The EPC (Electronic Product Code) Network will soon allow manufacturers and distributors to accurately track and maintain information on countless individual items via RFID (Radio Frequency Identification) technology. The network enables instant identification of physical objects within the global supply chain. Wal-Mart, the world?s largest retailer, is requiring its top one hundred suppliers be fully EPC compliant by the end of 2006. Other major retailers and the Department of Defense have followed suit, guaranteeing the EPC tag will play a major role in supply chain management and business logistics.
The network is a result of work by the Auto-ID Center, an international, nonprofit consortium of six universities and thirty-one companies representing the food, consumer goods, retail, transportation and pharmaceutical industries. The Auto-ID Center, recently renamed to EPCGlobal Inc, developed the EPC to serve as an international standard for RFID-based supply chain management systems.
At the most fundamental level is the EPC itself, a unique identifier for an individual item. The EPC is a number, a 96-bit identifier similar to –although longer than–the UPC (Universal Product Code) embedded in the ubiquitous barcode. Like a UPC, an EPC can be stored on an RFID tag, printed, or used to query a database. It consists of a 2-bit version number, a 28-bit manufacturer identifier (about 268 million possible manufacturers), a 24-bit product identifier (about 16 million possible products) and a 36-bit item serial number (about 68 billion unique items).
An EPC RFID system consists of two basic components: a tag (also known as a transponder) and a reader (also known as a transceiver). Tags consist of a small microchip capable of holding an EPC and an antenna. While form factors vary, RFID tags are flat, generally less than a millimeter thick, and have a surface area between that of a dime and a playing card. An EPC is written to an RFID tag, which is then physically applied to an item. With a mechanism similar to a contactless fare card system, when a tag comes in range of a reader its EPC is transmitted to the reader and subsequently the item management system. RFID systems can identify and track items on a warehouse floor, in a retail environment, or anywhere proximity between a tagged item and reader can be established. A tag can be either active (battery powered) or passive (relying on power broadcasted from the reader). The latter are considerably less expensive and will be used in most distribution and retail environments.
Each tagged item will exist in what EPCGlobal calls “a network of things.” As an EPC tag only serves as an identifier and holds no information, vast databases are being created to compile data on the make, conditions and whereabouts of items in the network. EPCGlobal has asked VeriSign, the company that controls the Internet?s root servers, to develop and manage the ONS (Object Name Service). This technology, similar to the Internet?s DNS (Domain Name Service), allows network users to access information on an item by using its EPC.
Consumer packaged goods giant Procter & Gamble was a founding member of and remains a driving force behind EPCGlobal. It plans to use the EPC technology in five primary ways:
1) Replacing unreliable and untimely retail point of sale reports with real-time demand data.
2) Sharing data with retailers and suppliers to assist in collaborative planning.
3) Producing according to consumer demand rather than to monthly or weekly forecasts.
4) Dynamically replenishing products at retail locations, and speeding products to the shelf.
5) Giving retailers tools to assist in ordering and management of Procter & Gamble inventory.
Procter & Gamble hopes this will result in reduced out-of-stock conditions (which today average between 11% and 15%), cut costs associated with manual processes such as inventory checks, and ultimately reduce inventory levels.
Wal-Mart and the DoD will only require suppliers to tag pallets and cases. While the EPC Network has the capability to store information on individual consumer products, referred to as “item level tracking,” there are a number of factors keeping tags off retail shelves. Contemporary RFID readers require highly tuned equipment to accurately detect tags in a small space (such as a shelf). Retrofitting thousands of retail locations with specialized shelves and readers, the high marginal costs of passive RFID tags and the absence of off the shelf item level tracking software would be too expensive. Additionally, several consumer groups such as the ACLU, CASPIAN, EFF, and EPIC have issued a position statement saying item level RFID is a threat to personal privacy. While the statement acknowledges that RFID does have a useful place in commerce, it insists on safeguards such as products labeling and deactivators.
Dozens of newer companies specializing in RFID and EPC services have risen in response to rocketing demand. Chip fabricators Matrics and Alien are escalating production of tags and readers to help suppliers comply with EPC adoption mandates. Forrester research reports they may still fall short of demand. Leaders like OatSystems, Savi and Manhattan Associates have emerged from countless solutions vendors to provide customized, RFID-specific supply chain software and hardware integration.
Almost all major business software companies have begun the integration of RFID and EPC related systems into their offerings. SAP offers middleware to manage the large quantities of information RFID readers produce. Oracle enhanced its databases and warehouse management system to accommodate EPC data. PeopleSoft has allied itself with Manhattan Associates to bring RFID enabled warehouse management into its supply chain management software. Hardware providers like Texas Instruments and Phillips have made major investments in developing inexpensive tags and readers and are beginning to take orders for millions of tags.
The EPC Network is a highly coordinated and well-funded initiative with broad support from a number of industries, major retailers and the public sector.
Implementation deadlines from some of the world?s largest organizations are causing businesses to rush to familiarize themselves with the technology. RFID?s numerous advantages over current inventory tracking mechanisms make it more than just a competitive edge. RFID technology combined with modern databases will enable the EPC Network to revolutionize the supply chain by making inventory visibility almost unlimited.