METI s Program for Efficient Distribution and Logistics - focusing on the use of information technology -

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1 METI s Program for Efficient Distribution and Logistics - focusing on the use of information technology - Distribution and Logistics Policy Division Ministry of Economy, Trade and Industry 1

2 Contents 1. Basic Concept of METI s Program for Efficient Distribution and Logistics 2. New Comprehensive Program of Logistics Policies 3. Outline of program for efficient distribution and logistics based on the New Comprehensive Program of Logistics Policies. 4. Promoting efficiency through the use of IT (1)Former measures and new program (2)Plan for promoting Supply Chain Management (SCM) in the distribution system. 1) Establishment of common use distribution platform 2) Promoting Diffusion of RFID 3) Establishment of Standardized Logistics EDI for the Internet 2

3 1. Basic Concept of METI s Program for Efficient Distribution and Logistics As one of the most important issues for economic structural reform, it is urgently necessary to establish an advanced and total-effective logistics system to strengthen companies international competitiveness as well as increase consumer benefit. Therefore, METI is implementing measures for improving the logistics environment through promoting the use of IT, standardization, and joint logistics operation. Meanwhile, with the rising social needs to tackle environmental issues such as global warming, it is also important to establish more environment-friendly logistics systems. <Key Words> IT, Joint logistics operation, Standardization / Cost, Environment, Globalization <Government Goals> The Japanese Government intends to implement a new logistics system suitable for the Japanese economy and society in the 21st century, aiming to achieve the following by ) Establish of an advanced, total-effective logistics system to realize an internationally competitive society. 2) Establish a logistics system to cope with social and environmental issues. 3

4 2. New Comprehensive Program of Logistics Policies (July 6, 2001 Cabinet Decision) Part One: Basic Concept Part Two: Specific Measures (1) Establishment of an advanced, total-effective logistics system to realize an internationally competitive society 1) Measures to establish an advanced, total-effective logistics system (a) Promotion of joint operation, use of information technology and standardization of logistics (b) Improvement of business practices (c) Regulatory reform, simplified and more efficient administrative procedures (d) Development and use of new technology (e) Promotion of unit loading (f) Promotion of establishment of logistics infrastructure 2) Measures to strengthen the function of international logistics bases (a) Establishment of infrastructure related to international logistics bases and enhancement of their function (b) Measures to cope with 24-hour full opening of harbors (c) Electronic procedures, one-stop services (2) Establishment of a logistics system to cope with social problems (3) Measures to ensure logistics activities that support national life 4

5 3. Outline of Program for Efficient Distribution and Logistics Policies based on the New Comprehensive Program of Logistics Policies In METI s program, various measures are taken mainly focused on improvement of business operation, from the viewpoints of establishing the overall optimal supply chain through the use of IT, streamlining the establishment of more environment-friendly logistics systems and, through joint logistics operation and standardization, realizing efficient logistics systems in the Asian region. Improvement of business operation 35% of total Japanese logistics cost Improvement of infrastructure related to logistics and providing logistics services at a lower cost 65% of total Japanese logistics cost Establishing the overall optimal supply chain through the use of IT Streamlining logistics business operation through joint logistics operation and standardization Realizing efficient logistics system in the Asian region Establishing more environment-friendly logistics Measures on road transportation Measures on maritime transportation -Establishing SCM infrastructure -Establishing new logistics system through the use of RFID. -Promoting joint logistics operation -Promoting through-transit palletization by using standard pallet -Technical assistance for human resource upgrading -Technical assistance for standardization -Establishing and promoting more Environment-friendly logistics 5

6 4. Promoting Efficiency through the Use of IT (1) Former Measures and New Program The The form form of of IT IT is is shifting shifting from from intra-company intra-company use use to to inter-company inter-company use. use. For For reducing reducing the the total total cost cost of of supply supply chains, chains, it it is is important important to to promote promote business business cooperation cooperation and and collaboration collaboration among among manufacturers, manufacturers, wholesalers wholesalers and and retailers, retailers, and and manage manage flows flows of of information information and and products products to to optimize optimize the the overall overall supply supply chain. chain. Issues Former program New Program -Too many incompatible original commerce and distribution EDI codes, messages, etc. -Problems with information sharing and collaboration (Each company makes own demand forecast, production plan, shipment plan, etc.) -Standardization of commercial EDI (B to B) -Standardization of domestic logistics EDI -Standardization of traderelated logistics EDI -Promoting the use of IT among small and medium sized companies (dispatching specialists, etc.) -Improving efficiency through the use of RFID ( (2)) -Establishing and promoting internet-based commercial EDI standard ( (2)) -Establishing and promoting internet based total (domestic and trade) logistics EDI ( (2)) -Continuing to promote use of IT by small and medium sized companies. 6

7 (2) Plan for Promoting Supply Chain Management (SCM) in the Distribution System To promote SCM which truly optimizes overall supply chains (beyond individual companies), METI is implementing a 3 year plan to establish a more efficient distribution system utilizing new technologies: the internet and radio frequency identification (RFID.) Establishment of the Internet Collaboration Platform - Speedy information sharing for collaboration throughout supply chains (among manufacturers, wholesalers and retailers) - Responding to international trends relating to SCM - Standardization for the internet XML-EDI - Global Commerce Initiative Establishment of Standardized Logistics EDI for the Internet - Integration of the domestic logistics EDI* standard and the trade-related logistics EDI standard *focused on EDI among shippers, transportation suppliers, warehouse companies, etc. - New version for the internet XML-EDI Promoting Diffusion of RFID Utilizing RFID tags to make Distribution and logistics more efficient - Automated shipping or receiving inspections, inventory, etc. - Tagging pallets, containers - Tracking - Traceability - Real time inventory recognition - Use at POS counters *XML: extensible Mark-up Language 7

8 Why is it difficult to truly optimize the overall supply chain? Manufacturer Wholesaler Retailer Pileup of Inventory Pileup of Inventory Pileup of Inventory Info. Data gap or Data conversion needed Info.: Order, sales, inventory, etc. Data gap or Data conversion needed Info.: Order, sales, inventory, etc. Resolution Realizing optimal supply chains through speedy information sharing utilizing IT (the internet) *Change of corporate management mind-set and business practices are also needed. CPFR Reduction of inventory, shorter lead time, prevention of stock run-outs *CPFR: Collaborative Planning, Forecast and Replenishment 8

9 1) Establishment of the Internet Collaboration Platform Consumer packaged goods Future: Wider areas of goods Manufacturer Wholesaler Manufacturer Wholesaler Internet Internet Collaboration Platform ( Plan ) - Synchronization of product data bases - Use of international standardized codes (European article number, Global Location Number) - Use of XML which is suitable for the internet - Use of JEDICOS-XML messages - Electronic ordering, billing - Interchange of sales records and inventories Internet -GMS Retailer -Supermarket -Convenience Stores - Department Stores - Drug stores, etc. - XML: extensible Mark-up Language - JEDICOS: Japan EDI for Commerce System, EDI messages developed in Japan in conformity to the EANCOM, a subset of the UN/EDIFACT for the distribution industry - JEDICOS-XML: the XML version of the JEDICOS 9

10 2) Promoting Diffusion of RFID 1. Overview of RFID Advantages over bar codes - Larger data storage capacity - Remote ( Contactless ) data reading - Collective data reading - Data renewal, additional data writing Expectations of the RFID - Great improvement of efficiency in logistics: shipping and receiving inspection, inventory, etc. *Wal-Mart Stores has announced a policy that its top 100 suppliers should tag RFIDs on their pallets by Jan Higher consumer safety for foods, drugs, etc. through improved traceability 10

11 Effects of Realizing Product Traceability Upstream of product Total Product Traceability Downstream of product Manufacturing/processing company Parts manufacturer Wholesaler Retailer Consumer Manufacturer Merits for manufacturer - Quality assurance - Handling of complaints - Management of returns - Tracking of distribution/stocks - Tracking of freight Merits for transportation company - Improved transportation efficiency - Improved transportation accuracy - Improved service Merits for wholesaler - Automated inspection - Streamlined stock - Inventory control - Management of expiry dates - Claims/enquiries - Streamlined internal warehouse operations - Management of returns Merits for retailer - Use at POS counters - Automated inspection - Streamlined stock - Inventory control - Prevention of shoplifting/theft - Prevention of forgery - Management of expiry dates - Claims/enquiries Merits for consumer - Safe and inexpensive - Improved service 11

12 Examples in Apparel Logistics Practice 1) Shipping and receiving inspection 1) suits, jackets, etc. (hung) ( before ) ( after ) 12

13 (2) Shipping and receiving inspections 2) trousers, slacks, shirts, neckties, etc. (in cartons) ( before ) ( after ) 13

14 Merits when Used in apparel industries (1) Current situation - Time consuming manual checking or bar code scanning one by one - Duplication: shipping inspection and receiving inspection (example of company A) - Gross profit: 16.9 billion yen / $154 mil. 100% - Logistics cost: 8.6 billion yen 51% Labor cost: 2.8 billion yen 17% Shipping and receiving work 2.0 billion yen 12% - Number of items: about 1 million / year Example: logistics process from ordering to shipping (2) Merits 1) Decrease in labor cost and shorter lead times decrease of logistics labor and time *e.g. 40% decrease (see below) 2) More accurate inventory management 3) Decrease in mis-shipments 4) Decrease in sales opportunity losses (prevention of stock run-outs) Processes expected to be omitted through using the RFID Ordering process Shipping process *Work time for 100 items Popular goods selection (working time) Preparing order voucher Getting Chief`s approval Notifying order Picking Issuing price tag Price tagging Shipping inspection Packing Informing receiver of shipment Creating shipping notice Issuing shipping notice 24min. 29min. 45min. 24min. 47min. 33min. 62min. 22min. 31min. 16min. 17min. 10min. uplication Manufacturing factory Warehouse or distribution center Retail shop Shipping inspection Receiving inspection / Shipping inspection Receiving inspection Consumer 14

15 Examples in the Grocery Logistics Practice (1) Current situation - High cost for shipping and receiving inspection, and inventory - Advanced consumer needs: more safety-conscious, shorter shopping time (2) Merits 1) Shorter lead times; dramatic reduction in shipping and receiving inspection work 2) Better inventory management 3) Improved traceability 4) Real time inventory recognition 5) Use at POS counters * Waterproofing is necessary 15

16 In Retail Stores: Use at POS Counters, Real Time Inventory Current Current Operation Operation - One by one bar code scanning - Item name input by scanning bar codes and quantity input through manual operations - Taking inventory requires effort of all employees after closing shops for half a day several times a year Operation Operation using using RFID RFID (future) (future) - Pass the check out gate basket by basket Calculation in an instant - Furthermore, self check out - Automatic inventory by reading data stored in tags with built-in data readers in the shelf - Real time inventory recognition 16

17 . Diffusion of RFID in the Distribution System Diffusion throughout supply chains Merits Better for companies Optimal overall supply chains: cost reduction Better for consumers Higher value of information and service Efforts to diffuse Unrealistic and difficult to diffuse RFID to all industries at once because of problems still to be solved such as higher cost compared with the bar code system Step by step diffusion : First step 1) Relatively higher priced and cost effective goods (e.g. apparel, electronic appliances) 2) Goods on pallets or in cartons: tagging to pallets or cartons Step by step diffusion gradual but steady increase of RFID tags step by step price reduction 17

18 3. Example of Efforts: Trial Trial in the field of apparel supply chains - Overall process Steps expected to become more efficient [Factory] [Warehouse] [Retail shop] RFID tagging - Shipping inspection - Receiving inspection - Shipping inspection - Return receiving inspection - Inventory - Receiving inspection - Return shipping inspection - Inventory - Use at POS counters - Antennas -Goods Suits, shirts, etc. Tunnel type Gate type Handy type 18

19 - Types of RFID tags (13.56MHz) ( 1/2 credit card size ) ( Credit card size ) From FY 2004, planning more focus on how to use* inside retail stores (*) Providing goods-related information to consumers, speeding up of check out, etc. Merits - Diffusion to wider variety of goods - Improvement of consumer value 19

20 4. Other efforts (1) Assistance with the development of low-cost RFID tag (2) Proposal to the ISO: codes for unique item identification (ISO/SC31/WG2) (3) Considering rules to handle personal information Codes for Unique Item Identification (UID) Issuing authority code - company code- product code - serial number (JAN, CII, Duns, etc.) (Company A, (Content management (Content management brand B, etc.) by companies) by companies) 2) 1) E.g.: Toyota, R35 (Skyline GT-R), Lexus, Kao. Merit (Shampoo) 1) Sharing of identifiers For various codes where data length is not specified, common identifiers should be inserted according to necessity. These identifiers are in compliance with ISO15418, which is in wide use internationally. 2) Issuing authority codes The IAC code (ISO15459), a standardized ISO code, is applied. 20

21 Specific Examples using Standards JAN Codes Number-issuing organization codes - Corporate codes - Item codes - Serial codes C/D(*) 12345*** JAN Codes (*)C/D:Check Digit (Note) If the number-issuing organization code is 0 to 9, it signifies EAN code (JAN code). (Note) The manufacturer code in the JAN code is (7 digits) and (9 digits). Duns Codes Number issuing organization codes - Corporate codes - Corporate item - codes-serial UN *** 12345*** (DUNS number) 21

22 3) Establishment of Standardized Logistics EDI for the Internet JTRN (Japan TRaNsport) JTRN (Japan TRaNsport) : domestic logistics EDI standard - Created in Non-internet ( private line ) type - Syntax rule in conformity with the Japanese domestic standard called CII Trade-related Logistics EDI Standard No trade-related logistics EDI among shippers, No trade-related logistics EDI among shippers, port authorities, port logistics companies port authorities, port logistics companies - - Development Development of of a a trade trade related related logistics logistics business business process process model model - - Development Development of of standardized standardized messages messages - - Consistency Consistency with with already already existing existing trade trade related related EDI EDI systems, systems, e.g. e.g. TEDI TEDI - - Syntax Syntax rule rule in in conformity conformity with with UN/EDIFACT UN/EDIFACT Standardized Logistics EDI for the Internet - Integration of the JTRN and the Trade related Logistics EDI Standard - XML base By the end of FY2005, establish internet-based total (domestic + trade-related) logistics EDI standard Transport Label Standardization - In conformity with ISO15394 (Shipping Transport and Receiving Labels) - Commonly used among shippers, transporters, consignees, etc. UN/EDIFACT : United Nations / EDI For Administration, Commerce and Transport XML: extensible Mark-up Language 22

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