Modern technology makes it possible to track and trace in real time the origin of any product sitting on a supermarket shelf and, as importantly, to record exactly where and when it is sold. The accuracy of this information and the ease of use of the related systems have brought many advantages. In particular, it means that retailers can now closely monitor the rate of sales for individual items, control costs and inventory more tightly, and coordinate with suppliers to ensure stores are never out of stock. It is just one example of how advances in supply chain management can bring benefits for international business, as well as for the average consumer.
The basis of this latest form of magic is the Electronic Product Code (EPC), which takes the concept of bar coding and goes one step further. It allows users to tag goods with an encoded serial number and track status at each point of the supply chain, by combining Radio Frequency Identification (RFID) technology with Internet-based communication.
Recognising the impact this will have, manufacturers, logistics companies, distribution centres and retailers are all gearing up to install the equipment required to read the electronic tags. Potential users of the new technology could also include the government, health-care providers, fashion houses and pharmaceutical companies. In their diverse ways, each sees the system's potential for controlling production, cutting storage costs, increasing efficiency or preventing counterfeiting.
EPC is owned and managed by the not-for-profit standards authority, EPCglobal Inc, which was established in the US in September 2003. Already, over 1,500 people representing end-users, solution partners and research institutes are actively developing global standards and sharing experiences during the process of implementation. EPCglobal Hong Kong is promoting the standard locally and has more than 30 solution partner members so far - the largest membership of its kind in Asia. This progress indicates increasing readiness in Hong Kong. It will also help local enterprises comply with international standards from the outset, eliminate risks in sourcing the relevant technology, and allow them to get maximum business value from adopting the standard.
EPCglobal Hong Kong was set up in March 2004 and is overseen by GS1 Hong Kong, a membership-based body which enhances standards and practices for supply chain services. GS1 Hong Kong chief executive Anna Lin says the beauty of EPC is that each code is embedded in a chip which provides historical data, current location and other detailed information about the goods. "Manufacturers can trace any product on a real-time basis," she explains. "Other benefits include reduced wastage and pilferage, as well as lower inventory and labour costs."
She notes that many local enterprises now recognise that global supply chain management is a critical part of their business. "It requires collaboration between suppliers, logistics providers and vendors, and becomes much easier to manage when all have access to the same accurate information," Ms Lin adds.
Leading international buyers such as Wal-Mart, Metro, Tesco and Target have provided real impetus. They started to issue EPC/RFID compliance requirements to their major suppliers in 2003 and will expect all worldwide partners to be equipped and compliant with the global standards by 2007.
Ms Lin admits that Hong Kong is still in the early stages of adopting the EPC system. She points out, though, that with more local manufacturers being required by overseas buyers to achieve compliance, the rate of implementation will accelerate. To support this, GS1 Hong Kong started in August to collaborate with local institutions to include EPC as a training module for executives and operational staff, so that they understand the hardware, standards and technology.
The government has also taken measures to enhance Hong Kong's readiness for EPC/RFID. For example, in April, the Legislative Council approved a tracking frequency to allow users free access to the system. In addition, there is a HK$14 million fund to sponsor the establishment of a network infrastructure in line with global specifications.
Inevitably, there are expenses involved in setting up. However, Ms Lin says the cost per individual EPC tag has already dropped from 50 US cents to just 10 US cents. "Also, EPC tags are not needed for every item, but can be attached per carton or pallet depending on the goods," she says.
Although Europe and the US have given a lead in promoting the standards, Asian companies, which play such a large part in the global supply chain, will have to keep in step. Recent figures indicate that the greater Pearl River Delta region now manufactures over 50 per cent of the world's consumer goods. Before too long, items for global retailers which support the standard will all have to be EPC/RFID tagged before shipment to markets overseas.
Setting an example is VTech, a leading supplier of electronic learning products. The company will soon attach tags to its pallets and cases, and install EPC readers in factories and warehouses.
Well on track
- EPC / RFID technology allows accurate tracking along the
full supply chain
- Major global buyers will require suppliers to implement
- Costs will decrease as usage becomes more widespread
- The government fully supports development of the technology
in Hong Kong