Background

Logistics/supply chain management (SCM) enabling technologies cover a wide spectrum of technologies that facilitate the smooth flow of goods, services and related information as well as the integration of business processes across the supply chain. In particular, the emerging Radio Frequency Identification (RFID) technology could revolutionize the product information flow and has a high potential to transform the whole global supply chain into a highly effective and efficient information pipeline, especially when coupled with a global information network, such as the EPCglobal Network.

Hong Kong is a major logistics hub that possesses a world-class transport infrastructure and excellent information connectivity. Transportation and logistics related sectors (including freight and passenger transport) account for over 7% of our GDP, employing over 210 000 workers. Every day, over $2 600 million worth of goods are produced by tens of thousands of factories scattered over the Mainland and shipped to Hong Kong for export. Such export activities require quality logistics support to keep the supply chains intact and efficient. Hong Kong's logistics facilities and services have contributed significantly to the Pearl River Delta's (PRD) rapid rise as a production base. The PRD, in turn, has provided Hong Kong with a huge and expanding cargo base. Mainland China has become a major manufacturing base in the world, supplying a majority of commodity items to the world market. Hong Kong occupies a unique position as the gateway and logistics hub to link the Mainland with the world, especially after the implementation of CEPA. It is vital to develop and introduce appropriate technologies to support the growth of the logistics/SCM industry. In this regard, the benefits of developing RFID-based logistics are significant, as the new technology will greatly improve the visibility of products flowing along the supply chain. The development of RFID-based logistics is gaining momentum on international fronts, with many top worldwide retailers already initiated adoption of the technology in their operations. In fact, there is an increasing awareness on RFID technology in the local industry and some local companies are actively exploring its potential in their supply chain operations.

Potential Benefits

The benefits of developing logistics/SCM enabling technology are multi-fold. By increasing the visibility of critical elements in the supply chain, the industry could achieve substantial saving through better inventory management, reduction of product shrinkage and improvement in supply chain efficiency. In turn, the overall competitiveness of the industry and quality of service would increase and thereby reinforce Hong Kong's role as the logistics hub of the region. On the other hand, such development aligns with the global trend to move towards a RFID-based supply chain. The swift adaptation of the new technology would give the local IT industry the early mover advantage and facilitate the upgrade of the technological base in general. The setting up of an RFID R&D Centre also helps to boost the confidence of the local SMEs in the adoption of the technology. In time, new industry or investment may be spurred to make this area a sustainable edge for Hong Kong.

Strengths and Opportunities

Hong Kong has an excellent transportation infrastructure to support global logistics operations. It has also a well-established communication infrastructure and IT knowledge base to meet the growing demands on the supporting IT system. In terms of knowledge base, Hong Kong has a strong R&D and industry base. There are various academic departments and research groups in the local universities that are dedicated to logistics-related IT system and methodology research.

The need for efficient global supply chain operation is ever increasing with the global trend that trading across nations gradually taking over trading within nations. In addition, the total amount of exports and imports in the PRD has recorded a growth rate of 24% and 90.8% respectively from 2001 to 2002 according to Guangdong Statistical, an official publication in Guangdong. Hong Kong is in a good position to benefit from these huge volume transactions.

Risks and Weakness

Along with the great potential, there are equally strong risks due to the severe competitions from competitors all around the world. There are some uncertainties with regard to compatibility issue among competing international standards, the local industry's awareness and receptiveness to the new technology and the potential replacement of RFID by other emerging technologies.

R&D Centre for Logistics and Supply Chain Management Enabling Technology

Hong Kong has a strong R&D and industry base in logistics/SCM. Many research groups in local universities are dedicated to research in logistics related IT system and methodology. Under the new strategy of innovation and technology development, the R&D Centre for Logistics and Supply Chain Management Enabling Technology has been set up. The initial focus of the Centre will be on RFID technologies and the Centre would conduct pilot projects and facilitate local manufacturers in meeting the initiatives from global retailers in the short-term, provide infrastructure for fast access to RFID-based product information and conduct R&D on RFID in the mid-term, and enhance the overall efficiency of the supply chain operation in the long run. Further details can be found here.