Antecedents to RFID Adoption:
Perspectives of Retail Supply Chain Stakeholders
Stephen Waters
and Shams Rahman
School of Management, University of Western Sydney, NSW, Australia
School of Management, RMIT University, VIC, Australia
Abstract. This paper examines factors antecedent to the adoption of Radio
Frequency Identification (RFID) from the perspectives of three key retail
supply chain stakeholders: retailers, retailer suppliers, and technology providers
and develops a conceptual framework to explore the impact of RFID on retail
supply chain performance. Drawing on extant interorganisational information
system theory, this research identifies factors likely to impact on the adoption of
RFID. Four categories of factors such as technological, economic,
organisational and external are identified. The relationship between RFID
factors, RFID adoption and retail supply chain performance was developed as a
conceptual framework employing Analytical Hierarchy Process (AHP). The
proposed framework was validated by the results of two Australian pilot studies
and responses from stakeholders of two mini surveys. The study identifies
several gaps and proposes that each stakeholder group must be aware of, and
agree to the salient factors that effects an RFID adoption decision.
1 Introduction
There has been an increased interest in RFID due to advances in the RFID
technologies and improvements in Internet technologies. Equally, a notable reduction
in technology and associated costs has triggered a review of RFID capabilities.
Organisations within fast moving consumer goods (FMCG) supply chains are now
looking to replace barcodes with RFID tags [1]. More importantly, they want to
progress from established RFID closed system environments to RFID open system
environments [2]. Open systems operate when tags attached to products containing a
microprocessor chip are populated with identity information. As a pallet load of
products passes a reader, it picks up radio signals from the products and passes
information to the organisation’s enterprise system. Location information is
simultaneously circulated to supply chain partners via the Internet. EPCGlobal is the
principal institute involved in developing RFID technology. Currently EPCGlobal is
coordinating RFID efforts within the retail industry and endeavoring to provide the
infrastructure supporting an open system network [3].
The scope of the paper is restricted to RFID open system technology which has
the potential to radically change retail supply chains.
Waters S. and Rahman S. (2007).
Antecedents to RFID Adoption: Perspectives of Retail Supply Chain Stakeholders.
In Proceedings of the 1st International Workshop on RFID Technology - Concepts, Applications, Challenges, pages 35-49
DOI: 10.5220/0002434700350049
Increased interest in RFID has resulted in a growth of literature, including books,
research articles and articles in trade and business journals [4-6]. However, much of
the information is anecdotal and the majority of articles are published in trade journals
[7] and newspapers [8]. Robust research of RFID in the context of supply chain
management is limited.
Implementation of RFID technologies are likely to result in benefits within supply
chains [6, 9, 10]. These benefits include improvements over current barcode
technology. For example, RFID technology will provide greater levels of inventory
visibility, increased accuracy, and lower labour costs [2, 6, 9]. These benefits provide
the incentive to investigate the value of RFID in supply chains. The potential benefits
of RFID are summarised in Table 1.
Table 1. Benefits from Adopting RFID.
Authors Major Benefits
Faster processing - increased information
Higher accuracy
Increased tracking capability
Increased inventory visibility
Decreased inventory levels
Decreased out of stock
Increased inventory turnover
Decreased shrinkage
Lower labour costs
Minimised bullwhip effect
Prevention of counterfeiting
Process freedom
Improved customer service
To prove the benefits of RFID, Wal-Mart commissioned the University of
Arkansas to undertake a scientific study. The results concluded that stores using RFID
outperformed stores without RFID [7]. Supply chain measures such as ‘on-shelf
availability’ improved with a 14% reduction in out of stock (OOS) products. Also the
stockouts were replaced three times faster, and there was a decrease in manual orders
submitted by RFID enabled stores [7]. While the Wal-Mart study confirms some of
the benefits, it fails to mention other factors including offsetting costs.
The objective of this paper is to develop a conceptual framework for RFID
adoption based on extant literature and validate using responses from retail supply
chain stakeholders. This will assist in understanding the relationships between factors
impacting on the adoption of RFID and in turn its impact on the retail supply chain
performance. The structure of this paper is as follows. Section 2 reviews literature on
several interorganisational information systems, RFID, and performance measures of
retail business. Section 3 summarises supporting adoption theories and proposes a
conceptual framework employing analytical hierarchy process (AHP). Section 4 tests
the proposed framework against the perspectives of three key stakeholders using two
Australian pilot case studies and qualitative information collected through two mini
surveys. The paper is concluded with a discussion on the findings, limitations, and
future intentions.
2 Literature Review
2.1 Interorganisational Systems
Interorganisational systems [13] enable multiple organisations to communicate
through efficient electronic links. IOS facilitates integration resulting in higher levels
of collaboration and coordination [14]. Furthermore, higher levels of collaboration
and coordination leads to higher levels of supply chain performance [15]. We discuss
two widely researched IOS technologies such as Electronic Data Interchange (EDI)
and the Internet due to their prominence in literature [16, 17].
2.2 Electronic Data Interchange (EDI)
Electronic Data Interchange (EDI) is defined as the computer-to-computer transfer of
information between organisations in a structured format [16]. The primary drivers
for implementing EDI are operational gains, competitiveness, and improvements in
inter-organisational relationships [18]. Benefits from EDI including, quick response
and access to information, improving data control, improving customer service,
enhancing competitive capacity, faster inventory turnover, consistent flow of
information among trading partners, standardization of procedures, and improving
trading partner relationships have been reported in literature [19].
Initially, these reported benefits compelled organisations to consider adopting
EDI. However, claims of inevitable wide spread adoption did not eventuate. Apart
from fortune 1000 firms, only 2% of organisations in the US have implemented EDI
[20]. Factors impacting on adoption include high costs [21], technology complexity
[22] and the requirement for close cooperation by supply chain members [23]. Such
factors prompted the search for other technologies.
2.3 Internet
Organisations have adopted the Internet technology to conduct electronic business in
a dyadic framework [24]. Known as e-business, it has been demonstrated that higher
levels of web usage throughout supply chains leads to higher organisational
performance [25, 26]. Organisations including Dell, GE, Cisco have claimed
significant benefits from the adoption of e-business within their supply chains [27,
It is apparent to businesses that the Internet makes sharing information easier and
cheaper [29], reduces response times, simplifies payments, extends supplier bases,
reduces the manual paperwork, and eliminates errors [30]. e-business applications
have advantages over EDI resulting in organisations switching across [31]. For
instance, compared to EDI, internet technology requires lower implementation and
operating costs and does not require close coordination between partners. There is
also a limited need for adjustments for compatibility [29]. Unlike EDI, the Internet
has the advantage of a common protocol (xml) [24] and operates in an open world-
wide-web system [32]. Internet is also being combined with technologies such as EDI
[33], electronic trading hubs [34], business process management systems [35], and
automatic data capture technologies [36] to create more effective electronic systems.
However, studies also identified factors that impact adversely on adoption of e-
business. These include technology competence, availability of IT professionals,
organisational size, global scope, integration, competitive intensity, and regulatory
environment [37]. There are increasing evidences of the Internet merging with other
Both EDI and the Internet have reported benefits for organisations contemplating
adopting either of these technologies. Conversely, both technologies have a number of
factors that act as antecedents to adoption. These factors can be grouped into
categories: technological, economic, organisational and external. We assume that
similar factors will be found when we examine RFID technology.
2.4 RFID
Like EDI and the Internet, RFID is now classified as an interorganisational
information system [38]. There are two main reasons for current interest in RFID.
Firstly RFID has been designed to enhance the transfer of information between
organisations. This is achieved by taking information about a product directly from
tags placed on these products without line of sight. Secondly, designers provide a
network whereby this valuable information can be shared via the Internet [11].
However, RFID technologies have a number of factors that are currently
preventing wide spread adoption. RFID is a new technology and not compatible with
many of the existing technologies such as other RFID technologies and Enterprise
Resource Planning (ERP) systems [12]. RFID is prone to interference causing errors
in reading tags [10]. There are economic reasons as well. RFID is considered too
expensive [11]. Infrastructure costs, hardware costs, tag costs are all reasonably high
[11]. There are also organisational considerations in the adoption of RFID. Studies
indicate that only larger organisations are capable of committing considerable
resources required to adopt RFID [9]. Furthermore, there is a need for top
management support for successful implementation of RFID [6]. Finally there are
factors external to the organisation such as competitive pressures [39] and privacy
issues [40]. These factors all act as antecedent to adoption of RFID and will be
discussed in the following subsections in more detail.
2.4.1 Technological Factors
According to literature, the adoption of technology innovations is shaped by three
factors. If a technology is compatible with existing technology, and is not overly
complex, and has some relative advantage, then it is more likely to be adopted [41].
Despite advances in technology, RFID has both compatibility and complexity issues
that are currently acting as barriers to wide spread adoption. A substantial effort is
underway to overcome existing technological issues. Conversely one reason for
current attention in RFID is the relative advantage that RFID tags have over barcodes.
A comparison of RFID and barcode technologies results in RFID being considered as
superior. A summary of technological factors is presented in Table 2.
Table 2. Technological Factors Affecting RFID Adoption. Source: [6, 10, 12, 42, 43].
2.4.2 Economic Factors
Our research also identifies economic factors as antecedent to adoption. Although the
costs associated with RFID technology are declining, they are still considered
unacceptably high [2]. The passive tags, which were used in supply chain trials in
2000, cost around $1.00. These tags can now be purchased for between 15 to 20 cents
[44]. Some studies suggest that a target cost of 5 cents is likely to be accepted by
industries [45]. Table 3 summaries the major issues concerning costs.
Table 3. Economic Factors Affecting RFID Adoption. Source: [2, 11, 44, 46].
2.4.3 Organizational
Literature acknowledges the importance of a number of organisational factors in the
adoption of RFID. In particular, the support and leadership of top management and
the size of the organisation impacts on the propensity to adopt an emerging
technology such as RFID [47]. Although top management support has not received
wide coverage in RFID literature, a study by Sweeney [6] highlights the need for
management involvement in the deployment of RFID. The size of the organisation is
reported to have an impact on RFID adoption. Studies show that at this early stage of
RFID implementation, mainly the larger retailers and manufacturers are involved in
RFID technology trials [2, 9, 12]. We argue that these organisational factors are
critical for the RFID adoption process. A summary of organisational factors are
presented in Table 4.
Cat.egory Factors Major issues
Inability to integration with other RFID systems
Incompatible with ERP systems
Incompatible numbering, frequency and power standards
High levels of false reads
High data volume
Continuous information
More accurate information
Simultaneous tag reads
Read without opening cartons
More data stored on a tag
Active tags can record data such as temperature and humidity
Anti tampering capability
Ability to write to active tags
Operate in harsh conditions
Does not require line of sight
Category Factor Major issues
Economic Costs
RFID tag costs
Hardware costs
Software costs
System integration costs
Training and consulting costs
Table 4. Organisational Factors Affecting RFID. Source: [2, 9, 38].
Factors Major issues
Firm size
Large firms dominate
Small firms not considered
Top Management Support
Wide adoption less likely
without support
2.4.4 External Factors
The adoption of technology is often shaped by the reaction of competitors, supply
chain partners and other stakeholders. A number of external factors such as pressure
from competitors, industry readiness, and privacy concern have been linked to the
adoption of RFID.
When high levels of uncertainty exist, organisations are often subject to coercion,
mimetic and/or normative pressures [48]. For example, Wal-mart has mandated
suppliers to adopt RFID. Suppliers are aware that failure to comply may result in lost
business [49].
Consumer are disturbed about unwanted access to information held in RFID tags
attached to products after they leave the store [40]. The issue of anonymity has caused
adverse reaction by consumers who object to the thought of being tracking via these
tags. [50]. A summary of external factors is presented in Table 5.
Table 5. External Factors Affecting RFID. Source: [38, 40, 49, 50].
Category Factors Major issues
Industry readiness
Retailers and Department of Defence industries
Competitive forces
Retailer mandates
Mimetic behaviour
Consumers action groups against tags
2.5 Retailer Performance
Leading organisations have focused on adopting appropriate performance indicators
for supply chain performance [51]. These indicators assist in determining
improvements throughout the supply chain.
Retailers have recognised that improvements throughout the supply chain will
impact positively on their own performance [52, 53]. In particular, upstream
efficiencies will impact positively on product availability. Product availability has
become the accepted bottom line performance measure for retailers [52].
Retailers compete by offering a wide variety of products to customers. A typical
supermarket may manage as many as 30000 products at one time [54]. One issue with
such a large assortment is the likelihood of product being out-of-stock (OOS). A
recent world wide study reported that the average OOS is about 8.3%. Furthermore,
lost sales resulting from products not being on the shelf are reported to be 3.9% of
sales world wide [55]. The majority of OOS occurs due to store mismanagement such
as failure to order the product. Since OOS is a major concern when it comes to
customer service, it is argued that OOS should be completely eliminated [56].
3 Conceptual Framework
3.1 Adoption Theories
There are a number of theories acknowledging adoption and diffusion of emerging
technologies [41, 57, 58]. The adoption process has been recognised in terms of
initiation stages (agenda setting and matching) and implementation stages
(redefining/restructuring, clarifying, and routinizing) [41]. Initiation focuses on the
stages up to an adoption decision and is more relevant to emerging technologies such
as RFID. The adoption decision is dependent on an organisation’s knowledge about a
new technology [41]. Organisations continually scan the external environment for
new technology. This technology is then examined in the context of matching a
problem noted in the organisation’s agenda of problems requiring solutions [41].
Equally, knowledge of an emerging innovation can also lead to an investigation of its
value, regardless of problems. However, there is uncertainty with radical innovations
due to the considerable amount of knowledge an organisation must acquire[41]. This
knowledge reflects an organisation’s preparedness and the level of accessibility to
antecedent factors.
The decision to implement a new technology results in either acceptance or
rejection [41]. However, we propose that the decision may also include adoption
postponement. Emerging technologies, such as RFID are continually being developed
and as a result, organisations need to access all the latest information about antecedent
factors. Thus a feedback loop is required to be added between adoption and
organisational preparedness to account for uncertainty. Literature also describes how
retail performance is influenced by the effective execution of logistics activities
upstream in the supply chain. We have considered the term product availability as the
performance indicator to capture these factors. Increased product availability will lead
to improvements in retail performance. Our conceptual framework is represented in
Figure 1.
Fig. 1. RFID Adoption Framework.
3.2 Analytical Hierarchy Process
In order to ascertain the managers understanding on factors that affect the successful
adoption of RFID, this study develops a conceptual framework using the AHP
approach [59].
Supply Chain
Product availability
AHP is a decision-making approach which integrates simultaneously qualitative
and quantitative information for prioritising alternatives when multiple criteria must
be considered. According to Saaty [59], a decision making approach should have the
following characteristics:
be simple in structure,
be adaptable to both group and individual decision making environments,
be natural to human intuition and general thinking,
encourage compromise and consensus, and
not require inordinate specialisation to master and communicate.
The decision making process of the AHP is consistent with these characteristics.
After comparing five different utility models for determining priorities, Schoemaker
and Waid [60]
concluded that the AHP was the easiest to use and produced the most
credible results. AHP has been used in a recent publications in the field of RFID [61].
3.2 The Modeling Process of the AHP
The modeling process involves four steps:
1. assessment of factors in the adoption of RFID
2. structuring the problem as a hierarchy and building the AHP model
3. collection and compilation of experts’ opinions and application of the
prioritisation procedure, and
4. determination of critical factors.
The first step involves identification of key factors that influence the level of RFID
adoption. Identification and classification of these factors have been discussed earlier
and are shown in Table 2 – Table 5.
The structuring step consists of breaking down any complex multiple criteria
decision-making problem into a series of hierarchies or set of integrated levels.
Generally, the problems are structured in at least three levels given in Table 6.
Table 6. Problem Structure and Definition.
Level Generic definition In the study
1 Goal
The overall objective of the decision
making process which is placed at the
apex of the hierarchy
The goal is to identify the
state of organisational
preparedness based on the
level of accessibility of
each of the factors.
2 Criteria
Bases on which the alternatives are
Factors such as
technological, economic,
organisational and external
3 Alternatives The outcomes of the evaluation process
Importance of four
The goal is to identify the state of organisational preparedness based on the level of
accessibility of each of the factors. This is shown at level 1 in Figure 2. Level 2 is
represented by the four antecedent categories: technological, organisational, economic
and external. Factors within each of these categories (Level 3) requires continous
refinement. Frequent advancements update an organisation’s knowledge about RFID.
For example, industry has been awaiting a 2
generation of standards anticipating
enhanced capability [3]. Our framework indicates a flow from these four categories of
factors via updated knowledge to a decision point. The decision node is defined by
three outcomes, rejection, acceptance and postponement. While some organisations
may have rejected RFID outright, many have postponed their decision pending further
information. Postponement is therefore linked back to the state of organisational
preparedness. Continual postponement is likely to force organisations to reject RFID
altogether. On the other hand, there is considerable evidence that acceptance will lead
to significant supply chain improvement. This improvement is represented by product
availability. As discussed earlier product availability is now accepted as a bottom line
retail performance measure. The conceptual framework for RFID adoption developed
using AHP is shown in figure 2. This framework could be used to assess the State of
Organisational Preparedness using both quantitative and qualitative information.
However, in this paper our objective is to validate the proposed framework using only
the qualitative information collected from two pilot studies and two mini surveys. The
next section examines this validation process.
Fig. 2. Detailed RFID Adoption Research Framework.
Level 3
Retail Chain Performance
Product Availability
Hardware costs
Software costs
Implementation costs
Infrastructure costs
Level 1
RFID Adoption
State of Organisational Preparedness
Level 2
4 RFID Stakeholder Perspectives
There are a number of stakeholders representing the current RFID environment. Three
major parties are retailers, suppliers to retailers, and RFID technology and service
providers. In this paper we gathered information from all three sources and compared
each stakeholder’s view of RFID implementation. This information was obtained
from two pilot studies in Australia and two mini surveys undertaken during the latter
half of 2005 and 2006.
4.1 Australian Demonstrator Project
The EPC Network Australian Demonstration Project was a trial undertaken in
Melbourne during 2006. A consortium of retailers, suppliers, technology providers,
transport providers and materials handling organisations in the fast moving consumer
goods industry (FMCG) conducted a pilot study of RFID technology.
Supply chain participants including Gillette, Proctor and Gamble, Chep Pallets,
Linfox, Metcash Retailer, and technology service institutions such as Commonwealth
Scientific Industry Research Organisation (CSIRO), and GS1 Australia. The
objectives of the trial objectives were to show that EPC Network could deliver
benefits to all members of supply chains through RFID adoption .
The trial also set out to encourage Australian companies to get involved rather
than wait for mandates[3]. CSIRO analysed each site and designed the RFID layout.
Technology service providers including Verisign and Sun Microsystems provided
hardware and software. A subsequent report outlined the results including integration
beyond 1
tier suppliers and customers with the adoption of a single set of global
standards resulted in higher levels of visibility and real time information. The trial of
EPC Network Project provided evidences that such collaborative affords can be
successfully applied[3].
This trial provides support for our framework. For example, all the participants of
the Network Project are of the opinion that technological factors have serious
implications on the adoption of RFID. RF interference, complexity of RFID, failure to
link with existing technologies, and false reads are some of the major technological
concerns expressed by these companies. Metcash identified the significant amount of
resources needed to adopt RFID, alluding to the fact that only larger organisations
would be capable of RFID adoption. Metcash also revealed external factors such as
the need for all parties to agree to adoption before it could be a success.
Gillette mentioned organisational factors such as top management support, while
P&G and Linfox both indicated the difficulty in justifying the return on investment.
Among the possible benefits of RFID adoption expressed by the companies are
improvement in sharing information (Gillette), process improvement (Capilano and
Nugan), improvement in supply chain visibility (P&G), and improvement in tracking
capabilities (Chep). Although there was no mention of improvements in product
availability, it is suggested that such improvements will invariably impact on the
product availability of the entire supply chain [3].
4.2 Patties and Montague’s EPC/RFID Pilot Study
Another trial was Patties and Montague’s EPC/RFID pilot study. Patties Pies, and
Montague Cold Storage are both suppliers to retailer outlets. Together with a number
of technology providers they examined RFID technology to determine the reliability
and integration capability in a business to business setting [62]. Montague’s cold
storage facility added a new dimension to the study of RFID technology. One
important finding of this study is that tags can be read successfully in sub-zero
temperatures. Results also indicated improved visibility, elimination of scanning,
reduced labour requirements and overall efficiency of the supply chain [62]. This
study also validates our proposed conceptual framework. For instance, technological
issue such as RF interference was expressed as a major concern.
4.3 RFID Australasia 2005 and 2006
Two mini surveys were conducted in 2005 and 2006. The first involved respondents
from a trade exhibition held in conjunction with ‘RFID Australasia 2005’ conference
in Sydney in August 2005. This venue provided an opportunity to gather information
from RFID technology suppliers. Suppliers of RFID technologies included senior
level representatives from both local and multinational organisations. These
executives were interviewed individually.
The exhibition displayed RFID related technologies which include identification
systems, contactless smart cards, middleware, RFID enabled supply chain
applications, RFID hardware, RFID software, RFID labels and label printers, RFID
readers, transponders and technology consultants. Respondents answered a structured
set of open-ended questions aimed at soliciting verbal responses.
The findings support our proposed framework for RFID adoption. Respondents
revealed that factors such as technological (infrastructure, standards, interference),
economic (costs), organisational (top management support), and external factors
(competitive pressures, and mandates) are likely to have profound impact on the
adoption of RFID. However, size of organisation was not mentioned as an issue. The
possible benefits of RFID expressed by the respondents include labour savings,
automation, advantages over barcodes and increased supply chain visibility.
Our 2005 survey was replicated at the 2006 exhibition and found similar results
with regards to factors impacting RFID adoption and benefits derived from adoption.
However, during this survey we also questioned respondents about changes to the
RFID environment in the last 12 months. These responses are summarised in Table 7.
It would seem that while some changes could support acceptance of the technology,
other responses indicate continuing postponement.
Table 7. Changes to the RFID Environment – 2006 Pilot Study Results.
5 Discussion and Conclusions
First this paper compares extant IOS literature with RFID technology and concludes
that the factors that generally impact the adoption of IOS also impact RFID adoption.
These were categorised as technological, economic, organisational and external
factors. Applying the adoption and diffusion theory [41], we concluded that adoption
of RFID would follow similar pattern as other IOS technologies. RFID adoption is
dependent on knowledge about the technology, and other antecedent factors. Our
research proposes that in the earlier stages of the innovation process involving radical
emerging technology there is considerable uncertainty. Thus organisations continually
seek the latest information about changes, developments and upgrades. We highlight
this point in our framework and define as ‘State of Organisational Preparedness’. We
suggest that under these conditions, organisations may decide to accept or reject the
technology, as well as postpone adoption.
We employed AHP to develop a conceptual framework for RFID adoption
presenting the relationships between the various factors. Three levels are identified in
the AHP process. The first level is the goal, characterized by state of organisational
preparedness. The second level is factors impacting on the goal, and the third level
defines alternatives which represent the importance attributed to factors.
Our research proposes that the organizational preparedness is linked to the RFID
adoption decision. Acceptance of RFID is likely to lead to improved supply chain
performance in terms of superior product availability.
We test the proposed framework by analysing information from two pilot studies
and two mini surveys conducted at RFID exhibitions in Australia. Information was
collected from three stakeholders such as retailers, suppliers to retailers, and
technology providers. The results from the case studies and mini surveys validated
our proposed framework.
It is worthy mentioning that the proposed framework validation process was
designed for a preliminary exploratory study. Thus there are two major limitations to
this study. First, the trials were localized (in Australia) and did not involve the two
major retailers (Coles and Woolworths). Second, the sample size was small and
Significant improvement in ultra high frequency with generation 2 technology now available
The ability to read and write to passive tags
The relaxation of power regulations allowing organisations to gain 4 watt licenses for RFID
Greater levels of education have become apparent
Consensus on the GS1 standard as the preferred standard for RFID
There has been a slowdown in RFID technology trials
Decreased hype about the technology
Significant resources required to undertake such a project
No open systems have been adopted in Australia
The two major retailers Woolworths and Coles have not adopted and do not intend to adopt
RFID in the near future. Both are in touch with USA counterparts (WalMart and Target) and
therefore able to monitor this environment.
therefore may not be representative of the retail industry. Further research is required
to validate the framework using large sample size and utilizing quantitative data and
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