Small-Scale Tests Make the Case for RFID

By pilot-testing radio frequency identification technology, life sciences firms can prove its value and build support for broader deployment.

Radio frequency identification (RFID) technology has a lot to offer drug makers, retailers, and consumer packaged-goods manufacturers, and it makes sense to start implementing the technology now. The key to success, however, is to plan implementations carefully, with targeted return on investment in mind.

Because RFID allows products to be tracked individually from the manufacturer to point of sale, pharmaceutical firms can use the technology to streamline their business processes and protect product integrity. This, in turn, allows pharmas to increase efficiency in the supply chain, guard against diversion, reduce drug counterfeiting, improve patient safety, and increase product recall effectiveness.

Managing the Flow of Information

Spurred by looming mandates from companies like Wal-Mart, the mechanics of applying RFID tags en masse to the requisite products have diverted many companies' attention away from looking for opportunities to improve their business processes at the same time. (For details, see "Making Wal-Mart Compliance Pay Off for Pharma.")

But applying tags to items so they can be read reliably is only one part of the RFID equation.

"RFID is a data-collection technology, and that's really important to remember. RFID can be a conduit to collect information, but it is really system integration that solves the business problems that people want RFID to solve," says Jeff Woods, a principal analyst at Gartner.

Unlike a bar code, which is scanned a finite number of times along the supply chain, RFID tags emit signals constantly, generating an enormous amount of data. That's why Sun Microsystems built a way to handle all this data into its solution architecture (PDF) for EPC (electronic product code). Within the solution architecture, the Sun EPC Event Manager collects and analyzes the data and translates it into business events that the Sun EPC Information Server then directs to the appropriate information systems, such as inventory control and warehouse management.

"The EPC Event Manager translates the stream of data from RFID tag read events into business events that mean something within a supply or manufacturing chain," says Ben Griffin, Sun RFID solutions architect. "Translating read events into business events is the difference between knowing that an item was scanned and knowing things like when an item left the distribution center or what time it arrived at the loading dock. This is the type of information that can create efficiencies."

Building Support, Little by Little

Because deploying RFID across an entire supply chain or product catalog is expensive and time consuming, small pilot projects are a good way to build a business case for RFID. Such projects allow firms to prove the value of RFID in a more manageable setting and fine-tune the process before rolling it out on a larger scale.

Within some companies, there is top-level executive support for developing a company-wide RFID strategy. However, rarely is the top brass willing to sign a blank check for RFID implementation. Those who understand the technology's promise must still prove its value to the organization.

"Right now RFID is an investment in the future," says Liz From, Sun life sciences strategist. "Pharmas make that type of investment in their R&D, but traditionally not elsewhere. Supply chain is viewed as a cost center, not a place to invest. Piloting internally can prove the value of RFID and change that bias."

While complying with the Wal-Mart mandate may be the impetus behind getting RFID into the supply chain, From says the key is pairing that project with an internal pilot that can establish a strong business case for the technology. "For instance, some pharmas have internal inventory management issues. So here's a chance to lower your inventory write-off and create better availability for orders. By starting with something discrete—something you can get your arms around without a huge investment—you end up with more value for the business. Asset management within your four walls is a good match for a Wal-Mart project."

Involving personnel with specific expertise is important to any successful test. "It's crucial that a pilot involve both someone who is up to speed with RFID technologies and someone who's familiar with the business practices where the pilot is planned," says Griffin. "That combination ensures that you apply the tags to products properly and scan those tags at points that make sense for that particular business process."

Applying RFID to Real Business Problems

Deciding what operational area is best-suited to a pilot project can be a challenge. Every company is different, so there's no one right way to target a pilot. Assessing where the technology has the most potential to streamline processes or curb counterfeiting should help project leaders determine where to conduct the test. RFID can be used to solve universal business problems, such as inventory management, but pharmas can also use it to address issues specific to life sciences.

For example, RFID can help minimize drug counterfeiting. "For products with predictable life cycles, it's possible to set up RFID scans at key points," says Griffin. "As a product moves through each scan point, the product origin and chain of custody is affirmed. If the previous scan point for a drug is at a destruction center, that sends up a red flag that there's a problem. The drug might be expired or it might have been hijacked and relabeled. Without the data from the RFID scans, it might not be apparent that there was a problem."

Griffin adds that the mere presence of RFID tags can discourage counterfeiters. "Spoofing an RFID tag is hard to do. You'd need the same technology as the manufacturer and a certain kind of reader to program the tags with the appropriate numbers."

The Food and Drug Administration concurs. A February report from the agency's Counterfeit Drug Task Force endorses adoption of RFID by 2007 and asserts that "RFID technology will make copying of medications either extremely difficult or unprofitable."

Improving product quality is another instance in which pharmas can reap benefits from RFID. Within the life sciences industry, product quality and product safety are often one and the same, and product defects carry enormous liability consequences. Using smart totes (containers equipped with RFID tags) to automate the handling of materials in the manufacturing chain can eliminate human error and ensure compliance with regulations for treatment of raw materials.

Because RFID tags allow materials to be monitored as individual items, they can be used to improve the accuracy of measurements, From says. "RFID can help monitor proper storage of sensitive materials and prevent problems. For instance, in a hospital, blood units need to be kept within a strict temperature range. Rather than inferring the temperature of the blood from the temperature of the refrigerator or based on how long it has been out of refrigeration, RFID allows for tracking the actual temperature of the blood and can be used to generate a record for verification."

Pharmas can also use RFID to aid in product recalls. A chain of custody allows recalled products to be identified precisely, even down to specific lot numbers, speeding the recall process and minimizing expense. "Rather than calling every distributor or retailer that may have the product, you can put an alert into the system that will flag affected items as they move through the chain of custody," says Griffin. "Because of that chain of custody, manufacturers can account for each recalled item in the supply chain and even track items to the point of sale."

Sun's experience working with companies to pilot RFID programs, including the Gillette Company and Dai Nippon Printing, has allowed it to develop proven methodologies and to predefine the common elements of implementation.

From concludes: "We understand what the patterns are—what's common and what isn't—and we've institutionalized that knowledge into a package that offers customers a turnkey solution for large RFID projects and smaller, discrete pilot projects."

More information on the Pharmaceutical Anti-Counterfeit RFID Package from Sun and SupplyScape.