Tracking a hi-tech revolution

When bar code and scanner technology was widely adopted more than 10 years ago, it transformed the retail sector and had a positive impact on many aspects of the extended supply chain. Now, radio frequency identification (RFID) technology is about to take things to the next level.

Industry experts say that it will create tremendous benefits for end-to-end supply chain visibility. The system helps capture and track unique data on individual items. And through a worldwide electronic support network, anyone with authorised access to the database will be able to check this wealth of information, which could include anything from a product's exact place of manufacture to its expiry date, recommended storage temperature, or the number of days it has been in one place.

Clearly, this will have far-reaching implications for the global supply chain, with the chance to improve inventory management, ordering and invoicing.

When the necessary systems are in place, everyday shoppers may notice just one thing: the price and contents of a whole cartload of supermarket goods will be calculated by pushing it past the checkout.

But each sale will also trigger the replenishment cycle, giving logistics companies, distribution centres, merchandisers and suppliers a real-time status update.

Essentially, the system consists of three elements. The first key part is the RFID tag, or transponder, which is a microchip and antenna contained in a stick-on or other form of label. It can be attached to each pallet, carton or item.

Lee Chung-yee, head and chair professor of the industrial engineering and logistics management department at Hong Kong University of Science and Technology, said the antenna sent radio waves to the reader, thereby transmitting data stored on the chip. The reader converted this to a digital format, which could then be stored on the computer.

'The integrated circuit inside means there is no need for close contact with the reader,' said Professor Lee. Consequently, tags could be read through containers and other packaging materials, at a rate of hundreds per second.

Professor Lee said there were active and passive tags. The former had a battery to run the microchip's circuitry and to broadcast the signal; the latter drew power from the reader, which emitted electromagnetic waves that induced a current in the antenna.

Generally, the 'reading distance' for tags is up to 10 metres, and their data can be modified. That's because each tag has a unique 96-bit electronic product code (EPC). This is basically a serial number made up of a header, which identifies the EPC format and the volume of data to follow, and three other parts. The first identifies the so-called EPC manager - usually the product manufacturer - with a company prefix. The next 'object class' denotes the exact type of product by stock-keeping unit, say, a 355ml can of Coke Light. And the final 36-bit part would refer to one individual can, with an appropriate record of its manufacturing and transport history.

'The unique EPC can be captured by readers in the factory before loading on board ship, at the distribution centre and in the store,' said Anna Lin, chief executive of EPCglobal Hong Kong, a not-for-profit organisation promoting the adoption of EPC technology. Besides providing training programmes and advice on implementation, the organisation has also worked with the government to build up a local network based on global standards.

Ms Lin described the electronic product code information services (EPCIS) as a network specifically for the supply chain, or an 'internet for things'. It will allow trading partners to identify items at different points of the supply chain, and exchange information.

In terms of system architecture, the backbone is customised middleware and an object name service (ONS), which closely resembles the internet's domain name system (DNS). By matching the code on the RFID tag with an EPCIS server, the ONS effectively directs a search inquiry to the correct database, which stores the associated information about details like style, size, colour and packaging.

'There is a common language to communicate, so we will have full interoperability,' said Ms Lin.

She noted that the next phase of development was to promote 'knowledge transfer' and the business case for companies to implement the technology. This was being done through the Supply Chain Innovation Centre at Hong Kong Science Park, and a series of pilot projects involving leading manufacturers and some of the world's biggest retailers.

Professor Lee said that each tag cost 15 to 20 US cents, but the price should fall to about 5 cents as the number of users grew.

'As the technology gets more mature, costs will come down,' he said. 'But if you want RFID to become popular, you need upstream and downstream industry to implement it.' He said many companies still seemed to be watching and waiting. They were ready to join the 'bandwagon', but first needed to be fully convinced about aspects of cost, reliability and database management.