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The Importance of Standardization
The process of standardizing technology and ways of conducting business is messy and time-consuming, but it’s vitally important.
May 17, 2004—Here’s a question for historians, economists or perhaps some clever graduate student looking for a topic for a thesis: Do standards have an impact on the overall long-term growth rate of the world economy?
I don't know the answer. I've never even read an article where the question has been posed. But it's worth thinking about. We know, for instance, that generally accepted legal and accounting principles have facilitated economic growth by providing a means of redress for aggrieved parties and providing a predictable framework for investment. Likewise, standardization could affect macro-economic growth, because it reduces "friction" in commerce. That is, standards make it easier to do business and therefore promote growth.
When I talk about standards, I'm not referring simply to formal international standards for technology. I'm talking about the standardization of everything involved with doing business, including currency, language, business processes and data. The process of standardizing these things is ongoing, and each step toward standardization removes some of the friction in the global economy.
I've been thinking about this a lot lately, because there is so much important RFID-related standardization work going on right now. Over the next few weeks, EPCglobal, the organization charged with commercializing the EPC Network, will select one of three protocols to be the official UHF Gen 2 standard. It’s a difficult process, emotions are running high, and it won't be a lot of fun for those involved. But this process is critical to achieving the potential benefits of RFID in the global supply chain.
A group within EPCglobal is working on user requirements for shipping and receiving. Its goal is to develop standards for the data that needs to be shared and the processes that need to be followed in order to facilitate efficient shipping and receiving using EPC technologies. These standards could provide huge benefits for manufacturers. Instead of dealing with 20 different retail customers in 20 different ways, manufacturers could conceivably use the same procedures and share the data in the same format with all their customers, which would save them a lot of time and money.
Global data synchronization is another important part of standardizing data and removing friction from business transactions. There are huge benefits for both manufacturers and retailers if they are sharing the same product data. And it's critical to getting the benefits of RFID (see Roll Up Your Sleeves). Companies in the retail and consumer products goods industries continue to work towards synchronizing data through UCCnet and other industry bodies.
Boeing and Airbus recently announced that they would work together to standardize the use of RFID for tracking major airplane parts (see Boeing, Airbus Team on Standards). These two companies are lucky. They own the market for large airplanes and can sit down together and agree on what technology to use, what data should be shared between a manufacturer and its supplier, and what procedures should be implemented to automate business transactions. Boeing and Airbus share roughly 70 percent of the same suppliers, and those companies will benefit from using one system for both customers.
Most other industries are far more fragmenting, which makes standardizing business processes more difficult. Getting a group of 20 or 50 or 100 companies, each with its own agenda and financial interests, to agree on procedures for sharing data and transacting business is enormously challenging.
The hard work that's being done within EPCglobal's work groups to standardize EPC technology and the business practices surrounding how it will be used is not glamorous. It doesn't get you on the cover of Fortune, Business Week, or even RFID Journal. But my hat's off to the men and woman who are donating their time, energy and creative talents to getting it done. All end users and technology providers will benefit from their efforts. In fact, I'll bet you years from now that some economist will come out with a book saying that the standardization of data, technology and business processes between business partners is responsible for a rise in global economic growth.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below.
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