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Using RFID to Enhance Supply Chain Visibility - Airbus Case Study

By Serena Ong 1. Introduction In this paper we will present the topic "Using RFID to Enhance Supply Chain Visibility". We believe that there is huge potential for improvements by using new and modern technologies in supply chain management. The fact that many companies are not satisfied with their supply chain visibility highlights the importance of this topic. We will introduce the RFID technology; how it can optimize the overall supply chain performance by focusing on the supply chain visibility aspect, and then we will conduct a case study of Airbus where RFID was deployed successfully. 2. Supply Chain Visibility Supply chain management has never been more challenging today, where companies have to be proactive and constantly develop plans to eliminate disruptions from their supply chain. The success of an organization hinges on the company's ability to deliver their products regardless of the situation. Visibility is essentially the trackability of products or components throughout their flow from the manufacturer to the final destination. It is about making available data that can be analyzed to make recommendations and generate strategies to improve a supply chain. Visibility has several benefits. For one, companies can cut down on inventory as they are better able to react to demand. Visibility is also increasingly becoming a competitive advantage for companies over competitors who are less able to plan for an impending situation, such as in times of natural disasters. This is because visibility enables companies to be flexible in dealing with situations. (Penfield, 2008) 3. Model of Focus - RFID One rapidly evolving technology that creates visibility in the supply chain is RFID. The strategic application of RFID technology to business problems and leveraging its data has the potential to optimize critical processes, enhance business intelligence, and improve collaboration across industries. (Klein, 2006) Also, supply chains today are vulnerable to security threats and uncertainties, and many experts believe that RFID provides a solution to this problem (ehsan, 2005). The advent of RFID technology allows large amounts of data to be stored in tags that are attached to components, providing the opportunity to transform the way information about products, equipment, and even people is gathered and analyzed in real time. RFID technology can be used to provide visibility in the supply chain and production line, reduce risks in employee health and safety, as well as verify plant maintenance. (Holloway, 2006) Thus, the potentials of RFID are enormous and many industries can benefit from RFID. In the following, we will introduce RFID basics and standards, its potentials, and motives for using this technology. We will then compare RFID with the bar code technology, and show the costs and benefits of RFID. 3.1.How does RFID Work? RFID is basically a tagging system used to provide electronic identity to objects, using wireless to gather and analyze information about the item. (Poirier & McCollum, 2006) The RFID environment consists of four elements: RFID chips that contain portable memory and are attached to objects; RFID readers that read the chips; RFID middleware that coordinates many RFID readers; and Applications that uses RFID data and are needed to perform functions such as tracking inventory and placing orders. (Poirier & McCollum, 2006) TAn antenna sends radio waves and generates voltage in the inductor of the passive transponder or triggers the active transponder to send data. 3.2.Advantages and Limitations of RFID Below is a summary of the solutions that RFID can provide: Inventory management and reductions Greater visibility in the supply chain network Potential to share useful data and collaborate with supply chain partners Better production control through more accurate matching of supply and demand Lower repair and maintenance costs

 Improved data quality across many supply chain links The limitations are summarized as follows: High costs, as compared to bar codes The need to engage in process reengineering and restructuring Limitations of RFID systems for global applications due to various frequency ranges Lack of standardization Interference from residual radio frequency sources Interference with reading tags from environmental factors like metal and water (Poirier & McCollum, 2006) 3.2.1. Application Areas Scanning: RFID enables the opportunity to scan physical objects more efficiently and effectively. It is possible to scan many objects simultaneously and it can withstand hostile environments. Tracking: RFID can improve shipment and inventory management of parts, devices and containers by reporting real-time information about the production status, thus avoiding inaccurate data tracks and wrong status information. Tracing: RFID technology can improve the traceability of products and help to reduce costs of a production failure. Since every step in the production process is monitored and stored, it is possible to detect errors in the production through RFID. The company may be protected from lawsuits for its products if a malfunction occurs- material or immaterial damages. Therefore, data records may prove that the product was manufactured correctly. Metadata Management: It is possible with RFID chips to store metadata about relevant and important processes on the physical object. Therefore information would not get mixed up or lost accidentally. Label Management: Currently in the supply chain process different customers want different barcode solutions to label and transport their objects. Differences occur in coding scheme, label format or information on the label. These differences may reduce the supply chain performance and increase the costs for the process unnecessarily, since label printing requires specialized printers and are currently done centrally in order to limit the number of expensive printers. RFID can replace this old-fashioned method, because it is possible to store customer-specific information in the chip. Everything can be organized with one chip and the overall efficiency of the supply chain process would be enhanced. Inter-Enterprise Collaboration: Due to these potentials RFID can improve the communication and coordination between companies, since every company along the supply chain can share the information on the RFID chip and benefit from this technology. The whole supply chain becomes much more visible. (Gunther, Kletti, & Kubach, 2008) 3.2.2. RFID versus bar code The useful features of RFID as compared to bar codes are as follows: A reader can scan multiple tags, as many as 1000 at a time The goods being scanned do not have to be manually oriented toward the reader for it to work RFID radio frequency can usually penetrate an item's packaging and determine the contents Tags embedded in the package cannot be scraped or rubbed off or damaged Information on the tags can be written again to store further information There is information flexibility, whereby information on the tags can change as the goods move across the supply chain network Ability to read the data contained in the chip without line of sight

(Poirier & McCollum, 2006) There is a conflict in the supply chain arena between proponents who believe that RFID tags will replace barcoding - a technology of nearly 30 years - and opponents who believe that the investment does not provide a significant return on investment, given that barcodes are still much cheaper than tags. The main argument against the use of RFID is the current near-universal use of barcoding. (Poirier & McCollum, 2006) Others contend that RFID and barcodes will coexist for several years, given their respective advantages. 3.3.RFID Implementation in Avionics The supply chain for parts, tools and similar products is recognized as an area offering promise for efficiency enhancements and cost savings, and RFID can be used to significantly improve efficiency within supply chains and the associated administration and information flow. (Poirier & McCollum, 2006) The business environment in the avionics industry is set to see the following trends: Rising revenue growth from the launch of new aircrafts such as A380, A350 and B787, and the growth of low-cost airlines. Passenger demand is forecasted to double by 2020. Aerospace companies face competitive pressure to eliminate waste by creating corporate-wide lean enterprise programmes. Industry investors want to see greater Return On Investment (ROI) from their R&D investments. Companies are increasingly collaborating on programmes. The need for strict safety has driven the industry to look at ways to uniquely identify parts and assemblies (Holloway, 2006) In light of the future trends, aerospace manufacturers need to improve their operations performance and effectiveness in areas such as control systems, tracking, quality, maintenance, and visibility. Furthermore, as aerospace companies outsource more of their manufacturing processes, there is greater need for real-time visibility, speed, and accuracy in dealing with demand fluctuations and supply chain disruptions. The ability to make right decisions on short notice to coordinate a complex array of activities among various partners is of great importance. This has a major influence on a company's productivity, profitability, and the ability to stay competitive. (Holloway, 2006) Bearing in mind the challenges offered by the avionics industry and the need for companies to meet these challenges to stay competitive and profitable, we can see how RFID will aid companies in their objectives: Improve airline configuration control Reduce ownership costs of rogue parts (faulty aircraft components), helping to minimize airline inventories as well Provide reliable part traceability Reduce internal processing and cycle time Enhance accuracy of information exchanged between manufacturers and suppliers (Holloway, 2006) 4. Case Study of Airbus and RFID Airbus recently introduced a 'maintenance, repair and overhaul' (MRO) strategy supporting RFID adoption for "value chain visibility," by tracing both flyable and non-flyable components over their total lifecycle. (Sweeney, 2010) According to Carlo K. Nizam, Airbus's head of value chain visibility, the increasingly competitive global market, and the need to reduce costs and streamline business processes in order to remain competitive has driven the firm to adopt RFID. Airbus views RFID as an infrastructure that can be deployed across many areas of its business, each of which delivers value not just to the company, but also to its suppliers and customers. (Roberti, 2009) As Nizam said, RFID acts as their "business radar to let (them) see what's going on faster and in real time so (they) can make the right decisions faster." (Gaudin, 2008) We will now conduct a case study about the Airbus supply chain and how they use RFID to achieve, among other benefits, a better visibility and transparency in their whole logistics. First, we will analyze the background of Airbus and how they managed the

introduction of RFID. The second part covers the use of the RFID-technology in the whole Airbus supply chain. Finally we will do a comparison between the time before and after the utilization of RFID in the Airbus Integrated Company to see how useful the integration of this new technology has been. 4.1.Background of Airbus In 2001, the Airbus company, the biggest aircraft manufacturer in Europe, consolidated its four national companies from Spain, France, Germany and England to Airbus SAS (Socit par Actions Simplifie) due to inherent conflicts of interest among one another. But there were still different methods of communication, contracts and requisitions with 75 percent external suppliers. (Airbus, 2010) Also, the competitive pressure and large-scale projects to create new types of aircrafts like the A380 and A350 provided reasons to improve the whole supply chain management. Therefore, in 2001 Airbus spearheaded the "Sup@irworld" program to enhance their delivery punctuality, quality management as well as to reduce their inventories for better buying process coordination. Other reasons were to achieve better response to difficult market conditions, reduce costs, and increase visibility. (Computerwoche, 2005) The Sup@airworld project uses a web-based platform which can be accessed via the Internet for easy connectivity and integration. One sub-domain of Sup@irworld is the introduction of an e-supply-chain to unify all suppliers' communication channels to enable an efficient collaboration between all supply chain owners. It covers processes like expressing needs, invoice status, transport tracking and despatch advice, which is an electronic delivery note from a supplier to its customer. (Bundesministerium fr Wirtschaft und Technologie, 2006) To enlarge its visible horizon and accelerate the reaction speed in case of wrong deliveries from the supplier, Airbus introduced the RFID-technology. (logistics.de,2003) 4.2.How Airbus utilizes RFID The usage of RFID technology by Airbus is summarized below: Minimize unplanned maintenance and detect malfunction early Manage and reduce airline parts inventories Establish audit trails for each uniquely identified object Ensure that the correct part is being used in the right place Mechanics can access document, task, and parts data, and locate and track approved spare parts in real time Identify and track tool location, usage history, and repair requirements Improve safety and security by authenticating components (Holloway, 2006) Airbus introduced the RFID-technology to increase their overall supply chain transparency and visibility to improve their general reactivity. Its goal is to "error-proof and automate" its supply chain and manufacturing operations to reduce aircraft production and maintenance costs. (Sullivan, 2008) There are three phases in Airbus's rollout of RFID: First phase: Supply chain logistics and distribution, which focuses on tracking supplies and reusable shipping containers through the supply chain to warehouses and assembly facilities. Through complete automated data entry, Airbus reduced the physical handling time, thus reducing inventory handling costs and increasing labour productivity. Second phase: Focuses on Airbus' global transport, manufacturing and assembly operations, such as tracking aircraft parts across manufacturing facilities, automating work order confirmations, and streamlining the "track and trace" process for parts. Third phase: Extends RFID into in-service and support operations, with the aim to benefit Airbus's customers. (Sullivan, 2008) In an industry where safety is paramount and where there are thousands of airplanes each with millions of individual parts to be managed, Airbus needs a large supply of readily-available inventory. Tracking individual parts becomes a tumultuous task. Furthermore, the precise nature of aircraft construction and the extreme conditions under which the airplane will fly means that the parts must be built to exact specifications. Components need to be easily traceable with a full transparency of the product lifecycle and allow for verifying of information online at all times from a central database. (Airbus, N.A.) Airbus utilizes the RFID-technology in two ways. First, their own suppliers equip their supply goods for Airbus with RFID-tags,

instead of old-fashioned barcodes, to increase the whole supply chain transparency and to allow automatic analysis of error. Because 75 percent of Airbus' suppliers are based all around the world, its monitoring process for parts, components and other assets becomes very challenging. With RFID, it is possible to detect automatically when there are shipment errors because when the goods leave the suppliers' warehouse, they are already equipped with RFID tags carrying important information. At each relevant point of the supply chain, this information is read. The information stored in the RFID tags includes the parts and serial numbers, manufacturer codes, country of origin, date of installation and maintenance, and inspection information. This information is especially useful in the maintenance process because the service history can be stored on the tag as it goes through different stages of its life cycle. (Holloway, 2006). If a shipment is at the wrong place or contains the wrong parts, the system alarms employees to fix this problem without interrupting the production process. (IBM, 2009) In 2008, Airbus began equipping in-cabin items on its A330 and A340 such as life jackets and seats. Thus the configurationmanagement process could speed up and be streamlined. The configuration-management includes an attestation, where an employee has to confirm the requirements with what is physically installed. The collection of information became much faster with RFID. (RFID Journal, 2009) Secondly, Airbus uses RFID in aircraft tool management by equipping all its tools and toolboxes with RFID tags containing history, shipping, routing, and customs information. (Holloway, 2006) It was found that tools managed with RFID had a higher effective availability, required less paperwork and had lower error rates, leading to greatly reduced administration. Airbus also leases its own tools for the highly-sensitive aircraft maintenance to other maintenance companies or airlines. In 1997, Airbus pioneered the use of RFID in its tools business. The motivation was to provide a better and quicker service to customers by improving the efficiency of administration. (Airbus, N.A.) The Airbus "Spares and Support Service", located in Hamburg (Germany) with about 400 employees, is responsible for this maintenance-cycle. To reduce the administrative and logistic effort for the whole cycle, they equip their own tools with RFID tags. The tags are used to track the items as they are sent out to the centres and returned. (Holloway, 2006) Thus they can increase the flexibility of the whole leasing process, optimize their inventory management, identification of individual parts and recording of data. The process-cycle tool-leasing-sending can be monitored precisely by Airbus, the customer and the repair-shops. If the system detects a failure or the need to maintain the tools, an automatic alert from the system to the customer would be sent to the "Calibration and Repair Shop". With this system, the company or customer is able to send defective tools directly to the Airbus' reparation shop and not to the Airbus' tool shop. (Bundesministerium fr Wirtschaft und Technologie, 2006) Airbus's own tool usage and tracking is also optimized by RFID in its manufacturing facility. They can reduce the "book-in" and "book-out" time for tools. With this process, Airbus will have more accurate information on how often a tool is borrowed and the number of cycles a tool is being used. Based on this information, they can improve the calibration process. (RFID Journal, 2009) After using RFID, the maintenance-cycle can be optimized as a result of having RFID-tags with all the necessary information for accurate location and identification. Currently, Airbus is expanding its use of RFID to parts tagged by suppliers. This will help them to customize cabins for customers, and enable clients to collect data regarding items within a cabin, such as oxygen canisters, quickly and effectively. (Roberti, 2009) In the next section we will examine the benefits of RFID to Airbus and its other potentials. 4.3. Benefits of utilizing RFID to Airbus 4.3.1. Visibility With RFID, Airbus achieved strategic benefits like real-time visibility, getting automatic updates of events in the value chain and an unprecedented high level of information. After the introduction of the RFID technology, Airbus is able to enhance its communication and quality of management and therefore to gain business improvements. By providing absolute transparency and real-time automated visibility of the whole supply chain, RFID technology can reduce the time required to solve service-related problems, and the use of RFID tags can aid in detecting problems in aircraft before they occur. (Frost & Sullivan, 2006) Mechanics can check the parts' journey through the supply chain, its service history and its original manufacturing source. The information flow between participants in the supply chain becomes easier and faster. (logicaCMG, 2005) RFID helped to remove the need for manual-based processes and to re-design them more efficiently. RFID technology also helped to speed up and streamline the configuration-management processes, whereby the installed aircraft parts are checked to confirm that they match the design requirements. For the in-cabin items, the company could collect information about them using RFID much faster than it did previously using paper. (Wessel, 2009) Another benefit is ease of ensuring product authenticity. Product authenticity is very crucial in the aerospace business. As an

airplane manufacturer, Airbus is responsible for every part fitted onto an aircraft. It cannot afford to allow parts that have not passed through rigorous tests to be used on an aircraft. However, one issue faced by Airbus is that in remote locations, maintaining an aircraft and ensuring that the parts fitted are certified become very problematic. With up to 70% of a mechanic's time spent on locating parts, the process is strewn with inefficiency. Another issue is the volume of parts needed on each aircraft, multiplied by a total of more than 20,000 aircrafts - the amount of inventory is massive. The difficulty in dealing with parts is that sometimes it can be hard to tell the difference between different parts, and Airbus cannot afford to take risks because it is responsible for the aircraft. It is estimated that the use of counterfeits previously costs Airbus over $8b in replacement costs. (Holloway, 2006) 4.3.2. Process Benefits Airbus now has more efficient automated processes, which means that the cycle times are shorter and less inventory is needed. An increased accuracy and control of business operations cause less non-conformities. More automation means less manual intervention and an improved labour productivity. Other benefits are a speed-up of process and quality management due to accurate information. Airbus achieved a higher quality level of information through an automatic collection of data. There is now a faster and optimized information flow among all members in the supply chain whereby they can track the life cycle of a tool accurately. (Bundesministerium fr Wirtschaft und Technologie, RFID Anwenderbeispiel AIRBUS Deutschland GmbH, 2006, page 8) The sharing of information between partners is now one of the most important supply chain processes, because the integrity of information is critical for the uninterrupted flow of goods. (Holloway, 2006) A major benefit of RFID technology is a simplified administration and parts repair management, where the repair and flight history of the component are made readily-available electronically. The microchip ensures the accuracy and availability of important information and also allows for a comprehensive tracking system. (Airbus, 2003) Maintenance of service records electronically is expected to significantly increase safety and service levels, reducing the time required for aircraft inspection. (Frost & Sullivan, 2006) 4.3.3. Business Benefits The business benefits are: a reduction in inventory, capital assets and stock reconciliations, and an increased labour productivity and supplier monitoring. With an improved supplier-forecasting Airbus achieves improved supplier delivery performance. Thus they can reduce their costs of production, maintenance and inventory. The results are leaner and more competitive business processes. For instance, Airbus reduced its incorrect deliveries by eight percent and also improved the flow of materials. (Holloway, 2006) With regards to Airbus' tools-leasing, in 2006 Airbus saved 100,000! compared to the 180,000! investment costs, and reduced the repair cycle by 6.5 days, thereby improving their inventory management. 6,000 tools are already equipped with RFID-tags and approximately 2,000 to 5,000 parts could require RFID tags. (Bundesministerium fr Wirtschaft und Technologie, 2006), (Sanquirgo, 2006) We have highlighted the numerous benefits of utilizing RFID technology to Airbus above. However, we should note that these information benefits are medium-term because it takes time for the system to collect all the records that are required to perform an analysis. Analyzing the information is helpful for planning in the areas of maintenance, material, personnel, and finance. 5. Critical Analysis 5.1.Involvement of Suppliers in RFID implementation Airbus distributed RFID requirements to suppliers worldwide for parts of its A350 aircraft. While the requirements would not impact all suppliers, it will affect all those who provide parts involved in a repair cycle. According to Carlo K. Nizam, Airbus's head of value chain visibility, about 2,000 to 5,000 parts could require RFID part marking by suppliers by 2011 or earlier. (Wessel, 2009) Airbus is also working closely with its suppliers to help them meet the requirements. It specified some criteria in the requirements document to help their suppliers assess which parts to tag, either with RFID or contact memory buttons. To help suppliers choose the proper memory size, Airbus provided information on the amount of memory required for a range of maintenance cycles. (Wessel, 2009) Airbus bought tags from MAINtag and recommended to the majority of their external suppliers that they do the same, so that all parts will have the same standards of technology. However, Airbus stated that their suppliers have full freedom to choose their suppliers, and that their recommendation is an option that could simplify procurement processes for their suppliers. (Wessel, 2009) 5.2. RFID tags should be used on which aircraft parts

There are different requirements for permanent parts marking, depending on the part and its environment. For instance, RFID tags, which are more robust to harsh environments, would be employed in pressurized areas of the aircraft, while contact memory buttons would be used in unpressurized sections. Aircraft manufacturers generally tag parts that are of high value or require frequent replacement.(Frost & Sullivan, 2006) RFID tags can be attached to materials for their distribution to the stations, warehouses, or maintenance bases. Data such as what components were sent, received, or in transit, their description, part number, and serial number can be recorded and maintained. RFID tags can also be assigned to tools used for the disassembly process in order to track who is using the tool and the duration. (Holloway, 2006) Airbus's company-wide programme is categorized into flyable and nonflyable applications. Nonflyable applications refer to the supply chain and logistics tracking processes. Based on positive results of its pilot programmes, Airbus has decided to deploy RFID across these applications. Flyable applications refer to in-service operational parts that are subject to regulations. (Moorman, 2007) A350 XWB was the first aircraft in the Airbus fleet to use RFID on flyable parts. The programme deployed RFID tags on flyable parts, allowing improved aircraft configuration management and line maintenance, repair shop optimization, warehouse logistics, payload tracking and life-limited parts monitoring. (Market Wire, 2010) Airbus purchased 8-kilobyte tags which will be used to track flyable aircraft parts and components, as well as store data. The highmemory tags are to be placed mainly on repairable parts with the aim of giving immediate access to parts that need servicing. This will enable Airbus, aircraft owners and aircraft repair companies to improve their maintenance and warehouse logistics processes. (Wessel, 2009) Also, it is very important for Airbus to have robust RFID-Chips as they are used under extreme temperatures such as during take-off and landing as well as during the flight where there are subzero temperatures. (logicaCMG, 2005) Airbus' A380 superjumbo airplane will have passive RFID chips on removable parts, which are replaceable units with short life cycles, says Jens Heitmann, senior manager of systems standardization, process, and methods at Airbus. That means tags will be affixed to passenger seats, which have a five-year life cycle, and brakes, which are usually changed every 1,000 landings, as well as thousands of other parts. Airbus will continue to use text and bar codes to keep track of parts data, but RFID chips can be more quickly accessed with handheld scanners, Heitmann says. "We could use RFID to do routine checks before a flight, for example, making sure a life jacket is under each seat." (Information Week, 2004) 5.3. ROI of using RFID for Airbus The airlines and aerospace industry has traditionally been a low margin industry, characterised by high investment and relatively low ROI. The adoption of RFID is increasingly being seen as an enabler of higher ROI in the industry. (Frost & Sullivan, 2006) Nizam did not disclose how much Airbus is spending on the project, but noted that the company will be saving in the order of "millions of euros per year", with the savings coming from avoiding work disruptions caused unavailability of the right components, improved productivity, automated data entry and reducing inventory. (Gaudin, 2008) From the industrial tests conducted, Airbus determined a net Return on Investment period of less than 12 months. (Wessel, 2009) It was found that short-term returns can be gained through labour cost reductions, better asset management, inventory shrinkage, less out-of-stock costs, and customer service improvements. (Poirier & McCollum, 2006) 5.4. Establishing common industry standards for RFID Airbus and Boeing are collaborating to create joint industry-standards for RFID on commercial airplane parts. For instance in 2004, the two companies hosted a series of workshops and forums worldwide, inviting all the world's airlines, parts suppliers, regulatory agencies, and third-party maintenance shops, so that all of them can work together to establish common standards and enable technology that can benefit the whole industry. Both firms recognized the need for an industry standard for capturing data automatically based on the standardization of RFID in Air Transport Association (ATA) Spec2000. The Spec2000 is a comprehensive set of e-business specifications, products, and services for the aviation parts industry. (Holloway, 2006) There needs to be an industry-wide commitment to invest in and integrate RFID into the supply chain, otherwise, RFID technology would not be able to take off freely. (Moorman, 2007) 5.5.Challenging issues in the RFID technology

RFID has faced resistance and pushback due to various concerns outlined below. 5.5.1. High Costs According to an RFID industry expert, one reason for RFID's slow pace in entering companies' supply chain is the high costs. Because the initial cost of implementing RFID is very high in many industries, it is difficult to establish justifiable ROI. The chip prices depend on functionality and are between 5 euro cents to several Euros. RFID readers are between a few hundred to several thousend Euros. However the cost of changing to RFID infrastructure includes not only the tags, but also the learning curve, labour costs, software and systems integration costs, process redesign and organizational impacts. Every decision to implement is a

custom project and often requires expensive purchase of new software, hardware, and re-engineering of their process operations. Hence, companies struggle to determine whether they will meet their ROI targets to cover the expense of deploying RFID. (ehsan, 2005) This is especially so for the aerospace industry which takes decisions of adopting new technologies very seriously in view of the critical nature of their products and the significant investment required for RFID implementation.(Moorman, 2007) Airbus's willingness to take this big step may actually encourage other companies to consider adopting RFID, if evidence of positive results can be seen. However, it is believed that the costs of both active and passive systems should come down significantly as the technology matures. Experts also foresee that RFID eventually will remove the human component in much of the supply chain, especially in parts management and tracking and in maintenance and repair. (Moorman, 2007) 5.5.2. Standardization Issues Several experts say that RFID is a costly solution that still lacks standardization. It can be very challenging to manage multiple readers and hardware, especially across many facilities. Global standards defining how RFID devices communicate with higherlevel systems are still evolving, making it necessary for system components to allow for inexpensive upgrade as the standards shift over time. (Holloway, 2006) Airbus is actively addressing the standardization issue as it leads the international standardization activities through participation at steering boards and industry conferences. Airbus also participates in the ATA Spec 2000 Chapter 9 Task Force, Permanent Bar Code Parts Identification and actively holds discussions with customers, suppliers and other aircraft manufacturers. (Airbus, N.A.) Its main objectives are: Define harmonized identification information Develop tag data standards Define passive and active RFID usage in close cooperation with authorities Develop an agreed standard for data exchange between different parties while considering existing aviation standards (Airbus, N.A.) 5.5.3. Potential Data Interference and Overload Issues Another challenge is regarding the development of usage policies for active and passive RFID technology on aircraft. Some concerns raised are: whether multiple passive RFID devices can cause interference to aircraft systems, whether a strong and undesired signal can activate all devices simultaneously, and the corresponding effects on aircraft systems. Hence, there is a need to ensure that RFID equipment does not interfere with aircraft systems. The goal of the policy is to allow the installation of active and passive RFID tags on a variety of aircraft parts and equipment. (Holloway, 2006) Another concern is about the potential for data overload, because an RFID reader will continuously scan each tag several times as long as the tag remains in its read range. The large data volume can overwhelm the network. However this problem can be solved by programming readers to eliminate duplicate information or building data-filtering function into the RFID system. In addition, in cramped places where scanning areas may overlap, data noise can result, whereby a reader may read the wrong target. Other problems could be unreadable, damaged, or missing tags. Such potential issues should be taken into account. (Holloway, 2006) 5.5.4. Environmental factors Environmental factors such as temperature, presence of liquids or metals, such as foil packaging and liquid detergents, can affect the ability of readers to work reliably. It is crucial to ensure that the RFID tags are robust enough to tolerate the extreme temperatures caused by flying. However, it is believed that as the RFID technology advances, such issues will be overcome easily. 5.5.5. Resistance to Change from Barcode System Barcode systems have been used for many years in many manufacturing facilities and distribution centres. In many case, the established barcoding infrastructure is deemed to be efficient. There is a resistance to change by many organizations that rely heavily on barcode scanning to track goods, because for an organization to move from a familiar technology to a new one is a very challenging task. 5.5.6. Supply Chain Partners Issues An issue involving supply chain partners is the lack of integration, for instance, when the manufacturers' resource planning systems

are not linked in real-time to shop floor systems. Another issue is the partners' resistance to information sharing, which is necessary to achieve maximum benefit from RFID technology. There needs to be collaboration among supply chain partners both up and down the chain, as well as support for integration with resource planning systems that run the company's businesses. (Holloway, 2006) Ideally, the information flow precedes the product's arrival, giving each handler a forward view into the product before it arrives. At the same time, data flows backward through the supply chain, delivering lifecycle visibility all the way back to the manufacturer. As a result, the whole supply chain benefits from the control and the business intelligence that RFID data provides. (Klein, 2006) Manufacturers will be able to get more accurate information about their demand for parts and they can lower their parts inventory and reduce the time taken for plane reparation. Suppliers will be able to reduce inventory, improve efficiency of their manufacturing operations, and verify to Airbus that the parts they get are genuine, hence reducing the amount of unapproved parts entering the supply chain. (Holloway, 2006) Airbus had started a series of RFID pilots to engage suppliers in the initiative. If all of Airbus' suppliers would adopt RFID technology, the whole supply chain could all benefit. The RFID initiative will not realize its full potential unless the adoption strategy includes multiple business units across the supply chain. One of Airbus' philosophies, according to Nizam, is to develop an approach that would maximize benefits to as many players as possible, including its suppliers. (Halper, 2008) Airbus began with "closed loop" suppliers, who send RFID-tagged reusable containers that continuously travel back and forth between suppliers and Airbus's final assembly facility in Germany. Airbus achieved tremendous cost savings from the reduction of the number of containers feeding the A380 finally assembly, and hence a decrease in the time taken to enter data about the container contents. Further savings could be realized if Airbus could get the "open" portion of its suppliers to use RFID tags on the shipping labels of the boxes they send to Airbus. However, Nizam believes that over time, Airbus' demonstration of the benefits of RFID would eventually convince the rest of its suppliers to commit to RFID technology. (Halper, 2008) On the other hand, implementing forceful mandates is a good way to drive acceptance among supply chain partners. For instance, Walmart started the ball rolling in June 2003 with a notice to its top 100 suppliers to utilize RFID at the case and pallet level by January 2005, and in August 2003, Walmart ordered the remaining suppliers to comply by January 2006. (Poirier & McCollum, 2006) 6. Learning Points RFID technology provides enormous potential benefits, but implementing RFID is a huge decision and a highly challenging undertaking. A business-wide approach is needed to realize maximum value from this technology. Firstly, a good understanding of the range of implications and opportunities offered by RFID is essential. Secondly, minimizing the risk of failure can be achieved by appreciating the pitfalls involved in RFID technology selection, integration, and implementation in the supply chain. (Holloway, 2006) There needs to be conviction that RFID technology is a true enabler of business engineering and to treat it as such. The use of such technology is a huge investment and thus other companies that are considering using this technology need to keep a few things in mind. They need to be prepared to follow through with this technology in the long run. Therefore it is extremely important to choose the right partners and involve them early in the project. RFID is a process-enabling technology and it should not be implemented just for the sake of it, instead companies should access the suitability of the technology in relation to their business. Senior management's approval and involvement in the implementation of the technology is crucial. In the short run they should focus on quick wins where RFID can demonstrate immediate value and as a result, this will build up momentum to the RFID project and raise awareness of the project. As Nizam, Airbus's head of value chain visibility predicted, RFID will become "as everyday as bar coding" in the aviation industry as accurate information becomes not a luxury but a necessity. (Weier, 2008) Furthermore, according to analysts at Frost & Sullivan, since the aerospace companies have many common suppliers, the market penetration for RFID in the industry is expected to increase substantially in the coming years. (Frost & Sullivan, 2006) 7. Conclusion Airbus is studying the possibilities of utilizing RFID on future aircraft programmes and will continue to lead the industry in standardizing RFID, develop new projects and promote widespread adoption of RFID technology. The next step is the revision of the ATA Spec 2000 and general agreement from the FAA and EASA. RFID is currently the buzzword in the world of supply chain management. But is it simply a fad or an unstoppable business improvement? The success achieved by Airbus seems to imply the latter. RFID undoubtedly has the potential to provide numerous benefits that are superior to barcoding. Businesses should not view RFID as a means of complying with heavy-handed mandates from the large organizations, but that it will be a highly-beneficial enhancement to the supply chain, bringing a host of improvements with greater visibility. With organizations like Airbus leading the implementation of RFID, and putting pressure on their suppliers to be compliant, many

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