TOBACCO DISTRIBUTION SOLUTION

Using RFID Technology ～executive summary～

13th Jan. 2012

Current Malaysia’s Tobacco Situation？

Annual Tobacco Consumption Amount

23.3billion

（Yr 2009）

Tobacco Consumption Shift

（Billion）

18.7 20.8

23.3

10

15

20

25

2000 2002 2009

Public Health Concerns

Encourage Smokers to Stop

Prevent Youngsters from Smoking

Tobacco Price Shift

4

6

8

10

122

00

4

20

05

20

06

20

07

20

08

20

09

20

10

20

11

(Dunhill 20s)

(RM)

Tobacco Price Increase, same time, Tobacco Consumption has Increased!?

One of the MAIN reasons:

ILLICIT TRADE &

SMUGGLING

The MAIN Illicit smuggling Countries

Thailand

China

Indonesia

Cambodia

10%

20%

30%

40%2

00

4

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Illegal Tobacco Ratio Shift

Annual Total Illicit Tobacco

About 9 billion

（Yr 2009）

Smuggled & Illicit Tobacco Market Price under

Estimated Profit from Illicit Tobacco Trade

RM 1Billion

Gov. Taxes Lost Estimated

RM2Bln.

From August, 2004

Special device:

Authenticity Check

Control illicit trade

…however, with little effect !?

Several factors

Illegal

tobacco

distribution

Production / Distribution Tobacco

Regulation / Investigation

People

Manufacturing control

Distribution system

SCM control

Tobacco price

Tax rate

Penalty

Custom inspection

Investigation

Detection device

Security technology

Syndicate Consumer attitude

Retailer attitude

Can be improved!

15% 1～2%

1 Licensing all participants in the tobacco business

2 Tracking and tracing systems from the points of manufacture to all points of sale

3 Traceable methods of payment

4 Strict scrutiny procedures in the selection of contractors during the supply process

5 Significant financial penalties for infringements

Key factor

“Supply Chain Control”

SUGGESTION

RFID Technology Application

Success in Supply Chain

“The U.K. government is sick of losing $7 billion in tax dollars every year due to the illegal cigarette trade. In order to avoid this problem in the future they are testing out a plan that implements RFID technology.” – May 13th 2011 RFIDiva

System

Distribution, Import/Export

Unique ID number Location / Status Info. Time stamped

Record Record Record

Production Sales

Tobacco tag information

• Unique ID number

• Manufacturer ID number

• Tobacco name / type

• Production date

• Location information etc.

Registration

Stick tag (Manufacturer)

Write production info. (Data lock)

Track & Trace

Update tobacco tag information

Location management

Record any abnormal status

Individual history tracking

Unauthorized move from factory.

Illegal distribution

Point of Sales

Tobacco tag invalidation（Kill）

D/B status update

Security

Unique ID number + TID

Encoded data lock function

Inspection

Visual inspection

Contactless scanning

Benefit？

Prevent terrorist & crime funding

Help prevent increase in smokers

Increase legal tobacco sales revenue by preventing Illicit Trade

Enhance Supply Chain Management efficiency

Final goal?

Prevent distribution of the illegal tobacco!!

Global Illicit Tobacco Trade Situation (For Reference)

Campaign for Tobacco-Free Kids in 2006 report

Illicit Tobacco Market Share

Gov. Loss(US$)

Global 11.6% 40.5Billion

High Income Nations

9.8% 17.6Billion

Mid & Low Income Nations

12.1% 22.9Billion

Globally Government Loss

> US$ 40.5 Billion

US$ 40.4 Billion

(Yr 2010)

Annual Sales Turnover

Illicit Tobacco

Ratio (%)

No data

0 - 5

6 - 10

11 - 20

21 - 30

30+

SERIOUS PROBLEM WORLDWIDE

Illicit Market Share (%)

30+ 21-30 11-20 6-10 0-5

Albania Cameroon Algeria Pakistan Argentina Chile

Bolivia Croatia Armenia Philippines Australia Indonesia

Bosnia & Herzegovina Estonia Canada Poland China Israel

Brazil Lebanon Columbia Singapore Costa Rica Italy

Ethiopia Malaysia Côte d'Ivoire Taiwan El Salvador Japan

Georgia Morocco Ecuador Thailand Kazakhstan Mexico

Hong Kong Peru Ghana United Kingdom Nicaragua New Zealand

Iraq Russia Guatemala United States Panama Saudi Arabia

Laos Sudan India Uruguay South Africa Spain

Macedonia Syria Iran Yemen Tunisia

Uzbekistan UAE Jordan Turkey

Venezuela Nigeria Ukraine

Zambia Pakistan Vietnam