Supply Chain Frontiers Issue #25. Read all articles in this issue
The initial cost and a lack of clear cut returns are two impediments to the adoption of radio frequency identification (RFID) technology and related Electronic Product Code (EPC) standards. Pioneering work underway in Colombia by Bogota-based logistics company LOGyCA and standards organization GS1 Colombia could help companies to overcome these hurdles by enabling them to share and analyze EPC/RFID data.
GS1 Colombia is part of the worldwide GS1 organization that designs and implements standards that improve supply chain visibility and efficiency. LOGyCA was set up by GS1 Colombia to focus more deeply on supply chain management solutions. LOGyCA has built what it claims to be the most robust supply chain technology infrastructure in Latin America.
The two non-profits have combined their expertise to create a service based on a new international standard called Electronic Product Code Information Services (EPCIS). The standard represents a significant step forward for EPC/RFID since it facilitates the exchange of data between trading partners. Prior to the launch of the standard such data had to be extracted from EPC/RFID systems manually. The Colombia initiative builds on EPCIS to leverage EPC/RFID and demonstrate the value of the technology to users.
In addition to general cost and ROI issues, the adoption of EPC/RFID in Colombia is hampered by problems that are more regional in nature. For example, innovation is a low priority for the many small to medium-sized companies in Colombia, said LOGyCA Consulting Services Director Isabel Agudelo. Also, although a number of major vendors such as Tyco Sensormatic have offices in the country, the lack of a national production base for EPC/RFID hardware means that domestic companies have to go to the expense of importing the equipment.
Software limitations represent a major obstacle for numerous companies. As Agudelo explained, larger enterprises that have the resources to invest in sophisticated ERP systems are well positioned to take advantage of EPC/RFID. However, smaller companies with software solutions that are developed in-house find it more difficult to integrate with EPC/RFID systems and utilize the information generated by the technology.
There are also some important supply chain issues to resolve. "The implementation of EPC/RFID brings agility to the processes involved and allows for fast decision making. The challenge for the technology is to increase sales volumes through the lowering of out-of-stocks and to bring clear benefits to the last and most important link in the supply chain: the consumer," said Pedro Blanco, Logistics Director, Compañía de Galletas Noel.
Even so, interest in EPC/RFID is growing. In 2005 Compañía de Galletas Noel, a leading food products manufacturer, became the first company in Colombia to use the EPCglobal standards in a commercial environment. Personal hygiene products company Productos Familia-Sancela recently completed an EPC/RFID implementation project with the aim of optimizing product flows between production lines and distribution centers. A joint project between Compañía de Galletas Noel and Almacenes Exito involves the sharing of EPC/RFID data on product storage, dispatch and receipt, with technical support from a group of technology vendors. Efforts are also underway to bring suppliers aboard. Last year leading company Almacenes Exito began collaborating with some 50 suppliers to initiate the use of EPC/RFID technology at the box and pallet levels.
The EPCIS initiative promises to take this activity to a higher level. “It will present the benefits of EPC/RFID more clearly and demonstrate the value of the technology to a community of users,” said Agudelo. The concept could become “an internet for products” as it evolves into an information hub and analytical platform.
LOGyCA and vendor partners are providing early adopters that are affiliated with GS1 with the tags, readers and scanners they need at no charge. “The idea is to offer the basic service as a value-add for associate organizations and to charge for more advanced services such as detailed reports,” said Agudelo. LOGyCA is currently developing formats for these reports.
Since the economics of tagging low-cost, mass-produced products is still questionable, the EPCIS service will concentrate on the movement of trucks and freight containers. Shippers, logistics services providers, carriers and other nodes in the supply chain such as ports will provide real-time information on the comings and goings of tagged vehicles and containers. “It is easier for transportation companies and third-party logistics service providers to demonstrate an ROI in this way than it would be if we were just tagging products,” Agudelo explained.
Participants will be able to track the progress of vehicles and containers between points in the supply chain and, crucially, to share this information with designated trading partners. “Business partners will be speaking in a standard language, and have access to shared information that will enable them to make better decisions about how to manage their supply chains,” Agudelo said. Of particular interest is the potential for cargo tracking and tracing, and keeping tabs on the availability and operational efficiency of vehicles. LOGyCA will manage the central EPCIS database.
Armed with this information the participants should be able to clearly analyze the benefits and costs of EPC/RFID. The aim is to have the EPCIS service fully operational by the middle of 2008 and to recruit 20 active companies this year. “This is a Colombian initiative that we believe to be a pioneering effort to increase the adoption of EPC/RFID and make companies more competitive,” said Agudelo.
For more information on the EPCIS service, contact LOGyCA’s head of public relations María del Mar Hermida.