627 229,627 1,680,144 991,280 688,864 140,182 795,759 28,135 7,099
14,168,812 1,874,498 19,231 234,214 1,613,551 952,096 661,455 132,740 1,234,476 31,067 9,794
8 21 12 21 4 3 6 22 96 30 98
Receipts Count appropriation ($) State aid ($) Miscellaneous ($) Designated funds ($) Total ($)
13,166,121 320,803 1,033,775 4,044,922 18,565,621
13,568,942 308,165 2,822,905 4,753,240 21,453,252
14,527,696 641,354 1,137,842 5,056,764 21,363,656
10 100 10 25 15
Case 2: Road race Road race is the entity responsible for operating a large regional 10K running event with the goals of increasing interest in cardiovascular exercise in the community and raising funds for public education on the importance of physical exercise. Here, RFID is being used as a timing and tracking mechanism whereby the organization can offer accurate timing of all participants. Prior to implementation, the race had to manually collect bar code strips from each runner and insert all the times into a database, which resulted in many times being approximates at best. Additionally, times were usually only available to the elite running group as the trackability of all participants was impossible with the bar code method. The new RFID method has enabled the organization to remove the human element from the timing process, while simultaneously expanding the present capabilities to offer official times to all participants (runners and walkers). The race director openly stated that the implementation of the RFID system, coupled with expanded web registration, has allowed road race to increase the number of registered participants from about 14,000 in 1996 to more than 45,000 in 2006. This is illustrated in Figure 2, which denotes the marked increase in participants. In keeping with a consistent methodological approach, interviews were conducted with the race director, race volunteers, and several participants who have patronized the event on multiple occasions. In examining how RFID implementation has affected performance in terms of the service profit chain framework, it was found that the utilization of the technology has not had a significant effect on employee satisfaction or loyalty. However, it has enabled a drastic increase in productivity in that employees are now capable of performing more tasks for participants while using fewer resources than was once required. The implementation has resulted in improvements in the service delivery system
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Figure 2. Road race participant figures
in the form of higher levels of internal quality where mistakes in the delivery process (i.e. service failures) have been reduced. The race director quickly attributed the increased service reliability to the utilization of the automated timing system. The combined increase in productivity and internal quality has led to customers (i.e. runners) perceiving enhanced offering quality from which greater value has stemmed when considering the service they now receive in comparison to what they used to obtain. Specifically, race participants noted that they are extremely happy with the way in which the race now flows and by the fact that they can now access their respective race times within a few hours of race completion. The interviewees were also quick to say that they are very loyal to this specific race as the overall quality and perceived value are head and shoulders above other race options of a similar ilk. The financial impact in this case example is driven by the number of participants in the race where more runners equates to higher revenues. With the RFID technology enabling the timing capacity of the race, road race’s director stated that the organization is performing better financially than it had at any point in the history of the event.
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Case summary When comparing the results obtained from the two distinct case examples, it can be seen that the performance impact of RFID implementation stems mainly from the way in which service offerings have been altered to increase the value perceived by customers. Even though some effect on employees was found, it was only consistent in terms of productivity while not really affecting employee satisfaction or loyalty. However, RFID implementation can be tied to enhanced internal improvements (quality and productivity), higher customer perceived value, slight increases in loyalty, and improved financial positions. These results are listed in Table II. Discussion and implications As noted, the majority of research pertaining to radio frequency identification has been focused on how it can be used to increase operational efficiency with the ultimate goal of reducing costs (e.g. Gaukler et al., 2007; Lee and O¨zer, 2007). In this research, we employ an alternate perspective where it is posited that RFID implementation can actually affect front-office performance. Specifically, it is believed that RFID can be used as a facilitator for reengineering the service offering and all associated processes to increase internal quality and productivity in order to enhance the overall value perceived by customers. Our beliefs were supported in the case examples in that the technology was used as a tool through which the value of the offering was perceived as being higher in the eyes of the customers. However, the service profit chain relationships did not all prove to be meaningful as the overall impact on organizational employees was not supported in our analysis. The findings presented in this research offer a series of implications for organizations considering the implementation of RFID with a specific focus on enhancing customer-facing processes. The first of these is that these findings are applicable in instances where the focus is on changing customer perceptions of the relevant aspects of the delivery system. This can be drastically different from the approach where the goal is to lower costs through efficiency improvements. However, it is believed that our investigation can provide a good starting point for practicing managers as it denotes how an RFID implementation can be utilized to increase revenues as opposed to only reducing costs which are subject to a zero-bound situation. Our results also present a consistent picture with prior research in that enhancing customer perceptions has positive effects on organizational performance (e.g. Oliver, 1999). Additionally, the utilization of RFID in this manner agrees with prior assertions that have noted the real benefit from the technology will result from using it to add clarity to unstructured processes instead of being used as a simple replacement for bar codes (Curtin et al., 2007). Another implication is in the continuous improvement of service quality. As was noted, many organizational employees and associated customers thought the quality of interactions had improved as had the speed at which customers are processed. It is believed that the quality improvements can span beyond these two areas. For instance, continuing to use RFID’s capabilities to better maintain inventory positioning and placement can only increase customer perceptions of the reliability of the organization. Additionally, the maintenance of consistent interactions provides the assurance often desired by individual consumers. In looking at the potential quality impact, it can be seen that the RFID implementation has the ability to affect the majority of the components set forth in the SERVQUAL (Parasuraman et al., 1988) instrument.
Service profit chain component
City library
Road race
Employees stated that the move from mundane tasks has helped, but is offset by increased patron interaction responsibilities and new technology issues
Employees stated that the utilization of RFID helped in the performance of their jobs but was not really related to heightened satisfaction
Employee loyalty
Minimal effect was noted by managers and employees
Minimal effect was noted by the race director and employees
Employee capability
Employees are beginning develop Employees stated that they feel new, advanced skill sets they are now more “managerially capable� as opposed to rote workers
Internal quality
Employees and managers said that they thought the internal quality of the system has improved (materials management and book locations are continually improving)
Employees and managers stated that the internal quality was greatly improved as fewer errors are noticed in the delivery system dealing with both customers and suppliers
Productivity
Employees are slowly transitioning to more efficient operations whereby output is increasing given the relative input level
Employees noted that their productivity levels have increased due to the utilization of the integrated RFID system
Output quality
Employees and customers both stated that the service quality (especially in terms of speed and personal interactions) has improved
Customers stated that the quality of the race (specifically rapid access to race times and more accurate race times) has increased
Service value
RFID has enabled the race to offer The total value of the service is better given that the offering has timing services to both runners been improved and no additional and walkers costs (e.g. time, effort, etc.) have been incurred
Customer satisfaction
Customers openly stated that their All customers interviewed said satisfaction levels have improved that they are more satisfied with the race as it is currently operated
Customer loyalty
Loyalty was not noted as It was stated that many increasing due to the RFID system participants will continue to participate as the race continues to present an excellent event
Revenue growth and profitability
Although not directly tied to customers, the patrons did say that governmental funding should be increased due to the efforts made by city library
Employee satisfaction
The race director provided input on how the race has grown drastically (an improved financial situation) as road race amended the service offering with the assistance of the RFID system
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Table II. Case study findings summary
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Another implication for organizations is in how they deal with employees. One finding herein was that the technology did not have a real effect on employee satisfaction or loyalty, which runs contrary to the service profit chain framework. This finding is not unique, as prior work has noted that service profit chain investigations often only show weak support for the impact of employee issues (Silvestro and Cross, 2000; Silvestro, 2002). In general, we agree with these studies as our results fail to demonstrate the impact of the technology on the employee aspects of capability, satisfaction, or loyalty. We do believe that our focal organizations were effective in using RFID in order to redesign their service offerings but may have missed an opportunity to enrich jobs currently in place. Namely, using the technology to simultaneously alter the service offering and employee roles can reap an even bigger benefit. This task can be onerous, however, as often job redesign in the face of new technology can result in job enlargement without the consideration of job enrichment (Campion et al., 2005). Therefore, careful analysis needs to be undertaken whereby employee roles are redefined with the goal of making individuals both more productive and more satisfied. We believe this denotes a real opportunity for practicing managers in how technology can be used simultaneously to improve the situation for both customers and employees from which even more benefits can accrue. A final implication for organizations considering using RFID to alter front-office operations comes in the form of a cautionary tale. In this case, the implementation decision must consider aspects of technology costs (i.e. implementation and integration), return on investment, and customer acceptance. The first area addresses the investment costs associated with using RFID as a reengineering facilitator (see Hammer and Champy, 1993 or Grover and Malhotra, 1997 for issues on reengineering). It has been noted that item costs are decreasing but are still viewed as very expensive given that an organization may want to tag every item held in stock. This was the case for the library, which tagged over a million individual items and would be even more expensive in a retail setting where the items are sold as opposed to being returnable assets. It is believed that these costs could be overcome given the potential savings recognized by more efficient operations coupled with increased customer satisfaction with the organization. This fact, however, leads to the next issue to consider, the justification of such a large investment. As noted, we believe that the implementation has the possibility to pay for itself, but it will be very difficult to track in the face of the intricacy in explicitly linking the effect of RFID to both internal operational improvements (e.g. less out-of-stock situations, better inventory control) and externally-perceived aspects such as improved quality, higher value assessments, or increased satisfaction levels. Establishing this return on investment from technology implementation is often problematic simply due to the inability to link implementation to measurable outcomes. A final issue to consider is in the customer acceptance venue. Specifically, it has been noted that general consumers are not always willing to patronize organizations using RFID systems due to privacy concerns (Gu¨nther and Spiekermann, 2005; Lockton and Rosenburg, 2005; Ohkubo et al., 2005). Issues such as these can be readily seen in recent examples where customers have raised serious concerns about information security. For instance, the German retail firm Metro is in the midst of a controversy surrounding their tag de-activators not properly disarming tags as promised (Claburn, 2004). It has been noted that issues surrounding the assurance of
privacy and information utilization are the biggest detractors to widespread RFID adoption and utilization (Juban and Wyld, 2004). However, it is believed that organizations that are proactive in their implementation plans should be able to overcome these limitations via active marketing campaigns in order to reap the performance benefits.
The impact of RFID on service organizations
Conclusion The main contribution of this study is that it is, to our knowledge, one of the first to explore the impact of the implementation of radio frequency identification tags from the perspective of the interaction between service providers and their customers. In doing so, it is believed that an enriched understanding of how RFID can lead to enhanced performance is highlighted. As has been noted, the main performance effect stems from the improvement in the quality of the experience offered by the provider, which was a function of the expanded service offering as opposed to being significantly affected by changes in the employee components. In turn, the enhanced quality of the offering resulted in an improved value proposition perceived by customers, which led to higher satisfaction levels and enhanced loyalty. As with any research, this study does have limitations. First, the utilization of the case study methodology and the selection of the two focal organizations could limit the generalizability of the findings. Specifically, the use of not-for-profit organizations may be construed as not applicable via the utilization of the service profit chain. However, as the continued operation of each organization is directly tied to funds generated through customer satisfaction and loyalty, it is believed that the results obtained herein offer valuable insights. In light of this limitation, we do believe that profit-seeking organizations can benefit from our results as they too focus on offering quality services with the goal of satisfying customers. Second, the utilization of a qualitative research approach results in research findings that are open to interpretation by the research team. Efforts were made to gather data from multiple sources to reduce the interpretation effect, but the lack of quantitative data limited the scope of the results. In light of the limitations, we believe that a substantive first step has been taken that can provide the springboard for future research on the front-office impact of RFID. As stated, most of the current research on the phenomenon has focused on using the technology as a cost-cutting tool while neglecting the possibility of using it as a means for improving internal operations and customer perceived value. Future research could be conducted with the goal of extending our exploratory findings. Specifically, investigations into the for-profit sector impact could extend the validity of the findings offered herein. Additionally, investigations are needed to explore the conditions under which implementation would be most beneficial. Finally, a large-scale, empirical examination of the implications of RFID implementation is needed to fully explore the concepts proposed by this study.
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