The EPC Network: Extending the Value of RFID
RFID stands poised to fundamentally change supply chain management, enabling enterprises to realize significant savings to the top and bottom line.
This is evidenced by some of the earliest adopters of RFID technology. Consider Procter & Gamble, which expects to increase aftertax profits by $150 million and realize a working capital increase of $1 billion through adoption of RFID.
The value of basic RFID technology has been covered extensively within major supply chain industries, as well as technology businesses where management of asset tracking is a core focus. But an even more compelling value proposition for RFID is emerging as the EPC Network gains momentum and traction. By leveraging RFID and emerging standards around item identification such as electronic product codes (EPCs), the EPC Network addresses real-world challenges by enabling the automatic dissemination and discovery of real-time, accurate, and on-demand product information for all parties in the supply chain.
RFID in the Supply Chain
Today, radio frequency identification is a technology in increasingly widespread use for applications such as EZ Pass, SmartTag, and Mobil SpeedPass. RFID couples tiny chips with very small antennas. The tiny chips contain information that the antennas transmit without requiring visual scanning; thus, the tagged items can automatically transmit data to RFID readers within a certain range.
One emerging use for the technology is the ability to track valuable items as they move through supply chains. While RFID tag costs are still relatively expensive, they are declining quickly and approaching a level at which it becomes practical to tag products at the item level. This will open the door for large-scale use of RFID tags on consumer goods, as evidenced by Gillettes recent purchase of 500 million tags to track their high-value razor product lines.
Most applications of RFID tagging and tracking have remained inside the four walls. For instance, some retailers are using RFID to track items throughout their internal distribution infrastructure, e.g., from regional distribution center to retail stores. Other companies are using RFID tags to track items moving through a manufacturing or distribution facility. But most applications to date have not yet had to address the challenge of tracking products as they cross the physical boundaries between trading partners.
According to the Department of Transportation, the amount invested in transportation logistics and related services added up to approximately 11 percent of the U.S. GDP in 2002. Given the massive investment in distribution systems and the enormous expense associated with maintaining these inventories, the value of applying RFID to automate the tracking of movement of items between parties in the supply chain (beyond the four walls), is guaranteed to be significant.
To take RFID outside the four walls and create value for the entire supply chain, a few things are needed. First, there must be a standardized way of uniquely identifying items within the supply chain. Second, there must be a standard means of discovering and sharing the data that describes each identified item.
The first requirement is addressed through electronic product codes. EPCs are essentially the next generation of Universal Product Codes (UPCs) used in bar codes, except that they have the added benefit of being able to identify products uniquely at the item level. The EPC is a virtual unique license plate for a product that identifies the manufacturer (e.g., Gillette), product class (e.g., Mach 3 Razor), and serial number (e.g., the 574,896th instance of the Mach 3 Razor).
Using this EPC, members of the supply chain can identify and locate information about the manufacturer, product class, and instance of a particular product. Depending on the type of tag, EPCs can be used to uniquely identify up to 268 million unique manufacturers, each with 16 million types of products. Each unique product can include up to 68 billion individual items, meaning the format can be used to identify hundreds of trillions of unique items.
The second requirement to extend RFID value between trading partners is a standards-based method to discover and share data about these EPCs. This is the role of the EPC Network. The EPC Network leverages the existing Internet infrastructure to create a low-cost, standards-based set of services for trading partners to discover information associated with each EPC. It is made up of three main elements: an object naming service (ONS), the EPC Information Services, and the EPC Discovery Service. Each plays a unique and important role in enabling the secure discovery and sharing of detailed, real-time product information.
The ONS is the authoritative directory of information sources that are available to describe EPCs in the supply chain. EPC Information Services are the actual data repositories used to store information about unique items in the supply chain. The EPC Discovery Service is essentially a chain-of-custody registration service. For each manufacturer, the EPC Discovery Service provides a directory of all EPC Information Services that have read and contain information about a particular manufacturers products. While each of these three components is critical, the EPC Discovery Service is the most valuable component of all, enabling many applications of the enhanced product data set.
Creating Real Value
The EPC Network truly enables an entirely new class of applications that have heretofore not been available or possible. The following are examples of real-world business problems that can be solved with the EPC Network.
Shipping and Receiving
One of the constant challenges in todays supply chains is maintaining the accuracy of shipments sent and received by parties throughout distribution. Often the shipments contain the wrong quantities of product, or even the wrong product type. Checking and ensuring the accuracy of deliveries is manually intensive, and still has limited effectiveness because identification at the item level is not possible with todays bar codes. The result is either time spent investigating these exceptions, actual product loss, or inventory inaccuracy. Each of these ultimately impacts the consumer in the form of higher distribution costs and resultant higher prices.
The EPC Network delivers an efficient solution that streamlines and automates the whole process. For instance, each can of soda on a pallet of soda cases can now be individually identified. And because this identification happens automatically as the pallet moves through a receiving door equipped with an RFID reader, the exact amount and type of product is immediately known to all parties. Any discrepancies between the amount ordered and received can be automatically identified and noted for both the shipper and receiver of the goods.
Product Theft
Up to $30 billion each year is lost due to theft, often called product shrinkage. The majority of this loss occurs in the middle of the supply chain, between the manufacturers front door and the retailers back door. Without full and timely visibility into the whereabouts of each product within the supply chain, it is impossible to identify and stop the sources of loss.
Since product arrival and departure is captured at each point, the EPC Network enables comprehensive distribution visibility that creates a record of the chain of custody for each product. And while not actually preventing the theft of an item, or even the legitimate loss of an item, the ability to pinpoint the custodian of the product when it was lost allows the manufacturer or retailer to take preventative measures for the future.
Counterfeiting
Product counterfeiting is a significant problem worldwide, and increasingly in the United States. In the pharmaceutical industry, for example, drug counterfeiting is a particularly hot topic, spurring the FDA to form the Counterfeit Drug Task Force. Confirming a drugs authenticity (i.e., that it did not just magically appear in the middle of the supply chain) is challenging given the complexity of modern supply chains.
The EPC Network can help address these challenges by enabling drug shipments to be automatically scanned and authenticated as they traverse the supply chain from manufacturer to pharmacy. This electronic pedigree can be used to determine the authenticity of a shipment. The pedigree for a shipment will be stored and accessible to all parties, preventing copies from being introduced into the supply chain.
Product Recall
Product recalls create another expensive source of loss in the supply chain. The inability to pinpoint only the specific faulty instances of a product often leads to the destruction of perfectly good products (i.e., throwing the good out with the bad). Product recalls also cause an interruption to the flow of other products within the supply chain.
By enabling more granular identification of products, the EPC Network will enable manufacturers to have immediate access to the exact location of specific recalled products within the distribution channel. Also, members of the supply chain can periodically check, in real time, for the issuance of recalls that are applicable to a particular EPC.
These are just a few of the potentially useful applications of the new EPC Network. As the EPC Network gains greater adoption, the many industries deploying RFID technology will continue to create new applications that address their most urgent needs. The consumer packaged goods industry, pharmaceuticals, and the Department of Defense are likely to be just the beginning.
How Does the EPC Network Work?
The six-step process by which the EPC Network enables the discovery of detailed, up-to-date product information across the supply chain begins with a product getting an RFID tag that includes an EPC (see Figure 1). This EPC is registered within the ONS when the tag is manufactured, and remains with the tag (and the tagged product) as it moves through the supply chain. The information associated with this particular product is also added to the manufacturers EPC Information Service, and knowledge that this data exists within the manufacturers EPC Information Service is passed to the EPC Discovery Service. When the product leaves the manufacturers facility, its departure is automatically registered with the EPC Information Service. Likewise, when the product arrives at the next point in the supply chain (e.g., a distributor site), it is automatically read and its arrival is registered with the distributors EPC Information Service. Once again, knowledge of information on this product is registered with the EPC Discovery Service.
In one scenario, a retailer may need to get information about the product it has just received; it asks the ONS for the location of the manufacturers EPC Information Service. The root ONS provides the location of the manufacturers ONS, which in turn provides the location of the manufacturers EPC Information Service. This query process is transparent to the supply chain member requesting data through an application and takes only milliseconds to execute (see Figure 2).
With the manufacturers EPC Information Service location, the distributors application can request the product information it seeks.
As products make their way across multiple points throughout the supply chain, this process of products being scanned and the knowledge of their data within EPC Information Services repeats itself. The registration of this product knowledge by each EPC Information Service into the EPC Discovery Service enables full supply chain visibility. The result is real-time, complete visibility of the supply chain.
A Step Forward
The evolution of data exchange within the supply chain stands to take a major step forward with the advent of the EPC Network. Throughout most of their history, supply chain networks consisted of parties who exchanged product information directly between one another. This information exchange was manageable with a modest number of products, a simple product data set, and a well-known, simple distribution channel. However, as the number of products grew, the number of trading partners increased, and the data set grew more complicated; these methods of information exchange became relatively inefficient, inaccurate, and ineffective.
Value-added networks (VANs) brought an improvement to the flow of information because supply chain parties were often able to reduce the number of disparate data sources. But then the suppliers or retailers were forced to join multiple VANs to reach all of their respective trading partners. As supply chains increase in complexity, the practical reality is that many members of the supply chain remain invisible to other members.
The EPC Network is the logical next step in the evolution of supply chain networking and information sharing. The low-cost, standards-based platform of the EPC Network will ensure compatibility and scalability across a diverse set of users, allowing a free flow of information.
The EPC Network allows for a single implementation without individual partner setup. This creates a low-friction environment that facilitates exponential growth more quickly than expensive and time-consuming point-to-point communication solutions.
Deploying the EPC Network
To support the enormous number of items traversing supply chains at any given moment in time (large consumer packaged goods companies are known to ship hundreds of billions of units each year), the EPC Network will require a large-scale infrastructure that is unlike anything previously deployed. To be worthy of global commerce, the infrastructure will need to handle this load while delivering carrier-grade reliability (99.999 percent). As a leader in critical infrastructure for the Internet and telecommunications networks, VeriSign provides proven, highly reliable, highly scalable services for supporting the EPC Network. In January 2004, EPCglobal selected VeriSign to provide the root ONS for the EPC Network. Additionally, VeriSign delivers a suite of complementary services to help supply chain members deploy their EPC Network Services. These extend the value of RFID beyond the four walls of an enterprise by enabling all parties in the supply chain to conduct secure, real-time discovery and sharing of product data.
Conclusion
Expectations for the efficiencies and cost savings to be gained from RFID technology and the EPC Network are high and with good reason. The EPC Network and its component ONS, Discovery Services, and EPC Information Services promise to streamline the supply chain while increasing visibility, accuracy, and communication among all the parties involved.
