JOS VAN HILLEGERSBERG: Today, we will visit GS1. GS1 is an organisation that is dedicated to developing and introducing standards in the supply chain. We will talk to Frits van den Bos.
FRITS VAN DEN BOS: My name is Frits van den Bos. I’m innovation manager for GS1 Netherlands. Most people will know us from the barcode. Everyday there are 5 billion beeps that you hear in shops, and that’s the sound of GS1.
Companies need standards in supply chains because they want to link the physical goods with the information flows that are used to manage supply chains. So if you have a barcode, that’s basically a number. And that number says this is this product. You can use that number to order the product. You can use the product to invoice the number. You can use the product to notify somebody that this product is coming up to receive. Today’s trends in supply chain make stabilisation more and more important.
If you look at the consumer that’s 24 hours, seven days a week, online, if you look at legislation, if you look at new technologies, and if you look at sustainability, those things will drive that we want to know more about what’s happening in the supply chain. And technology enables that. And that’s interesting. If you look at regulations, nowadays, if people buy food online, the government will ask manufacturers to supply those customers with product data that’s normally on the label on the actual product. And to link those things needs unique product identification. And you need standards to make all the data available, because somebody else will process the data.
I think the barcode is the most simple example. Everybody knows the barcode. It started in 1972, I think, in the US, and it came to Europe in 1976. And retailers have been driving the implementation of that standard. And what the practical essence was that before we had the bar code, the manufacturer had to price ever single product for a certain retailer. So if the retailer had a different price, they had a different product. So you had a different stock, because you have to know which price had to go to which retailer. With the barcode, that wasn’t necessary anymore, so you can reduce your stocks in the supply chain. So you can make it much more efficient.
You want to be an expert in supply chain integration, I think that you have to pay attention to development of standards. You have to pay attention to how standards are used. And you have to pay attention to the quality of your data. If business processes change, you have to adopt the standards as well. So you have to realise that you have to make changes to your systems as well. And if you look at maintenance, another aspect is data quality. If you think about standards, if you think about IT, and you don’t deliver the right data to manage the supply chain, then you have a problem.
A very practical example, if you measure up products that have to be on the shelf in the shop. And you turn the product, while measuring, in a different direction than that is appears on the shelf, you have a problem. Because it won’t fit. So we have to realise how other parties in the supply chain will use your data. And I think that that’s very important, that people understand that a standard is not just a standard. It’s not just data, but it’s datas that are used in supply chain management. So you have to understand how it’s used.
What drives standardisation is often the need to be more efficient in a certain sector. Or that it’s been enforced by legal regulations. That helps us when we start implementing standards, because then people have to adapt before a certain time. What we do normally when we start a standardisation project is we bring all kinds of companies together, so retailers, manufacturers, and sometimes also the logistics service providers. We help them coordinate the implementation among all those parties involved. Implementing standards takes time. And that has to do with three things. That has to do with priority. It has to do with the investment that’s needed, because people have to change their systems.
And it has to do with creating the awareness of why do we want to have a standard? Everybody will say, OK, standards is good. But before they adapt to the standards, they will say, what does it bring to me? And that’s a question that every time, in every company, will be asked. So before you have a huge community who sees the benefit of a standard and starts to implement it. It certainly takes time.
If you look at the difference between big and small companies, big companies are likely to be ahead of smaller companies in the standardisation process because they have a bigger interest. If they do things more efficient, they do it more often, so they get more benefits. It’s not necessary that the big companies are more capable to implement standards than small companies If we look at RFID here in the Netherlands, we have a very small shoe retailer who has implemented RFID. Where a lot of big companies are still thinking about it and postponing the implementation. And he already has a stock accuracy in his shop of 99%, where most big companies are about 60%.
When we developed RFID tags– and RFID tags are basically a barcode in a chip. The difference is with a barcode you have to have the laser scanner to see the barcode. You actually have to see the product. With a chip, you use radio frequency, and you can have many products in a box and still scan them. If you go into a store, and you pick a product from the shelf and you take a look at it, and you place it back on the shelf, but in a different shelf, for the next shopper, it will be out of stock. And for the shopkeeper, it will be stock that he finds at the end of the year when he takes inventory.
And probably can’t sell it anymore because it’s out of fashion. With RFID, however, you can scan your stock twice, three times a week. So it’s much easier. And you know when somebody has placed product in the wrong shelf, and you can replace it. Or you can easily direct the customer to the right place in the shop. The accuracy of a normal inventory system for a shop is 60%. With RFID, you can increase that to 99%. And that gives you the opportunity to do real stock optimisation that creates the value of standardization. If you use RFID throughout the supply chain, what happens is you can link information from different parties to the products.
An example of traceability, for instance, there’s a new fish regulation which says if you sell fish you have to indicate the place where the fish is caught. The first party, who actually captures the fish, will enter the data about where it’s caught. Then the next party, where the fish is preparated, will add their data. Then it’s transported and being stored somewhere, and that party will enter their data. And when you can trace where the chip has been, or the fish was, you can also ask all those parties, what’s the information that you have entered, that you have entered, and that you have entered? And that together brings in a whole story of the product.
So in that way, you use standards, again, to make a very efficient way of sharing information along the supply chain and bring that to the consumer.
If you look at online retail, the future for standardisation is that it becomes more and more important. If you look at supply chains in online retail, there are more parties involved. More parties need information and they have to exchange it between each other. The need to really check and trace products in that supply chain becomes more important. You have to differentiate new products from returns products. You have all those returns now in omnichannel supply chains. And that’s a challenge. Another example of new standards is that we want to help search engines to find the right product for the consumer. We help the builders of websites.
To enable them by putting markers up before product attributes, which say, hey this is a marker from GS1. This says that the following attribute in this website text will be the colour of the t-shirt. And we’ll use colour table number XYZ And that way you could easily help search engines to decipher the websites than they do now. They don’t need that very complex algorithm anymore. They can be certain that when you search that t-shirt, you will find it. And you’ll find all black t-shirts, size 42.