While U.S. shippers and logistics providers continue to debate the merits of RFID technology, North Asian companies are plowing ahead with RFID projects. The development and deployment of RFID technology in China, South Korea, and Japan is growing rapidly, finds new research from global consultancy Frost & Sullivan.
All three countries are in the growth stage of the market cycle, but applications of RFID tags in various verticals are progressing differently, and the market share contributions vary across each country, the research shows.
What's behind the region's surge in RFID use? In addition to technological advancements, government support lends a boost to RFID tag sales in the area.
The governments of China, South Korea, and Japan aggressively promote RFID through information centers, conferences, and summits to help local companies better understand the latest development in RFID technology and its applications, the report shows.
The governments have formed organizations such as the RFID China Alliance, the South Korean Ubiquitous Sensor Networks, and Hibiki, a Japanese group exploring ways to manufacture inexpensive RFID tags locally. Also, auto-ID labs in China, South Korea, and Japan have initiated joint research on RFID topics ranging from chips to middleware.
China, in particular, is in a position to lead growth in RFID use. Because of its dominance as a global manufacturing center, and its growing consumer market, China is poised to become the largest RFID tag application market in the world, say Frost & Sullivan analysts.
The country has also begun to develop RFID standards, which may help boost RFID use among Chinese companies.
Though U.S. businesses have come to rely on China as a source of inexpensive labor and manufacturing resources, ongoing trade relations between the two nations may not be worry-free. Recent concerns have come to light about China's compliance with World Trade Organization (WTO) guidelines and its commitment to foreign direct investment.
In her annual report to Congress, U.S. Trade Representative Susan C. Schwab described China's "mixed record" when it comes to complying with WTO obligations.
"China has taken many important steps to implement its World Trade Organization obligations, but on the fifth anniversary of its WTO membership, China's overall record is decidedly mixed," she said.
"Chinese reforms have lowered systemic trade barriers to many goods and services from the United States and other WTO members," Schwab added. "At the same time, certain industries face frustrating barriers to doing business in China, and there are worrisome signs that China's market liberalization efforts have slowed in the last year."
The issue of restricted market access for U.S. companies in China was also raised by Franklin Lavin, the U.S. Under Secretary of Commerce for International Trade, at a December business lunch in Hong Kong.
"In the past two years, China has become more ambivalent about the role of foreign direct investment in its economy, and is not always willing to let market forces work," he said. The United States should expect escalating trade friction with China next year because of Beijing's increased restrictions on foreign investment, Lavin predicted.
China has made broad progress to date in implementing trade reforms, but it needs to take additional action in important areas such as intellectual property rights enforcement and the elimination of government policies that hinder market access for U.S. companies, finds Schwab's report.
She also lists China's policies on industrial issues, trading rights, services, and agriculture as areas of concern.
It is unclear at this point whether the U.S. government plans any action to address these challenges.
"Hopefully, the two sides can resolve these issues without the United States having to resort to formal trade action. But China needs to show flexibility," said Lavin.
As part of a global bid to free air cargo of paper transactions, the International Air Transport Association (IATA) recently announced a test program for electronic freight documentation on key trade routes linking Canada, Hong Kong, the Netherlands, Singapore, and the United Kingdom.
IATA selected the five initial pilot locations based on the areas' network connectivity and cargo volumes, as well as each government's willingness and ability to seamlessly exchange electronic information and e-documents with airlines, freight forwarders, and customs administrations.
The paperless trend is also catching on in Thailand. Bangkok's Suvarnabhumi Airport recently became the first Southeast Asian airport to embrace a paperless customs system. Developed cooperatively by the Thai Customs Department and cargo terminal operator WFSPG Cargo Co., the system will significantly streamline airfreight customs procedures.
Thai officials hope the system will further its quest to become a regional air logistics center to rival Singapore, and help it persuade major global airfreight carriers such as DHL and FedEx to base operations at Suvarnabhumi.
The web-based information technology will help Suvarnabhumi Airport reduce paper, time, and money normally spent on imports, exports, and transshipments that pass through the airport.
The system will also quicken the normally tedious customs process—from roughly three hours per transaction to no more than 30 minutes—and speed the flow of goods through Suvarnabhumi, say Thai officials.
The Netherlands is best known as home to one of the world's most decadent cities, but it can now add "Europe's most wanted distribution center location" to its list of honors.
The Netherlands was recently selected the most desirable location for European DCs in a survey commissioned by global consulting company Capgemini, and ProLogis, a worldwide industrial real estate firm.
While the United Kingdom is currently the largest employer in Europe's distribution network, Netherlands is the country of choice for European DCs in the high-tech, electronics, and food and beverage industries, finds the report, which surveyed more than 100 supply chain leaders in a wide range of industries.
Netherlands neighbors Germany and Belgium also fared well.
"The Netherlands has a relatively large number of distribution centers compared to its population size. This is because the country is close to major demand markets, possesses good transport infrastructure, and provides access to two large international ports—Antwerp and Rotterdam," says Bert Angel, senior vice president, global services Europe at ProLogis.
The only industry bucking the trend is consumer products, which selected France as its favorite European DC location. Belgium finished a distant second choice in this industry.
Interestingly, life sciences and pharmaceutical companies do not appear to favor one specific location because their network structure is highly decentralized, consisting of many relatively small national distribution centers, the survey shows.
The study also gauged respondents' views on business trends expected to impact distribution networks in Europe. The companies surveyed indicate the following expected distribution network changes:
Consolidation driven by globalization. The desire to reduce supply chain costs and complexity may drive respondents to reduce their number of distribution centers, and to merge distribution networks.
Growing importance of regional distribution. Increasing transport costs, shorter delivery lead times, and emerging markets—especially in Eastern Europe—have respondents contemplating regional-based distribution strategies driven by transport costs, not inventory costs.
Adapting with new strategies. To keep up with these changes, respondents may increase logistics outsourcing, lease properties with shorter lease contracts, or utilize flexible warehouse space.
Handling a total of $134.9 billion in merchandise in 2005, New York's John F. Kennedy International Airport (JFK) maintains the position of top U.S. international freight gateway, according to a report recently released by the U.S. Department of Transportation's (DOT) Bureau of Transportation Statistics.
JFK has been the number-one U.S. international freight gateway by value for all but one year between 1999 and 2005, the DOT reports. In 2005, JFK handled $59.3 billion in export trade and $75.6 billion in imports—totalling $547 million more freight than the second largest gateway, the Port of Los Angeles.
The land port of Detroit ranks third on the DOT's list with $131 billion. Rounding out the top 10 U.S. freight gateways are: New York and New Jersey (water), Long Beach (water), Laredo (land), Houston (water), Chicago (air), Los Angeles (air), and Buffalo (water).