Jun 05, 2007From the moment Wal-Mart announced that it would require top suppliers to tag pallets and cases with radio frequency identification transponders based on the Electronic Product Code standard, consumer product goods manufacturers complained they had to bear the cost of the tags and got little benefit in return. The recent ratification of EPCglobal's Electronic Product Code Information Service (EPCIS) should change the equation.
The EPCIS is a set of standardized network interfaces and protocols for sharing EPC data. These interfaces and protocols create a single way to capture and share information automatically. They allow computers to communicate with each other, so processes can be automated. And because they are based on common Internet standards, different industries and even individual companies can implement the standard in ways that work for them.
In a sense, the EPCIS is similar to European banks setting up, in 1973, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), to create a standardized messaging service to facilitate the rapid transfer of funds. Prior to 1973, all interbank communication was done via telephone, telex, courier or mail, which was slow and inefficient. Under the SWIFT standards, each type of message contains information about the kind of transfer. A sending bank must write SWIFT instructions that conform to preset messages in order for the receiving bank to respond.
All industries will be able to use the EPCIS, but right now the retail/CPG industry is furthest along the EPC adoption curve because of retailer mandates. So retailers and CPG manufacturers have been among the first to test EPCIS's capabilities. Wal-Mart, Procter & Gamble, Unilever and others have all run pilots.
The EPCIS should deliver value to CPG manufacturers as RFID rollouts expand because it standardizes the communication and the data formats. Data from one or more retailers can be transferred securely and automatically via the EPCIS and stored in an EPCIS repository. CPG companies can use the data to determine in real time what's happening in the supply chain.
For instance, Kimberly-Clark is using EPC data to improve the way it manages in-store promotions (Kimberly-Clark Gets an Early Win). K-C gets information in near-real time from Wal-Mart, analyzes it and determines which stores are not getting the promotional displays and products onto the retail sales floor on time, so it can alert its merchandising service provider to take corrective steps.
Up to now, that data has been shared via Applicability Statement 2 (AS2), an Internet form of Electronic Data Interchange (EDI). The AS2 system works when a company is managing a limited number of tagged promotions with one retailer, but AS2 and standard EDI networks are point-to-point solutions, akin to one bank faxing another. EPCIS adds value by allowing for one-to-many or many-to-many connections, so a CPG company can have data from many suppliers flow into the EPCIS automatically and respond when promotions aren't being executed properly.
Moreover, by having data from many retailers flow into its EPCIS, a CPG company can manage replenishment across its supply chain. Today, for instance, it would be hard for a CPG company to divert a pallet of a product from ABC Retailer, which has seen demand weaken, to XYZ Retailer, which has seen stronger-than-expected sales. That's because the two retailers provide point-of-sale data in different formats, making it hard to look at the data on an aggregate basis. The EPCIS should make it possible for CPG companies to examine the demand across all retail partners and make decisions about what to ship where.
It's not clear how quickly EPCIS will be adopted. Many companies have been testing the standard, but few are using it as part of their EPC rollouts. It's likely that companies will shift to the EPCIS standard as applications that use it are rolled out; some—such as replenishment, supply-chain management, electronic pedigree and electronic proof of delivery—already support it. The true value of the EPCIS comes as more companies adopt EPC technologies within an industry, because the EPCIS is all about facilitating the sharing of EPC data securely among many players in an industry. Consider that some 7,800 banks in 200 countries use the SWIFT network to route $6 trillion daily. It would be hard to do that by phone, fax and mail.