Originally Published PMPN
May 2004
NEWS
Despite Setbacks, Industry Still High on RFID |
| The Matrics AR 400 is an RFID reader that can be integrated into existing network infrastructures. |
Radio-frequency identification (RFID) continues to score high marks from packaging professionals, with a recent survey indicating that many expect the technology to take off in 2004. However, some experts caution that the technology is far from being ready for implementation, citing high costs and other issues.
RFID uses electronic readers to retrieve digital data stored in micro-chips embedded in plastic product tags. Unlike bar code scanners, the readers can collect data from tagged items packed in boxes or hidden behind other items. They contain the electronic product code (EPC), a number that uniquely identifies a product as well as other data.
FDA is also committed to RFID. In February, the agency’s anticounterfeiting task force issued “Combating Counterfeit Drugs,” a report recommending that companies adopt the technology by 2007. While not requiring the implementation, FDA calls the use of track-and-trace
technology—specifically RFID— “feasible” by that date.
Entities as diverse as Wal-Mart, the U.S. Department of Defense, Target, and the Healthcare Distribution Management Association have all recently launched initiatives using RFID. A group of pharmaceutical companies, including Abbott Labs, Barr Pharmaceuticals, Pfizer, and Cardinal Health, has also announced a recent partnership to evaluate RFID within their supply chains.
Wal-Mart has been the most high- profile champion of the technology. Last year, it had requested 24 pharmaceutical companies to start tagging bulk containers of Class 2 drugs shipped to its main distribution center. However, the deadline came and went without being met.
Still, optimism prevails. A recent Packaging Strategies/Cap Gemini Ernst & Young survey of 275 participants at the 17th Annual Packaging Strategies Summit in Atlanta revealed that packaging professionals expect big things from RFID. More than half (51%) of the attendees surveyed called RFID a “major business driver this year,” and are initiating a program and action plan in 2004. Another 54% believed that Wal-Mart’s supplier mandate will be a catalyst for the evolution of RFID adoption in the industry. The survey also showed that 58% agree that retail will be most affected by the first wave of RFID adoption by 2010. An additional 31% believe that the health and pharmaceutical industries will be transformed by RFID, leading to improved security for prescription drugs and reduced shrink/gray-market losses.
“There are huge benefits to using RFID,” says Wolf Bielas, CEO of RSI ID Technologies (Chula Vista, CA). “The main thing is that it’s very effective for combating counterfeiting. It is definitely the hottest technology right now, and we’re seeing lots of new players.” RSI ID has acquired a technology that allows for the integration of RFID inlays into pressure-sensitive labels. This can be accomplished during the converting process or can be retroactively integrated into an existing label.
Matrics (Columbia, MD) is another company that is supporting RFID. The company just introduced the AR 400 RFID reader, “a more intelligent reader,” according to Chris Warner, director of marketing. The AR 400 in- tegrates into a customer’s existing network infrastructure. Customers can manage and service RFID readers through their internal network or remotely via the Internet. The product also provides information to customers’ network management platforms through real-time reporting of events and status. In addition, Matrics has formed a strategic alliance with Checkpoint Systems to deliver RFID solutions for the retail supply chain.
Likewise, Ken Reich, director of marketing and public relations for Tagsys (Doylestown, PA), says his company is on “the cutting edge” of RFID. “We actually show real revenue,” he adds. Tagsys has a full line of encapsulated tags, RFID-enabled readers, antennas, and printers.
Another company, CCL Label (Upland, CA), specializes in low-cost disposable and durable RFID tags, labels, and wristbands. “RFID is on the launchpad because it has true value, and FDA is obviously committed to it,” says Paul Reyland, CCL’s president.
However, the technology’s cost is an issue. A new Forrester Research Inc. report, “RFID At What Cost?,” places RFID implementation costs, including start-up and one year of maintenance at approximately $9 million annually for a typical product manufacturer attempting to comply with Wal-Mart’s initiative. Tags alone typically cost 25–30 cents each, a price that analysts say needs to fall below 5 cents before an investment can be recovered. “There is no business case for most suppliers in the short term,” wrote Forrester Research senior analyst Christine Overby in the report. “The technology is not ready and there is a lack of deep expertise in the industry to help suppliers implement RFID.”
“That’s the trouble,” reflects Ken Reich. “It’s pretty expensive. The Wal-Mart thing has put a real damper on progress. Also, I think people are itching to be early adopters of RFID, but they want to see what happens first in terms of standardization.” Paul Reyland of CCL adds that there is a “line in the sand of compliance that has been drawn. RFID will be moved back perhaps a few times, because of issues of implementation that have not been fully considered.”
Those issues are plentiful. It is predicted that already-high professional services spent on getting distribution centers operational will only increase, due to a small supply of experienced RFID experts. In the Packaging Strategies survey, 46% pointed to implementation/integration as the biggest potential headache, with an additional 21% saying problems with tags will be the biggest barrier.
In addition, source-tagging cases at the manufacturer can be disruptive for companies to implement. Some recommend a “slap-and-ship” approach, in which suppliers tag cases and pallets in the distribution center. “That seems much more realistic for suppliers,” says Reyland.
In spite of the issues involved, companies don’t seem to be deterred. “A lot of people are investing in this right now,” says Wolf Bielas. “I think we’ll all be watching Wal-Mart to see what happens, but we’re going to keep going regardless.”
Copyright ©2004 Pharmaceutical & Medical Packaging News
