Radio Frequency Identification (RFID) tags can be used to measure the amount of embodied energy flow throughout the supply chain
Radio-frequency identification (RFID) is the wireless non-contact use of radio-frequency electromagnetic fields to transfer data, for the purposes of automatically identifying and tracking tags attached to objects.
Nowadays many industries are using RFID systems for their enterprise resource planning (ERP) purposes or to track the products status. RFIDs store product specific data which allows the entities within the supply chain to understand the exact specifications of the product they are sourced with. In other words, the upstream flow of product to downstream is easily traced via the readers and is stored in the databases that are connected between supply chain entities.
Along with upstream flow of the product (from supplier to the end user) another flow exists which is called “energy flow”. The energy flow contains the “embodied energy” per production of one unit of good that is delivered downstream. The embodied energy grows as the product value grows through the supply chain.
The focus of the proposed idea is on merging the concept of RFID (which already exist in many firms) with “energy flow” to provide a transparent supply chain in terms of energy use per unit of good manufactured and delivered to the customer. One of the key advantages of using RFID to track the energy flow is to understand where the bottleneck is and provide energy efficiency solutions to the supply chain which in the ends brings down total energy use (also GHG emissions) and final cost of product. This innovation is suitable for large industries (with energy intensive components), ERP software companies and urban planners that want levy energy related tax policies on industries.
Following diagram illustrate the flows that exist in the supply chain:
What actions do you propose?
Energy is the main driver of any sorts of production activity and is attributed to a sizeable share of production cost per each unit of good manufactured. Over the course product development in the supply chain, not only the value of the product increases but also the embodied energy increases due to various reasons such as activities that are operated over the raw materials to turn them into a component for upstream activities, transportation, storing, manufacturing and so on. The energy consumed is directly linked to the final cost of product as well as the Green House Gasses (GHG) emissions. Hence, an agile approach to record the trace of energy flow would be important as it could provide a transparent system for the supply chain entities to better understand the outcome of their activities. Following diagram represents the concept of embodied energy as well as value added for a product from upstream to downstream of the supply chain:
As can be interpreted from the above diagram, the embodied energy increases along with the valued added of the product.
The first step to optimize the energy flow within the supply chain is to provide transparency in the system which is built on the real-time data. For this, the proposed idea offers the integration of energy measurement approaches with the information flow of the supply chain through the RFID tags. Many manufacturers use the tags to track the location of each product they make from the time it`s made till it`s pulled off the shelf and tossed in a shopping cart. These technologies can be developed in a modular framework to not only contain product specific data (such as number of pieces, date of manufacturing, origin and etc.) but to also include level of energy consumed for production of one unit of good. Let us have a look on the idea that is depicted in the following diagram:
As can be seen, the supply chain entity receives the goods that are labelled with the RFID tags. The readers at the entry point of the entity, reads and transmits all the data that are stored in the RFID tags to the database. These data include generic product info such as number of pieces, origin as well as level of energy consumed per piece of unit that is produced and respective GHG emission that is embodied in the product (please note the calculations for energy consumption per unit of output is not listed in this note). In the course of production in this entity, the amount of energy that is consumed to manufacture one unit of product is recorded as well and is updated in to the database. At the end of the production, new RFID tags are attached to the boxes which indicate energy consumption per unit of output.
To explain how it works, let us assume that there are only two entities of A and B in the supply chain. Followings provide stepwise approach for the offered innovation to measure the amount of energy and record it into the supply chain database of the companies:
1- The supply chain entity A measures the amount of energy consumed per unit of good manufactured.
2- Energy consumption per unit is recorded into the entity A`s ERP systems and is printed on the RFID tags along with other product specific data on the product package for delivery to the entity B downstream.
3- Entity B receives the packages and reads the RFID tags automatically. The data is stored into the ERP system.
4- Entity B measures the amount of energy per output unit like the way entity A does in step 1.
5- Embodied energy, or in other words, the total amount of energy spent for the product to reach this point is calculated. This is in fact the total step 1 and 4.
6- Embodied energy is stored in the system and is printed on the RFID tags along with other specifications of the product.
The similar approach can be attributed to bigger and more complex supply chains. In fact the approach is easily extendible and replicable.
The question here would be how the innovation can lead into a profitable business case? It is important to say that the first step for any sorts of management is appropriate measurement. The phrase “You can’t manage what you don’t measure” has been long existed in the business contexts. This innovation in fact provides the ways to have an assessment of energy consumption throughout the whole supply chain and gives the visibility to find out where the bottlenecks are and how the energy efficient solutions could be used to reduce the amount of energy (and accordingly GHG emissions) consumed. Needless to say that the energy costs are directly associated to final cost of the product and for that, any sorts of energy efficiency solutions not only enhance the amount of energy consumptions but increases the profit margins for the entities in the supply chain. This innovation is very well fitted to the multinational companies’ strategies that have global supply chains. The figure below depicts the supply chain of one of these firms:
The companies with global supply chains would be keen to understand how the situation with regards to the energy consumption is. The energy consumption data that is stored via RFID into the database of the company reveals real-time data on the amount of energy at each of its suppliers’ or factories’ plants. Once the transparent data becomes on hand, headquarter will decide on how to tackle with the issue of energy efficiency at the most energy consuming entities. Let us have a look on the following picture:
The company with the global supply chain at the first step tracks all the amount of energy that will be piled up to manufacture one unit of the product. Based on that, at the step two, implements energy efficiency optimization efforts for its suppliers or offers some sorts of funding (especially for companies located in the developing countries) to optimize the energy consumption process. It is important to highlight that, nowadays many of the manufacturing units are placed in the developing world where the production costs as well as energy efficiency efforts are cheaper. On the third step, it tracks the level of energy consumed after the implantation efforts have been made. The impact of these efforts is not limited to the entity that has undergone the energy efficacy solutions but influences on the overall profitability of the supply chain (step 4). Following diagram shows this impact:
The very important thing about the RFID-energy tags is that it offers access to the real-time data on energy consumption throughout the supply chain and also demonstrates the impact of energy efficiency solutions. This impact can be seen in the figure above for ex-ante and ex-post to the implementation of the business idea.
After the innovation is implemented, it is estimated that the overall energy consumption to be reduced by10% to 40%.
The innovation has a very direct impact on the climate change as it provides measurable approaches for “precise” tracking of energy efficiency efforts. It does not require huge infrastructural investments as the proposed idea benefits from the systems (RFID tracking and ERP systems) that are already in place. Visualisation of the energy flow can be easily linked to the GHG emission figures and this will help the industrial and urban planners to have an assessment of activities done with a supply chain.
Who will take these actions?
- Database developers and Enterprise Resource Planning (ERP) companies such as SAP and Oracle.
- Large manufacturing and parent companies as well as original equipment manufacturers (OEMs).
- Governments, urban planners and policy advisers that seek for a measurable way of assessing energy consumption per one unit of product that is manufactured.
Where will these actions be taken?
The actions will be taken in the locations where most of the energy is consumed to manufacture one unit of the product. In this case, as most of the productions and heavy industries these days are transferred to developing countries, the actions should be taken in these countries and of course with the help of developed worlds that have the ownership of the products. So, the action is global but should be supported by the manufacturing/financial firms in the developed countries.
How much will emissions be reduced or sequestered vs. business as usual levels?
It is estimated that through the implementation of the RFID-energy tracking system and the underlying energy efficiency efforts, the project lead to significant amount of emission reductions (some between 10 to 40%) depending on the level of efforts and the industry under practice. The comparison between business as usual and project scenario is illustrated in the above sections.
What are other key benefits?
The key advantages of the proposed idea are:
- The transparency on the amount of energy consumption in the supply chain on real time basis.
- Through knowing the source of energy and respective fuel consumed, total amount of embodied GHG emissions can be calculated as well.
- Energy is directly linked to the cost of companies within the supply chain, if one company reduces its amount of energy, the overall supply chain will have the reduction in the amount of energy consumption which means lower cost for the whole supply chain.
- Transparent energy consumption, can be used for corporate social responsibility purposes. The companies adopting this system for their green marketing strategies can place on top of their marketing campaigns highlighting the fact that they are aware of the energy consumption/emissions of their product and have the goals towards the concept of green production from the source to the final delivery.
The message to the society is short:
"Green supply chain"
What are the proposal’s costs?
The project costs are divided into three phases:
- Preliminary studies (respective industries, modeling and programming) : 300,000 USD
- Pilot implementations (cooperating with large supply chains to test the solutions): 500,000 USD
- Final product solutions (provision of a replicable/scalable package for different industries in the supply chain): 800,000 USD
The proposed actions are implantable in the following phases:
- Preliminary studies: 6 months to 1 year
- Pilot implementation: 1 year
- Final product solutions: 2 years
The proposed product will have long term applications.